Are pipeline companies too powerful? Texas' unusual gas market faces fight over winter storm costs

On a February morning in 2021, a trader at the San Antonio utility CPS Energy messaged his counterpart at the pipeline company Energy Transfer to get a price for natural gas to run CPS power plants over the coming weekend. On a typical day, CPS might have expected to pay $2 or $3 per million British thermal units. But 90 minutes later, the Energy Transfer trader wrote back, “Ok, are you sitting down?” before quoting $150 per mmbtu — five times Texas’s previous record for gas, according to a court document filed by CPS in September. Nine minutes later, before the CPS trader had even responded, Energy Transfer — Texas’s largest gas supplier — raised the price to $225. Three days later, with a frigid winter storm sweeping across Texas and leaving millions of Texans without electricity, Energy Transfer raised the price to $500 per mmbtu.

The massive increase in natural gas prices during last winter’s blackout has set off a wave of litigation in state and federal courts and prompted an investigation by the Federal Energy Regulatory Commission, casting a spotlight on the workings of Texas’s complex, opaque and lightly regulated natural gas market. The Texas market, unlike any other in the United States, provides opportunities for pipeline companies such as Energy Transfer to exercise vast market — sometimes monopoly — power to demand whatever prices they want in times of gas shortages, resulting in soaring costs for customers and profits for the companies, according to experts and legal filings. In the 15 months since last February's winter storm, power companies such as CPS, Vistra Energy of Dallas and Brazos Electric Cooperative of Waco have accused pipeline firms of price gouging and other practices that contributed to billions of dollars in losses for Texas’s power sector, forcing some electricity providers into bankruptcy and others to raise rates on customers for years to come. The skyrocketing prices also left Texas natural gas customers with a $3.6 billion bill that will take a decade to pay off. Coincidentally, Energy Transfer and the Houston pipeline company Kinder Morgan earned combined profits of $3.4 billion during the storm.