Jan. 23—Beginning in March, CPS Energy customers will pay more for their electricity and natural gas, after the City Council OK'd a rate hike this month. But the additional expense is likely to go up from there.
The rate increase of 3.85 percent includes a charge of $1.26 per month — for the next 25 years — to pay for $418 million worth of electricity and gas that CPS bought at exorbitant prices on Texas' spot market during the winter storm nearly a year ago.
Overall, CPS racked up about $1 billion in charges the week of Feb. 14. It's fighting gas suppliers in court over $587 million of that $1 billion, accusing the companies of price-gouging.
Beginning last March, CPS sued 18 companies and the state grid operator, the Electric Reliability Council of Texas, in state District Court in Bexar County.
The city-owned utility now has resolved several of those lawsuits, possibly settling for lesser amounts in some cases. However, CPS officials declined to discuss why they ended the litigation or whether they reached any settlements.
Nevertheless, CPS interim CEO Rudy Garza said the storm-related charge that goes into effect in March will increase, though the City Council will have to approve any amount over the already-set $1.26.
"It will rise," Garza said. "Those lawsuits will be decided, and whatever the bill is, that's the bill. But at worst, that $1.26, maybe it turns into $3, $3.50 a month down the road."
In other words, CPS customers likely will be on the hook for the amounts resulting from any settlement agreements the utility strikes with the gas companies.
The rate increase the council approved Jan. 13 will add an average of about $5 to residential customers' monthly bill. At the high end of the range Garza noted — $3.50 — the new average would be around $7.24.
CPS has resolved eight of its lawsuits over gas bills totaling $101 million, according to court filings. In December alone, the utility and defendants agreed to end five of the suits.
CPS early last month dropped its lawsuit against EDF Trading, whose North American headquarters is in Houston. CPS had been challenging $9.6 million in gas bills from the company.
Also in December, the utility dropped its complaint against Connecticut-based Castleton Commodities over charges totaling $31.1 million.
In October, the utility ended its suit against California energy giant Chevron over $8.8 million in combined bills.
CPS officials have largely declined to discuss the utility's litigation related to the winter storm since filing the lawsuits last spring.
"We are actively engaged with litigation with a number of parties and will not comment on the details of matters we have resolved," a CPS spokesperson said in a statement last week.
Play-by-play of a meltdown
CPS pumps natural gas into households for heating, and it burns the fossil fuel in five of its seven power plants to generate electricity.
The utility buys about 30 percent of its natural gas under longer-term contracts at fixed prices. But the volume of gas that CPS needs changes day to day, with San Antonio weather being the biggest wild card.
CPS purchases the rest of its gas on the Texas spot market as needed. There, prices can shift based on the most recent average prices paid at any one of several in-state gas trading hubs.
CPS' largest remaining lawsuit is against two subsidiaries of Dallas-based pipeline giant Energy Transfer: Oasis Pipeline and Houston Pipe Line Co. CPS is challenging more than $250 million that the Energy Transfer units billed the utility during the storm.
The lawsuit and subsequent court filings in the case are a window into the dizzying escalation of natural gas prices in Texas before and during the freeze.
On Feb. 1, CPS said in court papers, gas was priced around $2.60 per unit. By Feb. 10, the cost had jumped 25 percent to $3.25.
The next morning, a gas trader — CPS didn't specify in the filing which Energy Transfer subsidiary he worked for — sold gas to the utility for between $13 and $14. By the afternoon, when CPS sought to buy more gas, the trader quoted a price of $30, more than twice what the utility paid earlier that day.
Early Feb. 12 — three days before catastrophic blackouts engulfed the state, the result of ERCOT-mandated outages and freezing temperatures that knocked many power plants offline — CPS was looking to buy more of the fuel from the Energy Transfer unit. When CPS asked for a price, the trader said in an email, "ok, are you sitting down?" He quoted CPS a price of $150 per unit of gas.
Nine minutes later, before CPS responded to the offer, the Energy Transfer company raised its asking price to $225 per unit, which CPS accepted.
On Tuesday, Feb. 16, with the storm in full swing, the subsidiary charged CPS $400 per unit of gas — an increase of over 15,000 percent from the start of February.
"No wiggle room," the trader told CPS that day. "We have to hold at $400."
The next day, the price CPS paid for the company's gas peaked at $500 per unit.
Before the storm, the highest index price recorded for natural gas sold in Texas since 1994 was about $25 per unit at the Houston Ship Channel hub, according to CPS. That was in 2003.
Energy Transfer and other gas suppliers have argued they were well-prepared, able to deliver gas when others weren't because of the historic cold, which froze numerous wellheads and brought over-the-road transportation of the fuel to a crawl.
"Our extensive experience in operating pipelines, combined with a significant amount of both long- and short-term preparation, allowed us to continue operating reliably throughout the storm," Tom Long, Energy Transfer's co-CEO, said in a call with stock analysts in May.
If CPS didn't pay these companies' prices for natural gas, other utilities would have.
Natural gas companies say CPS accepted the risk of buying gas on the spot market, where prices can swing up or down. And they contend they don't set their prices, that they are established by an index — an average of what buyers have recently paid for gas on the spot market.
"CPS purchased gas from Energy Transfer at prices that were negotiated based on market rates and were transparent to CPS," Energy Transfer said in a statement. "CPS could have purchased and stored sufficient natural gas in the days and weeks before the winter storm to responsibly manage its duty to protect critical needs. But CPS did not take this prudent action, which left it exposed to the vulnerabilities of purchasing gas on the spot markets."
Seven of CPS' remaining lawsuits have been combined under one judge in Bexar County. In that litigation, the utility is contesting $392 million in natural gas bills owed mostly to Energy Transfer. One other case is in federal court.
"CPS Energy and gas utilities across the state were left with the same awful choice — pay exorbitant prices or leave their customers without service," utility officials said in a statement.
"Energy Transfer misstates the facts and wholly ignores the reality that we were in an unprecedented event that was declared a state of disaster by the governor of Texas," they said.
(c)2022 the San Antonio Express-News
Visit the San Antonio Express-News at www.mysanantonio.com
Distributed by Tribune Content Agency, LLC.