Home Gas effect CPS Energy ratepayers likely to see another bill rise as utility drops lawsuit

CPS Energy ratepayers likely to see another bill rise as utility drops lawsuit

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From March, CPS Energy customers will pay more for their electricity and natural gas, after the city council approved a rate hike this month. But the extra expense is likely to increase from there.

The 3.85% rate increase includes a fee of $1.26 per month – for the next 25 years – to pay for $418 million in electricity and gas that CPS purchased at exorbitant market prices Texas spot during the winter storm nearly a year ago.

Overall, CPS racked up approximately $1 billion in charges the week of February 14. He is fighting gas suppliers in court for more than $587 million of that billion, accusing the companies of price gouging.

Since last March, CPS has 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 has now resolved many of those lawsuits, perhaps settling for lesser amounts in some cases. However, CPS officials declined to discuss why they ended the litigation or whether they reached any settlements.

Nonetheless, CPS acting CEO Rudy Garza said the storm fee that takes effect in March will increase, although city council will have to approve any amount above the already set amount of $1.26.

“It’s going to increase,” Garza said. “These lawsuits will be decided, and whatever the bill is, it is the bill. But at worst, that $1.26, maybe it will turn into $3, $3.50 a month later.

CPS Energy Acting CEO Rudy Garza speaks as City Council decides whether to approve a rate hike by CPS Energy Thursday, Jan. 13, 2022. A small group of protesters opposing the hike appeared before the council session.

San Antonio Express-News/Staff photographer Kin Man Hui

In other words, CPS customers will likely be liable for amounts resulting from any settlement agreements the utility enters into with the gas companies.

The rate increase approved by the board on January 13 will add an average of about $5 to residential customers’ monthly bills. At the top of the range, Garza noted – $3.50 – the new average would be around $7.24.

On ExpressNews.com: City Council Approves CPS Energy Rate Increase

CPS has resolved eight of its lawsuits over gas bills totaling $101 million, according to court documents. In December alone, the utility and the defendants agreed to end five of the lawsuits.

Early last month, CPS dropped its lawsuit against EDF Trading, whose North American headquarters are in Houston. CPS had disputed $9.6 million in gas bills from the company.

Also in December, the utility dropped its lawsuit against Connecticut-based Castleton Commodities on charges totaling $31.1 million.

In October, the utility ended its lawsuit against California energy giant Chevron for more than $8.8 million in combined bills.

CPS officials have largely declined to discuss the utility litigation related to the winter storm since the lawsuits were filed last spring.

“We are actively engaged in litigation with a number of parties and will not comment on the details of the issues we have resolved,” a CPS spokesperson said in a statement last week.

Play-by-play of a collapse

CPS pumps natural gas into homes for space heating and burns fossil fuel at five of its seven power plants to generate electricity.

The utility buys about 30% of its natural gas under longer-term contracts at fixed prices. But the volume of gas CPS needs changes from day to day, with the weather in San Antonio being the biggest wild card.

CPS purchases the remainder of its gas in the Texas spot market as needed. There, prices may change based on the most recent average prices paid at one of the many gas trading centers in the state.

CPS’ largest remaining lawsuit is against two subsidiaries of Dallas-based pipeline giant Energy Transfer: Oasis Pipeline and Houston Pipe Line Co. CPS is contesting more than $250 million that energy transfer units billed the utility during the storm.

The lawsuit and subsequent court filings in the case are a window into the spiraling escalation of natural gas prices in Texas before and during the freeze.

On Feb. 1, CPS said in court papers that the gas price was around $2.60 a unit. By February 10, the cost had jumped 25% to $3.25.

The next morning, a gas trader – CPS did not say in the filing which Energy Transfer subsidiary he worked for – sold gas to the utility for between $13 and $14. In the afternoon, when CPS looked to buy more gas, the trader offered a price of $30, more than double what the utility had paid earlier in the day.

Early on Feb. 12 — three days before catastrophic blackouts gripped the state, following ERCOT-mandated outages and freezing temperatures that knocked many power plants offline — CPS was looking to buy more fuel from the energy transfer unit. When CPS asked for a price, the trader said in an email, “ok, are you seated?” 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, February 16, with the storm in full swing, the subsidiary billed CPS $400 per unit of gas, an increase of more than 15,000% since the beginning of February.

“No wiggle room,” the trader told CPS that day. “We have to hold on to $400.”

The next day, the price paid by CPS for the company’s gas peaked at $500 per unit.

Before the storm, the highest index price on record for natural gas sold in Texas since 1994 was about $25 per unit at the Houston Ship Channel hub, according to CPS. It was in 2003.

Energy Transfer and other gas suppliers argued that they were well prepared, able to deliver gas when others were not due to historic cold weather, which froze many wellheads and put harm road transport of fuel.

“Our vast experience operating pipelines, combined with a significant amount of long-term and short-term preparedness, allowed us to continue to operate reliably throughout the storm,” said Tom Long, co- CEO of Energy Transfer, on a call with stock analysts. in May.

If CPS did not pay these companies’ natural gas prices, other utilities would.

Natural gas companies say CPS has accepted the risk of buying gas in the spot market, where prices can go up or down. And they argue that they don’t fix their prices, that they are set by an index – an average of what buyers have recently paid for gas in the spot market.

“CPS has purchased gas from Energy Transfer at prices negotiated based on market rates and transparent to CPS,” Energy Transfer said in a statement. “CPS could have purchased and stored enough natural gas in the days and weeks leading up to the winter storm to responsibly manage its duty to protect critical needs. But CPS failed to take this prudent step, exposing it to the vulnerabilities of buying gas in spot markets.

Seven of the remaining CPS prosecutions have been consolidated under a single judge in Bexar County. In that litigation, the utility is challenging $392 million in natural gas bills owed primarily to Energy Transfer. Another case is in federal court.

“CPS Energy and gas utilities across the state have been left with the same dire choice – pay exorbitant prices or leave their customers without service,” utility officials said in a statement.

“Energy Transfer misrepresents the facts and completely ignores the reality that we were in an unprecedented event that was declared a state of disaster by the Governor of Texas,” they said.

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