Last week when the country’s midsection was in the grip of a polar vortex, Texan Roland Burns, CFO of the natural gas company Comstock Resources, gushed, “This week is like hitting the jackpot with some of these incredible prices. Frankly, we were able to sell at super premium prices.”
It wasn’t his finer moment.
More than 50 deaths in Texas alone so far have been attributed to the frigid temperatures.
That the utilities were able to jack up their prices by exorbitant amounts surely will be investigated. The price of natural gas rose from $3 to more than $600 per standard unit in a matter of days.
Yes, the frigid weather wreaked havoc with machinery, causing gas production to drop. And yes, demand was up. But neither was proportional to how their prices spiked.
Today, certain communities from Mississippi to Minnesota are being charged 25-fold what they normally would pay for natural gas over the stretch of just a few days. That means a homeowner who typically sees a $100 gas charge can expect to see it rise to $2,500.
Humboldt, population 1,880, is looking at a possible energy bill in March three times over for what it allots for the entire year.
Cities that lock in prices well in advance of winter demand and set aside enough to skirt the inevitable price peaks do best in such times.
Iola, for example, has natural gas stored in multiple locations across southeast Kansas and northern Oklahoma, and makes a point of “topping them off” when prices dip. That volume helps it hold out longer when things get rough.
“This isn’t like Humboldt made a mistake,” said Cole Herder, Humboldt city administrator, at a specially convened council meeting Monday night. “If we consistently bought excess gas to cover a once-in-a-40-year event, then we would have been wasting money for 39 years.”
Humboldt purchases about one-third of its natural gas during the summer when prices are low. Another third is purchased one month before it’s expected to be used. The remaining third is purchased on a daily basis in what is called the spot market where the gas is bought and sold in real time. In that market, volatility is higher and equally unpredictable. Spot prices last week fell from $1,250 on Wednesday to $4 on Thursday.
Economists say the volatility is not relative to anything, such as anticipated inflation. Sky high prices can easily be followed by sudden drops without any explanation.
Humboldt “mixes” the three purchasing mechanisms to arrive at the rate it charges consumers, typically $3 to $3.50 per unit. Since 1992, when the city joined the Kansas Municipal Gas Association, the system has served Humboldt well.
TO HIS credit, Herder has been working the phones contacting higher-ups to see whether aid is possible to help lighten Humboldt’s burden.
He also hopes an investigation ensues in what he feels confident is price gouging when Americans were at their most vulnerable.
