By Shelby Webb
The Houston Chronicle, Jan. 6, 2023
Allison Matney did a double take when she looked at her most recent gas bill from CenterPoint Energy. It had nearly doubled from the previous month.
She started to re-evaluate her behavior and that of her teenager. Had they been taking more or longer hot showers? Her water bill suggested they had not. Nor had they used the gas furnace much during a relatively mild late autumn.
“I really could not pinpoint what on earth was happening to have a bill that much higher,” Matney said.
But it wasn’t anything she or other CenterPoint gas customers did differently. Rather, the company, like other gas providers across Texas, were passing on to customers gas prices that had skyrocketed during 2022. And the effects of those price hikes could be more noticeable as Texans with gas furnaces begin to crank up the heat during winter.
The evidence was there in the fine print of her CenterPoint gas bill: The “Gas cost adjustment” had risen in August to $1.13 per hundred cubic feet compared with 74 cents in February. A month earlier, in January, the rate had been 61 cents — an 85 percent increase in eight months.
The increase represented months of market turmoil highlighted by Russia’s Feb. 24 invasion of Ukraine that led to natural gas shortages across Europe.
Texas gas producers were happy to fill the gap, and exports from the Gulf Coast skyrocketed, forcing U.S. consumers and utilities to compete with Europe for the commodity, said Ed Hirs, an energy fellow at the University of Houston. By May, the average cost of 1 million British thermal units of natural gas reached $8.14, a 180 percent jump from the $2.91 per million British thermal units a year earlier, according to the Energy Information Administration. One million Btu equals about 1,000 cubic feet of natural gas.
“Natural gas jumped a lot during the summer, and CenterPoint passes those costs through that wholesale price to consumers,” Hirs said. “As long as the wholesale markets stay volatile, we have exposure to higher prices.”
In addition to the base charge for natural gas, CenterPoint and other gas providers charge a fixed rate to compensate for increases in the cost of natural gas. Some utilities — like CPS Energy in San Antonio, Atmos Energy in the Dallas-Fort Worth area, and Texas Gas Service in Austin and West Texas — change the rate of the so-called gas cost adjustment monthly. CenterPoint, which serves Houston, changes its rate just a couple of times a year.
Texas law prohibits utilities from profiting from the adjustment cost of natural gas passed on to consumers. If a utility collects more than necessary, it must rebate that money by reducing the rate. If it doesn’t collect enough, the rate increases. The Railroad Commission, which oversees oil and gas operations in Texas, randomly audits utilities to enforce the law.
CPS Energy in San Antonio, which changes its gas adjustment rate monthly, in April began raising it to a high in October of 86 cents per hundred cubic feet. In December, CPS cut the rate to 72 cents, and this month it’s about 56 cents — half the current rate assessed by CenterPoint.
Charles “Chad” Hoopingarner, vice president of financial planning for CPS Energy, said calculating that rate takes a lot of estimating. His team works to forecast how much natural gas CPS Energy’s customers will use, what the cost of natural gas will be on the spot market, and whether the utility will need to raise or lower it the following month.
But anything from production issues at wellheads in Texas to geopolitical events half-way around the world can upend the estimates.
“Everybody has their own strategy,” Hoopingarner said, referring to utility companies, “and the things that happened in the last year and half — between (the February 2021 freeze) and Ukraine — those were extraordinary events no one saw coming and no one fully understood the implications until afterward.”
During a tumultuous 2022, CenterPoint’s stuck with its strategy and changed its gas cost adjustment twice.
David Tuttle, a research associate at the University of Texas at Austin’s Energy Institute, said there are benefits and risks to any utility’s method. Changing it a few times a year means customers’ bills don’t change much month to month, but a utility can get socked if fuel costs sky-rocket in the interim. Changing it more often, he said, can result in monthly bill changes for customers but more stability for the utility.
CenterPoint didn’t make an official available for an interview, but echoed Tuttle’s point in a statement.
“The company typically updates the (gas cost adjustment) twice per year, which helps provide rate stability to customers throughout the year while still allowing for adjustments based on changes in market prices,” CenterPoint officials wrote on Thursday.
While gas customers can expect unusually large bills for the period covering the deep freeze that blanketed Texas just before Christmas, Hoopingarner and Hirs said they expect those costs to gradually fall during 2023 and for the natural gas market to be more stable. The benchmark price of natural gas on Thursday closed $3.78 per million Btu compared with a high of more than $9 in August.
Utilities that scrambled last year to deal with the sudden surge in European demand and resulting price hikes likely have a plan going forward, Hirs said. Production also has ramped up to meet that demand, he said, and Europeans stored larger quantities of the fuel ahead of winter, which has been mild thus far both on that continent and in the U.S.
“With oil production in the Permian basin back up to almost pre-pandemic levels, gas production has increased,” Hirs said. “The domestic supply of gas from the Permian is going to help keep the price of gas below (50 cents per hundred cubic feet) hopefully through the year.”
If CenterPoint continues to follow its rate schedule, its adjustment cost will change next month.
Hoopingarner didn’t venture to predict what natural gas prices would be this year, especially after the drama of 2021-22, but he CPS Energy’s budget for 2023 reflects forecasts for more stable and lower natural gas prices.
Still, gas customers such as Matney are wary of potentially larger bills on the way. She’s even considering the benefits of buying an electric stove to replace her gas-fueled model.
But Matney, who works for the Houston Independent School District, said she’s less concerned with her bill than she is with the bills of families of students in HISD, where more than 78 percent qualify for free or reduced-price meals. She knows families who have had to make difficult choices between paying rising utility bills and buying increasingly expensive food. The recent surges in gas prices won’t help.
“During the most recent freeze, you have families asking ‘Are we going to eat on Christmas or heat our house,'” Matney said. “Nobody should have to make that decision. If utility costs are increasing, then they may have to make those decisions, and those are basic needs of our students.”
Originally posted on The Houston Chronicle.