February’s widespread cold snap will definitely raise Missourians’ natural gas bills, and the size of the increase could depend on the outcome of a federal fight between gas marketers and utilities.
Spire and other utilities told the Missouri Public Service Commission on Tuesday that their customers face potential bill increases of 15% or more, unless costs are spread out over multiple years.
In making that calculation, Spire assumed that it will collect about $195 million in penalties from gas marketers whose performance and supply capabilities faltered during the deep freeze.
Because of those supplier failures, utilities had to buy at exorbitant prices, in some cases spending as much on gas in February as it spent in all of 2020. The penalties would offset some of those fuel costs, which will ultimately be passed on to customers.
The gas suppliers are asking the Federal Energy Regulatory Commission, or FERC, to waive the penalties, but state experts said they hope such a request won’t be granted.
“I personally think FERC will reject it, because that’s a really slippery-slope argument,” said Geoff Marke, chief economist for the Missouri Office of Public Counsel, which advocates for consumers on utility issues. “To let everybody off, where do you draw the line?”
“Penalties exist and are appropriate because (gas marketer) nonperformance jeopardizes our system and customers,” Spire added during Tuesday’s online hearing.
Revenue from the penalties would apply to Spire’s business on the western side of Missouri, company officials said. But it’s possible that the money — whether collected or not — could ultimately shape the future bills for all of Spire’s Missouri customers, thanks to the utility’s effort to consolidate its operations across the state.
The company’s businesses in eastern and western Missouri are now run separately, but Spire is seeking to “further unify” them in an ongoing case before the PSC. If approved, a unified statewide rate could force St. Louis-area customers to help shoulder the more extreme gas costs that the western side of the state incurred in February.
Spire said it’s too soon to worry about that possibility.
“It’s premature to have that conversation,” said Scott Carter, president of Spire Missouri. “We’ll work that out with the commission.”
Any price shock from February’s deep freeze is still months off for Missouri customers, because the state’s regulated gas monopolies don’t recover fuel costs immediately. Instead, rate changes are approved on a delayed basis, meaning that price impacts in February usually don’t hit bills until fall.
Spire said Tuesday that if the resulting costs were recovered in the single year, it would raise residential bills by 15%, or about $100 annually, for a typical residential customer in eastern Missouri. The company, along with other gas utilities, hopes to spread the costs out over three years, which would mean Spire bills in the St. Louis area would rise about 5%.
Gas customers in other parts of Missouri are expected to face steeper increases.
Spire also said it expects the same kind of extreme weather episode to happen every five to seven years, based on recent experience. That differs from the view of some energy industry officials, who have treated the cold snap as a fluke occurrence.
“We’ve seen two polar vortexes that have significantly impacted production and prices in the last decade,” said Scott Weitzel, Spire’s managing director of regulatory affairs. “As a gas industry, we shouldn’t be selling this as a once-in-a-lifetime event.”