Kansas natural gas utility nears deal to pass on $100M in cold snap costs to wholesale customers

Kansas’ largest natural gas utility is close to reaching a deal to recoup more than $100 million from large-scale customers that failed to provide enough natural gas during a February cold snap that forced power outages across the Midwest.

During the worst of the cold snap, which saw average temperatures in Kansas City fall below 15 degrees for 10 days, natural gas prices shot up to record levels and utilities scrambled to keep customers’ heat on.

In some cases, natural gas marketers, companies that use Kansas Gas Service’s distribution system to provide natural gas to wholesale or transportation customers, failed to get enough gas for their customers into the system, meaning KGS had to supply gas or risk running out for its residential customers.

State regulations require that KGS assess penalties, but because of the extraordinary cost of natural gas — which rose by 200 times in a matter of days — KGS asked to waive some of those penalties. Late Friday, the utility company, customer advocates, several natural gas marketers and staff of the Kansas Corporation Commission filed a plan with Kansas regulators to assess $105 million in penalties to marketers, which they say reflects just the amount of gas those companies used.

In a statement, KGS spokeswoman Dawn Tripp said the utility was “not seeking a windfall recovery” from the storm. The company is trying to recover its own costs without adversely affecting marketers.

“With this settlement agreement, residential and commercial customers are not subsidizing transportation customers’ gas costs during Winter Storm Uri,” she said.

KGS has requested to pass along about $451 million in excess natural gas and carrying costs from the deep freeze to its residential and small commercial customers over five, seven or 10 years, increasing the average residential customer’s bill by anywhere from about $5 to $11 per month. 

KCC spokeswoman Linda Berry said the regulatory agency’s staff has always supported using penalty provisions in the law to ensure all customers paid their fair share — “no more, no less.”

“This agreement reflects the detailed and time-consuming negotiations necessary to identify as precisely as possible the actual costs incurred by the transportation group as a whole and to ensure that one group of customers does not benefit at the expense of others,” she said.

But an attorney representing a coalition of end-use transportation customers said natural gas marketers would likely pass those penalties on to end-use transportation customers, such as hospitals, in short order. The attorney, Jim Zakoura, said his clients struggle with why the utility would pass those costs along “before federal and state investigations are completed.”

He noted the utility’s residential, or “sales,” customers were not affected by the proposed plan.

“KGS should not treat transportation customers better than its sales customers — but transportation customers should not be treated worse,” he said.