A natural gas trader sued by the Kansas attorney general over fuel sales during a winter storm in 2021 sold almost $154 million in gas to Oklahoma utilities during the same period.
Oklahoma customers of the state’s largest regulated utilities are paying back billions in natural gas costs for the next several decades from a two-week period during Winter Storm Uri.
The lawsuit, filed last month by Republican Kansas Attorney General Kris Kobach against Macquarie Energy LLC, alleges the company manipulated natural gas trades on the Southern Star trading hub in Kansas. The trades bid up the price of natural gas to unprecedented levels and allowed the company to earn record profits, the lawsuit said.
A spokeswoman for Macquarie Energy, a subsidiary of an Australian bank, said the company doesn’t comment on active litigation. Macquarie Energy is among the five largest natural gas traders in the U.S. market.
The company sold $118 million in natural gas to Oklahoma Natural Gas during Winter Storm Uri, according to fuel sale disclosures by the Oklahoma Corporation Commission’s public utility division. Macquarie sold another $15.2 million in natural gas to Oklahoma Gas & Electric Co. and $15.3 million to Public Service Co. of Oklahoma.
All told, those three utilities spent $2 billion on natural gas purchases during the winter storm. That exceeded their natural gas purchases for the entire previous year.
Oklahoma Attorney General Gentner Drummond is “aware of the Kansas litigation and has been reviewing whether there were similar circumstances in Oklahoma,” said spokesman Phil Bacharach.
OG&E said it kept the lights on during the winter storm that had unprecedented and extreme weather conditions.
“We and our customers ultimately were at the mercy of the natural gas market, and prices during the storm reached astronomical levels,” said Aaron Cooper, OG&E’s manager of corporate communications. “We have taken steps to protect our customers from skyrocketing fuel costs should we ever experience another extreme event like Uri.
“Like our customers, we are concerned if market manipulation is found to have occurred during Winter Storm Uri. We certainly would support any investigation into the practices of third-party natural gas marketers on behalf of our customers.”
The Kansas lawsuit involves natural gas trades on the Southern Star trading hub, where prices spiked to more than $622 per unit during the storm. Part of that market includes Oklahoma. Extreme cold led to unprecedented demand for natural gas for heating and electric generation. But Kobach’s lawsuit said the price spikes didn’t make sense.
“These conditions understandably led to increased natural gas prices during this time,” the lawsuit said. “However, the natural gas prices and benchmark prices in multiple Mid-Continent locations — and Southern Star particularly – were not readily understandable: but rather, as aptly described by the American Public Gas Association, ‘unprecedented and unthinkable.’”
Most of Oklahoma’s utilities got their gas from the OneOK Transmission hub, where prices spiked to $1,250 per unit, according to the federal Energy Information Administration. Prices before the storm were between $2 and $3 per unit.
Kobach’s lawsuit said Macquarie’s market size gave it “the ability to manipulate benchmark Southern Star Gas Daily price through manipulative trading of Southern Star physical gas.” Macquarie was one of the largest suppliers of natural gas to Kansas’ main gas utility, Kansas Gas Service, a sister company to Oklahoma Natural Gas.
“At Oklahoma Natural Gas, our focus continues to be delivering natural gas safely and reliably to our customers,” read a statement emailed Thursday by ONG public relations manager Chad Previch. “We cannot speak about other organizations’ operations.”
The Kansas lawsuit alleges wrongdoing under a federal law, the Commodities Exchange Act. It said Kansas customers paid at least $50 million more for natural gas because of Macquarie’s actions. The lawsuit was filed in Shawnee County, Kan.
The Federal Energy Regulatory Commission is still investigating possible market manipulation during Winter Storm Uri.
Oklahoma Corporation Commissioner Bob Anthony, who has questioned Oklahoma utilities’ response to the winter storm and their purchases of natural gas, said the Kansas lawsuit shows that state officials can act and don’t have to wait for federal investigators.
“In my opinion, to do any less than our absolute best to find the true sources of these extreme costs and examine the prudence in the context of appropriate market rates and industry best practices would be a dereliction of our duty to the ratepayers of Oklahoma,” Anthony said in a deliberation statement filed Thursday at the Corporation Commission.
Separately, the Corporation Commission voted 2-1 earlier this week to hire an independent consultant to review fuel purchases made by OG&E, PSO and ONG in 2021. That examination wouldn’t include most fuel costs during Winter Storm Uri. Those fuel costs have already been deemed “prudent” in the ratepayer-backed bond cases that were approved in 2022.
The ratepayer-backed bond cases for utility fuel costs during the 2021 winter storm all include provisions that would “claw back” money from companies found to be manipulating market prices during Winter Storm Uri.
Commission Chairman Todd Hiett said he had full confidence in the public utility division staff’s annual review of the fuel costs. But he said the large amounts – more than $1.75 billion from the three utilities in 2021 – necessitated the review of the fuel purchased for the rest of 2021. The public utility division and the attorney general’s office, which represents consumers in utility cases, would work together to select a consultant.
Anthony, who earlier called for a consultant to review all fuel charges from 2021, voted against the plan proposed by Hiett. New Commissioner Kim David, who took office in January, voted for the proposal.
“This is a poor approach,” Anthony said at the Feb. 28 meeting. “It’s limited. It’s restricted, and it ties the hands of a consultant. It seems to be cosmetic more than a substantive effort to give an honest and thorough assessment.”
Paul Monies has been a reporter with Oklahoma Watch since 2017 and covers state agencies and public health. Contact him at (571) 319-3289 or firstname.lastname@example.org. Follow him on Twitter @pmonies.