May 18, 2024

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Testimony: Utilities could have avoided winter storm price hikes

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When “Winter Storm Uri” hit in February, it plunged the nation into a deep freeze, causing rolling blackouts across the center of the nation and caused natural gas and electricity prices to soar.

In Kansas Senate testimony recently Berexco, LLC, Chairman and President Adam Beren told legislators in many ways, it needn’t have happened.

Berexco is a family-owned oil and gas energy company headquartered in Wichita.

There were several problems related to the weather, Beren said in testimony, and most of his company’s oil wells were shut down during the polar blast to avoid spills and conserve electricity. However, most of the natural gas wells continued to operate — except where electricity couldn’t be guaranteed.

The problem, according to Beren, is that the utilities were not in close contact with gas producers, and — because the utilities did not prioritize gas facilities for non-interruption, many of those facilities were not able to operate during the winter storm.

Beren says that despite natural gas prices being at historic lows, many of the plants that were ordered to come online to take up the slack when arctic temperatures caused wind farms to shut down did not have fixed-price contracts and were forced to pay high spot prices for natural gas — causing heavy losses.

“Sunflower (Electric Cooperative) had a $100,000,000 shortfall (approximately its annual power supply expense), while it’s our understanding the losses at Kepco and Midwest will be less,” one of Beren’s slides read. 

Moreover, Kansas was not short of power.

According to the Southwest Power Pool’s website, excess generating capacity is more than sufficient to meet peak loads — even without wind.

The SPP has the capacity to generate 67,940 megawatts of electricity without wind and more than 90,000 MW with wind generation. The summer peak load was 50,662 MW as of Aug. 19, 2019, and the highest winter peak load (prior to 2021, was Jan. 17, 2018, at 43,584 MW. The demand at the peak of the winter storm was only marginally higher at 43,661 MW on Feb. 15, 2021.

“Really the demand was not too terribly higher than another peak period that we had had before,” Beren said in the hearing. “So yeah, there was some more demand, but it wasn’t beyond peaks we’ve had in the past. 

Beren says the Southwest Power Pool has excess capacity and in Kansas, we have a lot of excess capacity.

“You know, so you’re scratching your head, where was that energy when we needed it?.

“So yeah, what happened in the vortex the wind didn’t blow, as we all know, the wind blades froze,” he continued. ” So there was no wind energy, the gas and coal plants sort of ramped up to save the day.

“I think what happened … because this isn’t information that’s publicly available, those gas and coal plants — because they are deprioritized, in the whole Southwest Power Pool, they probably didn’t have their fixed-price contracts in place. So they were scrambling when the Southwest Power Pool asked them to ramp up.”

Beren told legislators that because those base-load power plants were not considered a priority, somewhere between $250 and $300 million in extra costs will be passed on to consumers — primarily because those power plants didn’t have gas contracts in place.

Beren noted his company operates an ethanol plant in Nebraska that has a 25-year, fixed-price gas contract that was implemented when gas prices were at historic lows.

“Because the Southwest Power Pool doesn’t prioritize those baseload plants,” he said. “I really just think this was a situation where they just got caught, you know, with a once-in-a-lifetime thing. They didn’t expect they’d have to be paying $200 to $300 (per gas unit) when they needed to run.

“So yeah, I think maybe the Southwest Power Pool is a little bit to blame in all this as well.”

Moreover, he said, there was a problem delivering gas to some of the natural gas-fired generating plants.

“So I think what happened was, and I’ve heard this from some people in the industry, we didn’t have electricity to run our plants, because they weren’t sort of prioritized in the emergency kind of hierarchy of what needed to run,” Beren said. “I think that exacerbated the problem, as well so you had gas pipelines that didn’t have their compressor stations operating, you had gas plants that weren’t running. 

“So it all just kind of became something that could have been avoided.”

Interestingly, against the backdrop of the inability of wind farms to operate in severe cold, cities like Lawrence are fighting legislation to prevent them from outlawing the use of natural gas.

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