Dozens of gas pipeline companies in Texas may have profited off of Winter Storm Uri in 2021. A lawsuit filed by a former Enron energy trader may be Texans' last hope at restitution.
Kin Man Hui/Staff photographer
Houston Chronicle
The Editorial Board
First, start a natural gas pipeline company in Texas. And make sure it’s in Texas, the only state in the nation that lets you own the gas that moves through your network, seize people’s land to build pipelines wherever you want and create local monopolies so you can bully well owners to sell for less and force customers to buy for more.
Then, wait for an act of God. A vicious winter storm will do. A few days before the storm hits, go ahead and cut off some of the gas flows in your pipelines. In fact, move some of it into storage to make it appear to your clients — electricity generators and utility companies that deliver power to people’s homes — as if supply is running low. Heck, you could even export some of it to Mexico real quick. Then, once the storm hits, you throw up your hands and cry “unforeseeable circumstance!” so you can legally suspend your pricing agreements with clients and sell your supposedly dwindling supply of gas at an astronomically inflated price.
If this scheme is successful, you’ll make out like bandits — or maybe like Enron execs before the fall. In nine days, as people huddle for warmth and freeze to death across Texas, you’ll rake in, say, $11 billion.
Good money, if you can get it. Texas lawmakers and regulators certainly won’t stand in your way. Corruption is a lucrative enterprise — for you, and for them. See their campaign finance reports.
Of course, there will be significant consequences. Manipulating gas supply means power plants across the state will struggle to generate enough energy for millions of Texans cranking up their thermostats to keep warm. That means blackouts, frozen pipes, and a lot of people dying — 246 officially, but possibly hundreds more. There will be billions of dollars in damage, but hey, at least you won’t have to pay for it. When people start asking questions, just blame the frozen wind turbines. Some people will believe anything they hear on Fox News.
Sound too far-fetched? Such an elaborate price-gouging plot would surely be detected, right? After all, our vigilant then-Attorney General Ken Paxton was so quick to sue La Quinta for allegedly hiking their motel room rates during the storm. And surely, there are humans running these companies. What human would conspire to profit off of a tragic disaster — and then leave unsuspecting Texas taxpayers footing the bill?
Apparently the fine folks running some of the nation’s largest energy firms, according to a lawsuit filed months ago in Harris County against 92 companies and subsidiaries on behalf of all Texans who were cheated during the blackouts caused by Winter Storm Uri two years ago.
The lawsuit, detailed in a recent four-part series by Chronicle business columnist Chris Tomlinson, was brought by Erik Simpson, a former Enron energy trader who created a proprietary system to monitor and sell data on publicly disclosed gas flows from every meter in Texas. Simpson’s Enron experience gave him a nose for market manipulation. He witnessed the company concocting a billion-dollar scheme to withhold natural gas supply and drive up prices in the California gas and electricity markets.
The data Simpson collected through his company, CirclesX, counters the popular narrative that emerged after the deadly storm: that frozen gas wells, pipelines and wind turbines led to the failure of many gas-fired power plants, triggering one of the deadliest blackouts in the state’s history. Simpson’s data appears to confirm a suspicion that many regulators, energy experts, and this editorial board, wondered aloud about: whether shameless corporate money-grabbing was also a leading factor.
Take Dallas-based Energy Transfer, one of the largest natural gas pipeline operators in the state. According to the lawsuit, days before the storm was scheduled to hit Texas, subsidiaries of Energy Transfer reduced natural gas supply at its plants in Hemphill County and Moore County. The decreased production meant that the company’s pipelines would be unable to meet contractual obligations to its clients. The company declared “force majeure” — or “unforeseeable circumstance” — when the storm plunged temperatures below freezing, enabling it to sell its gas supply for higher prices. Gas that typically cost less than $4 per million British Thermal Units suddenly ballooned to between $200 and $1,200. The storm ended up reaping a $2.4 billion windfall for Energy Transfer in just a few days.
The lawsuit claims some companies even exported their gas supply out of state to drive up demand. J. Aron & Company, a commodities broker owned by Goldman Sachs with a pipeline contract in El Paso, exported gas into Mexico in the days before and after the storm, even after Gov. Greg Abbott issued an order requiring natural gas producers to divert its supplies to power generators in Texas.
One year after the storm, when ERCOT, Texas’ energy grid manager, issued and sold bonds for more than $2.1 billion to pay for damages incurred by the storm, guess which company was one of the lead underwriters? Goldman Sachs, which now stands to benefit from the fees assessed on the transaction.
Such flagrant profiteering should have caught the attention, or at least the curiosity, of Texas lawmakers, regulators or even our beleaguered attorney general. Taking advantage of people by hiking the price of necessities — including fuel — during an official disaster is, after all, explicitly illegal in Texas. Paxton promised one month after Uri that his office would investigate allegations of price fixing in the natural gas market, but he hasn’t provided a single update since.
Our lawmakers — the same ones who will soon take suspended AG Paxton to impeachment trial over unrelated corruption allegations — should see the corruption allegations here as worthy of their time as well. But pleading with them, or with so-called regulators at the Texas Railroad Commission, to do the right thing on behalf of average Texans is wasting ink. The commission’s default posture is to let the gas companies have their way and rely on their generosity to get re-elected.
Indeed, pipeline companies are major donors to the Texas Railroad Commission, the state’s oil and gas regulator. Kelcy Warren, the billionaire chairman of Energy Transfer, is one of the most generous. He donated $225,000 to railroad commissioners' campaigns between 2015 and 2020.
To his credit, Lt. Gov. Dan Patrick demanded the state try to claw back the windfall that gas companies reaped during Uri, but Abbott and then-Public Utility Commission chairman Arthur D’Andrea instead assured executives their profits were safe. Months later, Warren kicked in a $1 million donation to Abbott, like a card player tipping the dealer after hitting a blackjack.
Why do Texans put up with this? Other major gas-producing states are showing that accountability matters. Attorneys general in Oklahoma and Kansas are actively investigating alleged market manipulation that cost their residents dearly during the storm. Even San Antonio’s city-owned utility CPS Energy is suing a handful of natural gas companies for surprise fuel bills it handed customers after the storm, and, as Tomlinson reports, recovering millions in secret settlements.
We’re still waiting for the Federal Energy Regulatory Commission to wrap up its investigation into the alleged price fixing. If that probe concludes without any official sanctions, we will have to look to the courts, notably Simpson’s lawsuit, for restitution. Simpson wants the gas companies to return any “unlawful profits” made during Uri. He is also seeking economic and punitive damages from the gas companies on behalf of “tens of thousands” of individuals and entities that suffered losses during the storm, as well as a jury trial.
Every Texan who was impacted by Uri should send a thank-you note to Erik Simpson for keeping hope alive. It’s shameful that we have to rely on the courts to make people whole, but that’s what happens when our leaders turn a blind eye to corporate greed.