Fargo, Grand Forks could pick up most of North Dakota's $50M natural gas bill from Texas freeze
The sole natural gas provider to both cities, the Xcel Energy subsidiary Northern States Power, has asked for approval on the recovery of close to $33 million of unforecast costs over four days of the February freeze. Regulators want another look at their numbers.
FARGO — For many months after Texas froze over and blackouts plagued its residents, customers in the Upper Midwest will shoulder a share of the cost for the Lone Star State’s power grid failures.
In North Dakota, where the added impact of the natural gas price spike totals around $50 million, the hit to customers could vary substantially depending on which part of the state they live in and who provides their gas.
Especially short on luck are residents in the Fargo and Grand Forks areas, which together account for the majority of the unplanned February costs for North Dakota’s investor-owned natural gas utilities.
There, Northern States Power, the sole natural gas provider to both cities, is asking regulators to help recover around $33 million in unforecast costs from four days during the February freeze. For an average NSP household, that comes out to about $240, a cost North Dakota regulators decided to reevaluate last week.
At a special hearing of the state’s Public Service Commission on Thursday, May 27, Commissioner Brian Kroshus noted the amount requested by NSP is substantially higher than that of other companies serving North Dakota.
Great Plains Natural Gas, which only operates in Wahpeton, asked regulators to approve about $160 in added cost per household. Montana Dakota Utilities, which serves about 115,000 customers predominantly in western North Dakota, got approval Thursday to spread close to $100 per household over a 16 month period beginning in early June.
The fewer than 250 households in Drayton served by the small company Dakota Natural Gas, a recent entry into the North Dakota market, will see no impact to their bills from February’s national gas shortage.
“I’m hesitant, at best, and just not willing to take the $240 adjustment at face value,” Kroshus said of the cost recovery requested by NSP, a subsidiary of the large regional utility Xcel Energy.
NSP already went through a hearing before the Public Service Commission to make its case for its requested recovery costs, but regulators indicated Thursday they will bring company officials back to take a closer look at their numbers. Kroshus said he’s skeptical of the company’s request in light of the lower figures presented by other providers.
“How does a smaller company like Dakota Natural Gas significantly outperform a company like NSP during an event like we saw in February?” he asked.
In a statement, a spokesperson from Xcel Energy said its highest priority during the cold spell was the delivery of reliable heating and electricity to its customers. If the request to spread costs over a 14-month period is approved, the average per household impact will be $17 a month, they said.
The company added it is evaluating the possibility of increasing its storage capacity and hedging practices to better prepare for extraordinary circumstances.
"We are already working with our regulators and other stakeholders to extract learnings from February and make any adjustments needed to address the effects of extreme weather in the future," Xcel said.
Natural gas payments, known as a “pass-through” cost for utility companies, don’t yield any profit for providers. While utilities are entitled to some amount of recovery for unforecast costs under North Dakota law, NSP could have to eat some of the burden themselves if regulators don’t approve the sum of their request.
In total, Kroshus said the added impact of February’s natural gas price spike to North Dakota customers is approximately $50 million, with a little over a third of that applying to 150,000 regulated natural-gas-connected residential homes in the state.
Even considering the hits to customers’ bills, North Dakota utilities seem to have weathered February’s price spike better than those in other states in the region.
The Wichita Eagle reported a town of 500 people in Kansas is suing British Petroleum after seeing the cost of their natural gas shoot up by 11,000% for four days in February. In Minnesota, natural gas utilities told state regulators they had to pay around $800 million more than planned over the course of five days in the freeze.
“I don't think there's any question that, overall, utilities in North Dakota performed significantly better," Kroshus said. But, the commissioner added, this relatively lesser hit might come as little consolation to many customers, particularly those in lower-income households where forking over a few hundred dollars can mean sacrifices in other places.
Some providers in North Dakota like NSP had the advantage of storage capacity, where they can draw on previously purchased, cheaper natural gas. In the statement, Xcel noted they typically purchase about a third of their supply on the daily spot market. Once demand outstripped storage and gas locked in through long-term contracts in February, the company had to fill nearly half its supply off the spot market, where prices skyrocketed.
Meanwhile, the small newcomer Dakota Natural Gas had no storage capacity for its North Dakota households but still escaped February’s extraordinary spike with virtually no additional cost. Company executive Cody Chilson explained the Minnesota-based utility buys gas for its North Dakota customers on the first day of every month to stay away from the sometimes volatile daily markets.
That can often mean the Drayton provider risks overpaying if temperatures end up warmer than expected, but in case of February's sudden gas shortage, it paid off big.
“For long stretches of time, (our competitors) are able to provide cheaper gas,” said Chilson, who added his company is working toward buying its North Dakota gas even further in advance, by months or years. “When purchasing goes wrong in the day gas market, it has the potential to go very wrong.”
Readers can reach Forum reporter Adam Willis, a Report for America corps member, at firstname.lastname@example.org.