A Reflection of Winter Storm Uri with Don Krattenmaker
In February, Winter Storm Uri hit the central and southern states, bringing record low temperatures and causing an energy crisis in Texas that was unprecedented. As a few months have now passed, we wanted to sit down and reflect on what happened with Don Krattenmaker, VP of Business Development, to discuss the affects of this event, and what we can expect to see going forward.
What did we see in February with Winter Storm Uri and natural gas prices? What made the prices spike?
Winter Storm Uri settled over the southwest causing record low temperatures for an extended period. The electrical crisis was well documented as the various blackouts unfortunately resulted in loss of life. However, on the natural gas side, the cold caused freezing in both the natural gas wells and pipelines as natural gas in it’s raw form has liquid molecules. This freezing was exacerbated also caused by the infrastructure being designed for a warm weather climate. Unlike in places like Canada, where the system is designed to insulate heat, in Texas, the systems are designed to remove heat. In addition, demand for natural gas reached the highest that the country had ever seen. The supply shortage caused by freezing with increased demand caused prices to reach 200-300 times the normal price of gas.
With the sudden decrease in production due the freeze, should I be worried about my natural gas not running?
Yes. In the past nine months there have been three major failures in energy infrastructure, The California rolling blackouts, Texas weather event, and the Colonial Pipeline hack. Without sound policy and discussion, we are creating bigger energy problems going forward.
What did some residential and commercial natural gas users experience during the storm?
Utility users and WoodRiver Energy customers didn’t feel many impacts from the storm. However, utility customers will begin to see the storms impacts in the coming months. Xcel Energy spent around $650 Million on gas President’s Day weekend, more than what they spent for the whole of 2020. In short, they need to recuperate the costs. Xcel customers can expect to see an increase of $1.11per dth for the next two years. Essentially making the invoices about 20-25% higher than normal. Although most customers would barely notice such an increase, be assured, it will be there.
Will this ever happen again?
Yes. Over the last four years, we’ve had major disruptions in the energy markets. Three years ago in Iowa, prices went from $3 to $67 per dth on New Years Eve. In Seattle, WA two years ago, prices went up to $100 per dth. Then last year, Covid sent oil prices tumbling down to negative numbers within a day. To say another market event isn’t going to happen is naïve.
How are utilities responding to the market event?
We are going to see rates go up. An unprecedented amount was spent on natural gas that needs to be recuperated.
How can I protect myself from any future spikes, like what happened in February?
There are a couple solutions to staying safe from market volatility. If you are buying transport gas, you should be actively working with your supplier, like WoodRiver Energy, on a contract that passes on the risk of daily exposure to that supplier. A plan such as the Price Protection or Guaranteed Fixed Rate would be the best protection someone can acquire. In addition, consumers need to be attuned to how they use their energy. What kind of thermostats are being used, can I remotely control the consumption within the building, how the equipment is being used, and can the facility manager be proactive enough to cut consumption.
With a protection-based program, am I guaranteed to not experience a sudden price spike?
Yes. With WoodRiver Energy, if someone is on the Price Protection program or Guarantee Fixed Price program, they will have a lot of certainty into their program prices. On those plans, we are locking in pricesfor the winter months to avoid the spikes. We are moving away from partial requirement contracts and will only be signing for full requirements. Further, with our new ConnectedControl program, we are able to understand how customers may be able to use their energy more efficiently.
I’m with my local utility, why should I switch to a provider like WoodRiver?
Certainty and control. Utility customers haven’t seen the increases yet, but it’s coming. If a customer wants pricing options they will have to buy from a supplier like WoodRiver Energy. We are able to provide pricing that meets the customers needs whether it’s a Guaranteed Fixed Rate for a number of years, a mutual fund approach like our Price Protection Program or if they want to purely ride the market. Xcel won’t or can’t offer those options. Our sales team are seasoned gas experts that can discuss energy needs in depth and find plans that are best suited to that customer – another service that is impossible to find from the utility.
Don Krattenmaker has 20 years of experience in trading and selling natural gas. Most recently, he led a sales office of 25 people marketing gas in the Rocky Mountain and upper Midwest states. At WoodRiver Energy, Don leads the company’s business development efforts and supports the company’s ongoing sales and marketing efforts.