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An American Red Cross Disaster Relief vehicle
Due to enormously high natural gas pricing for a two-week period in February 2021, a small Southeast Texas city finds themselves with a dilemma.
The City of Kountze, which operates its own gas system, typically pays about $12,000 for natural gas for the month of February. But City Administrator Rod Hutto said the city received a $500,000 bill for February 2021, which they refuse to pay.
During a two-week period in February 2021 (Storm Uri), the city’s gas marketing company informed the city natural gas was going up from $3 per MCF (one thousand cubic feet) to $980 per MCF, according to Hutto.
The city administrator said the city has been fighting paying the $500,000 bill ever since it was received almost two years ago.
Hutto explained the purchase point for the city is tied into Houston Pipeline and the city’s marketing company, which is like a stock broker.
“They hustle the purchase of the gas which, in return, flows through Houston Pipeline’s pipe to the purchase point,” Hutto said. “Houston Pipeline charges the marketing company a transportation fee to transport the gas through their pipeline; the marketing company, in return, passes that fee on to the city.”
He said the natural gas prices are based off the Houston Ship Channel prices at real time.
“I informed them the city would not be able to afford such an astronomical increase and for them not to commit the city of Kountze to the gas,” said Hutto. “Unfortunately, we were under a Disaster Declaration and an emergency order from the governor to maintain the flow of gas to protect life and property, therefore having no choice but to receive the gas flow.”
Hutto said one of the biggest issues the city has with the situation is a majority of the $500,000 bill is penalties and fines from Houston Pipeline, due to the city not giving the marketing company permission to commit to the gas purchased.”
“So the pipeline says we cannot purchase gas from the pipeline directly so therefore penalties and fines were assessed,” Hutto explained. “This is another thing that is not supposed to be allowed during a Disaster Declaration. You are not supposed to price gouge or assess penalties. We have attempted to get these penalties waved. We have been denied.”
Hutto noted the city has applied for assistance with FEMA, since their definition for assistance is to be in a Disaster Declaration and to protect life and property. “FEMA has denied us twice, stating that they will not provide assistance due to it being an increase in operating cost,” he said.
Hutto said the city provided consumption documents showing previous years during similar weather conditions - that it has actually consumed more gas than it did during Storm Uri, therefore proving it was not an increase in operating cost.
“FEMA still denies assistance,” he stated.
Hutto said the city has made numerous attempts to contact the state’s Attorney General’s Office, requesting them to look into a possible “price gouging” event during a disaster.
Hutto noted, according to Assistant City Administrator Tim Drake, the storm event meets all of the FEMA criteria. He added the city has made several attempts to contact Gov. Greg Abbott, U.S. and state senators, State Rep. Ernest Bailes and others. Hutto noted Bailes’ office contacted him Nov. 17.
“No one will even take the time to look down their noses at us,” said Hutto.
The city manager said, according to an article in the Houston Chronicle, the state has $40 billion in a reserve “rainy day” fund.
“We have tried to get the governor to explain why we meet the definition to the letter but have been denied anyway,” he added. “No one is listening or they are trying their best to avoid rocking the boat, due to it getting into someone’s cookie jar.
They are expecting the city to borrow the money to pay this bill and recoup the funds from the city’s gas customers and we won’t do that.”
The city has between 250 and 280 gas customers.
“How do they expect for the city to collect that kind of money from their customers when they are already struggling to pay their bills now?” Hutto puzzled. “It would take 30 years to collect enough funds to pay off such a debt. Then, in the meantime, what if we have another weather event of the same nature?”
Hutto said he feels this is going to be the beginning of the end for the city’s gas system.
“None of our elected powers to be care to intervene in this matter even though they could,” he said. “This meets every definition for state and federal assistance but, as I mentioned it has fallen on deaf ears. I strongly feel, if an order can be made to force us to receive it, an order can be made for assistance also, especially with it meeting all criteria.”
In a statement, District State Rep. Ernest Bailes (R-Shepherd), stated, “I’m committed to helping prevent financial strain on the city of Kountze and their gas customers who shouldn’t have to foot an exorbitant bill. My office has been working on this issue and we’re hopeful to hear back on alternative solutions, legislative or otherwise, as soon as possible.”
Jennifer Harris, who works with District 3 Senator Robert Nichols, said there’s no record of Hutto contacting their office.
“If he had a conversation with the senator rather than calling into the office, I’m unaware,” Harris said. “I’m not saying it didn’t happen, but we definitely need to get that in front of legislation for sure.”
After a Nov. 17 executive session of the Kountze City Council, Hutto reported legal advisors, Guy Goodson and Kate Leverett with Germer PLLC, suggested the city send a letter to their natural gas marketing company and submit an offer to pay the February 2021 bill for “just the gas usage” and request that the penalties be waived from the $500,000 total. Hutto noted the penalties are from Houston Pipeline, not the marketing company.
“I’m not sure if the marketing company will be able to negotiate that but Houston Pipeline will not communicate with the city due to the city doesn’t have a contract with them, just the marketing company,” he added.