The company CirclesX says it can prove widespread natural gas market manipulation. So far, its case has gained no traction in court.
A look at more than a century of events that led up to the 2021 blackout and what happens now.On Feb. 15, 2021, Erik Simpson woke up in Houston without cellphone service, so he went outside looking for a signal.
The night before, as a historic winter storm moved into Texas, the state’s grid operator had cut power to millions in order to stabilize the electric grid. By daybreak, much of Houston was without power. Pipes were freezing. Simpson said a neighbor’s house caught fire. But, as he walked around his block, something else caught his attention. The storm had not knocked down many trees, at least not in his neighborhood.“If trees are knocking down power lines, that's just an act of God and, you know, a terrible natural disaster,” Simpson said. “But in this situation early on, there was very little of that. It didn't make sense.” Without visible evidence showing why the power was out, Simpson said his mind immediately went to his former employer, the energy giant Enron. Simpson worked for the company as a natural gas trader at the time it caused blackouts in California by intentionally withholding gas and electricity to boost its own profits. “I was on the east power desk at the time,” he said. “The guys on the west power desk were basically buying up capacity on all the lines going into California. It would cause prices to spike, and they would make hundreds of millions or billions of dollars.” Simpson was not the only one who wondered if something similar was afoot in 2021. But he was one of the few people with the resources to look into it. He runs the natural gas analytics firm CirclesX. He said within days of the blackout he was using his company’s method of tracking flows of natural gas to uncover an Enron-style fraud taking place on the Texas pipeline system.This is the origin story of one of the most closely watched lawsuits stemming from the 2021 Texas blackout. In the years since his morning walk, Simpson hired a law firm and convinced thousands of Texans to join him in litigation against some of the biggest names in energy and finance. That includes fossil fuel and pipeline companies BP, Energy Transfer, Atmos Energy, CenterPoint Energy, ExxonMobile, Kinder Morgan, Koch Energy Services, and Shell Energy as well as commodity traders Morgan Stanley, Goldman Sachs, Bank of America and many others. The suit alleges that these companies exacerbated or even sparked the days-long power failure by withholding natural gas to drive up prices. Simpson said his lawsuit also provides evidence that pipeline companies and gas suppliers broke firm contracts with electric utilities only to sell gas for higher prices in the midst of the crisis, further reducing electric reliability. In the energy business it is against contract law for gas suppliers break a contract simply because they want to get a better price for their gas somewhere else., a legal term meaning that the bad weather prohibited them from delivering gas, in order to get a higher price."It's just real simple: lying, cheating and stealing," he said."If you cancel your contract with someone and flip it to someone else, that's illegal under Texas law." The companies named in the suit all deny any wrongdoing, but this kind of market manipulation does happen — often during extreme weather events.was accused of illegally depressing natural gas prices at the Houston Ship Channel during Hurricane Rita. The company denied all wrongdoing, but eventually reached a settlement with federal regulators.fell under investigation for gas market manipulation around the time Hurricane Ike hit the Gulf Coast. The company similarly denied wrongdoing, but eventually came to a settlement just two years ago.“Energy transfer gets a $2.5 billion windfall. BP gets a $4 billion windfall” in 2021, Simpson said. Simpson said that money is wrongly being paid by everyday Texans who, since 2021, have paid extra on their utility bills to pay off the debt caused by high energy costs during the storm.the energy companies argued that, even if they did what CirclesX says they did, the Texas legislature had already deemed those actions legal, by paying the companies the windfall profits they made during the storm through a process called “securitization.”It compensated the energy companies by taking out a massive loan to pay them off in a lump sum. The loan is now being paid down through monthly charges added to Texans' utility bills. CirclesX argued that securitization doesn't mean ratepayers can't recoup money already paid to energy companies if fraud is proven. “Our view is that … you have an obligation to then recover the money if you later found out that it was ill gotten gains,” Simpson said. But the court agreed with the energy companies. It found CirclesX had no standing to bring the case. The judge found that the court lacked jurisdiction over “the amount at issue over the securitization of natural gas rates” and the alleged “harm related to loss of natural gas service." KUT reached out to several of the companies named in the suit for reaction. CenterPoint Energy replied: “We appreciate the diligence shown by the district court in dismissing all claims against CenterPoint and the other defendants.” The energy company also noted that the court agreed with CenterPoint’s argument “that the Railroad Commission of Texas had already weighed in on the issues alleged in the claims against the gas utilities.” The Railroad Commission of Texas, the state’s oil and gas regulator, oversaw the securitization of gas costs in the aftermath of the storm. CirclesX is now bringing the case to a court of appeals. It is due to submit that appeal by March 28. Simpson said other cases against energy companies and utilities in federal courts in Oklahoma and Texas have survived motions to dismiss.Mose Buchele focuses on energy and environmental reporting at KUT. Got a tip? Email him at mbuchele@kut.org. Follow him on Twitter @mosebuchele.Houstonian Sandra Edwards, who lost power for four days during the blackout, started getting electric bills this spring that are almost double what they used to be. That’s because electricity has its own supply chain — and everybody needs to get paid.Senate Bill 7, the bill that deregulated Texas' retail electrical market, was drafted in secret, championed by a disgraced energy giant and, ultimately, garnered bipartisan support. It drastically transformed Texas' energy landscape. Here's how it passed.Several groups are investigating manipulation of the electric and natural gas markets during the Texas blackout. But the rules are different for different kinds of energy.
2021 Winter Storm Atmos Energy Bank Of America Centerpoint Energy Energy Transfer Exxonmobile Goldman Sachs Kinder Morgan Koch Energy Services
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