Mayor: Hermann avoids penalty for gas use during cold snap

Mayor: Hermann avoids penalty

for gas use during cold snap

Ray Scherer

The city of Hermann has succeeded from incurring a stiff financial penalty based on residents' conservative use of natural gas during the recent polar vortex cold wave.

At Monday night's Hermann Board of Aldermen meeting, Mayor Bruce Cox reported the city faced a major issue concerning natural gas usage, which he said could've turned serious. Cox said a 600 percent increase in costs may have been levied against Hermann unless residents and businesses cooperated during the extremely chilly temperatures in turning thermostats below 70 degrees. Cox said that action kept the penalty from being enacted.

Alderman David Faerber met with various government officials in hopes of averting a crisis in costs, according to Cox.

"The governor got involved. The attorney general's office got involved," the mayor said.

But despite the effort, Cox said the city may yet have to field some type of price increase for gas because of the cold wave.

"We do know our cost of gas escalated a lot," he said. "We will look at that problem when the time comes."

He thanked residents for their cooperation in reducing the thermostat settings, and took the opportunity to remind voters of an unrelated utility issue that will appear on the April 6 ballot. That question will ask residents whether to approve a switchover in the control of certain electrical infrastructure in Hermann from the city to Central Electric Cooperative. City officials have said Hermann lacks the capability of responding to outages and maintenance needs with the electrical system -- which criss-crosses part of the city yet serves customers in other nearby jurisdictions.

Faerber said he spoke with numerous officials to review the situation involving the natural gas usage, but singled out Rep. Aaron Griesheimer, R-Washington, for his efforts to help resolve the matter.

"All of them were extremely helpful," Faerber said, noting that Griesheimer drove from his home in Washington to the Capitol in Jefferson City in order to respond to the circumstances. 

"He's a very good public servant," he said of Griesheimer.

City Administrator Mark Wallace said natural gas service to Hermann will be reviewed, including cost estimates from the effects of the polar vortex.

"We expect to see some numbers within the next few days," Wallace said. He and Cox also praised city employees -- including the street and water crews -- for their work during the severe winter weather.

"It's an all-hands effort," said Cox.

Ron Ragan, an official with Utility Gas Management, provided a statement to the Advertiser-Courier late Monday afternoon on the situation involving Hermann's natural gas and the cold weather. Utility Gas Management purchases gas on behalf of Hermann. Ragan said the statement was being delivered to all communities served by the Panhandle Eastern Pipe Line.

"Pipelines throughout the Midwest began issuing operational flow orders with most to become effective Feb. 13 forward," the statement opened. "Those flow orders required us to buy gas to cover your daily gas needs under the strict limits of those flow orders or receive penalties from the pipelines for not providing the amount of gas consumed within those strict limits. The temperatures for the time frame of Feb. 13 to approximately Feb. 21 on which date most pipelines lifted the operational flow orders, were at/near record lows for both the high temperature and the low temperatures for many of those days. Since temperatures were extremely low, significantly more gas was required to be put on the pipeline not only for anticipated needs, but to prevent costly penalties being assessed by the pipelines. In many cases these penalties can be both hourly and daily and can be multiples of the daily price, as noted in the trading publications Gas Daily and Natural Gas Weekly. Polar vortex events have happened in the past, most recently in 2019 and before that in 2014. These events are not uncommon and have not had a significant impact on gas prices until this event. This polar vortex was extreme both in the amount of land covered and the duration of the polar vortex…potentially very similar to one that occurred in winter 1983.

"The key difference between ALL prior polar vortex events and this one is the price of gas for this event. This is where it gets interesting. Most 'day ahead' market trades are made via ICE, which is a trading platform for natural gas. The city’s suppliers may obtain some, if not all, incremental gas via this trading platform and are therefore at the benefit or in this case the mercy of the pricing on the platform. The traders pushed prices to record highs on multiple pipelines throughout the Midwest…in the past a polar vortex price for a given day may double or some price close to that. In this instance, some of the prices for our customers gas purchases went to 100 times the first of the month price of approximately $3.00 per dth (energy unit measuring gas)! This is purely and simply price gouging at its very worst. Luckily, these prices only apply to the incremental gas quantities needed to cover the gas needs for vortex temperatures and the pipeline operational flow orders, which limits the damage significantly. Unfortunately, until this can be corrected via legal and legislative means, those incremental costs will be passed on to the customers at some point. We will do our full level best to minimize the impact and defer costs where possible. Investigations are already under way from legislators from all levels of government, from local to the federal level, and potentially multiple agencies. There are anti-profiteering laws in many states to prevent consumers from being taken advantage of and our gas manager, Utility Gas Management, along with the numerous cities and potentially other parties impacted, will exercise all legal remedies to recover damages owed to you, but as you know this will take time. There is absolutely no justification for a cost increase of this magnitude. It is appalling and all efforts will be exhausted to make sure those who are responsible are not only brought to justice, but pay for damages along with any other potential civil or criminal penalties that can be assessed.  

It is important to note that you, the citizens, by turning back your thermostats when requested to do so, greatly reduced the amount of gas purchased at these what we consider illegal prices, thereby saving thousands of dollars in additional costs. Thank you for your efforts and know that we will do everything possible to recover every dime in overcharges."

Ragan also said "the prices charged by these traders is unconscionable."