Lawsuits take aim at BP for ‘unconscionable’ prices during 2021 cold snap in Kansas
BP Energy and other suppliers took advantage of a historic cold snap two years ago to sell natural gas at hundreds of times its normal price, two class action lawsuits filed in Kansas allege.
The lawsuits, which name a combined eight companies in the natural gas supply chain, allege defendants violated the Kansas Consumer Protection Act and illegally profiteered off of the disaster.
Five Kansas residents and customers of Kansas Gas Service brought one lawsuit “to recover damages as a result of defendants’ unconscionable practices,” the petition, filed Tuesday in U.S. District Court in Kansas, says.
Another five residents who are customers of city-owned gas utilities that are part of the Kansas Municipal Gas Agency filed the other lawsuit.
“No one has yet brought a claim to seek reimbursement for the Kansas consumer ratepayers, and we think that claim should be brought because there were some very significant profits made,” said Jay Fowler, a partner at Foulston Siefkin, representing both groups of plaintiffs.
Along with BP, the lawsuit filed by KGS customers names Southwest Energy, Macquarie Energy, Energy Transfer, Tenaska, MIECO and Rockpoint Gas Storage as defendants. The KMGA customers’ case also names BP, Macquarie and Southwest Energy, along with CIMA Energy.
In February 2021, sustained, frigid temperatures brought the Midwest power supply to the brink of collapse. The storm, called Winter Storm Uri, caused rolling electrical blackouts, and the cost of natural gas skyrocketed. Gov. Laura Kelly declared a state of emergency, and Kansas energy regulators directed natural gas utilities to do whatever was needed to ensure continuous gas service.
But the prices utilities paid to supply gas to their customers were astronomical.
On Feb. 1, 2020, the spot price for gas coming from the pipeline that supplies Kansas was about $2.50 per MMBtu, the lawsuit says. It started to climb as meteorologists predicted cold weather. By Feb. 10, the price had risen to $329.60 per MMBtu. A week later, it reached $622.79, nearly 245 times the price from the beginning of the month.
Typically, the lawsuit says, utilities purchase gas in advance based on a set price, often the first-of-the-month price. If they need additional gas, they can purchase more at the daily “spot price,” which is the market rate at the time of purchase.
As prices skyrocketed in early February, the lawsuit alleges, the defendants declared force majeure, a clause often included in contracts that releases parties from responsibility because of unforeseen events.
Having shed their responsibility to deliver gas at the first-of-the-month price of $2.52, defendants then sold the same gas to other distributors at the spot price — as high as $329.60 or $622.79, the lawsuit claims.
“Defendants seized on Winter Storm Uri to redirect a substantial volume of natural gas that it had agreed to sell at lower prices … and send the same gas to make spot sales to distributors refilling their storage capacities,” both lawsuits say.
When the cold subsided, gas utilities had spent hundreds of millions of dollars to maintain customers’ service. Kansas regulators allowed them to defer those costs to be repaid by customers over time rather than hitting Kansans with astronomical one-time bills.
For the state’s largest gas utility, Kansas Gas Service, the cost of the storm, including financing costs, totaled more than $366 million.
Kansas Municipal Gas Agency members suffered extraordinary costs from the storm of more than $36 million, the lawsuit says. Many of the member municipal utilities spread the costs out over years to lessen the impact on customers.
Meanwhile, the lawsuit says, defendants reaped huge profits.
Energy Transfer, it says, reported $5.04 billion in revenue — before interest, taxes, depreciation and amortization — during the first quarter of 2021 compared to $2.64 billion during the same period in 2020.
Similarly, BP reported profits of $4.7 billion during the first quarter of 2021 compared to a loss of $4.4 billion the year before. During the fourth quarter of 2020, its profits totaled $1.4 billion.
A spokeswoman for Macquarie said the company does not comment on pending litigation.
None of the other seven companies named as defendants across the two cases immediately responded to requests for comment.