Yesterday we joined with our friends The Utility Reform Network and the National Consumer Law Center to protest a motion by a group of power plant owners and Shell Oil to increase household electric utility bills by millions of dollars in California. Here’s the deal: just as Public Citizen predicted, the fracking boom does not guarantee cheap natural gas, as prices skyrocketed from December to February with the cold weather snap. Because natural gas fuels 27% of electricity production, that means some generators saw their costs increase. Under complex reliability rules, some of these generators and power marketers claim they haven’t been able to recover all of their costs in the marketplace, and petitioned the Federal Energy Regulatory Commission for an emergency waiver from market rules to allow them to recover 100% of their rising natural gas costs. As we point out, this proposal shifts all the risk away from the owners of power plants an onto household consumers, while at the same time allowing these same generators to pocket excess profits should gas prices fall. But the really outrageous component of this brazen plan is that one of the petitioners is Shell Energy, a major seller of electricity in the marketplace. We write: “Shell Energy’s inclusion as one of the suppliers seeking the emergency waiver is particularly egregious because of Shell’s unique role as a global leader in natural gas production. Shell Energy’s parent company, Royal Dutch Shell plc, is one of the largest natural gas producers in the world and in the U.S. It is outrageous that an affiliate of such a major natural gas producer seeks relief from perceived high natural gas prices—particularly when affiliates of Shell Energy are enjoying stronger profits from the increased natural gas prices from sales of gas produced from thousands of Shell’s drilling wells.” In addition, affiliates of other suppliers requesting the emergency waiver are also sophisticated energy price hedgers, with companies like NRG and Dynegy veterans of dealing with natural gas fuel price volatility through the years, including the 2000s. And some of the owners of La Paloma, notably the investment banks Morgan Stanley & Credit Suisse, are among the most erudite proprietary financial traders of natural gas contracts in the world, and should therefore be quite capable of managing commodity price risk. We demand that FERC reject this outrageous request to shift big energy company’s risks onto working families utility bills.
Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum