The official autopsy of the great Texas winter blackout of February quickly established a clear timeline of events: Electric utilities cut off power to customers and distributors as well as natural gas producers, which in turn triggered a negative feedback loop that sunk the state deeper and deeper into frigid darkness.
It's now becoming clear that while millions of Texans endured days of power cuts, the state's gas producers contributed to fuel shortages, allowing pipelines and traders to profit handsomely off them.
Interviews with energy executives and an analysis of public records by Bloomberg News show that natural gas producers in the Permian shale basin began to drastically reduce output days before power companies cut them off.
As the flow of gas cratered, everyone scrambled to secure enough supply, sparking one of the wildest price surges in history. Power producers were forced to pay top dollar in the spot market for whatever gas they could find.
Soon customers will be saddled with the bill and it's a big one. The total comes to about $11.1 billion for a storm that lasted just five days, according to estimates by BloombergNEF analysts Jade Patterson and Nakul Nair.
The cost of gas for power generation alone was about $8.1 billion, or 75 times normal levels. A further $3 billion was spent by utilities providing gas for cooking, heating and fireplaces.
The analysts' estimate is based on spot prices at major hubs assessed by S&P Global Platts rather than private contracts, so is likely an upper limit of the total cost.
Millions of Texans are now faced with the prospect of paying higher gas prices for years as utilities seek to spread the cost over a decade or more. Texas lawmakers have set aside $10 billion to help natural gas utilities cover their costs from the storm through low-interest, state-backed bonds.
A special legislative session convened Thursday but the agenda did not include any measures to fix the power grid. This week, Gov. Greg Abbott appeared to double down on his early assessment that wind and solar were prime culprits of the freeze.
Even though gas failed in its role as a reliable backup fuel during the freeze, Abbott pushed regulators in a letter to strengthen incentives for fossil fuel and nuclear generators while increasing "reliability costs" for intermittent renewable power sources.
'MASSIVE WEALTH TRANSFER'
What Abbott didn't mention was the huge windfall key industry players made during the freeze. Natural gas and propane pipeline firm Energy Transfer posted its highest quarterly net income on record, more than three times its previous best quarter.
This is "the most massive wealth transfer in Texas history," said Ron Nirenberg, mayor of San Antonio. "Energy market participants took full advantage of the declared disaster, or did not take the appropriate steps to stop the exorbitant and unconscionable prices."
Energy Transfer reported years of investment meant it was able to keep its pipelines running and sell gas from storage, providing critical supplies when others could not. Its prices were fully negotiated and set by the market, the company stated.
At its peak, Winter Storm Uri left the Texas grid nearly 50% short of the power it needed, causing widespread blackouts 500 times worse than those affecting California during the wildfires of 2020. Several parts of the system were to blame: regulators failed to predict the severity of the low temperatures, power producers underestimated demand, wind turbines froze, and coal and nuclear plants tripped offline.
GENERATORS FAILED
But the largest point of failure was generators powered by natural gas, according to the Electric Reliability Council of Texas, the state's electrical grid operator. Most of it was attributed to weather-related breakdowns and idled plants.
Some producers closed off their wells as a preventive measure; huge amounts of water are used in fracking and operators feared the cold weather would freeze wells, pipes and roads.
As the cold weather swept through west Texas, the state's gas production tumbled by some 11 billion cubic feet over nine straight days from Feb. 9. Crucially, 52% of the drop in volume came before council's first power cut in the early hours of Feb. 15, according to data compiled by BloombergNEF.
By Feb. 14, the cold weather spread across the southern U.S. Natural gas hit $300 per million British thermal units in Texas, about 100 times regular prices, and a record $600 in Oklahoma.
Traders began drawing comparisons to the records set on the Midwest grid in 1998 and to the California energy crisis that caused widespread blackouts in the early 2000s. It was only on Feb. 15, that the council's first power cuts came into effect.
Texas usually produces far more gas than it can handle. Usually, gas is cheap in Texas and trades up and down by cents on the dollar each day.
Power providers secure the fuel through a mixture of contracted supplies of physical gas and financial contracts like swaps and hedges.
Gas utilities are more reliant on more volatile spot prices, but as gas production tumbled and providers canceled contracts, power companies were losing supplies by the hour. That forced them into the spot market, handing sellers the power to charge almost any price they wanted, according to power executives, who spoke on the condition of anonymity.
The executives expressed dismay that gas producers can shut wells and sellers can effectively pull out of contracts without penalty, while power generators have a public duty to keep the lights on -- or at least try to.
Information for this article was contributed by Sergio Chapa and Gerson Freitas Jr. of Bloomberg News (WPNS).