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Gas utilities deliver record volumes during cold snap, but not out of woods

Natural gas utilities were able to deliver record volumes during a historic cold snap in parts of the U.S., even as vulnerabilities in parts of the broader gas complex and electric grid posed ongoing risk to local distribution companies and their customers.

Several days into an energy crisis afflicting the southern and central U.S., missed opportunities to harden thermal power plants following past cold weather events emerged as a contributing factor. The freeze has also led to natural gas production and transmission disruptions, though serious problems do not appear to have materialized in the downstream gas utility sector.

The U.S. set a two-day record for natural gas deliveries, pumping 151.7 Bcf to residences, businesses and power plants on Feb. 14 and meeting 149.8 Bcf of demand on Feb. 15, according to figures provided by the American Gas Association, or AGA. The Valentine's Day deliveries marked the second-highest single-day demand figures on record, going back to Jan. 30, 2019.

The record figures showed up on the company level, too. CenterPoint Energy Inc. said it had delivered record gas volumes during the week's extreme weather conditions.

Gas systems face challenges

Still, gas utilities in affected areas urged consumers to conserve gas. CenterPoint issued advisories for six of the eight states where it delivers gas, including Texas. Atmos Energy Corp., which also operates in Texas, advised customers to set thermostats no higher than 68 degrees Fahrenheit, lower their water heater temperature, reduce bathing time and avoid using large appliances or natural gas fireplaces.

Power outages impacted heating for customers with both gas-fired and all-electric systems, since gas-fired furnaces typically require electric power. One Gas Inc. on Feb. 17 reminded customers in its Texas, Kansas and Oklahoma service territories that furnaces will not operate during a blackout and advised them to turn off power to the equipment until shortly after electric service returns. It also warned that a sudden surge in demand as thousands of furnaces turn on simultaneously can put stress on the gas system.

One Gas on Feb. 15 stressed the importance of conservation, noting that should an area lose service, it would take an extended length of time to restore service due to the need to check each home for leaks and reestablish service. The company said its suppliers' gas wells were freezing due to prolonged extreme cold, limiting the volumes they could provide to One Gas and raising the prospect of widespread gas outages to ratepayers.

"The demand for natural gas continues to outpace supply, and it is going to take time for our suppliers to get their natural gas wells back online," the company said in a Feb. 16 update.

The gas distribution arm of Black Hills Corp. issued similar conservation bulletins to customers in Arkansas, Colorado, Iowa, Nebraska, Kansas, South Dakota and Wyoming. Black Hills Energy reported on Feb. 16 that about 2,300 customers in Pea Ridge, Ark., were without service following reports of loss of gas pressure. It was not immediately clear whether the outage was tied to the historic cold. The company did not immediately provide a response.

Freeze puts building gas bans in perspective

Midwest storms highlighted the gas distribution system's role at a time when some policymakers and regulators are considering building electrification mandates, analysts at Mizuho Securities USA LLC said in a Feb. 17 research note.

The Mizuho analysts said they "believe regulators and policymakers will further see the significant value and reliability these assets provide to rate-payers." The AGA and its research arm, the American Gas Foundation, have recently ramped up calls for regulators to place a quantifiable value on gas system resilience.

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"The recent dynamic could make future customers in Central regions wary of building electrification and lead them to opt for energy redundancy in the form of natural gas for heating," Mizuho said. While robust building electrification drives were not underway in many of the most impacted states, the event could add clout to legislation under consideration in at least a dozen states to prohibit local governments from restricting gas use in buildings, Mizuho added.

In the firm's view, the companies positioned to benefit from the recognition of gas distribution system value include Alliant Energy Corp., Atmos, Black Hills, CMS Energy Corp., DTE Energy Co., One Gas and Xcel Energy Inc.

"Natural gas companies are able to reliably deliver for their customers even in the most challenging circumstances due to thorough preparation and a dependable and resilient delivery system, the importance of which comes into clear focus during extreme weather events like we are seeing right now in many parts of the country," AGA President and CEO Karen Harbert said in a Feb. 16 press release.