Natural gas prices went through the roof. Now a Kansas town may have to disband.
The town of Denison in Jackson County could become unincorporated if it doesn’t receive some type of assistance paying its gas bill.
The city’s bill jumped after freezing weather swept through Kansas and the Midwest earlier this month, when natural gas prices soared and other energy industries, like coal and wind, saw their production drop.
Vickie Wold, Denison city council president, said the Kansas Attorney General's Office is opening an investigation into price gouging during a disaster, but that might not help Denison in time.
“That’ll take time, we know that. We are going to have a bill coming that we can’t pay,” she said. “We could lose our city status.”
Becoming unincorporated means Denison wouldn’t have trucks to plow the snow or crews to repair broken streets.
Wold said gas is purchased daily for the next day, and Denison had to buy gas for multiple days in advance during the cold snap, which saw temperatures fall to as low as minus 20 degrees, with a weekend and holiday coming up. The city paid $622 per heat unit, or MMBtu, rather than paying the $2.69 that it costs now.
Denison is a town of about 180 people that now owes about $241,400 in gas bills, which is double the $125,000 it paid for gas in all of 2020.
Wold said the Kansas Municipal Gas Association could get a loan big enough for all 49 municipalities it represents to help them pay off the bills, which would ease the burden on residents.
Denison isn't the only city facing this unexpected financial burden.
Municipalities and consumers across the state are likely to see higher energy bills after consumption shot up during the historic cold weather.
But the eye-popping increases are most acute for utilities that rely heavily on natural gas, where the market exploded during the arctic temperatures. Whereas natural gas normally costs roughly $3 per unit, that rose to upward of $1,100 per unit, according to Kimberly Gencur Svaty, a lobbyist for a range of energy interests.
“Imagine pulling up to your gas station and you think you're buying gas for $3 a gallon and it is actually $1,100 a gallon,” Gencur Svaty said. "And you have to have gas. You have to buy it."
In Hesston, for instance, the gas bill was 45 times what it normally is in February. For the Kansas Municipal Gas Association, the buyer for dozens of municipalities across the state, including Denison, the bill for four days in February was $30 million. The yearly tab for the organization is usually about $8 million, Gencur Svaty said.
The question now becomes how to ensure that consumers, regardless of where they live, aren't hit with astronomical energy bills.
That response could come from the federal level, given that the energy crisis hit not only Kansas but the entire Midwest and parts of the South.
Gov. Laura Kelly and the state’s congressional delegation have petitioned the Federal Energy Regulatory Commission to take action.
In a letter last week, Kelly and Andrew French, chairman of the Kansas Corporation Commission, urged FERC to investigate any instances of price gouging during the weather emergency and to take emergency action “to protect consumers and ensure the integrity of natural gas” prices.
U.S. Sen. Jerry Moran, R-Kan., said Monday that the state was weighing whether to issue a federal disaster declaration in an effort to access aid, although it is unclear whether those funds could be used to help give relief to ratepayers.
Other options exist as well. More funding could be put into the Low Income Energy Assistance Program and income requirements could be relaxed, allowing more residents to apply for the aid.
Relief specifically for cities affected by the energy crisis could be slotted into a $1.9 trillion federal COVID-19 aid bill. And legislation has been introduced in Congress to provide loans to utilities in rural areas.
State-level solutions exist too. At Gencur Svaty’s urging, legislators introduced a bill Friday morning to issue bonds to cities with sky-high gas bills.
Municipal could pay that money back over a period of 10 years, allowing the costs to be passed along to consumers over a much longer time frame with an eye toward keeping massive bills to a minimum.
In Denison, Wold said, officials were waiting for something, anything, to help with the bill hanging over their heads.
“We are just hopeful that somewhere there is going to be some relief from this,” Wold said.
She hopes assistance also prevents future spikes in gas prices, because she doesn't expect Denison can survive another large price increase.
Indeed, there is larger anger among lawmakers, both state and federal, at the broader system for putting municipalities like Denison, as well as anxious residents, in this position in the first place.
“It was investors on Wall Street who took this money from our cities,” said Sen. Robert Olson, R-Olathe.
Gencur Svaty acknowledged that structural changes will likely be considered — after the initial bleeding has been stopped.
That could include placing limits on how much the natural gas market could fluctuate, something like what exists in the stock market. Regulators also could gain more control to step in during extreme circumstances.
“This is not just a municipal utility issue — it impacts utilities across 10 states," Gencur Svaty said. "So yes, there will be needed reforms that will come out of this. It is almost an industry reform that you need to start with."