Extreme Pricing of Natural Gas during Polar Vortex February 13 – February 20

Statement from – Clayton Energy Services, February 23, 2021

Municipal Gas Customers,

Polar vortex events have happened in the past. These events are not uncommon and have not had a significant impact on gas prices until this event. This polar vortex was extreme both in the amount of land covered and the duration of the polar vortex.

Natural gas pipelines throughout the Midwest began issuing operational flow orders on February 13. Those flow orders required us to buy gas to cover your daily gas needs under the strict limits of those flow orders or receive penalties from the pipelines for not providing the amount of gas consumed within those strict limits.

The key difference between ALL prior polar vortex events and this one is the price of gas for this event.

Most “day ahead” market trades are made via ICE which is a trading platform for natural gas. The City’s suppliers may obtain some, if not all, incremental gas via this trading platform and are therefore at the benefit or in this case the mercy of the pricing on the platform.

The traders pushed prices to record highs on multiple pipelines throughout the Midwest…in the past a polar vortex price for a given day may double or some price close to that. In this instance some of the prices for our customers gas purchases went to 100 times the first of the month price of approximately $3.00 per dth!

Fortunately, these prices only apply to the incremental gas quantities needed to cover the gas needs for vortex temperatures and the pipeline operational flow orders which limits the damage significantly. Unfortunately, until this can be corrected via legal and legislative means those incremental costs will be passed on to the customers.

Investigations are already under way from legislators from all levels of government from local to the federal level and potentially multiple agencies to determine if there were any illegal activities involved in the pricing of the natural gas.

All efforts will be exhausted to make sure those who are responsible are held responsible, including potential civil or criminal penalties that can be assessed, but as you know this will take time.