SACHA PFEIFFER, HOST:
The breakdown of the Texas power grid during a severe storm in February caused havoc in the state's energy markets. Now there are charges of manipulation against some big energy companies. Mose Buchele of member station KUT in Austin reports.
MOSE BUCHELE, BYLINE: The days leading up to February's big freeze were nerve-racking for CPS Energy, San Antonio's city-owned utility. Demand for electricity and heating would be huge. To prepare, the utility had to make sure it had enough electricity contracted and enough natural gas to supply its customers and fuel its own power plants. But then something else started happening, says CEO Paula Gold-Williams.
PAULA GOLD-WILLIAMS: So as we were watching this, we started seeing first natural gas prices start to escalate.
BUCHELE: First they doubled, then tripled, and that was before the storm hit. Gold-Williams says once the state was frozen and in the grip of the worst blackout in its history, electricity prices hit their market cap. Some natural gas prices were 15,000% higher. In many cases, utilities had no choice but to buy.
GOLD-WILLIAMS: It would be like you going to fill up your gas tank during the storm and you go to the gas station and instead of paying $50-ish (ph) to fill up your tank, you know, the register there reads give me six to seven thousand dollars.
BUCHELE: The thing is, jacking up the price of gasoline during a disaster is clearly illegal in Texas, but it's not clear whether the same thing is true for what happened to natural gas prices. In Texas' deregulated energy market, high prices during times of energy scarcity are expected. CPS Energy says this was different, that it was the victim of price gouging. And it's one of several utilities suing natural gas suppliers and the group that operates the state's electric grid. The state and the federal agency are also investigating what happened.
ED HIRS: We teach the electricity game at school.
BUCHELE: Energy economist Ed Hirs at the University of Houston believes market manipulation actually happens a lot in Texas. It can be done by holding back the product itself, the gas or the electricity, or manipulating the contracts for those products on the financial markets.
HIRS: When producers, when generators can combine and withhold power from the market, they can drive the price up.
BUCHELE: The gas companies being sued and the state's electric grid operator deny any wrongdoing. In a statement, Energy Transfer Partners says its pricing was transparent and CPS was simply the victim of its own poor planning. Either way, proving any price gouging could be tricky. Energy analysts say a number of states have clearer laws and more oversight. But the Texas gas market is largely one of private deals between buyers and sellers. Beth Garza is a former independent market monitor for the state's electric grid who spent years investigating fraud. She says in Texas, there are rules against market manipulation in the electricity sector but not really in natural gas.
BETH GARZA: You know, if your market doesn't have any rules against withholding, people will withhold because it's profitable.
BUCHELE: In San Antonio, CPS Energy's Paula Gold-Williams says that's all the more reason to sue.
GOLD-WILLIAMS: This is why we're fighting a fight that has never been seen in Texas before because the market didn't work.
BUCHELE: She hopes the courts will establish a definition for what constitutes price gouging for natural gas in Texas.
For NPR News, I'm Mose Buchele in Austin.
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