The panel agreed with the trial judge who dismissed the consolidated class actions last year that the consumers’ claims relate to interstate transactions under the jurisdiction of the Federal Energy Regulatory Commission.
(CN) – The 10th Circuit on Monday affirmed a trial judge’s finding that Kansas ratepayers cannot sue natural gas wholesalers under the state’s consumer protection law over large price increases during a February 2021 winter storm that brought record-breaking cold temperatures to the Southern Plains.
Unanimously DECISIONThe appeals panel said state consumer law claims in five consolidated class actions were preempted by the Natural Gas Act, the federal statute under which rates charged by wholesalers are regulated through the Federal Energy Regulatory Commission.
“However plaintiffs attempt to frame their argument here, their lawsuit directly targets interstate wholesale transactions and practices,” U.S. District Judge Harris Hartz wrote.
“All of the alleged improper activity of which plaintiffs complain concerned prices set for interstate wholesale sales of natural gas under FERC’s exclusive jurisdiction, not market conditions, such as price indexes, that independently affected both wholesale and retail prices,” the George W. Bush appointee added. “This can’t be enough.”
When the storm, dubbed Uri by The Weather Channel, hit Kansas, it not only brought sub-zero temperatures that caused a surge in demand for natural gas, but also froze wells across the region. As a result, wholesale gas prices in the spot market, which is the price domestic distributors pay to meet sudden demand, rose as quickly as temperatures fell.
The spot price on S&P Global’s Platts market index, the benchmark used for wholesale prices in the spot market, rose as much as 200 times, from $2,545 MMBtu, or million British thermal units, on February 1, 2021, to $622,785 MMBtu on February 17, one of their complaints said on February 17.
The Kansas Corporation Commission, the state regulator that oversees in-state and retail sales of natural gas, ordered local distributors and others to do everything possible and necessary to ensure that demand for natural gas was met, which included paying market prices in cylinders and, ultimately, passing the costs on to consumers over the next several years.
After the storm, FERC’s Office of Enforcement investigated wholesale transactions to determine whether there had been market manipulation or other misconduct, the 10th Circuit panel noted, but the investigation did not result in any enforcement action.
“We are certainly disappointed with the court’s decision, but we respect and appreciate the judicial process,” said Sam Walenz, a consumer advocate. “We are reviewing the decision and will decide on the next steps.”
An attorney representing the wholesale distributors before the 10th Circuit did not immediately respond to a request for comment.
The other judges on the appeals panel were his fellow Bush appointees, Chief U.S. Circuit Judge Jerome Holmes and U.S. District Judge Matthew Garcia, a Joe Biden appointee to the U.S. District Court for the District of New Mexico, who sat on the panel by appointment.
U.S. District Judge Daniel D. Crabtree last year found The claims under the Kansas Consumer Protection Act could not stand because regulating the transportation and sale of gas is a role assigned by Congress to the Federal Energy Regulatory Commission — although it acknowledged the price changes according to his order.
“As temperatures fell, the natural gas price index experienced an inverse — and corresponding — increase,” the Barack Obama appointee said of the storm, which wreaked havoc across a wide swath of the southern and central US, including Kansas and Oklahoma.
The outbreak is best remembered for the damage it caused in Texas, where it knocked out the power grid, leaving millions without power and killing 246 people. The weather service called it the costliest weather disaster in Texas history.
In the years following the storm, cases spread across the southern plains states. In Kansas, the bills started to mount of deferred costs in the summer of 2023. While the cases were filed in state and federal courts in Kansas beginning in 2021, the cases before Crabtree came in late 2023 and early 2024 and were then consolidated.
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