It's clear to anyone with a passing awareness of economics that the price of a good goes up when supply is tight and demand high. That the spot price of natural gas would go up during an intense cold spell, then, is no surprise.
But from a typical $3 per wholesale unit to $200, or $400, or even $600? That indignity was suffered in parts of the country recently in addition to the power failures down south. It would be like paying for a filet mignon dinner for four at Manny's and getting one Arby's roast beef sandwich. Or, for vegans, one Beyond Meat burger for the price of two original Weber grills.
The cost is rippling to consumers. Even Minnesotans — who know winter, have served with winter and even consider it a friend of theirs — can expect an additional $200 to $400 in natural gas charges as a result of a 60-fold run-up in spot prices at the Iowa hub that primarily supplies them.
That's like adding a single order of fries (or, if you please, pomme frites) for the cost of flying your family to — just for the sake of example — Cancun. At least you can pay in installments. The utilities will spread the additional charge across your monthly bills over a year or more.
You get the point. What happened to prices was Beyond Natural, and it hurts.
The basic distortion can be explained. Feb. 14 and 15 set a record for the largest natural gas demand in U.S. history over a two-day period, according to the American Gas Association, an industry group. At the same time, some parts of the network were literally frozen. Utilities don't rely solely on spot purchases but must make them sometimes. And when they face a price spike, temporary as it may be, so do consumers.
But the moonshot in spot prices can't be explained, not easily, without at least a suspicion of gouging at the wholesale level. That's why it's good that U.S. Sen. Tina Smith of Minnesota has called on federal regulators to investigate — and that, separately, the Minnesota Public Utilities Commission has voted to do so formally. A joint hearing of Minnesota legislative energy committees also was held Friday.
The February cold snap is shaping up as one of the sleeper stories of the year. It's not that it escaped notice as it happened, but that its implications — from the resilience of the grid to the tao of tax philosophy in Texas to the integrity of the energy markets as a whole — amount to an even bigger deal in retrospect.