NC businesses face hefty fines for burning natural gas during ‘polar vortex’
04/25/2014 7:00 PM
04/25/2014 7:01 PM
About 120 businesses in the state face massive penalties for failing to shut off their natural gas when requested by their utility during January’s “polar vortex” deep freeze.
Companies like Bridgestone in Oxford, Performance Fibers in Moncure, and Cargill in Raleigh continued burning natural gas as thermometers plummeted and natural gas prices spiked. As a result, these businesses incurred hefty penalties and ran up utility bills that in some cases exceeded a year’s worth of energy costs for just several days of running heaters and heavy equipment.
Bridgestone, which typically pays $7,500 for natural gas in January, is facing a fuel bill of $103,142 for the month. The tire maker switched to fuel oil for its boilers but said in public filings it used natural gas to heat its manufacturing plant, which houses more than 200 employees and spans nearly 5 acres.
The two utilities that are charging the fees, Gastonia-based PSNC Energy and Charlotte-based Piedmont Natural Gas, are asking state regulators to forgive their customers for violating the terms of their utility rates and to waive most of the extra fees.
The N.C. Utilities Commission has scheduled hearings in May to hear PSNC’s request and in June to hear Piedmont’s case to help industrial customers who failed to “curtail” their gas service as requested.
“Many of these customers are manufacturers, federal and state facilities, and institutional customers who have still not recovered from the effects of the recession,” said George Ratchford, PSNC’s vice president for gas operations, in written testimony to the Utilities Commission.
“I personally talked with the CEO of a hospital who stated that costs of that magnitude were not included in their budget,” Ratchford said. “I am also aware of a small manufacturer that indicated it might have to shut down because of the high curtailment gas costs it would incur.”
Public Staff agrees
The state’s consumer advocacy agency in rate cases, called the Public Staff, agrees that the utilities shouldn’t be required to charge the maximum fees to which everyone had agreed. The agency, contending that January’s freak weather was beyond anyone’s ability to foresee, plans to submit its legal filings Monday to the Utilities Commission.
“We’re commending PSNC for anticipating this is going to be very bad for their customers,” said Jeff Davis, director of the Public Staff’s natural gas division.
North Carolina’s natural gas utilities offer generous discounts to their industrial customers who agree to cut off their gas flow during extreme weather when there’s a threat of a temporary energy shortage.
But many of these companies had never been asked to shut off their gas valves and were caught unprepared when asked multiple times in January to do so as North Carolina’s two gas utilities attempted to meet record energy demand.
PSNC, the Triangle’s natural gas utility, has 626 industrial customers, 173 of which get a discount of between 20 percent and 25 percent for agreeing to cut off service on demand.
In January, PSNC made about 800 phone calls related to multiple service interruption requests affecting all 173 customers on the special rates. In all, 92 of those customers used some natural gas during the cutoff period, either combining gas with heating oil or propane, or relying exclusively on natural gas for their operations.
Piedmont said 27 of its customers did not fully interrupt service when asked.
$6 million bill
The companies told the utilities they could not obtain backup fuel or operate backup equipment. Some interrupted gas service but had to meet work orders and could not delay production any longer.
In all, PSNC’s violators owe $6 million for January usage, a bill that largely consists of penalties and extra gas surcharges on top of a $500,000 fuel bill. PSNC is asking the Utilities Commission to forgive $3.8 million in fees and charge the customers $2.2 million.
PSNC’s proposed total is based on the actual cost of natural gas the customers used, rather than on a formula that would charge some customers 20 times more than PSNC paid for the gas.
The names of the companies are confidential but a half dozen sent letters to the Utilities Commission.
Chemical Specialties of Harrisburg paid $221,000 for natural gas in all of 2013 and is facing a bill of $79,297 for five days of service in January. Under PSNC’s proposal, the company’s January bill would be slashed to $29,208.
Clariant Corp. curtailed its Mt. Holly facility for seven days in January, resulting in a revenue loss of more than $1.5 million. The company told the Utilities Commission it used a “minimal amount” of natural gas to provide freeze protection to its plant. It’s facing a January gas bill of $245,760 but the PSNC proposal would cut the bill to $96,432.
Cargill idled its soybean processing facility in Raleigh for five days, which “severely impacted Cargill’s ability to meet customer product operations.” The company installed a new boiler but when PSNC ordered a second gas service interruption, which spanned 11 days, Cargill’s fuel oil equipment was not connected the company said it had to rely on natural gas.
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