TEXAS VIEW: Texas’ energy pipelines are creating an unfair market

THE POINT: Wild West of pipelines increases costs at every level of powering Texas.

When the lights went out across Texas last year, a lot of people and businesses lost money. But one group of companies profited: pipelines.

All consumers are now responsible for the $3.6 billion cost of emergency power that we will pay on our electricity bills for years. Meanwhile, three major pipeline companies made $3.4 billion during the outages: Kinder Morgan, Enterprise Products Partners and, at $2.4 billion, Energy Transfer.

The deadly outages amounted to a wealth transfer.

The reasons are as mysterious to regular Texans as the network of pipelines buried underground. It has to do with an industry that provides a critical service to Texans but is not properly regulated and enjoys outsize market power.

The Texas Legislature must shine a light on this corner of the energy industry and impose law and order on the Wild West of pipelines.

The outages in 2021 revealed a problem that, in all of the hype about fixing the grid, hasn’t been addressed. Freezing weather across the state caused energy equipment to break down. Some power plants froze, and others lacked fuel because natural gas equipment also froze up. In many cases, power generators had to buy emergency fuel at a high cost. So, as natural gas market rates shot up, so, too, did electricity prices.

We might say: tough luck, that’s how capitalism works. Except in Texas, oil and gas pipelines are not exactly a free market. As the Houston Chronicle explained in a recent article, the lack of regulation of intrastate pipelines results in some companies enjoying monopolies in certain regions.

Interstate pipelines regulated by the federal government must deliver oil and gas for any number of suppliers, renting out space on the pipeline for a fee. The pipeline cannot own the oil and gas, it can only deliver supply, and prices are transparent.

But Texas intrastate pipelines have only safety regulations. Pipeline owners may buy and sell oil and gas, too, and there’s no requirement for transparent pricing. So if, for example, a natural gas-fired power plant gets its fuel from a single pipeline, the plant has little ability to negotiate prices.

A free market is the right approach; we are not calling for an old-fashioned regulated utility. But a free market requires guardrails to ensure fair competition.

This is a job for the Texas Legislature. We doubt that the Texas Railroad Commission, which oversees the oil and gas industry, will initiate and enforce pipeline regulations.

The Legislature would be wise to conduct a serious review and pass a new regulatory approach to intrastate pipelines.

As Texas becomes the energy producer for the world, we must get the basics right.

Dallas Morning News