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Tucson's city natural gas costs spike 1,700% from Texas freeze

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Tucson's city natural gas costs spike 1,700% from Texas freeze

Plunging temperatures in Texas have meant huge jumps in the cost to heat and power some city-owned facilities in Tucson.

The city's costs for daily natural gas use has increased to more than $41,000 due to price hikes prompted by the widespread freezing weather in Texas and elsewhere — a spike of 1,700 percent.

The city will reduce heat in many offices, ask more employees to work remotely and shut down equipment in some facilities to cut back the use of natural gas during the price spike, City Manager Mike Ortega said.

Pima County officials said that the county's gas costs have not been affected. The price increases do not apply to individual residential or business customers of Southwest Gas.

The city won't mandate lower temperatures in public housing, but will ask residents to voluntarily lower their thermostats.

"All other city facilities will see a reduction in thermostats by 10 degrees overnight and at least 5 degrees during the day starting tomorrow," he told the mayor and City Council in an email Wednesday night. "Employees will be asked to wear sweaters/jackets if they have to come into the office. We will explore areas where employees can work remotely until this passes. If possible and we can move an entire building to remote work, we will close that facility accordingly."

The supplier for the city has exercised a "force majeure" clause in a contract, allowing them to curtail the contract due to circumstances beyond the company's control, officials said.

That means Tucson's payments for daily supplies of natural gas increased from about $2,400 to at least $41,400 each day through the end of the week, a memo by city General Services Director Carlos DeLa Torre said.

"Earlier today, Kinect Energy and SWG informed us that our supplier, Symmetry, is exercising the 'Force Majeure' clauses on our commodity contracts for natural gas because of the Texas Big Freeze. Based on this, pricing has been adjusted from $2.64 per dekatherm to at least $45.00 per dekatherm until the end of the week," DeLa Torre wrote in a late afternoon memo Wednesday. "Historically, during the month of February we consume about 920 dekatherms per day...."

Because of the move by the supplier to cut off supplies, the city has had to purchase natural gas on the open market — at rates that have been through the roof due to the demand and short supplies in Texas and throughout the frozen middle of the country.

Ortega told Mayor Regina Romero and the members of the City Council that he asked City Attorney Mike Rankin to review the contract, "to make sure Symmetry has the authority to exercise force majeure and what the terms of them exercising it mean to us."

Pima County officials said that the county's gas costs have not been affected. The price increases do not apply to individual residential or business customers of Southwest Gas.

The city will be "exploring shutting down pools and some rec centers," Ortega said. "Staff is ensuring we can shut down these facilities without causing us more problems when we try to start them again."

"We have some facilities where we have vulnerable populations living like Tucson House and Craycroft Towers," the city manager said. "We will not implement a mandatory reduction in temperature controls, but may ask residents to voluntarily reduce their thermostats. ... Bottom line, we will protect this group from mandatory reductions is natural gas use."

"We remain concerned about our CNG fleet of buses and refuse trucks," Ortega told the Council. "Staff is exploring how we approach filling these vehicles. I spoke with a Southwest Gas rep this evening and they will see how they may be able to assist us with filling vehicles over the next couple days. It may be enough to get us past this, but they are not sure they can do it."

Wednesday night, city officials had indicated that it was the contracted supplier who had jacked up prices, but they provided a different, more detailed look at the situation Thursday.

"The current price spike is attributed to our need to use the commercial market to supply some of our gas needs and not due to a contractual price hike," said Tim Thomure, the interim assistant city manager, in a memo to the council.

City Attorney Mike Rankin said that "We are a high volume customer of natural gas. That means that we have the ability to acquire the commodity through negotiated contracts rather than rely on (Southwest Gas) as the provider. Those negotiated contracts have served us well, allowing us to secure rates far below what we would otherwise pay."

"Because Symmetry has invoked (force majeure) and is not providing us with gas under our contract, we have to secure gas from another provider during this time," he told city officials. "As you can imagine the market prices for gas in our region right now are very high."

Rankin explained:

Whether or not Symmetry is justified in invoking the FM clause is something that will have to be determined later. If in fact the freezing weather caused failures of their pipes and other facilities, then it is likely that their invocation of FM is justified and they will not be liable to us (and other customers) for our increased costs. If instead they stopped supply for other reasons – such as increased demand somewhere else, or the ability to sell their commodity for a higher rate to other users – then that would not be a legitimate FM event, and we could pursue damages for our increased costs.

"But that is not the immediate issue or priority," said the city attorney, citing the need to maintain service for "our most vulnerable end users," such as residents of city housing, and cutting back on consumption otherwise to save money.

"It is important that we conserve and limit consumption as much as possible, both because it will mitigate our increased costs and because it will help ease the overall demand in our region," he said.

"Please note that while we are feeling the immediate impacts of this because of our status as a bulk user/customer, the situation for our residents and businesses who are supplied by SWG are in a very different position," he said.

Among the shifts in operations have been in how water is pumped from Avra Valley storage facilities into the city.

"There are some gas and some electric well pumps and booster pump engines in Avra Valley. We normally run a mix of both. However, we have shut down the gas wells and engines. So, we are not running the water system at a premium cost," said city spokeswoman Lane Mandle.

DeLa Torre said the following city facilities will be among those affected:

  • Archer Pool (Parks)
  • Armory Senior Center (Parks)
  • CAP Water
  • City Courts (City Courts)
  • City Hall (Gen Services)
  • Clements Pool (Parks)
  • Craycroft Towers (HCD)
  • Crime Lab (TPD)
  • Dept of Transportation
  • Edith Ball (Parks)
  • El Pueblo (Parks)
  • Remediation Projects (Water)
  • Sun Tran Transit Services
  • TCC (Convention Center)
  • TOPSC 1 (Gen Services)
  • TOPSC 6 (Gen Services)
  • Tucson House (Comm Services)
  • Udall Pool (Parks)
  • Udall Rec Center (Parks)
  • CNG Fueling Station-Critical Infrastructure to fuel Refuse and Buses

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