APGA Testifies at Illinois Finance Authority Hearing

By Dave Schryver posted 02-25-2021 01:30 PM

Today, APGA President & CEO, Dave Schryver, testified at an Illinois Finance Authority (IFA) Special Meeting to consider a resolution authorizing the creation of a local government energy loan program to address the historic increase in natural gas prices recently experienced by large portions of the country. As described on its website, the IFA provides “access to low-cost capital to public and private institutions that are aligned with our mission of fostering economic development, creating and retaining jobs, and improving quality of life for Illinois residents.” Other witnesses at the hearing included the Illinois Public Energy Authority and Interstate Municipal Gas Association.

In his testimony, Dave discussed the challenges public natural gas systems faced when severe cold weather in large portions of the U.S. led to historic increases in the price of natural gas. He stated that extreme cold weather led to more than 15 billion cubic feet per day (Bcf/d) of U.S. natural gas production being lost nationally during the week of February 14. He also stated that the approximate 15 percent sudden drop in supply affected regional gas markets differently so that prices rose all over the U.S. at different times and different rates. For example, whereas first-of-the-month price for gas supplied into the interstate Panhandle Pipeline system that serves Illinois and other states was around $2.54 per dekatherm (Dth), the daily price hit $224/Dth for President’s Day Weekend. One location in Oklahoma exceeded other all-time records by a wide margin, hitting an unbelievable $1,193.15/Dth on February 18.

Dave communicated that the demand caused by extreme cold caused local distribution companies to purchase increased quantities for deliveries on those same days that experienced those historic daily spot prices throughout many states. In fact, 151.7 Bcf of natural gas were delivered in the United States on February 14 and 149.8 Bcf were delivered on February 15, making Monday the second-highest delivery day ever and setting a record for the largest demand for a two-day period.

Dave stated that these price increases, along with the increases in demand, placed strains on numerous public natural gas systems, which had no choice but to purchase the gas at the inflated prices or pay even steeper pipeline penalties to ensure that their customers could continue to heat their homes. In one case, a municipal utility spent its monthly gas budget each day over President’s Day weekend. In another instance, a joint action agency expended three times its annual gas purchasing budget just to buy gas for its customers for four days. Another APGA member anticipates spending seven times more for natural gas in February than they had originally budgeted for.

Dave closed by saying that this crisis has hit public natural gas systems particularly hard when they have limited options. For example, most, including the vast majority in Illinois, are captive to one pipeline with access to more limited gas production.

For questions on this article, please contact Dave Schryver of APGA staff by phone at 202-464-2742 or by email at dschryver@apga.org.