Regulate Texas gas pipelines
Bloomberg News investigation reveals de facto monopolies.
A Bloomberg News investigation published Dec. 5 reveals a significant weakness in the Texas energy market. The Legislature should fix it in 2025. Meanwhile, Texans will have to rely on wishing and hoping that two more winters don’t produce price gouging.
Bloomberg’s reporting revealed how intrastate natural gas pipeline companies operate de facto monopolies without market or regulatory limits on their fees, which eventually trickle down to customer electricity bills.
Under Texas law, pipeline operations contained within the state are supposed to operate in a free market, with competition keeping prices down. But the Bloomberg investigation revealed that the market often lacks competition, which leads to pricing that some industry players described as “excessively punitive.”
“It’s authorized monopoly abuse. There’s no other way to get around it,” former Electric Reliability Council of Texas watchdog Beth Garza said. “If there’s only one provider of a key service and there’s no limit on what that provider can charge for their product, that provider is going to profit-maximize by as much as they can get away with.”
Multiple power plants, together capable of serving 1.5 million Texans, depend on a single intrastate pipeline for the most reliable form of natural gas, the investigation found. Six plants, capable of serving 960,000 homes, are reliant on Dallas pipeline company Energy Transfer. The owners of four plants have alleged improper pricing by pipeline companies.
The barriers to entry to this market — the huge expense of building pipelines and the presence of enormous competitors like Energy Transfer — make it unlikely that the market will get more competitive.
What’s more, Texas shouldn’t want more competitors in this field, even if they were likely to emerge. Burying thousands of miles of duplicative pipelines is not the answer here. The cost of market competition would be paid in ecological impact.
A spokesperson for Energy Transfer declined to comment. When we asked the Texas Railroad Commission about these issues, they said their regulatory system is “complaint based and has rules that prohibit rate discrimination,” meaning producers concerned about predatory pricing can file a complaint and they’ll get a fair hearing. But complaints should be an avenue for redress when individual cases slip through an otherwise healthy system. Complaints shouldn’t be the entire system.
There’s a simple and proven solution to this, though it won’t be popular with pipeline companies or the libertarian wing of Texas Republicans: regulate the delivery of natural gas the same way the state regulates the delivery of electricity.
Rather than allowing multiple companies to clutter up our cities and highways with competing networks of poles and wires, Texas has granted a monopoly on electric delivery. In North Texas, that monopoly belongs to Oncor. To keep Oncor from opportunistic pricing that pipeline companies are accused of, the state regulates its rates. Oncor has to justify its fees and provide a transparent accounting of its operational costs.
In the absence of meaningful competition among pipeline companies, the state should do the same for gas delivery.
