Mulberry files lawsuit accusing BP Energy of price gouging during extreme cold

By: - March 4, 2021 1:00 pm
Gov. Laura Kelly signed Senate Bill 40 that broadened the Legislature's oversight powers during the COVID-19 pandemic and indicated she would re-issue a dozen executive orders April 1, including guidance on wearing masks. (Sherman Smith/Kansas Reflector)

Gov. Laura Kelly signed Senate Bill 40 that broadened the Legislature’s oversight powers during the COVID-19 pandemic and indicated she would re-issue a dozen executive orders April 1, including guidance on wearing masks. (Sherman Smith/Kansas Reflector)

TOPEKA — A small Kansas town is fighting natural gas prices charged by BP Energy during last month’s extreme cold, accusing the multinational oil and gas giant of “unconscionable profiteering” under state statute.

A lawsuit filed Tuesday by the city of Mulberry says BP inflated prices for natural gas from $2.98 per mmbtu on Feb. 9 to $329.615 from Feb. 13-16. The city is asking for bills to be recalculated at a reasonable rate.

Jim Zakoura, an attorney involved in the city of Mulberry’s legal fight over high natural gas prices, says BP Energy illegally profited during from a disaster. (Submitted)

Jim Zakoura, an attorney representing the city in the lawsuit, said BP took advantage of Mulberry and other Kansas towns that operate their own utilities at a moment when residents needed natural gas to heat their homes and stay alive.

“This is pure and simple price gouging and profiteering in the sale of a critical life product, in a life and death situation,” Zakoura said. “It is not only unlawful conduct under Kansas law but also shows a complete disregard for the people of Kansas.”

A spokeswoman for BP said the company was aware of the lawsuit filed in Crawford County District Court and declined to answer questions.

Mulberry is a southeast Kansas town along the Missouri border with a population of about 500 people. Like dozens of other small Kansas towns, the city distributes natural gas for heating to residents, businesses, schools, nursing homes and medical care facilities. Monthly gas bills for February would be 10 times higher than usual because of the higher prices.

The city pays a monthly service fee to Utility Gas Management to procure contracts to acquire natural gas, but the prices are dictated by producers like BP, which has headquarters in Houston.

ESCALATING PRICES

Prices charged per mmbtu by BP Energy to city of Mulberry, according to court documents

Feb. 10: $4.05
Feb. 11: $9.64
Feb. 12: $44.80
Feb. 13: $329.615
Feb. 14: $329.615
Feb. 15: $329.615
Feb. 16: $329.615
Feb. 19: $8.75
Feb. 20: $4.50
Feb. 21: $4.50
Feb. 22: $4.50
Feb. 23: $2.71
Feb. 24: $2.72
Feb. 25: $2.685
Feb. 26: $2.485
Feb. 27: $2.485
Feb. 28: $2.485

Between Feb. 1 and Feb. 9, when weather forecasts began predicting record chills from Canada to Texas, the price BP charged for natural gas increased from $2.54 to $2.98. Over the next four days, BP’s prices for Mulberry, according to the lawsuit, increased to $4.05, $9.64, $44.80 and $329.615.

As temperatures warmed, prices rapidly fell from their peak rate to $8.75, and then continued to decline. By the end of February, the cost was back down to $2.485.

Gov. Laura Kelly declared a state of emergency on Feb. 14, triggering provisions of the Kansas Consumer Protection Act that restrict prices from rising more than 25% above the usual rate.

Court documents contend the residents of Mulberry “have been subjected to profiteering during an extreme weather disaster, in the form of exorbitant natural gas pricing.” The lawsuit asks for the city to be repaid $40,459.48, and that rates be set no higher than $3.725, a 25% increase from the $2.98 price on Feb. 9.

Rep. Ken Collins, R-Mulberry, said he wasn’t familiar with the lawsuit but that it was important to find out why natural gas prices spiked.

“If there was actual price gouging involved, the proper authorities need to know about it,” Collins said. “It really has been a big burden on Mulberry and other cities with municipal utilities. And I generally think it’s good for cities have municipal utilities, but when things like this happen, it kind of makes me wonder.”

The Federal Energy Regulatory Commission announced Feb. 22 it would investigate wrongdoing in the sale of natural gas during the extreme cold. Kelly has urged regulators to look into allegations of price gouging.

“Because yeah — how can you let these companies charge that kind of money in a disaster situation?” the governor said during a news briefing Wednesday at the Statehouse. “That’s what we’re asking for them to find out. What happened here? What needs to be done to ensure that it never happens again?”

Lawmakers on Wednesday fast-tracked new legislation that provides $100 million in low-interest loans to Kansas municipalities that are struggling with natural gas bills. The program, which the governor signed into law, was viewed as necessary because some towns risked losing access to natural gas within days if they don’t pay bills they can’t afford.

The loans would mean residents all over the state would be paying for February price hikes for the next 10 years, as opposed to having thousands of dollars added to their current bill.

Sen. Alicia Straub, R-Ellinwood, opposed the legislation because the problem, she said, because consumers shouldn’t be held responsible for problems with market rates.

“I feel like I am being put to the task of negotiating the rate for the consumers,” Straub said. “First of all, I’m not paid to do that. Second of all, I wasn’t elected to do that. My job is to protect the end consumer, the constituent, and I think there’s a better way to do that.”

Sen. Tom Holland, D-Baldwin City, warned that without some sort of intervention in the markets, “we can be perpetually held hostage.”

“I may have been born during the night, but I wasn’t born last night,” said Sen. Tom Holland, D-Baldwin City. “I am continually perplexed when I see examples of both federal and now, once you get to the state level, where we have moral hazards and we’re rushing to bail out the energy companies.”

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Sherman Smith
Sherman Smith

Sherman Smith is the Kansas Press Association’s journalist of the year. He has written award-winning news stories about the instability of the Kansas foster care system, misconduct by government officials, sexual abuse, technology, education, and the Legislature. He previously spent 16 years at the Topeka Capital-Journal. A lifelong Kansan, he graduated from Emporia State University in 2004 as a Shepherd Scholar with a degree in English.

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