(March 2021) – Note: The article below was taken from the March 5 issue of KHA's Current Report newsletter.

APS and the Kansas Hospital Association want to update members on the natural gas pricing crisis that occurred during February and how it may affect your natural gas bills in the coming months. The natural gas issues are different and dependent upon:

• If your hospital is participating in the APS natural gas purchasing program

• If your hospital is in an area where service is provided by Kansas Gas Service, Atmos Energy, Black Hills Energy, and Spire or Ameren in Missouri 
• If your hospital is in an area served by a municipal natural gas system

APS Purchasing Program
The APS gas contract price is among the lowest in Kansas and Missouri and does not appear to have the high-price exposure being faced by other supply programs throughout the state. The APS purchasing program covers the volumes each hospital participant has nominated in their contract as needed supply for their operations. However, if a hospital exceeded the amount nominated in their APS contract, the natural gas distribution system will still continue delivery service, but at a non-contract default rate. The default rate is the price listed as the day-trade price in the area, as listed in a public index, which skyrocketed during several days in mid-February. The daily rate at times was more than 100 times the APS natural gas price.

Hospitals Not Part of the APS Purchasing Program
If a hospital is not part of the APS Purchasing Program, it will either be subject to the terms of their separate natural gas supply contract or their gas distribution company. If the hospital is a customer of the distributor, they should expect major increases in their gas bill, since the distributors' gas-supply costs increased during the month. February 2021 natural gas bills may be as high as up to 10 times the amount of the February 2020 natural gas bill.

Hospitals in Areas Served by Municipal Natural Gas Systems
The municipal systems in Kansas that are a part of KMGA, have experienced – through no fault of their own – increases in natural gas supply costs caused by suppliers who used the extreme winter weather crisis to increase prices from $3 per unit in the early days of February to prices exceeding $600 per unit in mid-February 2021. These extraordinary high prices will be reflected in future bills to hospitals in these areas, but the timing and amount of these increases are not yet known. The Kansas Legislature and governor have approved legislation establishing a low-interest rate loan program to assist in payments for these municipal systems.

Litigation has been initiated regarding these enormous price increases. This week, the City of Mulberry, Kansas, initiated litigation in Crawford County contending the BP Energy Company violated the anti-profiteering sections of the Kansas Consumer Protection Act by increasing the price of natural gas during a declared state of emergency, from $2.98 cents per unit to $329.61 cents per unit. We are carefully monitoring this litigation as we believe it will likely bring to light the facts surrounding what can only be described as price gouging during a disaster.

If hospitals have questions, contact Dennis George at (888) 941-2771.
--Dennis George