Spire President & CEO Suzanne Sitherwood on the Polar Vortex, Gas Storage and the Importance of Planning Ahead
How does Spire plan for winter throughout the rest of the year?
Among the three states we serve, winter weather impacts in Missouri are more common than in Alabama and Mississippi. But regardless of the region, we plan for extreme weather conditions in those states by annually looking back at the coldest weather over the past 80 years so we can fully understand what we might face and prepare accordingly.
That planning made a big difference this February. During the wave of extreme cold temperatures across the central U.S., the demand for natural gas significantly increased. But Spire was able to make sure our customers were kept safe and warm throughout the extreme weather event.
By managing gas supply, being good stewards of storage resources and closely monitoring our pipeline systems throughout all the areas we serve, our preparation positioned us well to best serve our customers.
How much of the energy that Spire provides customers during the winter comes from storage?
Storage is a very important part of the portfolio of assets at all of Spire’s utilities. Our storage contracts allow gas to be injected in the summer when prices are typically lower, and that gas is then used in the winter to meet demand when prices can be more volatile. In addition to being a natural hedge against prices in the winter, storage is also used to manage the fluctuations in customer demand over the course of a day or weekend rather than trying to buy and sell specific quantities of gas to try to manage those variations in demand.
Peak demand typically occurs in January and February, so Spire is careful to preserve its storage resources throughout the early part of winter heating season to make sure the maximum storage withdrawals are available when those peak weather conditions occur.
The overall percentage of demand that storage provides varies between our utilities in Missouri, Alabama and Mississippi, mostly because of the characteristics of the types of storage fields that exist in each region. Storage fields in the Midwest are typically depleted reservoirs and have less deliverability on a daily basis compared to salt dome storage fields in the Southeast that have higher deliverability. From an overall percentage of supply used to meet our system demand, in the Southeast, storage is used to meet 10% to 15% of our overall winter demand and in the Midwest, storage typically covers 25% to 35% of overall winter demand.
Have you seen evidence that this sort of year-round planning saves customers money during the coldest months?
The reason that Spire develops such a thorough planning process is to be prepared for when cold weather hits like it did this past February. We have very sophisticated models that predict how much gas our customers will use on a real-time basis, and we apply the models to actual extreme cold weather experienced in the past. This gives us solid predictions on how much energy our customers will use in the worst of weather conditions.
This detailed planning process also allows us to maximize baseload purchases prior the start of a month and to layer in hedges on that supply well ahead of winter. This baseload supply ensures we’ll have a large portion of our overall customers’ requirements covered at relatively low prices even when extreme weather hits.
The next layer of demand is met with gas withdrawn from storage. Similar to the baseload supply, this storage gas is less expensive in price and is not at risk to daily fluctuations of gas in the spot market. Typically, the last layer of supply is met with spot purchases that can see increased volatility like we just saw in prices in February.
Our models are complex in nature and are updated annually. That allows Spire to pinpoint demand more accurately to avoid buying high priced supply when prices increase.
The “insurance” costs associated with acquiring hedges and storage contracts are not guaranteed to reduce overall costs each year, but they do go a long way in limiting our exposure to catastrophic prices increases like those that a lot of companies experienced this past February.
When winter storms hit, what does Spire’s response process look like?
Extreme weather storms tend to hit on seven- to 10-year cycles. Because of our annual infrastructure and supply planning process, when these events occur, we stand ready to serve our customers and communities. What most of our customers don’t see is that we shift our operations from a 24/7 operation to an all hands-on deck, “working-around-the-clock” operation, including many of our support services. To deliver on the plans we have in place, we have to make sure customers stay connected and warm—no matter what.
If we do need an emergency response, we activate our Incident Response Team. Leaders throughout the company are mobilized to swiftly analyze the situation and collectively solve problems. It’s quite something to see the team in action.
How do you prioritize returning service to any customers who lose service during a storm?
Fortunately, the reliability of natural gas makes outages rare. It’s a question of the availability of the molecules and the infrastructure designed to meet the weather requirements “everywhere” on the system.
During the recent weather event, there was an operational issue from one of our third-party suppliers impacting our ability to provide natural gas service to more than 1,000 customers in the Carl Junction area near Joplin, MO.
This caused a temporary outage, and our field operations team quickly mobilized to move additional crews to the area and reconnect customers. Our teams separated the residential areas into quadrants and began the process of purging the system and reconnecting customers over the course of the day.
Over the course of the next 13 hours, more than 950 homes were reconnected to our system. That’s a testament to the planning we’ve talked about that makes a moment like this something easier to overcome.
This winter was a unique one—with polar vortexes on top of a pandemic. How did Spire adjust?
To use a word that’s expressed too often these days, it has been an “unprecedented” last 12 months. Fortunately, we have a strong mission and values to guide us. So, we responded as we normally do, by focusing on how to best serve our communities—starting with the pandemic.
- We matched new and increased customer and employee donations to DollarHelp by $500,000 and helped raise nearly $1.9 million to help thousands of families and small businesses struggling to pay their bills as a result of the pandemic
- We also expanded our assistance programs, providing nearly $740,000 to qualifying residential and small business customers in Alabama and Missouri
- To provide additional assistance to every community we serve across five states, we donated $250,000 to food-relief and meal-service programs
In terms of the polar vortex, we took a similar customer-centric approach. From the moment it became clear that natural gas supply and demand would be affected by February’s polar vortex, we stayed committed to ensuring our communities maintained access to the essential energy people needed, and to doing everything we could to minimize any impact to cost.
Fortunately, in eastern Missouri, we were in a strong position with the Spire STL Pipeline providing gas supply off the Rockies Express pipeline that sources from the Northeast and was not impacted by the polar vortex.
While Feb. 15 was the peak day for our system in Missouri, almost a week prior to that, our gas supply team was ready. In addition to having a plan in place for an event of this nature, early on, they noticed that gas prices were on the rise and began to make adjustments to ensure we could keep families warm. Their early purchase of gas from the Rockies, before prices per dekatherm reached unprecedented levels, was one part of a carefully orchestrated response to mitigate impact.
What do you want customers to know about Spire’s commitment to customers?
This winter presented new challenges, but we never lost sight of what’s important—keeping the people we serve safe and warm.
Because we actively listen to our customers and are focused on understanding their needs, we know that receiving great service at a great value is at the top of their list, and we work hard to meet and exceed their needs every day—no matter the weather.