Roses Wholesaler Alleges Breach of Contract by Energy Marketer Due to Natural Gas Prices Charged During Winter Storm Uri
April 19, 2021
Summary of the Lawsuit
Certified Roses, Inc. (“Certified Roses”) filed a putative class action against Symmetry Energy Solutions, Inc. (“Symmetry Energy”) on April 15, 2021, alleging that Symmetry Energy charged excessive prices for natural gas during Winter Storm Uri of February 2021.[i] The complaint, filed in the Eastern District Court of Texas, claims that Symmetry Energy “saw an opportunity for profit, bypassed its contractual obligations, and took advantage of its customers during a vulnerable time.”[ii] In the lawsuit, Certified Roses alleges breach of contract, as well as violations of the Texas Deceptive Trade Practices Act (“DTPA”), negligent misrepresentation and negligence. The complaint seeks class certification, damages, and injunctive relief.
Pending the filing of a legal response to this complaint, Symmetry Energy’s website offers insight into its position. Symmetry Energy explains that as an energy marketer, the costs it incurs to purchase supply for its customers are appropriately passed onto them pursuant to contracts. The website also provides information about Symmetry Energy’s efforts to warn customers in February as to the potential for extremely high natural gas costs and possible pipeline and local distribution company (“LDC”) penalties. Symmetry Energy further describes the measures it took, when gas producers and suppliers were unable to deliver gas because of well-head freeze offs, to secure replacement natural gas and meet the needs of its customers.[iii]
Plaintiff and Defendant
Based in Tyler, Texas, and founded in 1949, Certified Roses depicts its business as a leading producer and wholesaler of award-winning and sustainable garden roses serving customers throughout the United States, Canada and Puerto Rico. Certified Roses offers a broad selection of roses that are available at over 5,000 retail outlets including independent garden centers, mid-size hardware stores, and mass merchandisers.[iv]
Symmetry Energy describes the company as a leading energy supplier providing over 1 trillion cubic feet of natural gas to more than 100,000 customers in over 30 states. Using its wealth of experience, Symmetry Energy finds new ways to help residential and business customers maximize their energy budgets every day. Symmetry Energy offers competitive pricing options, as it strives to provide customers with energy strategies that best fit their needs.[v]
Index Price Contract
In the complaint, Certified Roses told the court that it entered into an index price contract with Symmetry Energy in February 2015, which automatically renewed yearly, with pricing calculated according to the Inside FERC’s Gas Market Report. Under the contract, Symmetry Energy provided natural gas to Certified Roses, which the wholesaler used to operate its greenhouse facilities before shipping the roses to customers around the world.[vi]
Winter Storm Uri
Over the course of a week in February 2021, Winter Storm Uri wreaked havoc on Texas with 4.5 million homes experiencing power outages.[vii] Texas Governor Greg Abbott declared a state of disaster on February 12, 2021 due to the severe winter weather.[viii] As described by the complaint, Uri “brought cold weather, including sub-freezing temperatures, snow, and ice to a region ill-equipped to handle such conditions.”[ix] This abnormal weather event resulted in Certified Roses and Symmetry Energy becoming embroiled in a legal battle over their contract and the natural gas supply prices charged under that contract in February 2021.
Reasons for Historically High Prices
Notably, the parties appear to agree on the reasons for the historically high prices in the next-day natural gas market during the week of the winter storm. Certified Roses explains that Texas largely relies on natural gas for power and heat generation. The prices were the result of freezing temperatures causing an increase in demand for natural gas, coupled with well-head freeze offs and the failure of natural gas processing plants and pipelines.[x] Certified Roses summarizes the situation: “Overall, the natural gas market experienced a significant disruption as demand increased, supply decreased and prices rose.”[xi] Symmetry Energy’s description of the drivers for the historically high prices is nearly identical.[xii]
Specifics of the Complaint
The complaint alleges that Symmetry Energy breached the contract by sending an invoice for February 2021 for nearly $249 million, which included incremental supply costs of roughly $234 million. Certified Roses claims that the contract neither mentions nor defines such costs.
Certified Roses further accuses Symmetry Energy of violating the DTPA. Various provisions of the DTPA prohibit businesses from engaging in false, misleading or deceptive practices. According to the complaint, Symmetry Energy led customers to believe that the natural gas plan it was offering would not be subject to severe fluctuations. The complaint also claims that Symmetry Energy failed to disclose the risks of its plan.[xiii]
In addition, the lawsuit alleges that Symmetry Energy engaged in negligent misrepresentation when contracting with customers for natural gas services. Certified Roses told the court that the services were supposed to entail index pricing and other limited pass-through costs.[xiv] The complaint describes these representations as false, pointing to the incremental supply charges included in the February 2021 invoice.
Finally, Certified Roses claims that Symmetry Energy was negligent. Without a reference to the contract or any legal requirement, the complaint alleges that Symmetry Energy “has a duty to apply a level of care commensurate with the foreseeable harm arising from its control and management of its natural gas services. This encompasses a duty to ensure, especially during a disaster, natural gas is not sold via Symmetry at excessive prices.”[xv] According to the complaint, as early as February 12, 2021, Symmetry Energy advised its customers to expect substantial increases in market prices when consuming natural gas.[xvi] Based on this communication, Certified Roses claims that Symmetry should have implemented measures to avoid the price spikes, which it failed to do.
Symmetry Energy’s Response
Symmetry Energy’s legal pleadings in response to the complaint are forthcoming. However, a review of a page on its website, which provides information on Winter Storm Uri and the February 2021 invoices, offers some insight into its position on this contractual dispute.[xvii] Describing its role as a retail natural gas marketer, Symmetry Energy explains that it purchases supply for its customers and then passes along the costs incurred to those customers. Symmetry Energy does not produce gas or set market prices; the price of natural gas is set by the market.
According to Symmetry Energy, the communication sent on February 12, 2021 advised customers that severe weather was expected to cause significant supply disruption and substantial increases in market prices. Symmetry Energy encouraged customers to speak with their representative and to mitigate their consumption of gas. The marketer further warned that “customers who continued to consume gas in these markets would be exposed to the extremely high cost of natural gas and possible pipeline/LDC penalties, with a result that invoices could be appreciably higher than normal.”[xviii]
Finally, Symmetry Energy explains that during the severe weather event, it received numerous force majeure notices from gas producers and suppliers who were unable to deliver gas because of well-head freeze offs. Symmetry Energy describes the efforts that it took to secure replacement gas, wherever possible, to keep natural gas flowing during this unprecedented event. It is Symmetry Energy’s position that the costs it incurred to meet the natural gas needs of its customers were appropriately passed onto customers consistent with their contracts.
[i] Certified Roses, Inc., Individually and on Behalf of all Others Similarly Situated, v. Symmetry Energy Solutions, LLC, Case No. 2:21-cv-133 (“Complaint”).
[ii] Complaint, ¶ 1.
[iii] https://february21winterstormuri.symmetryenergy.com/ (accessed April 18, 2021).
[iv] http://www.certifiedrose.com/about.html (accessed on April 18, 2021).
[v] https://symmetryenergy.com/ (accessed on April 18, 2021).
[vi] Complaint, ¶¶ 10-11.
[ix] Complaint, ¶ 12.
[x] Complaint, ¶¶ 14-15.
[xi] Complaint, ¶ 16.
[xii] https://february21winterstormuri.symmetryenergy.com/ (Why were natural gas prices so high during the February billing cycle?) (accessed on April 18, 2021).
[xiii] Complaint, ¶ 42.
[xiv] Complaint, ¶ 53.
[xv] Complaint, ¶ 60.
[xvi] Complaint, ¶ 61.
[xvii] https://february21winterstormuri.symmetryenergy.com/ (accessed on April 18, 2021).
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