Contract Enforcement Key to Energy Infrastructure Investment

A recent court ruling in Texas highlights the importance of contract enforcement for energy companies to make long-term investments in infrastructure.

CPS Energy, a municipal utility serving San Antonio, tried to walk away from natural-gas agreements after the 2021 winter storm. However, a state judge rejected this effort, ruling that the agreements were enforceable and 'not unconscionable.'

The court ordered CPS Energy to pay nearly $400 million, including unpaid gas charges, interest, and attorneys' fees.

This case illustrates a principle policymakers should remember: affordable energy requires investment, which in turn requires confidence that rules will be followed.

Policymakers are increasingly concerned about rising energy costs. A recent Pew survey found that 56% of U.S. adults are very concerned about gas prices, up from 32% at the start of the year.

However, rather than scapegoating energy suppliers or punishing them for prices determined by supply and demand, policymakers should focus on making sure America has enough energy infrastructure.

The war with Iran has exposed vulnerabilities in oil production and refining. Refineries are producing 10% less fuel since the conflict began, pushing gas prices higher.

Climate advocates have long argued for a rapid transition away from fossil fuels, but this vision is at odds with the reality that refined petroleum products remain essential to industrial and consumer life.