Local Electric Utilities Managing to Avoid Chaos Being Faced by Others Entities Across the State
Some electricity providers are facing serious financial fallout from the historic winter storm last month. Two major local providers, the City of La Grange and Fayette Electric Cooperative, say their organizations should be able to weather the financial storm.
On March 1, the Brazos Electric Cooperative announced that it would file for bankruptcy due to costs associated with the historic storm. Two days later the City of Georgetown said it plans to issue a $47.8 million bond to pay for the electric bill it received following the storm.
“We don’t have a full picture of the overall impact, but it looks like we will be able to manage without rate shock to customers,” said La Grange City Manager Shawn Raborn.
“The bills we have seen so far are nothing out of the ordinary, really,” said FEC General Manager Gary Don Nietsche. “We don’t know of anything coming that will be out of the ordinary.”
Brazos Electric announced the bankruptcy plans in a press release issued March 1. Brazos Electric provides power generation and transmission services to 16 member cooperatives that collectively serve 1.5 million retail customers. Prior to the storm, Brazos said it was “in all respects a financially robust, stable company with a clear vision for its future and a strong ‘A’ to ‘A+’ credit rating.”
“As a result of the catastrophic failures due to the storm, Brazos Electric was presented with excessively high invoices by ERCOT for collateral and for purported cost of electric service, payment of which was required within days,” the press release said. “As a cooperative whose costs are passed through to its members, and which are ultimately borne by Texas retail consumers served by its Member cooperatives, Brazos Electric determined that it cannot and will not foist this catastrophic financial event on its members and those consumers.”
The Electric Reliability Council of Texas (ERCOT), which manages the Texas electric grid, faces much criticism for its handling of the electricity crisis in the state last month. Several board members who lived out of state resigned in the days following the widespread power outages. The Public Utility Commission of Texas (PUCT) Chair DeAnn Walker, whose organization regulates electric utilities in Texas, resigned Monday afternoon, March 1, following testimony before the Texas Legislature. The remaining ERCOT board members voted to fire CEO Bill Magness last Wednesday, March 3.
“ERCOT is in a bit of turmoil, to put it mildly,” Nietsche said. “We’re seeing all kinds of weird things. They’re correcting bills. They had metering that was not working properly, and all kinds of weird stuff we don’t normally see.”
The hefty bills from ERCOT to some power providers came after ERCOT raised wholesale electric rates to the market cap of $9,000 per megawatt. That move was intended to encourage power generators to bring more electric supply to market. But during the historic storm, there was simply not enough power generation available. Power plants across the state shut down due to frozen pipes. Some wind generators stopped turning because of frozen ice on the blades. Some solar generators stopped producing due to snow piling up on the panels.
“When you get to $9,000 per megawatt, it’s supposed to incentivize generators sitting on the sidelines to come to market,” said La Grange City Manager Shawn Raborn. “But no one was sitting on the sidelines. No one came to market.”
Utilities that had to buy power at those high rates face the biggest financial hurdles. The City of Georgetown owes $44.8 million for about 3,000 megawatt hours it used between Feb. 14 to 20.
The City of La Grange purchases most of its power from the Lower Colorado River Authority under the terms of a long-term contract.
“I believe it will be manageable for us,” Raborn said regarding the City’s cost for electricity during the storm. “We had some market exposure, but LCRA’s initial contact with us has been that it will be manageable. There won’t be any near term rate hikes.”
Nietsche said Fayette Electric Cooperative hedges power costs by contracting with several suppliers. Nietsche said FEC was able to avoid much market exposure because most of the providers it buys power from never went offline during the storm. Nietsche said customers would not see any near-term rate hikes from the co-op as a result of the storm. However, he said many customers will see higher-thannormal bills because they used a lot more electricity during the storm. Customers who use electric heat pumps to keep their homes warm may notice the biggest bills.
Some Bills Double the Norm
“We have seen some bills that doubled because of the consumption during that time,” Nietsche said.
Nietsche said home heat pumps lose efficiency when the outside temperature drops below 30 degrees. At those low temperatures, heat pumps have to employ inefficient electric heat strips to warm the air.
“It’s a very costly way of heating,” Nietsche said.
Nietsche said customers can use Fayette Electric’s SmartHub app, which monitors electrical usage over time, to see how much electricity they used during the storm.
Long term, Nietsche said electric rates across the state could rise as power plants implement winterization efforts to avoid another power catastrophe.