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Texas AG expands win­ter storm inves­ti­ga­tion into nat­ur­al gas price increases

March 9, 2021

by Paul Ciampoli
APPA News Director
March 9, 2021

Texas Attorney General Ken Paxton on March 8 said that he has issued a civil investigative demand (CID) to Intercontinental Gas Exchange, a natural gas exchange.

Paxton’s office said that the exchange “saw massive price increases during the February winter storm that swept through Texas.”

The CID issued to Intercontinental Gas Exchange follows on the heels of CIDs issued to ERCOT and other power companies regarding power outages, emergency plans, energy pricing, and more related to the winter weather event.

CIDs were sent to:

The CIDs sent to these entities are available here.

Paxton sues power provider

Paxton on March 1 filed a lawsuit against Griddy LLC “for violating the Texas Deceptive Trade Practices Act through false, misleading, and deceptive advertising and marketing practices,” Paxton’s office said in a news release.

“During the February freeze, Texas power companies failed to withstand the winter storm and left millions of Texans without power and heat during lethal, record-low temperatures across the state. Compounding this disaster, Griddy passed skyrocketing energy costs to customers with little to no warning, resulting in consumers paying hundreds or even thousands of dollars each day for electricity,” the news release said.

The lawsuit seeks injunctive relief from Griddy “to ensure that the Texans it serves will receive truthful and accurate energy service in the future, and to have the court order refunds from available sources,” Paxton’s office said.  

ERCOT in a Feb. 26 market notice said that it had revoked all rights of Griddy Energy LLC to conduct activity under the ERCOT protocols due to a payment breach.  

ERCOT said in the notice that it had initiated the mass transition of Griddy Energy customers on February 26 and that it was working closely with PUCT staff and affected market participants to ensure an efficient and effective transfer of customers to designated providers of last resort.

Texas PUC declines to take action in response to report on $16 billion in additional costs

March 8, 2021

by Paul Ciampoli
APPA News Director
March 8, 2021

The Public Utility Commission of Texas (PUCT) declined to take action in response to a report from the independent market monitor (IMM) for the Electric Reliability Council of Texas (ERCOT) that a decision by ERCOT resulted in $16 billion in additional costs to ERCOT’s market, of which roughly $1.5 billion was billed to load-serving entities (LSEs) to provide make-whole payments to generators for energy that was not needed or produced.

“I think these are difficult decisions and they always have been,” said PUCT Chairman Arthur D’Andrea in commenting on repricing requests made by the IMM at a March 5 PUCT meeting.

“The IMM raised some good points and I think they’re very interesting and so we definitely should consider them,” he said.

With respect to the IMM’s suggestion of repricing the energy market, “it’s my understanding that unless we wanted to really disrupt the ICE [Intercontinental Exchange] markets, their deadline is today at 4 and so we would have to decide that now if we wanted to reprice that and I’m not inclined to do it today,” D’Andrea said.

“We did get a letter” from Texas Sen. Drew Springer “addressing this issue and I’m so grateful for legislative feedback on these questions,” he said. “On this question right now, we need to be just standing shoulder to shoulder with them. There cannot be any daylight between us,” D’Andrea said.

“On my part, I don’t intend to make any huge decisions without talking to all of them first,” he said

The PUCT didn’t vote to reject the IMM’s suggestion, “leaving the door open for a change of policy in coming weeks,” the Wall Street Journal noted in a March 5 article.

Texas public power utilities take action to help customers financially

March 8, 2021

by Paul Ciampoli
APPA News Director
March 8, 2021

Texas public power utilities are taking a number of actions to help protect customers financially in the wake of the Electric Reliability Council of Texas (ERCOT) last month entering emergency conditions and initiating rotating outages in the state in the wake of an arctic blast.

Austin Energy

The Austin, Texas City Council on March 4 approved $10 million in emergency bill relief for customers experiencing financial difficulty as a result of Winter Storm Uri or COVID-19.

The approved funding is effective immediately and is made possible through a combination of rate reductions, utility bill credits and a funding infusion to the “Plus 1-Customer Assistance Program” from Austin Water and Austin Energy. 

The Plus 1–Customer Assistance Program, which increased funding levels in April 2020, on March 4 received an additional $5 million funding infusion from Austin Water and $5 million from Austin Energy.

It has helped nearly 16,000 individual households and provided more than $11.7 million in assistance to Austinites experiencing financial difficulty due to COVID-19, serious illness, recent job loss or other emergencies. 

The Austin City Council also approved a series of measures designed to avoid high utility bills as a result of last month’s extreme freezing temperatures.

CPS Energy

Meanwhile, San Antonio-based CPS Energy on March 5 said that it is continuing to fight for customers to keep their bills affordable while pursuing prudent business practices that ensure the utility and San Antonio remain financially stable and strong. 

CPS Energy will begin releasing February 2021 bills on March 8, 2021, it noted.

CPS Energy said it is currently assessing the validity of the additional fuel and purchased power costs from the winter storm and is currently not passing them through to customers.  

As a precaution, CPS Energy officials suspended billing for customers on February 19 to confirm that energy bills did not include any rate changes or fuel adjustment costs related to the historic winter storm, and to ensure that billed usage is based on actual meter reads and not estimations. “That important step has been completed; February bills do not include any additional exorbitant fuel or purchased power charges from the winter storm,” the utility noted.  

Additionally, CPS Energy is also reviewing the accounts of customers who were most impacted by the February 2021 extreme winter storm and expects to provide helpful credits in those cases. The company’s credit plan will be announced in the next 30 to 45 days. 

Electronic and paper bills began to be released on March 8. Depending on a customer’s billing cycle, it could take until Saturday, March 13, 2021 for a customer’s delayed bill to be sent. 

As a result, customers may receive their February bill close to their March bill. CPS Energy said its energy advisors were standing by to work with all customers to discuss their bills and to assist with helpful payment arrangements. Additionally, no late fees will be charged to customers for their February bills or in the case of a customer being on a payment plan.  

CPS Energy noted that the suspension of energy disconnections announced in March 2020 is still in effect and late fees are waived on unpaid balances for customers who participate in a payment plan. 

Meanwhile, the Residential Energy Assistance Partnership (REAP), a partnership of CPS Energy, the City of San Antonio and Bexar County, provides energy bill assistance twice a year to those in need, CPS Energy said. 

And the utility’s new Energy Angels program fills a need not currently met by REAP. The Energy Angels program allows an individual to give the gift of energy to a specific individual or business account. This financial gift is not tax deductible, but the recipient is not required to meet an income-qualifying threshold. The gift will appear on the recipient’s bill as a credit to their account.

To help customers during the COVID-19 pandemic and winter storm disaster, CPS Energy is actively making phone calls to customers to share bill assistance and REAP information with them.

Bryan Texas Utilities

On March 3, Bryan Texas Utilities (BTU) said that it was continuing to monitor the financial issues and discussions surrounding the recent historic winter weather event as it affected the energy market.

“While there are financial settlements still to be resolved in ERCOT and the situation changes daily, BTU expects no changes to customer rates. The Bryan City Council, BTU Board and staff will work diligently to ensure rates are kept as reasonable and predictable as possible,” the public power utility said.

GEUS

In order to maintain strong financial stability, the Greeneville Electric Utility System (GEUS) Board of Trustees will consider securing short-term financing, GEUS said on March 5. A public hearing will be held to discuss this matter on March 11.

Short-term funding will provide GEUS with the ability to pay the increased energy costs for the month of February while continuing to manage the financial health of the utility, it noted.

“At this time, the costs of this event are being absorbed by GEUS,” said GEUS Board of Trustees Chair Sue Ann Harting.

GEUS said that “there are many questions about the legitimacy and even legality of some costs that were incurred during this event. We will continue to monitor the developments affecting pricing as financial settlements are resolved and will diligently work to ensure no unfair costs are passed on to GEUS customers.”

City of Georgetown

The City of Georgetown, Texas, on March 5 said it plans to issue $47.8 million in a 10-year bond to pay for energy used during February’s winter storm. The City Council in a March 2 meeting directed staff to pay the debt over 10 years from electric utility revenues at current rates.

“Even as we got word on the exorbitant cost of energy while we were in the middle of the disaster, there was never a question of whether we would not keep the power on as much as we could,” Mayor Josh Schroeder said. “Our focus was delivering electricity to our customers and controlling the variables we could. Another variable we have some control over is the burden placed on Georgetown electric customers as a result of this event, and the steps we took Tuesday will mitigate additional costs for our customers,” he said in a statement.

As a result of the planned bond issuance, Georgetown electric customers will see no difference in their electric rates, despite the high energy costs during the storm.

The city’s bill currently is due at the beginning of April. However, what the city owes continues to change as electric generators and providers, Public Utility Commission of Texas (PUCT), and legislators evaluate the financial situation and weigh options, it said. Any changes to rates or the bond needed because of an amended bill will be brought before the council for discussion and direction.

At the direction of the city council, the city plans to use the existing power cost adjustment (PCA) of $0.01375 per kilowatt hour to help cover the cost of the bond as it is paid back over 10 years. The PCA was on track to be eliminated in 2022 due to the end of a purchased power contract. The current PCA generates about $6 million a year, which would cover the additional, annual debt payment of $5.4 million from the 10-year bond.

The city also is pursuing a surety policy to cover an additional $6.4 million in reserves, which will be required to maintain debt service coverage ratios after the costs from the winter storm. The one-time, up-front payment (expected to be in the hundreds of thousands of dollars) for the policy will be paid for using existing revenues.

Georgetown said that customers might see higher-than-normal electric bills for February due to increased usage. Even with the mandated power outages from ERCOT, heating and reheating of a home consumes considerable energy and is likely to result in higher bills this month, it noted.

The city “has multiple options to help you pay your electric bill, such as funding assistance through partner agencies and in-house customer programs you may qualify for,” it noted.

On March 11, Schroeder, City Manager David Morgan and electric general manager Daniel Bethapudi will participate in a presentation and live question and answer about the electric costs facing the City of Georgetown as a result of February’s winter storm.

ERCOT board dismisses CEO in wake of power outages

In other news, the Board of Directors of ERCOT on March 3 voted to dismiss ERCOT President and CEO Bill Magness in the wake of rotating outages implemented by ERCOT after an arctic blast hit the state last month.

“The ERCOT Board of Directors met this evening and directed the Corporate Secretary to exercise the 60 days’ termination notice to ERCOT President and CEO Bill Magness pursuant to the employment agreement with ERCOT,” ERCOT’s Board of Directors said in a March 3 statement.

“During this transition period, Bill will continue to serve as President and CEO and work with state leaders and regulators on potential reforms to ERCOT. The ERCOT Board is expected to begin an immediate search for a new President and CEO, and will continue to discuss the transition plan at future meetings during this time period,” the board said.

DeAnn Walker on March 1 resigned as chairwoman of the Public Utilities Commission of Texas, days after she faced questions from state lawmakers at a hearing that examined rotating outages implemented by ERCOT in the wake of an arctic blast.

On Feb. 25, Walker appeared before a hearing held by the Texas Senate’s Committee on Business and Commerce. Magness also participated in the hearing.

TMPA’s Bob Kahn selected to serve on ERCOT’s board

Bob Kahn, general manager of the Texas Municipal Power Agency, has been selected to serve on the board of ERCOT, the Austin American Statesman reported on March 7.

Kahn served as President and CEO of ERCOT from July 2007 to November 2009.

Kahn was an ERCOT board member from 2002 to 2006 and was also the deputy general manager at Austin Energy.

PUCT votes to claw back ERCOT ancillary services payments made to generators

Meanwhile, the PUCT on March 3 voted to “claw back” ERCOT payments made to generators for a special category of power reserves they failed to deliver.

Known as ancillary services, the electricity reserves are contracted in advance to help ERCOT support the transmission of energy to users while maintaining reliable operation.

The PUCT situation was brought to the PUC’s attention by ERCOT’s Independent Market Monitor? who identified a number of instances between Feb. 14 and 19, in which ancillary services were not provided in real time because of forced outages or decreases in the available capacity of electric generating units.

While ERCOT operators would traditionally note the ancillary services’ “failure to provide” so that payments would not be made, the pace of activity surrounding the grid event caused this function to be overlooked, the PUCT said. As a result, the ERCOT payments must be returned.

U.S. House subcommittee launches probe of ERCOT’s role in Texas power crisis

On March 3, U.S. Rep. Ro Khanna, D-Calif., and Chairman of the House Subcommittee on the Environment, sent a letter to Magness, seeking information and documents “regarding the lack of preparation” by ERCOT for the recent winter storm. The subcommittee is also seeking information regarding ERCOT’s response to the winter storm and its preparedness for future storms.

“Extreme winter weather events in Texas have occurred repeatedly over decades and ERCOT has been unprepared for them,” wrote Khanna.

“ERCOT’s own consultant has predicted that such extreme winter weather events will continue to occur every decade. The subcommittee is concerned that the loss of electric reliability, and the resulting human suffering, deaths, and economic costs, will happen again unless ERCOT and the State of Texas confront the predicted increase in extreme weather events with adequate preparation and appropriate infrastructure,” the lawmaker said.

U.S. House Energy and Commerce Committee Chairman, others seek answers from ERCOT

Meanwhile, House Energy and Commerce Committee Chairman Frank Pallone, Jr., D-N.J., Energy Subcommittee Chairman Bobby L. Rush, D-Ill., Oversight and Investigations Subcommittee Chair Diana DeGette, D-Colo., Rep. Marc Veasey, D-Texas, and Rep. Lizzie Fletcher, D-Texas wrote to Magness on March 4 to inquire about ERCOT’s role in preparing for and responding to the recent extreme weather event.  

“The ongoing crisis raises significant questions regarding Texas’ grid resilience and regulatory regime, and ERCOT’s stewardship of the grid prior to and during this crisis,” the lawmakers wrote. “According to reports, ERCOT was aware of the possibility of a significant winter weather event as early as Tuesday, February 9, 2021, but may not have appreciated the seriousness of the event or its possible implications.”  

The lawmakers stressed in their letter that more must be done to protect communities disproportionately impacted by winter power outages. 

They pointed to a 2011 report from the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) that made a number of recommendations for the electric and natural gas industries intended to help prevent blackouts and natural gas curtailments after another major storm event that year.

“Several of these recommendations were directed at ERCOT, but it is unclear the extent to which ERCOT implemented any of these recommendations,” the lawmakers said. “With extreme weather events becoming more frequent due to climate change, it is critical that ERCOT and Texas apply lessons from earlier emergency events in order to increase the strength and resiliency of the grid and prevent future blackouts.”

The lawmakers requested a briefing and information regarding the outages, including:

Kansas governor signs bill to protect Kansas cities from surging costs

March 8, 2021

by Paul Ciampoli
APPA News Director
March 8, 2021

Kansas Gov. Laura Kelly on March 3 signed a bill to protect Kansas cities from potential price surges in electricity bills caused by extremely cold temperatures in February.

Senate Bill 88 establishes a $100 million low-interest loan program for municipal utilities facing high utility bills after last month’s frigid temperatures. 

“This loan program was absolutely necessary for our cities to manage the surging utility costs,” Kelly said. “It gives cities the immediate relief they need to avoid dire financial decisions while we pursue other, long-term solutions.”

The loan program will be administered by the Kansas State Treasurer’s Office using Pooled Money Investment Board (PMIB) funds.

The City Utility Low-Interest Loan Program is a backstop for cities in Kansas with public power or public gas systems that were financially devastated by the February extreme winter weather event, noted Colin Hansen, Executive Director of Kansas Municipal Utilities (KMU).

“Dozens of cities across Kansas face exorbitant natural gas and power supply costs. For many, six days of usage in February cost multiple times more than an entire year’s gas or power budget,” he said.  

The legislation enacting the City Utility Low-Interest Loan Program went from a hearing on the morning of March 3 to passage on emergency action by both the full House and Senate later that day, Hansen said, with Kelly signing the measure that evening. The State Treasurer was accepting applications 24 hours after the measure was enacted.  

“We are incredibly appreciative of the Governor, State Treasurer and our legislative leaders all joining together on a measure needed to help Kansans in such an incredibly abbreviated timeframe,” Hansen said.

“The loan program will enable cities that were using words like ‘insolvency,’ ‘bankruptcy,’ and ‘dissolution’ the time to begin to address the financial crisis caused by outlandishly high natural gas and electricity prices,” he said.

Monitor says ERCOT decision resulted in $16 billion in additional costs to market

March 5, 2021

by Paul Ciampoli
APPA News Director
March 5, 2021

An Electric Reliability Council of Texas (ERCOT) decision last month resulted in $16 billion in additional costs to ERCOT’s market, of which roughly $1.5 billion was uplifted to load-serving entities (LSEs) to provide make-whole payments to generators for energy that was not needed or produced, the independent market monitor (IMM) for ERCOT’s wholesale electricity markets said.

The IMM, Potomac Economics, on March 4 submitted a filing to the Public Utility Commission of Texas (PUCT) in a proceeding related to rotating outages implemented by ERCOT in February in the wake of an arctic blast that hit the state.

Potomac Economics said that it agrees with the PUCT’s order from Feb. 15, 2021, which mandated that real-time energy prices reflect firm load shed by setting prices at the value of lost load (VOLL). “This is essential in an energy-only market because it provides efficient economic signals to increase the electric generation needed to restore the load and service it reliably over the long term,” the IMM said.

“Conversely, it is equally important that prices not reflect VOLL when the system is not in shortage and load is being served. The Commission recognized this principle in its order, expressly stating it is only ERCOT’s out-of-market shedding firm load that is required to be reflected in prices,” Potomac Economics said.

ERCOT recalled the last of the firm load shed instructions at 23:55 on February 17, 2021. “Therefore, in order to comply with the Commission order, the pricing intervention that raised prices to VOLL should have ended immediately at that time,” the IMM told the PUCT.

 However, ERCOT continued to hold prices at VOLL by inflating the real-time on-line reliability deployment price adder for an additional 32 hours through the morning of February 19, Potomac Economics said.

This decision resulted in $16 billion in additional costs to ERCOT’s market, of which roughly $1.5 billion was uplifted to LSEs to provide make-whole payments to generators for energy that was not needed or produced.

Although most energy costs can be hedged by ERCOT’s LSEs through bilateral contracts or generation, “these make-whole payments are particularly harmful because they are uplifted to all loads through the Real-Time Ancillary Service Imbalance Charge. Therefore, they cannot be hedged and will likely result in substantial adverse economic effects, including higher levels of defaults,” the IMM said.

“Therefore, the IMM recommends that the Commission direct ERCOT to correct the real-time prices from 0:00 February 18,2021, to 09:00 February 19,2021, to remove the inappropriate pricing intervention that occurred during that time period,” Potomac Economics said.

“From a practical standpoint, this will primarily be accomplished by removing most, if not all, of the Real-Time On-Line Reliability Deployment Price Adder during these intervals, which will substantially eliminate the Real-Time Ancillary Service Imbalance Charge,” it said.

The IMM said that adopting this recommendation will not result any revenue shortfalls for ERCOT’s generation as the corrected prices will cover the generator’s as-offered costs, and efficiently reflect the actual supply, demand, and reserves during this period.

“We recognize that revising the prices retroactively is not ideal. In this case however, given that the prices are inconsistent with ERCOT’s protocols and the Commission order and that allowing them to remain will result in substantial and unjustified economic harm, we respectfully recommend that the Commission take the action described above to correct ERCOT’s real time prices,” Potomac Economics said.

In a March 1 filing in the proceeding, the IMM offered several recommendations “related to ancillary services in light of certain market outcomes.”

Among other things, Potomac Economics recommended that for operating days February 15 through February 20, 2021, there should be a repricing of all day-ahead ancillary services clearing prices to cap them at the System-Wide Offer Cap of $9,000 per megawatt hour.

Texas PUC chair resigns; state attorney general files lawsuit against power provider

March 2, 2021

by Paul Ciampoli
APPA News Director
March 2, 2021

DeAnn Walker on March 1 resigned as chairwoman of the Public Utilities Commission of Texas (PUCT), days after she faced questions from state lawmakers at a hearing that examined rotating outages implemented by the Electric Reliability Council of Texas (ERCOT) in the wake of an arctic blast.

On Feb. 25, Walker appeared before a hearing held by the Texas Senate’s Committee on Business and Commerce. ERCOT President and CEO Bill Magness also participated in the hearing.

Among other things, state Sen. Robert Nichols asked Walker questions about winterization by generators, which he said is “key to keep this from happening in the first place.”

She said that while the PUCT has enforcement authority over weatherization, it is limited to emergency operation plans. “We do not have any authority to require them to do weatherization.”

In response, Nichols said, “the time to fix these things is not during an emergency. It’s during a time when we’re not in an emergency.”

Sen. Brandon Creighton noted that Walker had mentioned several times that she doubted the authority she held.

When asked by Creighton whether she feels like she has enough authority, Walker said, “I think it depends on what obligation you’re referring to. If you’re referring to weatherization, I think I need more.”

Creighton pointed out that under the Texas Public Utility Regulatory Act, “that act gives the Commission complete authority over ERCOT…you have complete authority over ERCOT. So I’m having trouble with you mentioning several different times that you lack the authority or that this or that has been delegated to ERCOT.”

Texas AG sues power provider

Meanwhile, Texas Attorney General Ken Paxton on March 1 filed a lawsuit against Griddy LLC “for violating the Texas Deceptive Trade Practices Act through false, misleading, and deceptive advertising and marketing practices,” Paxton’s office said in a news release.

“During the February freeze, Texas power companies failed to withstand the winter storm and left millions of Texans without power and heat during lethal, record-low temperatures across the state. Compounding this disaster, Griddy passed skyrocketing energy costs to customers with little to no warning, resulting in consumers paying hundreds or even thousands of dollars each day for electricity,” the news release said.

The lawsuit seeks injunctive relief from Griddy “to ensure that the Texans it serves will receive truthful and accurate energy service in the future, and to have the court order refunds from available sources,” Paxton’s office said.  

ERCOT in a Feb. 26 market notice said that it had revoked all rights of Griddy Energy LLC to conduct activity under the ERCOT protocols due to a payment breach.  

ERCOT said in the notice that it had initiated the mass transition of Griddy Energy customers on February 26 and that it was working closely with PUCT staff and affected market participants to ensure an efficient and effective transfer of customers to designated providers of last resort.

CPS Energy fights to protect customers, keep bills affordable in wake of extreme weather

March 2, 2021

by Paul Ciampoli
APPA News Director
March 2, 2021

In the wake of a recent reliability crisis in Texas, San Antonio, Texas-based public power utility CPS Energy on March 2 said that it will proactively protect customers to keep their bills affordable while continuing to pursue prudent business practices that keep the utility and San Antonio financially stable and strong. 

“Last month’s extreme and historic Texas weather disaster has exposed a systemic market failure that has unfairly impacted communities and utilities across the Electric Reliability Council of Texas (ERCOT),” the utility said.

“For those people who live here, please know that CPS Energy did not do anything to add to the problem. In my opinion, CPS Energy was well prepared and helped in the situation by doing what it had to do when ERCOT asked it to shed load,” said Texas State Senator José Menéndez, following the March 1, 2021, CPS Energy Special Board of Trustees meeting. 

Relative to the February 2021 energy reliability crisis, the management team at CPS Energy is also focused on improving communications and other important aspects of its systems.

Formal reviews have been separately requested by the San Antonio City Council and CPS Energy’s Board of Trustees. The first review, from the city, will be starting soon and CPS Energy said that it will fully cooperate with both requests.

Since Feb. 15, 2021, CPS Energy President and CEO Paula Gold-Williams has often talked about a new financial tsunami in Texas that has been caused by gas suppliers that raised their prices by as much as 16,000 percent in anticipation of and during the storm and by ERCOT for allowing power prices to rise to and hold at the $9,000 per megawatt hour market cap, CPS Energy noted.  

On Feb. 25, 2021, CPS Energy filed a voluntary event notice to the investor community that provided a general estimate of what is owed by the utility.

The estimates of the components, which could change, are natural gas fuel costs of approximately $675 million to $850 million and purchase power costs of approximately $175 million to $250 million.

CPS Energy said that it is fighting to protect its customers and taking steps to mitigate future customers’ bills from the potential impacts of these costs. 

There are multiple mitigation options being considered and pursued, including federal and state financial assistance, regulatory intervention, policy help at the federal and state levels, negotiation, and appropriate legal actions as needed.

CPS Energy is also deploying multiple tools the utility has available to maintain cash and liquidity.

These tools were outlined at the March 1 Special Board of Trustees meeting.

In addition to a review of tools previously supported and approved by the Board and San Antonio City Council, there was a request to approve an additional line of credit to support operations in the interim. The credit line would only be accessed if necessary.  

At the end of the meeting, the Board approved this latest request from management to create additional borrowing capacity of approximately $500 million, which the utility noted is the equivalent of an insurance policy necessary to protect the financial health of CPS Energy and its customers.

This liquidity request will also be presented to the San Antonio City Council for its consideration, as soon as reasonably possible. 

“Our first priority is to protect our San Antonio customers. We will absolutely pay justified and legitimate charges, as we always have.  However, prudently, we must challenge all charges that we believe may be unlawful, unconscionable, or illegitimate,” said Gold-Williams.

“This is a very complex situation, and we are focused on shielding our customers from outrageously high costs that are inappropriate. Currently, we are holding all costs on our balance sheet and not passing them through to customers. We understand we must be the advocate for our San Antonio customers to ensure a more fair and equitable end result for everyone.”

While CPS Energy believes its plan is thoughtful and prudent, it has not been fully presented to and assessed by the financial markets.

In immediate reaction to the Texas crisis, Fitch and S&P initially put the utility on a Negative Watch. Moody’s review is in process. 

“CPS Energy believes that its plan will provide comfort to the financial markets. These presentations and discussions, including investor and lender outreach, are happening now,” it noted.

CPS Energy said its multifaceted strategic approach has been designed to:

Texas lawmakers hold series of hearings over recent power outages

March 1, 2021

by Paul Ciampoli
APPA News Director
March 1, 2021

Texas lawmakers over two days last week held a series of hearings tied to the Electric Reliability Council of Texas (ERCOT) last month entering emergency conditions and initiating rotating outages in the state in the wake of an arctic blast.

On Feb. 25, ERCOT President and CEO Bill Magness appeared before the Texas Senate’s Committee on Business and Commerce. Magness offered a presentation and fielded questions from state senators for a little over six hours during the hearing.

Magness said that “this storm, at its worst, took out 48.6 percent of the generation available to ERCOT to manage the system. Now, we always keep reserves. We don’t ever want to manage it down to zero. But when you lose almost half of your generation. When you have record demand like we have never seen in the winter in Texas, you’re going to have a problem.”

He said that if ERCOT had not acted by calling for controlled outages, “Texas was headed for a blackout.” Magness said that if the outages had not been ordered, “we’d probably be talking today about when the power’s going to come on. And what my team and the folks at the utilities in Texas would be doing is an exercise called black start, and we drill it every year, but we’ve never done it.”

Magness noted that Texas has never had a blackout. “There’s been blackouts in the Northeast. There’s been blackouts in New York. There’s been blackouts in California. Several places have had major blackouts. But if we have one, we’re going to be relying on folks in the utility industry to basically restart the electric grid,” which he said is a “very difficult process” and it is at a minimum weeks in terms of duration. “There’s no way it’s not weeks and it could be months,” he said.

“I feel a great deal of responsibility and remorse about the event,” he said at a later point. “I believe the operators on our team did everything they could have.”

 “But you wouldn’t have changed anything in terms of your play calling during those critical hours?” asked Texas Sen. John Whitmire.

“As I sit here now, I don’t believe I would,” Magness responded. “I wouldn’t step in front of them and question their judgement and their experience,” he said in reference to ERCOT’s operators.

“If we listen to all the tapes and we look at all the evidence and there were things that they should have done differently, that should certainly be on me because I’m ultimately responsible” for ERCOT.

Whitmore also asked Magness whether he was “ever concerned in the early parts of the crisis when the generators were saying, we’re doing the best we can because the gas lines are freezing up – do you ever” worry about the natural gas lines “not being really as frozen as were being claimed for the purposes of raising the price of gas?”

“What we were concerned about at the time was the generation units that were reporting that they couldn’t run or could run less because of gas shortage kind of issues. We don’t have any real significant interface with the gas industry. We don’t manage any of their operations,” Magness said.

The Federal Energy Regulatory Commission on Feb. 22 said that its Office of Enforcement is examining wholesale natural gas and electricity market activity during recent extreme cold weather to determine if any market participants engaged in market manipulation or other violations.

When asked by another state senator whether the market construct in ERCOT is adequate or should be changed, Magness said that “We’re certainly not the policymakers on that. We’ve seen a lot of success with the market structure we’ve got. We’ve served the highest demands during the summer that we’ve ever seen. We’re getting some new investment – maybe not the type of investment everybody wants – but we’re getting new investment.”

Along with the Committee on Business and Commerce, the Texas House Committees on State Affairs and Energy Resources on Feb. 25-26 held a joint public hearing related to the outages.

Texas governor delivers speech on response to power outages

Texas Gov. Greg Abbott on Feb. 24 delivered a televised statewide address on the state’s response to the recent power outages.

Among other things, he said that ERCOT must be overhauled. He noted that five ERCOT board members have already resigned, including the Chair and Vice-Chair. “But more must be done,” he said.

“I am already working with the Legislature on reforms to add more power to the grid and to ensure that we never run out of power again. Also, the Office of the Attorney General has launched a formal investigation into ERCOT,” he said.

City of Denton files suit against ERCOT

On Feb. 25, the City of Denton, Texas, filed suit against ERCOT in the District Court of Denton County seeking to prevent the unconstitutional use of public funds. The City of Denton owns and operates Denton Municipal Electric (DME).

ERCOT is using a mechanism within its protocols known as “uplift,” the city noted in a news release.

“Due to the recent record-high wholesale energy prices, some ERCOT market participants have failed to pay ERCOT for power purchases. Ultimately, uplift may spread the costs of those ERCOT market participants to other market participants, including DME,” the city said.

The city “views the payment of the costs of other utilities as an unconstitutional gifting of public funds and unconstitutional lending of its credit,” it said.

Late Thursday, the district court granted a Temporary Restraining Order in favor of the City of Denton in this matter.

The City of Denton said it “will explore all legal options to protect the financial assets of the City of Denton and its ratepayers from improper use. As this is a pending legal matter, there is currently no additional information or comment.”

Texas cooperative files for bankruptcy

Brazos Electric Power Cooperative, Inc., Texas’ oldest and largest generation and transmission power cooperative, announced on March 1 that it filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas.

Brazos Electric initiated this financial restructuring to maintain the stability and integrity of its entire electric cooperative system.

Brazos Electric provides wholesale power supply to its sixteen member-owner distribution cooperatives whose service territory extends across 68 Texas counties from the Texas Panhandle to Houston.

Brazos Electric said in a news release that before the severe cold weather that blanketed Texas with sub-freezing temperatures February 13-19, “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.”

Brazos Electric said that as a result of the catastrophic failures due to the storm, it was presented with excessively high invoices by ERCOT for collateral and for purported cost of electric service, payment of which was required within days.

“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,” it said.

Throughout the forthcoming financial restructuring process, Brazos Electric said it will remain committed to:

The filing also includes several “first day” customary operational motions Brazos Electric filed with the court in support of its financial restructuring including requests of authorizations to continue paying employee wages and benefits and certain critical vendors.

Brazos Electric will pay all obligations under normal terms of business for goods and services provided on the filing date of March 1, 2021 and thereafter.

Granholm comments on Texas situation in Q&As with Washington Post, NPR

Meanwhile, in a Q&A with the Washington Post, the newspaper noted that Secretary of Energy Jennifer Granholm recently tweeted that what happened in Texas, and what happened in California in the summer heat there, shows a need to upgrade the grid. “But was there anything that happened in Texas that was new to you, that made you think again about what kinds of changes are needed?,” Granholm was asked.

“A hand of friendship extended to Texas — to consider upgrading their connectivity to the national grid so that their neighbors can help them in times of crisis,” Granholm responded.

“Obviously, they have to winterize their energy system. I understand the desire to be independent. I get that that’s the ethos in Texas. But in emergencies, it would be good to know there’s backup,” she said.

The transmission grid that the ERCOT independent system operator administers is located solely within the state of Texas and is not synchronously interconnected to the rest of the United States. The transmission of electric energy occurring wholly within ERCOT is not subject to the Commission’s jurisdiction under sections 203, 205, or 206 of the Federal Power Act. 

Similarly, in an interview with National Public Radio, Granholm said “I think the country would welcome Texas being at least connected to the national grid in some way, shape or form that allows for its neighbors to help.”

Granholm said that “We all plan for redundancies and backups in our lives and this might be just a backup that Texas might want to consider at this time.”

She also told NPR that “Texas needs to weatherize, winterize its energy systems.”

APPA, APGA urge President Biden to declare a natural gas supply emergency, cap prices

February 23, 2021

by Paul Ciampoli
APPA News Director
February 23, 2021

The American Public Power Association (APPA) and the American Public Gas Association (APGA) recently urged President Biden to use the Natural Gas Policy Act (NGPA) to declare a natural gas supply emergency and to authorize the Secretary of Energy to exercise delegated authority under section 302 of the act to cap the price for purchases of natural gas from producers of natural gas or other persons to the extent authorized by the NGPA.

In their Feb. 19 letter to Biden, APPA and APGA noted that the recent cold weather in the Midwest and Texas has driven high demand for electricity while at the same time supply (power generation) has been constrained due to natural gas well and pipeline freezes, wind turbine freezes, and freezes/cold weather impacts at power plants themselves.

“As a result, many public power customers in Texas have been without power as their local providers have been forced to ‘shed load’ (reduce demand) to help the entire Texas electrical system (known as ERCOT) remain stable and functioning,” the letter said.

In addition, natural gas prices, which had hovered around $3/MMBtu, skyrocketed to upwards of $300/MMBtu and even higher in some cases, APPA and APGA pointed out.

“With demand for natural gas rising in response to the cold temperatures, our members had no choice but to purchase gas at the inflated prices or pay even steeper penalties to ensure that our members could meet their communities’ energy needs,” the letter said.

“This situation has also driven up wholesale gas and power prices in adjacent areas of the country, into the Southwest and Southeast.”

Within ERCOT and the Midwest markets known as the Southwest Power Pool (SPP) and the Midcontinent Independent System Operator (MISO), prices for power purchased on the wholesale market in these regions have sharply risen over the last several days, APPA and APGA pointed out.

Natural gas powers a significant amount of the baseload generation in the regions impacted, and inadequate supplies of natural gas have caused the price of this critical fuel to skyrocket.

“This, in turn, has impacted the spot prices of electricity, compounding the financial burden on many of our not-for-profit utility members. While these utilities have hedging strategies and reserves in place, the magnitude of the spike has outpaced these risk management tools in some cases,” APPA and APGA said.

“For example, natural gas for one public power-owned power plant cost $78 million for four days of supply — whereas fuel had cost only $18 million for all of 2020. If no relief is provided, these staggering costs will ultimately have to be borne by utility customers at a time when many have lost their jobs or are otherwise struggling because of the COVID-19 pandemic.”

Given the magnitude of this situation, the groups urged Biden to consider using his authority under section 301 of the NGPA to declare a natural gas supply emergency and to authorize the Secretary of Energy to exercise delegated authority under section 302 of the NGPA to cap the price for purchases of natural gas from producers of natural gas or other persons to the extent authorized by the NGPA.

Inadequate supplies of natural gas threaten the availability of the fuel for high priority uses, including electric power generation, the groups said.

“Limiting the price of gas to a fair and equitable level, we believe, would assist in meeting the requirements of such high priority uses. While the natural gas supply emergency authority under the NGPA has been used sparingly, we believe this financial crisis is significant enough to merit such action.”

In the meantime, public power and public gas utilities “are focused on keeping the lights and heat flowing and taking steps like conservation measures to ensure consumers have the energy they need. They are also communicating with their customers about ways they can save energy (to prevent future curtailments in the case of generation); stay safe while using generators and space heaters; and avoid scams,” APPA and APGA noted.

The letter was signed by Joy Ditto, President and CEO of APPA, and Dave Schryver, President and CEO of APGA.

FERC’s Office of Enforcement to examine potential wrongdoing in markets during recent cold snap

February 23, 2021

by Paul Ciampoli
APPA News Director
February 23, 2021

The Federal Energy Regulatory Commission (FERC) on Feb. 22 said that its Office of Enforcement is examining wholesale natural gas and electricity market activity during recent extreme cold weather to determine if any market participants engaged in market manipulation or other violations.

The move came in the wake of the arctic storm impacts on the Electric Reliability Council of Texas, the Southwest Power Pool, the Midcontinent Independent System Operator, and other surrounding regions.

If the Office of Enforcement finds any potential wrongdoing that can be addressed under FERC’s statutory authority, it will pursue those matters as non-public investigations, FERC said.

FERC explained that this examination will take place as part of the Division of Analytics and Surveillance’s (DAS) ongoing surveillance of market participant behavior in the wholesale natural gas and electricity markets.

The Division uses market participant-level trading data and data from the financial markets to screen daily and monthly trading at the majority of physical and financial natural gas trading hubs in the United States and the organized and bilateral wholesale electricity markets.

DAS closely identifies and scrutinizes any potentially anticompetitive or manipulative behavior to determine if an investigation is appropriate.

Throughout this process, the Office of Enforcement will work with FERC’s federal partners as necessary and appropriate, FERC said.

In a Feb. 19 letter to FERC Chairman Richard Glick and David Huizenga, Acting Secretary for the Department of Energy, the American Public Power Association and the American Public Gas Association said that FERC, in coordination with the DOE, should expand a current inquiry into the operations of the bulk-power system during recent extreme weather to include the significant price increases experienced in the natural gas markets.

FERC and the North American Electric Reliability Corporation announced on Feb. 16 that they will open a joint inquiry into the operations of the bulk-power system during the extreme winter weather conditions experienced by the Midwest and South Central states.