Two days ago in these pages, I estimated the utility debt related to Winter Storm Uri that will have to be repaid by Texas ratepayers may total $10.1 billion. Shortly after that piece appeared, I was alerted to an August 16 report commissioned by NRG Energy, a Houston-based independent power producer, titled “Beyond Texas: Evaluating Customer Exposure to Energy Prices Spikes, A Case Study of Winter Storm Uri, February 2021.” The report, done by consulting firm Intelometry, puts the total utility-related debt from the storm in Texas at $10.5 billion, a number that’s $400 million higher than what I reported.
The report also estimates the cost recovery for the Texas entities could cost each residential utility customer in ERCOT as much as $921. That sum includes $498 to repay the electric utilities, $351 for the gas utilities, and $72 for debt that may be securitized by ERCOT. To be clear, those figures are averages and won’t apply to every customer. For instance, ratepayers who live in an all-electric home will not be responsible for repaying the gas utilities.
The Intelometry report lists the utilities that are seeking cost recovery in Texas, as well as the total losses incurred by utilities in other states during the deadly storm. And while Texas consumers are getting dinged, it’s clear that Oklahoma ratepayers are getting mugged.
Intelometry reports that Oklahoma utilities – led by Oklahoma Natural Gas, which lost nearly $1.3 billion, and Oklahoma Gas & Electric which lost about $740 million — will recover a total of $2.8 billion from consumers. The report estimates the cost recovery in Oklahoma could increase costs for residential ratepayer in the state by as much as $1,622, a sum that includes $427 to repay electric utilities and $1195 to repay gas utilities. Put another way, residential customers in Oklahoma could be saddled with nearly twice as much in debt repayments as their counterparts who live south of the Red River.
Intelometry also reports that Iowa and Missouri are facing bigger losses when measured on a per-customer basis than those in Texas, but the nominal losses in Texas are larger than in any of the 15 states covered by the report.
Why is NRG publishing a report like this? The answer appears obvious: NRG lost nearly $1 billion due to Winter Storm Uri. While it had to absorb the bulk of those losses, the regulated utilities are being allowed to socialize their losses by making ratepayers pay the tab. Here’s an extended quote from the report:
- As of this writing, we have identified 85 utilities either seeking or approved storm related recovery of nearly $14.8 billion, to be paid by ratepayers, with residential customers paying an estimated 53% of that total. These utility-monopolies seek not only to recoup losses at their customers’ expense, but, in at least some cases, to also charge their rate of return on the losses until they have been recovered, thereby transforming what in a competitive industry would constitute massive financial losses into a profit center. Meanwhile, although Texas has come to be identified with a fully competitive energy market, it is not. On the contrary, the natural gas utility sector for residential customers in Texas consists entirely of utility-monopolies. These entities have applied to their regulator to recover all their extraordinary costs. Additionally, Texans living in Austin, San Antonio, certain other cities and in rural areas have no choice in electricity provider. The losses the municipal and co-operative utilities experienced during the event will also be entirely recovered from their fixed base of consumers…
The report also has a list of the Texas entities that are seeking cost recovery and the amount attributed to each one. I’ve reproduced that list below.
The report does not mention any of the pending litigation against ERCOT and other entities. As I reported in these pages back in January, some 131 insurance companies have sued ERCOT and about three dozen electricity generators, claiming that they are to blame for the power outages during Uri. That litigation is coming on top of dozens of personal injury and tort claims that have been filed against the grid operator. If the courts rule that ERCOT does not have sovereign immunity, Texas ratepayers could be required to pay even more than the $10.5 billion detailed by the Intelometry report.
Finally, as I mentioned in my piece on Wednesday, the increased costs that will be absorbed by ratepayers in the form of surcharges on their bills to pay for cost recovery to the electric and gas utilities will come on top of higher prices already being paid by Texas consumers. I also noted that data published by the Texas Public Utility Commission shows that electricity prices in several areas of the state more than doubled between June 2021 and June 2022. That matches with what I am hearing anecdotally. A friend of mine in Houston told me yesterday that the electric bill for his modest ranch-style house has nearly doubled over the past year, going from $335 per month to $637.
The $10.5 billion debt, which will be repaid over the next 30 years, along with today’s higher electricity prices show yet again, that ratepayers always get stuck with the bill.