Lawmakers try new solution to minimize winter storm debt - The Dallas Morning News

AUSTIN — One lingering question from February’s devastating winter storm is what, if anything, to do about the remaining debt of some electricity market participants caused by the soaring price of power during the crisis.

Unpaid bills for nearly $3 billion worth of wholesale power piled up at grid manager the Electric Reliability Council of Texas between Feb. 12 and Feb. 20, and efforts to retroactively reprice the extraordinary cost of electricity — $9,000 per megawatt hour — during a 32-hour period in February’s winter storm didn’t go far.

At least 10 bills this legislative session propose securitizing winter storm debt, meaning that it would be paid off more quickly through the use of state-sanctioned bonds. These include bills introduced by lawmakers in each chamber that would create a Texas Electric Securitization Corporation to provide low-cost financing for paying off the debt in ERCOT’s wholesale power market from February.

Normally, the “short pays” feature fewer zeros after the dollar sign. And if buyers can’t pay, there’s an “uplift” process that assesses all market participants a bit of money so that the unpaid power sellers are eventually made whole. But ERCOT and Public Utility Commission rules limit the amount of monthly uplift to $2.5 million, meaning it would take more than 96 years to collect enough uplift fees to pay off the whopping, almost $3 billion of bad debt from this year’s storm.

Such measures are attractive because faster payment of debts from the winter storm would allow power sellers who were stiffed to get some money faster.

“Say you’re South Texas Electrical Cooperative or whatever and you’ve been short-paid where you had to pay the gas producers for all that gas that you consumed in your gas plants that week,” explained Doug Lewin, an energy consultant for Stoic Energy, using a Victoria-based rural electric coop as a hypothetical example. “And now you’re not getting paid back — it’s like this little tiny trickle, right? … And drip, drip, drip each month for the next 100 years. That’s a problem. You need to get that money and pay … for the gas.”

Lewin said securitization would allow the loss to be socialized, “evenly spread like peanut butter across load-serving entities [utilities or retail electric providers], generators — like, everybody pays.”

But fights are emerging over how to “securitize,” or allow bonds to be issued, to pay off the ERCOT debt.

House Bill 4492 was voted out of the House on Thursday, 129-15, with two amendments added by the bill’s author, Marshall GOP Rep. Chris Paddie, a top ally of Speaker Dade Phelan.

According to Michael Jewell, an attorney and policy adviser for Conservative Texans for Energy Innovation, the amendments make that bill more similar to Senate Bill 2227 by Mineola GOP Sen. Bryan Hughes, which received a Senate committee hearing on Wednesday.

Although the two bills differ on what debts securitization would cover, the amendments added to the bill on Wednesday add in uplift charges which were not on there before, add in ancillary services charges to the amount to be securitized, and puts in an opt out for industrial customers that want to go ahead and pay the debts they owe.

Based on testimony for SB 2227, Lewin gathered that some of the changes to HB 4492 could cause additional charges to energy consumers, which he estimates could be $1.50 each month.

“But I don’t know that, and Chairman Paddie said on the floor he doesn’t know either,” Lewin said. “So they literally just passed a bill that has potential to charge every single person in the state $18 a year for the next 15 years, and they don’t know.”

When Austin Democrat Donna Howard questioned him on the House floor about what the average cost to retail consumers would be, Paddie responded, “Ms. Howard I really don’t know at this point.” He explained the numbers are still subject to change before the bill is final.

During testimony Wednesday on SB 2227, which was introduced in late April, Katie Coleman, an attorney representing the Texas Association of Manufacturers, which represents some of the state’s largest energy consumers, testified against the bill. Also against the bill were multiple electric co-ops.

Thomas Hardy testified against the bill representing the Lower Colorado River Authority, explaining that he believes the bill would shift costs and increase losses on LCRA and its customers.

Coleman explained in testimony that the way SB 2227 structures its financing would put unnecessary charges on consumers.

Separately, bills have been filed and are moving toward passage that would let the bonding occur to pay off winter storm debts amassed by gas utilities such as Atmos; rural electric co-ops; and electric utilities in East Texas and West Texas that are not served by ERCOT’s grid.

Previously, Coleman told The Dallas Morning News she’s a proponent of securitization bills that would help electric co-ops and other debtors from the winter storm pay their bills while minimizing the amount of money that gets uplifted to the market. Of the nearly $3 billion in short pays, nearly $1.9 billion is owed by Brazos Electric Cooperative and almost $642 million is owed Rayburn Country Electric Cooperative. Coleman acknowledged that either way, customers are going to have to end up paying for some of the accrued debt.

“Those are all fair outcomes, (but) the things that make less sense is there have been proposals to put several billion dollars in those securitization bonds that would go to generate or weatherization,” she said.

Earlier in the session, some members and stakeholders had been trying to push legislation that could wrap other costs, including those of weatherization, into securitization bills, Coleman said.

“What we’re really worried about is that this will just become kind of a dumping ground for anything people don’t want to pay for,” Coleman said.

February’s polar vortex plunged about 69% of Texans into darkness for at least a time, contributed to at least 151 deaths and delivered an economic toll estimated as high as $295 billion.

Although Lewin said he’s not opposed to the idea of debt being distributed, he wrote in a tweet that what he dislikes about the securitization bills is that they’re the closest the Texas Legislature will get this year to adopting a policy to prepare for climate change and a possible increase in volatile weather. As Weatherford GOP Rep. Phil King said at a committee hearing last month , the state has securitized “at least six times” before this year.

“This is now the de facto climate adaptation policy of the state of Texas: Wait for a massive costly event, securitize the costs. Repeat,” Lewin wrote.

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