Texas power companies seek to shift storm prep costs onto consumers

By Eric Dexheimer of The Houston Chronicle. Excerpts:

"Thanks to skyrocketing energy costs during the February freeze that paralyzed the state and killed hundreds of people, Texans will be paying billions of dollars in higher gas and electric bills for decades.

Now, energy companies are asking to pass on to ratepayers millions, even billions in additional storm-related costs.

Last month, Gov. Greg Abbott signed into law new rules intended to strengthen an energy grid that failed Texans during a week of subfreezing temperatures. “Bottom line is that everything that needed to be done was done to fix the power grid in Texas,” he said at the time.

A major component of Senate Bill 3 was a requirement that electric companies weatherize their facilities to withstand future freezes — something lawmakers failed to do after a 2011 winter storm froze power equipment and caused rolling blackouts.

Yet the new law didn’t say who should pay for the upgrades. In recent filings with the Public Utility Commission of Texas, several large electric generating companies have said residents — not the investor-owned companies themselves — should cover the cost of weatherproofing their equipment.

Because the new requirements “represent a societal judgment that mandates an additional investment in additional extreme weather conditions,” it makes sense for the public to pick up the tab, Houston-based Calpine Corp. said in a filing.

The companies said that if they had to bear the costs of weatherization, it could make the Texas grid less reliable.

Absorbing the costs might cause some companies to become uncompetitive in the cutthroat Texas energy market, which would force them to take generating facilities offline, said Texas Competitive Power Advocates, which represents electric generating companies."

"the new law requires generators and transmission companies to weatherize their equipment enough to withstand a future severe storm. Failure to do so could result in a penalty of $1 million per day."

"the details of what weatherization will look like were left up to the utility commission. The agency has until September to write the necessary regulations"

"Several electric companies warned against a one-size-fits-all rule, noting that a generation facility in Lubbock may require very different cold weather protection from one in Houston. Older plants, too, may have different needs than modern equipment.

The companies also noted the challenge of installing insulation, windbreaks and heaters while having to protect the same generating equipment from intense summer heat several months later. “The commission should balance whether certain requirements for cold weather preparedness have a corresponding reduction in summer output,” wrote Vistra Corp."

"estimates of the costs of mandated weatherization have varied widely"

"An April study by the Federal Reserve Bank of Dallas pegged the cost of winterizing the entire Texas energy system at $430 million a year. The study concluded that was a reasonable expense, compared with the damage February’s storm did to the state economy, estimated at $80 to $130 billion." [Texas has a population of about 29 million so this works about to about $15 a year per person to winterize the energy system]

"Ratepayers probably will end up paying many of the new mandated storm prep costs. Transmission companies can petition the Public Utility Commission for permission to charge higher rates to recover extraordinary costs. Municipal utilities and co-ops can obtain cash through local governments or members to upgrade their equipment."

"companies said having to spend millions of dollars on the new requirements could force them to reduce the size of their generating fleets, which would mean less power when the Electric Reliability Council of Texas, the state’s grid manager, needs it most."

"Whether state leaders intended for the companies or the public to cover the costs is unclear. The power companies say Abbott signaled that he wanted generators to be able to recover their costs when he directed the Legislature to mandate weatherization but also “to ensure the necessary funding.”"

"Consumer advocates respond that lawmakers had ample opportunity to approve public funding for weatherization — one failed bill would have used money from the state’s rainy day fund — but chose not to do so. That suggests they intended that the companies should pay for it, the advocates say."

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Companies were paid to cut off power during February storm in Texas