Thanks to Austin Energy, we aren’t facing huge electric bills

This is an excerpt from the Austin Politics Newsletter. To get daily breaking news and analysis on city politics, click here to subscribe. 

 

I’d like to circle back to something an Austin Energy spokesperson told me last week:

Preliminary analysis indicates that Austin Energy was a net generator during the event. Based upon what we currently know, we do not anticipate any negative impacts regarding Austin Energy’s ability to continue to operate and to meet outstanding financial obligations.

It’s worth pondering that for a moment. Although I do think AE needs to answer some tough questions about how it managed the outages, it’s good to know that at the very least, after the hell that half of Austin endured two weeks ago, people can rest assured they won’t get hit with a financially devastating utility bill.

The historic Seaholm Power Plant, which is no longer in use.

Elsewhere in Texas, many of those who were lucky enough to have maintained power during the storm are now confronting four or five-figure bills. In fact, even some who lost power got hit hard. The Texas Tribune explains:

As the bad weather bore down, it froze natural gas production and wind turbines, choking off the supply of electricity as demand skyrocketed. In response, the Public Utility Commission, appointed by Abbott, let the wholesale market price of electricity rise to $9 per kilo-watt hour, a 7,400% increase over the average 12 cents per kilo-watt hour.

Karen Knox, a special education teacher in Bedford…lost power during the crisis but still owes some $7,000 to Griddy, an electricity provider located in Houston.

At first, it may seem like the surge in prices only hurt those poor souls on “variable” electricity plans. Indeed, there is no shortage of smug market fundamentalists who would shrug at these people’s misery, insisting they are not in fact victims but rational market actors who made a risky bet.

But actually, many Texans on fixed rate plans may see their bills go up in the coming years. From the Tribune:

Kaiba White, an energy policy specialist with consumer advocacy group Public Citizen, said the costs would be passed on to customers one way or another.

“If they [the electric provider] don’t have a mechanism that allows them to do that in the immediate — like on the next bill or the next several bills — it’ll end up getting rolled into the overall cost of service,” she said. “It’s just a matter of whether it’s going to get passed on in an immediate way, in a shocking way … or spread out over time.”

Now, at least one expert I talked to disputed this, saying that the competition in the retail electricity market is fierce enough that companies may just eat the huge costs they incurred during the storm and not pass them onto their customers. But some of them won’t be able to afford to do that. For instance, Brazos Electric Power Cooperative, the state’s oldest and largest power co-op, just declared bankruptcy and it sounds like it’s not going to be the only one. From Reuters:

The state’s grid operator, Electric Reliability Council of Texas (ERCOT), on Friday said $2.1 billion in initial bills went unpaid, underscoring the financial stress on utilities and power marketers. More providers likely will reject the bills in coming days, executives said.

“The municipal power sector is in a real crisis,” said Maulin Patani, a founder of Volt Electricity Provider LP, an independent power marketer that is not a member of the Brazos coop. ERCOT should suspend the service charges to halt further defaults, he said in an interview on Sunday.

In other words, it’s likely we’re going to need a state bailout to keep many of these utilities afloat. Hooray for the free market.

Meanwhile, the People’s Republic of Austin and its customers don’t have this problem. Why? Because, according to what Austin Energy has said, the city-owned utility likely made money during the storm. You see, AE is both a generator and a distributor. It owns power plants that generate power that it, like every other Texas generator, is obligated to sell into the broader ERCOT market. But it simultaneously buys electricity from the ERCOT market to power Austin homes and businesses.

Thus, when prices are high, AE is paying up the wazoo for electricity like all other utilities, but it is also flush with cash from the money it’s making selling the energy it’s generating from its power plants and wind farms. Are you following me?

Now, if AE’s generators had all gone offline during the crisis, the situation would be very different. Austinites wouldn’t have been hit with high utility bills right away, but AE may have faced a serious financial difficulties that could have forced City Council to hike rates, perhaps substantially.

Here’s what Robert Cullick, who was AE’s comms director from 2014-19, says:

We need more information from the City. The news that Austin was a “net generator” during the freeze could be very, very important. On the face of it, It means that when power jackknifed from $40 to $9,000 per unit, Austin Energy may have been selling as well as buying. That would have protected consumers against the price gouging that was occurring in the market. That would be great. But we have to find out which plants were producing power. If the units that were producing were coal, gas or nuclear-powered, the freeze raises political questions — these are the very units that environmental lobbyists are pushing the Council to close prematurely because they prefer renewable sources. We deserve the whole story.

Well, to be fair, renewable sources aren’t merely a preference. They’re a moral imperative and, most of the time, they’re cheap, which is why utilities have invested so heavily in wind power in recent years. However, it is true that we likely do not have the storage technology yet to rely entirely on renewables. We still need to have sources that can be dispatched at any time, whether the wind is blowing or the sun is shining.

So if it was the coal-powered Fayette Power Plant or the one remaining unit of the gas-powered Decker Power Plant that kept AE (and its customers) from losing its shirt during the storm, that certainly makes it harder to vociferously campaign for their closure, as environmental groups have done in recent years.

TO BE VERY CLEAR, all of the above has very little to do with whether Austinites kept their lights on two week ago. Austin Energy’s ability to produce power does not have any direct effect on whether its own customers have power because it is obligated to sell whatever power it generates into the broader ERCOT grid. So, the overall effect of AE’s success as a generator during the storm was that it helped to stabilize the statewide grid and it prevented financial disaster for the utility and its customers (you and me).

At the very least, one should hope that AE’s apparent ability to perform while so many of its peers failed means that we will no longer have to live under the continual threat of privatization by the legislature. After all, at least we’re paying our bills.

This is an excerpt from the Austin Politics Newsletter. To get daily breaking news and analysis on city politics, click here to subscribe. 

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