Without the outages, Austin Energy may have lost big money

This is an excerpt from the March 8 edition of the Austin Politics Newsletter. To get daily breaking news and analysis on city politics, click here to subscribe. 

It’s time to explain a few things about Austin Energy that I have come to realize most people don’t understand.

Many understandably believe that Austin Energy generates power and then distributes it to Austin homes and businesses. Therefore, they figure that if 40% of Austin lacked power during the storm, it was because AE simply wasn’t generating enough. Or they see a report about how an AE biomass plant sat idle during the storm and conclude that more Austin homes would have been powered if that plant had been running.

None of this is true. Let me explain:

  1. Austin Energy, like every other utility in ERCOT, is required to sell all of the power it generates into the ERCOT grid. It does not have the option to “keep” the power for its own customers.
  2. To power our homes, it then buys back power from the grid that comes from generators all over the state.
  3. Therefore, your home is not necessarily powered by the energy generated by AE.

As I explained the other day, during the week of the storm AE was a net generator, meaning that it provided more power to the grid than its customers (us) consumed. As a result, in contrast to the utilities (and their customers) that got crushed by the sky-high prices of energy during the crisis, AE likely made money –– money that can be invested in a way that benefits the community it serves.

This context is important when you look at the debate in past years between AE and environmentalists over how much of the utility’s generation should be renewable. AE’s reluctance to phase out its fossil fuel generators was due to the potential financial risk. They wanted to be sure that in the event of sky-high prices, they would be able to sell as much power to the grid (at the same high price) as AE customers were consuming. If you’re completely reliant on intermittent wind or solar power, you can’t be assured that your generation will meet demand in every circumstance.

But what if there hadn’t been outages?

Until yesterday, the only information I had from AE was that it was “net generator.” However, in its presentation to City Council yesterday, the utility offered more specifics in the way of this graph:

The black line represents AE’s “load,” or the amount of power being consumed by Austin homes and businesses.

CM Alison Alter made an important observation: although AE’s generation mostly exceeded its consumption throughout the storm, it almost certainly only was a net generator because nearly half of its customers didn’t have any power. Had there not been massive outages ordered by ERCOT, the utility would have been forced to buy more power off the grid than it was providing.

“While we can say that we met the needs of our load, such as it was reduced, and that’s better than what happened in other markets, it’s not clear that we would have been able to meet our needs absent ERCOT’s load sheds,” she said.

Therefore, “We were still contributing to the need for the load shed in the first place.”

Yep. AE’s status as a “net generator” during the storm was largely due to the fact that roughly 220,000 Austin homes were without power.

AE did not push back on that point, simply pointing out that its generation was hampered by the unprecedented storm.

This is definitely something important for the utility to consider in its long-range plans. If for some reason ERCOT had not ordered the outages but energy prices had still been extremely high, AE would have spent a fortune providing power to its customers but not have sold enough to cover the cost. And that might have put the utility in the precarious situation that many other utilities across the state now find themselves in. The utility would not have been able to immediately pass the cost on to customers, but it may have been forced to seek a rate hike at the next available opportunity.

This is an excerpt from the March 4 edition of the Austin Politics Newsletter. To get daily breaking news and analysis on city politics, click here to subscribe. 

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