CPS Energy has negotiated a settlement to pay for a fraction of the power costs it incurred during the mid-February winter storm, though that could change as regulators, legislators, power companies, and the Texas electricity grid operator continue to negotiate over billions in charges owed to power generators.

CPS Energy and the Electric Reliability Council of Texas (ERCOT) agreed to a settlement of $87 million, according to a Monday report from Moody’s Investor Services, one of the big three rating agencies that judge the utility’s creditworthiness.

“CPS Energy and ERCOT reached an agreement on the utility’s purchased power costs as CPS Energy agreed to pay its net obligations of $87 million to ERCOT,” Moody’s analysts wrote in a March 8 rating.

That $87 million wouldn’t actually go to ERCOT itself, but to the power generation companies that were supplying electricity to the Texas grid at the same time CPS Energy was buying power off the grid. ERCOT acts as a clearinghouse for wholesale power transactions, though it does collect a fee of $0.56 per megawatt-hour to fund its own operations.

“We collect money owed by market participants to ERCOT on one day and then pay market participants the next day,” ERCOT spokeswoman Leslie Sopko said in an email Wednesday. “If we are short-paid by the market participants, then our payments out to market participants are short-paid.”

CPS Energy estimates it incurred between $850 million and $1.1 billion in unexpected costs during the storm, according to Moody’s. Speaking to San Antonio audiences, Gold-Williams has cited an estimate of $1 billion, comprised of $800 million in natural gas costs and $200 million in electricity costs . Moody’s cited the range of electricity cost estimate as $175 million to $250 million.

Outside of that $87 million settlement with ERCOT, CPS Energy has also paid $99 million to “counterparties in collateral calls on additional power transactions,” according to Moody’s. It’s not clear who those parties are, how much they were paid, or what they were paid for, exactly. CPS Energy did not respond Thursday to emailed questions about those payments.

CPS Energy, now under the microscope in the wake of blackouts that left nearly 400,000 households in the San Antonio area without power, did not make any of its officials available for interviews Wednesday or Thursday. In response to emailed questions from the San Antonio Report, the utility issued this statement from President and CEO Paula Gold-Williams.

“CPS Energy remains focused on helping its customers through these challenging times and is absolutely committed to performing at the highest levels,” Gold-Williams said. “This is despite this year’s challenges associated with COVID-19 and lower wholesale market sales. We know the credit rating agencies are watching all significant activities in San Antonio closely. Part of their close focus is because, historically, we have performed extremely well.”

On March 4, Fitch Ratings downgraded $5.3 billion in CPS Energy combined senior- and junior-lien bonds from AA+, its second-highest, to AA-, its fourth-highest. Analysts cited CPS Energy’s “weakened financial profile resulting from higher purchased power and natural gas fuel costs following the unprecedented winter weather and market dislocation experienced throughout Texas during the week of Feb. 14.”

Moody’s changed its outlook for CPS Energy from “stable” to “negative,” though it affirmed its previous bond ratings of Aa1, its second-highest, for $3.9 billion in senior lien debt and Aa2, its third-highest, for $1.5 million in junior lien debt.

“Every day we are focused on operating efficiently and are working diligently to return the outlook to ‘stable,’ across the board,” Gold-Williams said.

CPS Energy has so far shielded its customers from high energy costs by borrowing up to $500 million using short-term debt. However, customers will inevitably pay interest on that debt. For three years, the utility has also been signaling its plans to approach City Council for a rate hike. Its last rate increase took effect in 2014.

Much uncertainty remains over how much CPS Energy and other utilities across the state will ultimately have to pay for their power costs during the storm. The issue affects retail electric utilities, transmission line operators, and power generators across the state.

CPS Energy participates in the ERCOT market both as a buyer and seller of wholesale power, using its fleet of power plants and renewable generators to shield its customers from price spikes on the market. However, many of CPS Energy’s plants failed to perform in below-freezing conditions, Gold-Williams has said.

On Thursday, Texas lawmakers debated in Texas House and Senate hearings whether ERCOT should retroactively adjust the prices of electricity on the grid during a particular 32 hours on Feb. 18-19 when electricity supplies were tight and prices remained at the market cap of $9,000 per megawatt-hour. Prices typically hover in the $10 – $50 per megawatt-hour range.

That led to “over-priced energy” to the tune of $16 billion, according to Potomac Economics, a firm working as ERCOT’s independent market monitor.
Texas Gov. Greg Abbott and 28 Republican and Democratic state senators called for the Public Utility Commission of Texas, which regulates the electricity industry, to “immediately correct those billing errors.”

However, any ERCOT repricing would likely create winners and losers among different Texas cities and power companies, Arthur D’Andrea, the PUC’s newly-appointed chair, told lawmakers at a Texas House State Affairs Committee hearing Thursday. D’Andrea has recommended against what the industry calls “repricing.”

“It is impossible to unscramble this sort of egg,” D’Andrea said at a PUC meeting Friday.

Not all municipal utilities suffered the financial losses CPS Energy experienced. Austin Energy officials have said their utility netted $54 million in wholesale power revenue during the week of the storm, with Austin Energy’s generators producing more electricity than the utility’s customers were consuming. Austin Energy was still subject to forced blackouts, with roughly 40% of its customers left without power during the worst of the outages.

On Wednesday, Austin Energy officials filed comments with the PUC opposing restructuring the debt.

“Austin Energy customers stand to see significant financial losses passed through to them if repricing is adopted despite the relatively successful performance of Austin Energy’s generation fleet throughout the event,” Austin Assistant City Attorney Andy Perny wrote Wednesday.

Disclosure: CPS Energy is a San Antonio Report business member. Click here for a list of donors.

Brendan Gibbons is a former senior reporter at the San Antonio Report. He is an environmental journalist for Oil & Gas Watch.