When Grey Forest Utilities natural gas customer Thomas Weaver received his September gas bill, he noticed a $14.55 charge that was not normally there.
Weaver was shocked to learn it was a charge that he and Grey Forest Utilities’ other 17,000 customers would be charged monthly — possibly for the next eight years — to pay back the cost of the natural gas Grey Forest Utilities purchased at a premium during February’s winter storm.
Upon learning what the charge was for, Weaver — who lives in a Northwest San Antonio area that is served by Grey Forest — refused to pay it, and sent in the payment amount he makes monthly. “Paid in full,” he wrote on the check, aiming to make it clear to the utility he was not OK with being saddled with the extra costs for gas during the storm.
Like many utilities across Texas, Grey Forest Utilities is on the hook for an unusually hefty bill from its gas provider, Koch Energy Services, for gas it supplied during the winter storm. Across Texas, utilities large and small — like CPS Energy and Grey Forest Utilities — are dealing with how to pay the exorbitant gas prices incurred during the winter storm.
Grey Forest Utilities’ February natural gas bill, which is normally about $540,000, came out to $22 million.
Sky-high fuel costs
That’s because the Public Utilities Commission of Texas ordered the Electric Reliability Council of Texas, which manages the state’s electric grid and controls the flow of electric power to more than 26 million Texas customers, to put wholesale electricity prices at ERCOT’s cap of $9,000 per megawatt-hour. In comparison, electricity prices averaged $22 per megawatt-hour in 2020. ERCOT allowed prices to remain that high for about 77 hours, from midnight on Feb. 15 to the morning of Feb. 19.
With a spike in electricity demand as Texans turned up the thermostat, and a dip in production as some infrastructure failed in the freezing temperatures, the amount of electricity in circulation on the grid dropped and utilities were charged the full $9,000 per megawatt-hour for about three days.
Most Texas power plants are fueled by natural gas, which is either used to turn turbines or burned to turn steam engines to generate electricity. During the freeze, gas supply was diminished while electricity demand greatly outweighed supply. The supply or electricity available was further reduced with a shortage of natural gas production.
Utilities that own their own power plants were forced to buy natural gas at about $400 to $500 mmBtu — about 400 times the regular price, as they sought to provide their customers with gas and/or electricity.
CPS Energy’s total fuel tab during the freeze came to roughly $1 billion in. While the utility is fighting $580 million of that in court, executives have confirmed that customers will likely be paying off at least $418 million in “legitimate” fuel costs from the freeze over the next 25 years.
Those costs will be recovered through the fuel component of the bill, CPS Energy said in a statement last month, amounting to roughly $1.25 per month. Should CPS Energy fail to clear the other $580 million in disputed fuel costs, residents could pay closer to $3.20 per monthly bill over 25 years.
To protect its credit rating, CPS Energy has already paid the $418 million, and is now seeking to recover those costs through a regulatory asset — a cost that is deferred on a company’s budget sheet over time — that would spread costs out over 25 years, said CPS Energy spokeswoman Christine Patmon. The utility’s board of trustees and the city will need to approve this cost-recovery asset before the end of the fiscal year to make it official, Patmon said.
Protecting credit ratings
To deal with its outstanding bill, Grey Forest’s board of trustees and the Grey Forest City Council voted in May to issue a $22 million bond to be repaid over eight years to pay Koch Energy Services. However, Grey Forest has also vowed to its customers that it will continue to dispute the “excessive” portion of the bill, Grey Forest Utilities Vice President Jeff English said.
The utility has paid Koch about $1 million, disputing the remaining $21 million. Koch has not formally responded, English told the San Antonio Report.
The natural gas supplier has instead requested Grey Forest consider entering mediation to resolve the disputed bill or to find an agreeable solution. English said even if they do mediation, Grey Forest needs Koch’s response so the utility can be transparent with its customers.
While Grey Forest continues to fight the charges, it still has to make payments on the bond, to protect its credit rating — hence the $14.55 per customer charge every month for eight years. Grey Forest has promised to repay customers if it is successful in negotiating with Koch.
Weaver isn’t having it.
“I’m not going to pay their $14.55 per month,” Weaver said. “I imagine eventually they’re going to disconnect me and that’s OK. I have electrical backups.”
Nothing has really been done at the state level to prevent ratepayers across Texas from either being saddled with the costs from Winter Storm Uri, or to prevent ratepayers from being stuck paying for similar tabs in the future.
Earlier this month, oil and gas regulators at the Railroad Commission of Texas voted to approve the issuance of $3.4 billion in state-backed bonds so utility providers across Texas can pay back natural gas companies that provided gas during the February freeze over time.
While more than 100 bills were filed during the state’s regular legislative session earlier this year related to fixing issues exposed by the winter storm, only two made it across the finish line.
But Senate Bills 2 and 3 focused on restructuring ERCOT and creating some oversight for the winterization of energy infrastructure. Neither offered utilities or Texas ratepayers relief from what CPS Energy has argued in court was “one of the largest illegal wealth transfers in the history of Texas,” from utilities to natural gas providers.
“It’s money and power,” said state Sen. Roland Gutierrez (D-San Antonio). “Numerous people died and froze in their homes. Meanwhile, men like [natural gas company Energy Transfer Partners CEO] Kelcy Warren made $2.4 billion. Energy Transfer made $2.4 billion in one week, in addition to their regular profits. Then he gave [Gov.] Greg Abbott a $1 million-dollar check.”
Gutierrez said that with many state Republicans financially backed by the natural gas industry, there’s no real incentive for the Legislature to create more regulations for gas companies.
Republican state Rep. Lyle Larson (R-San Antonio), who announced in October that he will not be seeking re-election in 2022, agreed that legislators did not do enough to prepare Texas for another potential freeze this upcoming winter.
“I think the whole legislature, not only the governor, but everybody sent to Austin should be held accountable for what transpired,” Larson said. “I would have liked to see us address the base problem, and the base problem is that we’ve got to have more capacity in our system.”
Where’s the outrage?
Weaver said he feels frustrated by the lack of outrage among fellow ratepayers.
“I think the Texas state Legislature went around this in a very improper manner,” Weaver said. “Instead of taking care of the citizens of the state of Texas, they’re just gonna pass this whole thing off through this exorbitant billing.”
Local utilities such as Grey Forest Utilities and CPS Energy are being held hostage by gas providers, said Michael Webber, deputy director of the Energy Institute at the University of Texas at Austin and a UT mechanical engineering professor.
Fearing their credit ratings will be affected if they do not immediately pay these companies back, Webber said, many utilities are taking out bonds and turning to their main source of income to pay their bills: ratepayers.
Webber noted that in a final report released last week, the federal government was clear that it was the failure of gas companies’ infrastructure that led to the shortage of gas and high natural gas prices.
“The gas system froze up,” Webber said. “Despite that, it was still a very profitable event for the gas industry, and now gas utilities in San Antonio and elsewhere in Texas are stuck holding the bill — which really means the ratepayers are.”
In another bad sign for consumers, ERCOT also confirmed in an analysis released late last week that the Texas grid is still vulnerable and that electricity outages across the state could occur this winter if Texas experiences another cold snap that forces power plants offline at the same time as demand for power is high,Skyr as happened in February.
“Some of the same problems can happen again,” Webber said. “We haven’t really taken suitable steps to prevent it from happening again.”
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.
Correction: The relationship between the state’s gas and electric supply has been updated.