Off the Kuff Rotating Header Image

Keith Ellison

The Big Freeze didn’t just screw Texas

I had no idea.

Texas’ deep freeze didn’t just disrupt natural gas supplies throughout Lone Star country—its effects rippled across the country, extending as far north as Minnesota. There, gas utilities had to pay $800 million more than they anticipated during the event, and Minnesota regulators are furious.

“The ineptness and disregard for common-sense utility regulation in Texas makes my blood boil and keeps me up at night,” Katie Sieben, chairwoman of the Minnesota Public Utility Commission, told The Washington Post. “It is maddening and outrageous and completely inexcusable that Texas’s lack of sound utility regulation is having this impact on the rest of the country.”

The gas and electric markets in Texas are lightly regulated and highly competitive, which has pushed companies to deliver energy at the lowest possible cost. But it also means that many companies were ill-prepared when the mercury dropped. To save money, they had skimped on winterizing their equipment. As a result, gas lines across the state—which has about 23 percent of the country’s reserves—quite literally froze. The spot price of natural gas soared to 70-times what it would normally be in Minnesota, and gas utilities paid a hefty premium when they used the daily market to match demand.

In a twist, the biggest gas utility in Minnesota is CenterPoint Energy, a Houston-based company that also supplies a large swath of Southeastern Texas. The company said it spent an additional $500 million on gas that week in February, and it has asked Minnesota’s utility commission for permission to add a surcharge to customers’ bills. The surcharge not only seeks to recoup the additional money CenterPoint spent on natural gas, it also includes 8.75 percent interest. The company expects that each customer would shoulder a burden of $300 to $400.

Crazy, huh? I heard about this from friends on a recent Zoom call. CenterPoint is not only pushing to bill their Minnesota customers more to make up for the price differential, they’re asking to begin doing that in May instead of in September when price adjustments are normally made. They’re doing this because they say they’re in a cash bind, while at the same time their CEO is assuring investors that their cash position is just fine. They sure know how to make friends, don’t they?

The WaPo story has more details. This bit at the end caught my interest:

The state’s attorney general, Keith Ellison, a former Democratic member of Congress, has filed a strongly critical response to CenterPoint’s plan.

It notes that over the two-year payout schedule, the interest charged to customers would amount to $60 million, “at a time when many of them are already behind on their bills.”

CenterPoint argues that the interest charge reflects its own capital borrowing costs and that it is an appropriate item to add to its bills.

“The company has already had to pay most of the natural gas costs from February, but these costs will only be recovered over an extended period of time,” [CenterPoint spokesperson Ross] Corson wrote. “Until recovered, CenterPoint Energy must finance these costs through a combination of debt and equity. Given the unprecedented magnitude of this financial commitment, it is appropriate to include finance charges.”

Annie Levenson-Falk, executive director of a nonprofit called the Citizens Utility Board of Minnesota, asked in an interview why CenterPoint didn’t appeal for voluntary reductions in gas use when it saw prices spike.

She said the utilities should demonstrate why they had to rely so heavily on the spot market. But, she added, “there’s no getting around it — these are big costs that someone is going to have to incur.”

Natural gas, though, is an “essential good,” she said, adding that ordinary Minnesotans, collateral damage in the Texas disaster, are blameless.

“You know, somebody made a lot of money off people needing to heat their homes,” she said. “And that’s not right.”

There’s talk that Minnesota AG Ellison may file a lawsuit against CenterPoint over this. I can already hear the caterwauling from certain local politicians if that happens.

On a side note:

An updated analysis of February’s Texas power crisis by experts at the Electric Reliability Council of Texas shows that lost wind power generation was a small component of the huge losses in electric generation that plunged much of the state into darkness during the severe cold weather.

While Texas Republicans were quick to blame renewable energy during the storm — and have continued to target renewable energy for reform during this year’s legislative session — a recently updated report on the causes of generator outages during the week of Feb. 14 show that the most significant cause of the low power supply to the grid came from natural gas plants shutting down or reducing electricity production due to cold weather, equipment failures and natural gas shortages.

In ERCOT’s first preliminary report on the causes of the power crisis, released in early April, the grid operator included a chart that appeared to show power generation losses from wind as just slightly smaller than natural gas generation losses that week. But that analysis used the capacity of the state’s wind turbines to generate electricity, not what wind turbines would have actually generated if not for the outages.

Wind power feeds into the grid depending on weather conditions, and renewable energy sources typically have much higher potential to generate electricity than what is actually produced on a day-to-day basis; sometimes renewable power generates a lot and at other times none or very little. ERCOT uses detailed weather forecasts to estimate how much wind and solar power will be available to the grid.

In the updated analysis included in a Wednesday ERCOT meeting, the grid operator calculated that for the week of Feb. 14, natural gas power losses were several times that of wind generation.

[…]

The analysis also provided a more detailed picture of the reasons for natural gas outages, showing that disruptions in natural gas supply to the plants were a bigger share of the outages than initially estimated. Still, weather-related problems and equipment problems remained the biggest reasons for natural gas plant outages.

Here’s a pretty picture for you:

Sure would be nice if the Legislature spent less time attacking transgender kids and renewable energy, and more time working to make the grid more reliable and less likely to produce another big freeze, wouldn’t it?