After Hurricane Beryl, CenterPoint would need about $2 billion to address the damages caused by the storm. However, the company is still forecasting growth and benefits despite the risks that surround Houston.
CenterPoint is set to pass nearly $2 billion in storm-related costs to Houstonians; if the request is approved, electricity bills could rise by 2% for the next 15 years to cover the $1.8 billion spent on restoring power, plus interest.
According to the Houston Chronicle, the company has benefited from great profits in Houston, where it holds a monopoly on the city’s power infrastructure. This allows the utility company to embed costs into bills, ensuring stable profits even in disaster-prone conditions. State Senator Lois Kolkhorst noted the company’s “amazing business model” that allows it to recoup 9.4% profit by passing costs to customers. Last year, CenterPoint earned $917 million in profit.
The company has decided to focus on its 2.7 million customers in Greater Houston, after scaling back from previous expansions into other states, due to the reliable proffit its experiencing from the city.
During a legislative hearing, Public Utility Commission Chairman Thomas Gleeson highlighted the low-risk nature of CenterPoint’s returns, emphasizing the utility’s reliable profit. However, CenterPoint also has faced scrutiny over its handling of Hurricane Beryl, with Kolkhorst asking whether the company is incentivized to do the right thing by Houston.
“Obviously, they did not during Beryl,” Kolkhorst said, “and I don’t think they do going forward unless we make major adjustments.”
CenterPoint President and CEO Jason Wells admitted the company’s compensation incentives are heavily weighted toward earnings per share. Despite facing criticism, the company announced $228 million in second-quarter profits, bringing its yearly total to $578 million. Investors, however, fear potential regulatory actions could hinder future profits.
In recent years, legislative bills have facilitated CenterPoint’s profit growth, allowing annual rate hikes and cost recovery for grid improvements. Despite controversies, such as the costly rental of mobile generators during the 2021 freeze, the company has consistently increased investments in long-term projects to enhance Houston’s power infrastructure.
CenterPoint’s lobbying efforts have been effective, securing favorable policies and maintaining a strong financial position in the city of Houston, where it is still expecting reliable profits from its monopoly.
