The nonprofit electric cooperatives that were billing those customers and others like them — which primarily sell electricity in rural areas where customers don’t have retail choice — are now looking to the Legislature for their fair share of help in defraying those costs. They’re jockeying with gas companies that also took on a great deal of debt when gas prices surged during the devastating storm.
State senators on Wednesday voted to direct $3.9 billion to pay off some of the costs pushed onto customers because of high prices for gas or electricity. The lawmakers left for future discussion the specific funding breakdown between entities to lessen costs for their customers from the storm.
“What we’re trying to do is treat as many people equally and fairly as we can,” State Sen. Robert Nichols, R-Jacksonville, said at a Senate Finance Committee hearing last week. “I think that’s all we can ask.”
The money to cover that debt comes out of a broader $11.8 billion spending plan by Senate Finance Chair Joan Huffman, a Houston Republican, that cleared the Senate by a unanimous vote Wednesday. The supplemental budget bill would draw some funds from the state’s historic $32.7 billion surplus to add to Texas’ current budget, pumping money into state employee pay raises, mental health hospitals and border security, among other matters.
The House has its own version of the bill, filed by House Appropriations Chair Greg Bonnen, a Friendswood Republican, that is similar though not identical to the Senate plan. Both are separate from the $130.1 billion budget proposals that House and Senate writers are hammering out for the coming two years.
The House and Senate proposals each include $2.9 billion to plug gaps in Medicaid funding and $1 billion for the Employee Retirement System offset costs associated with Texas’ $14 billion in unfunded pension liabilities for state employees. The bills also include $600 million for school safety measures, $400 million for flood mitigation projects and $100 million for a first round of pay raises for state employees.
Both bills additionally set aside $100 million for the Parks and Wildlife Department to acquire land. The agency has been scrambling to figure out how to buy Fairfield Lake State Park, which sits on property it leased for free from Vistra Corp. A real estate developer entered into a contract to buy the property, which was listed for $110 million.
The 2021 storm nearly collapsed the state’s electric grid as people cranked up their heaters to fight freezing temperatures. Grid operators set the price for electricity at what was then its maximum — $9,000 per megawatt-hour — leaving electricity providers with massive costs.
“The February storm and related market failures were substantially beyond the control of electric co-ops,” said Mark Stubbs, general manager of the Farmers Electric Cooperative, to legislators at the committee hearing. “People were freezing, and we did everything possible to keep the lights on with no thought to the economic consequences.”
Meanwhile, natural gas fuel prices spiked more than 700% during the storm.
In the months following, legislators drafted bills to approve bonds backed by the state’s assurance that there would be an extra charge on customers’ bills to pay the bonds back — a financial tool known as securitization. This allows companies to attract cash from investors at a lower interest rate, with the goal of helping consumers pay less.
Initial drafts of the current supplemental budget bills intended for the entire $3.9 billion to go to gas utilities that planned to pay off what they owed through ratepayer-backed bonds, rather than customers eventually paying off that whole bill. The bonds are set to close March 23, according to state officials.
Eight utilities participated in that option, with Atmos Energy and CenterPoint accounting for the bulk of the cost. But not all gas utilities addressed their debt that way, and officials from at least one of the companies that didn’t participate wondered why they were being left out in the early bill language.
The senators broadened the bill with an amendment.
President of the Texas Consumer Association Sandra Haverlah also questioned why state officials didn’t pause the issuance of the bonds until they decided whether they were going to pay all or part off, saving taxpayers from paying various fees and bond-related costs. Bonds were already issued to cover debt for the electric cooperatives starting early last year, Forbes reported.
Reporter Joshua Fechter contributed to this story.
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