Taking the Bull by the Horns

With Texas’ energy prices taking a big bite out of consumers’ pocketbooks, almost 3,700 United members attended a virtual town hall event by telephone and through the internet to find out why their energy bills have gone up dramatically this summer and what they can do to save energy dollars.

United CEO Cameron Smallwood began the telephone town hall meeting explaining how the historically high price of natural gas this year has caused dramatic increases in the price of electricity for United members.

“The key question really has to do with power cost and understanding why the power cost has gone up so much,” Smallwood said. “I’m a member too, and I got the largest bill last month that I’ve ever gotten as a member of United Cooperative Services. I know many of you are seeing the same thing right now. So, we’re going to spend some time explaining that to you.”

Along with understanding high energy prices, members also heard updates for Member Appreciation Day to be held on Oct. 14, 2022, a virtual Annual Meeting, now slated for Nov. 18, 2022, and a progress update for United’s  high-speed internet project. Attendees also took advantage of a question-and-answer time after the main presentation.

Starting with higher energy costs, Smallwood said it was important for members to understand the anatomy of their energy bill from United, which is a non-profit entity. For every dollar members pay to United, about 70 to 80 cents of that dollar is just a direct pass through to  Brazos Electric Cooperative, which is United’s power supplier. Whatever Brazos has billed United for the electricity it generates, United passes that cost on to United members without any markup on it, he said.

“The remaining 20 to 25 percent is actually what it takes to run United Cooperative Services,” he said. “I had a letter from a  member the other day that said, ‘You need to do all these steps on the distribution side to reduce costs so you can reduce our bill.’ We have taken steps, and we actually are one of the most efficient co-ops in the country as far as cost goes. If we stopped investing in  X, Y and Z on the distribution side, all it would do is affect the ability to serve you at the level that you want to be served.”

Smallwood outlined three main drivers responsible for the higher energy costs consumers now face in the Texas market. Natural gas, the main fuel for the electrical generation fleet in Texas and a global commodity, has nearly tripled, driving up the cost to produce electricity in the Lone Star State and nationwide. The war in Ukraine has stressed the global natural gas energy market significantly as producers liquefy American natural gas and ship it to Europe. That, in turn, reduces supply in the U.S.

For the past seven years, natural gas has cost about $3 per MMBtu, he said. In the last six months, the market has seen a significant run up to $8 per MMBtu even crossing the $9 mark recently. These higher prices not only impact United, but also all providers in the ERCOT market as well as the rest of the country.

Secondly, the challenges and subsequent rotating outages faced by the ERCOT grid during Winter Storm Uri in February 2021 also created increased costs, Smallwood said. Structural changes as to how ERCOT calls on generators to run and required winterization have increased the cost of several market structures, and those increases get passed on to United from ERCOT through Brazos.

“We’ve already had some really hot days this summer, and we’ve been very close to rotating outages a couple of times,” Smallwood said. “We’ve not had that happen, which is great, but some of this is likely because of the things that ERCOT put into place since Winter Storm Uri to help prevent rotating outages on those really hot days in mid-July this year. There has been an increase in market costs because of those measures and due to natural gas prices.”

And thirdly, the energy market in Texas is much more risk-averse following Winter Storm Uri, he said. Wary of another rotating-outage scenario that includes astronomical peak pricing during this summer’s tight available generation days, market participants that sell energy have insured against the risk of another Uri-type event, and that also has increased overall costs for Texas consumers.

“They want to cover the risk of another Winter Storm Uri-type event, and so costs are higher right now,” he said. “All the purchases that are made in the market to supply what Brazos sends us are done at a higher cost as well. So, those three components together are really what’s driving our cost, which is passed on to you.”

Members are noticing the higher prices on the Power Cost Recovery Factor (PCRF) portion of their bills, Smallwood said. United’s rate structure is a fixed rate from Brazos. The PCRF is where unexpected price increases that United receives from Brazos are calculated. United expects to pay a certain amount for the electricity supplied from Brazos. However, if United’s charge from Brazos comes in significantly more than has been budgeted due to higher electric generation prices relating to higher natural gas prices, the PCRF has to increase to cover the difference.

“And that’s where, if you look at your bill now and compare your PCRF today to the PCRF six months ago, you’ll see a very significant difference,” Smallwood said. “That’s where all of these costs from Brazos that we’re getting are actually being put into the PCRF. And so, folks have been asking the question, ‘What in the world is that,’ and ‘we’ve never had that before.’ No, you’ve always had that. It’s always worked the same way. It’s just that you’re noticing it now because it’s such a big number compared to the past.”

While United’s current 15.9 cents per kWh isn’t as palatable as the one’s United members have grown accustomed to paying, it stands starkly cheaper than most of the current Power-To-Choose contract choices, which now charge as much as  19 to 20 cents per kWh.

“And so you might say, ‘Well, one of my neighbors has Oncor, and their rate is 10 cents right now.’” Smallwood said. “Well, they’re under a contract that started before the price run-up. The price run-up has only happened in the last six to nine months. So, when their contract runs out, this is what they’re going to see. For those that are signing up right now, they’re seeing these 19- and 20-cent offers. Right now, the co-op is 15.9 cents. So you should be thankful that we haven’t opted in, and you should be thankful that you’re on the co-op even though it’s a higher cost presently. You could be a lot higher if you were in the deregulated open market right now. The good news is we’re significantly lower than that. The bad news is we’re still very high.”

To counter the high prices, Smallwood recommended that members should find ways to reduce their energy usage. All members can take advantage of energy- and money-saving rebates, including one that will pay up to $100 on an HVAC tuneup.

Signing up for a free home energy audit is another effective tool to finding out where members’ homes can be repaired to tighten up the energy envelopes and reduce wasted electricity use.

The co-op’s website lists several charitable organizations that offer assistance, he said.

United again will hold Member Appreciation Day events at each of their offices throughout the service territory starting at 11 a.m.  to 2 p.m. on Oct. 14. Members are invited to attend and enjoy good food,  goody bags and fun with neighbors. Members also are encouraged to attend the Nov. 18, 2022,  Annual Meeting virtually, which will be available through the internet and by dialing in beginning at 4 p.m. Visit www.ucs.net/annual-meeting to participate in the meeting.

Following the more than 90 percent “yes” vote in 2019 from United’s membership to pursue high-speed fiber-optic internet, United now stands at more than 4,000 miles of fiber-optic line hung and more than 13,000 members activated in the two years since the project began in earnest, Smallwood said.

“We’ve got a really, really good solid product out there right now,” he said. “We get a lot of questions about, ‘When is it my turn?’  We have a map on our website that shows the areas that we’re working on. Know this; we’re working hard to try to get fiber as far and deep into our territories as we can.”

Smallwood added  he was pleased with the largest turnout and the quality of participation during the August town hall meeting. Borne from the need to communicate with members during the COVID-19 pandemic, the telephone town hall meeting is now a regular and effective communication tool for bringing updates to members.

“I’m pleased so many of our members took time out of their day to listen to the challenges we all face, but also hear the successes we have had,” he said. “It’s so important for co-op members to be engaged in this process, and the number of participants and types of questions we received during the event show our membership is engaged and ready to learn.”