United CEO Dispells Myths, Tackles Recent
Changes For Members During March Online Event
With members uncertain about energy costs and other changes coming in the wake of the conclusion of Brazos Electric Cooperative’s bankruptcy, about 4,720 of them attended United Cooperative Services’ March Telephone Town Hall Event to find answers, making it the most attended virtual meeting in the co-op’s history.
During the program, United’s CEO Cameron Smallwood covered a multitude of topics aimed at clarifying questions members have raised recently, including United’s relationship with its new power provider, Constellation Energy, and how that new relationship will offer some billing relief by stabilizing prices at rates lower than Brazos’ recent costs.
Smallwood covered other topics, as well, including challenges many members have faced with the cooperative’s new payment platform, reasons for recent billing format changes, an update on United’s high-speed internet build-out and a briefing on issues being considered by the Texas Legislature this year. To view the entire town hall event, visit the News and Information tab at www.ucs.net.
The Telephone Town Hall provided an enhanced, 30-minute Q&A session for members to speak directly to Smallwood. Members who left messages with their unanswered questions were contacted over the following days to address their needs.
“I want to start with the fact that we are a non-profit electric distribution cooperative,” Smallwood said. “That’s important to bring up to you, because ultimately, with the way our business model works, anything that we bill you is on a cost basis. And then, any profit we make–we call it margin—that margin is returned to the members in their patronage account. So, anything we make, we cover our costs and give it all back to our members at the end.”
“So, we’ve had a lot of social media comments with our rates going up recently stating that we’re greedy or that we’re taking advantage of our members or things of that nature, or that we’re paying our people too much. Ultimately, we’re here for you. We utilize the cooperative business model to support and serve you every day. That’s really what it’s about. Our mission is to provide you with exceptional service and value, and that is what we’re going to focus on.”
The Brazos Bankruptcy Wrap-up, Power Costs and the Downside of Opting Into the Retail Market
As Brazos Electric Cooperative has exited bankruptcy following the conclusion of the trial in November 2022, Smallwood said that United and the 15 other member-owner cooperatives had to make changes to continue providing members with electric service.
As part of the settlement, Brazos will no longer generate electricity and is in the process of selling its generation plants, which should conclude in the coming months. Still a co-op, Brazos now will provide transmission service that feeds its member-owner co-ops as well as maintain the substations that it’s always owned.
Because of this bankruptcy stipulation, Smallwood said United had to find a new energy provider. On March 1, it began purchasing its electricity from Constellation Energy.
“Constellation Energy is our generation provider now, and Brazos is now our transmission and substation provider,” Smallwood said. “We’re still the distribution company, so we take the power from the substations and distribute it to our members as we have always done.”
While he predicted consumers would not see pre-Uri energy prices in Texas for some time, United’s new generation provider costs about two cents less per kilowatt hour than the recent high and regularly fluctuating rates from Brazos, Smallwood said. Along with price stability and price protection from another Winter Storm Uri-type event, the contract with Constellation will end Dec. 31, 2025.
“I know the frustration with high bills is out there,” Smallwood said. “In my bill last month, 91 percent was from the power supply charges, and 9 percent was from United. When we look at that, the majority of the cost that’s been billed is not United charges. It’s mainly the power supply charges. Our goal is how do we get those power supply charges down. That’s what we’ve been working on. Our goal is to get back to 70 to 80 percent of your cost being power supply costs and not 90 percent.”
Smallwood also approached another erroneous social media belief that United’s recent meter changeout was responsible for members’ recent high bills.
“The system that we use today is no longer supported by the manufacturer, so we’re changing out those meters,” he said. “We will have that done by the end of ’23. So, ultimately the meters are accurate, they’ve always been accurate. For the last 25 years, we’ve used electronic technology. Those meters are really good, and we continue to use those meters today. They only communicate to us differently with this new system.”
When Winter Storm Uri descended on Feb. 14-20, 2021, not only did it bring sub-freezing temperatures to the Lone Star State, but it also caused several power generators to cease production of needed electricity when natural gas supplies froze. The lack of much-needed electricity resulted in rotating outages and staggeringly high $9 per kilowatt hour power prices that lasted for days. At the time, United members paid about 9 cents a kilowatt hour for comparison.
Brazos Electric Cooperative was one of the power generators affected by the storm. Under contract to provide power to its 16 members cooperatives, Brazos had to procure power from the wholesale power market at the $9 per kilowatt hour price, which resulted in more than a $2.5 billion bill.
Brazos didn’t have the money to pay that bill, Smallwood said, and one option was to bill each of the 16 member-owners. Those costs would have resulted in about a $4,000 February electric bill for the average United member. Instead, Brazos declared Chapter 11 bankruptcy in March 2021. At the bankruptcy’s conclusion, the original $560 million United owed Brazos for the energy it used during the storm decreased to about $440 million.
“The state of Texas enacted various laws that allow different companies to securitize that—basically borrow that money over a long period of time,” Smallwood said. “Senate Bill 1580 was specific to allowing cooperatives to securitize, and that’s what we did. That’s the process that we went through, and we issued those securitized bonds in December. We’ve made our payment to accept the mediated settlement.”
Since this January, United members have begun repayment on the securitization in the form of a 1.17 cent per kWh charge. Also, part of the mediated settlement, a newly created hardship fund is now available to pay 100 percent of the securitization charge for those United members who qualify. The Brazos Electric Ratepayer Hardship Fund is a $140 million trust that is designed to be in place for the next 10 years to assist those qualifying members. The information and application pages can be found at www.ucs.net/brazos-hardship.
While some have recently inquired about United opting into the retail competition to allow members to choose their power providers, Smallwood said the vast majority of members have been against the idea since the co-op began straw-polling members during various town hall events in the past two years.
Last April’s town hall showed about 92 percent of participants were against the idea. Of the 1,114 members who participated in this March’s town hall telephone survey, 90 percent were against opting into retail competition.
Smallwood said opting in would still be a possibility, though the process would take two years to complete. Joining the open market would add extra charges to members’ bills, he said, and once done, the co-op would not be able to opt out again.
“Bottom line is we’re a co-op. We’re your co-op. You’re the members. You’re the owners,” Smallwood said. “If you tell us to opt into competition, we’re going to do that. Now if we were to do that, I want you to know a few things about it. Number one, it’s going to cost us some money. It’s not free. To go through all the technology and all the regulatory steps, probably several million dollars a year in additional costs that we’re going to have to add to your distribution rates will be needed to support that. In addition, the experts we’ve engaged over the years don’t believe our market of 72,000 members would attract many, if any, retail electric providers (REPs). Those REPs vie for electric consumers in much bigger markets, such as the Oncor market, which has several million consumers. But at the end of the day, if that’s what you want to do, that’s what we’re going to do.”