A BRIEF DESCRIPTION OF HOW THIS WINTER STORM IMPACTS MEMBER BILLS
During Winter Storm Uri in February 2021, wholesale power prices in ERCOT were $9 per kWh for nearly four full days. By comparison, wholesale power prices are about 8-10 cents per kWh more than a year after Uri.
The immediate cost of the event to United was over $530 million, which was never billed to United by Brazos Electric because Brazos filed for bankruptcy. As a result of the bankruptcy process, that amount was initially increased to $560 million. During the bankruptcy mediation, a reduction was agreed upon, and the amount that actually billed to United was about $440 million—a reduction of $120 million because of the final outcome of the bankruptcy.
To pay this bill in the least impactful way to the membership, United issued securitized bonds allowed by Senate Bill 1580, which the Texas Legislature passed in 2021. In December 2022, United paid the $440 million bill as a part of the mediated settlement of all the parties of the bankruptcy, including ERCOT, the Public Utility Commission of Texas, the State of Texas, creditors in the bankruptcy case and all market participants. The securitization financing allows United to spread these extraordinary costs over 28 years to keep member bills from being sharply higher.
Beginning with the January 2023 billing cycle, United will include a securitization charge of 1.17 cents per kWh to member bills, which will be included in the PCRF on member bills. The monthly impact on 1,000 kWh usage will be less than $12. Every six months, United will review the amount that is charged on a per-kWh basis and adjust, if necessary, to ensure it is collecting the correct amount to satisfy the bond holders. As United grows in the future, the per-kWh charge is expected to be reduced as the securitized amount will be spread across the additional meters.
The law (Senate Bill 1580) requires the charge to be applied to all existing and new members’ bills. The charge will stay with the meter until the securitization term ends in 28 years, so it doesn’t matter if you’re a new member or were served by United during the storm. The law requires United to apply the charge to all members in this manner.
In the first half of 2023, a hardship fund will be established to help offset the cost of the securitization for qualifying low-income members. More details will be provided in the coming months.
Adoption of Financing Order
On August 22, 2022, United’s Board of Directors adopted a Financing Order pursuant to Senate Bill 1580, Subchapter D of Chapter 41 of the Texas Utilities Code, §§ 41.151 – 41.163. The Financing Order authorizes United to utilize securitization financing to recover power costs and other extraordinary costs and expenses incurred due to Winter Storm Uri. The financing is expected to close by the end of this year, 2022. The financing will allow for the spreading of these extraordinary costs and expenses over an extended period of time at what is anticipated to be an advantageous interest rate instead of such extraordinary costs and expenses of Winter Storm Uri becoming due all at once. The securitized charges, including related costs and expenses, will be irrevocable, will be adjusted from month-to-month to pay the related bonds, and will be included in member monthly bills starting in or about January 2023. A copy of the Financing Order is available here.