Electricity rates soar after outage | GVEC, city working to soften the blow of high bills

Dalondo Moultrie The Seguin Gazette

Many electricity consumers across Texas and around Guadalupe County are steeling themselves to the thought of shocking power bills following last week’s very un-Texas-like winter weather.

Most Seguin Electric customers need not fret because the city utility has contingency plans in place to avoid tremendous rate increases due to unforeseen circumstances like those of last week, Deputy City Director Rick Cortes said.

“I think we’re in a better position than some utilities,” he said. “We want to be consistent in our pricing. We’re still looking at the ancillary costs but I think, overall, we’re going to be in good shape.”

Cortes cautioned customers to take his words with a “really big grain of salt.” Sometimes things happen beyond people’s control, but he thinks Seguin Electric customers should feel comfortable in trusting their rates won’t increase due to last week’s weather.

The same can’t be said for rate-payers at other power companies.

Repercussions are just beginning for Guadalupe Valley Electric Cooperative customers, who should prepare to feel the impact of the storm, according to a news statement released on GVEC’s website.

Residential customers should expect an increase in upcoming bills, GVEC said. The increases are driven by two factors, one of which is an increase of kilowatt hour usage during the storm and week-long bad weather.

“Freezing temperatures lingering for consecutive days caused many central heating systems to operate in emergency heat mode, utilizing heat strips for long periods of time,” GVEC Senior Executive Manager Graham Hauptman said. “Multiple days of this type of energy use, compounded by the additional operational strain from rotating outages, significantly raised individual usage during this period of time, which will result in a higher bill.”

Pricing of wholesale power during the week also will contribute to increases of power bills for GVEC customers, the company’s statement read.

Electric Reliability Council of Texas ordered power outages across the state during the storm and aftermath. The result was GVEC buying electricity at a 15,000% markup, GVEC CEO and General Manager Darren Schauer said.

“With ERCOT ordering rotating outages, GVEC was forced to purchase certain allocations of power at $9 per kilowatt hour, up from the more traditional 6 cents per kilowatt hour,” he said. “This extreme level of pricing has never happened — for the extended and continuous lengths which we saw — in the history of the ERCOT competitive wholesale market.”

The rise of the price of natural gas from $2 per Metric Million British thermal unit to $180 per Metric Million British thermal unit exacerbated the problem, Schauer said. The MMBtu is a commonly used unit for energy pricing.

Natural gas is used to create electricity in many power plants.

GVEC’s production costs increased exponentially. The company doesn’t plan to hit its customers all at once with the costs, Schauer said.

“The positive news is that due to the strong financial position GVEC has held for years, as a result of our long-term financial strategy to hedge against large market fluctuations, GVEC will not have to immediately pass the high costs experienced last week to our members,” he said. “While GVEC will likely need to raise the generation and transmission rate, the good news is the cooperative, as a direct result of our strong financial position, has the ability to structure rate changes to help minimize the direct burden to our membership.”

GVEC is exploring options to recover costs “over multiple years,” Schauer said. Company leadership is trying to figure out a way to lessen the impact to members.

Once plans are solidified, someone from the cooperative will let members know, GVEC said.

Seguin Electric decided years ago to hedge its natural gas prices to prevent dramatic spikes like those GVEC and other electricity distributors realized, Cortes said. The city made the move to protect rate-payers from drastically fluctuating and exorbitantly high energy costs, he said.

“The rates are the rates,” Cortes said. “Our rates are set.”

Usage, however, could fluctuate dramatically and lead to large increases in some Seguin Electric customers’ upcoming bills, he said.

If, for instance, Seguin Electric customers had power the majority of the time or were connected to an emergency grid and kept their homes very warm using electricity, bills could show a large increase, Cortes said.

“If you ran it 24 hours a day, your demand went up and your costs went up,” he said.

Still, he believes most of the city’s customers will be OK through it all, Cortes said. Moving forward, as was the case prior to the historic storm, conserving power remains important the entire year, he said.

When temperatures hover around or drop below freezing, thermostats should be set to around 65 degrees, Cortes said.

“Conserve as much as possible,” he said. “That’s the key, is just to conserve. Even when it’s 110 degrees outside, always conserve your utilities as much as possible.”

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