PRICES ON THE RISE A contributing factor to the increase in electricity bills is due to the increase in natural gas prices, NBU says. Over the past three years, the price of natural gas has increased in the United States with a large spike occurring in February 2021 during Winter Storm Uri.
DOLLARS PER THOUSAND CUBIC FEET
placed in an emergency reserve until NBU is able to build back its reserves. Prior to the winter storm, NBU had $25 million in power reserves funding. As of Aug. 19, the utility company has $751.22, according to Hubbard. Taylor said the NBU board of trustees opted to pursue the short-term loan because the power supply program worked well during Uri, resulting in less debt than other utility companies. “So the total liability we had coming out of it was low enough that it made sense to do short-term debt. So again we saved $44 million [in interest], and that is a lot of money by doing that instead of a 30-year bond,” Taylor said. “WE DO NOT CONTROL THE COST OF POWER AND OUR COSTS. SO AS THAT POWER CHANGES, THAT PCRA RATE CHANGES TO REFLECT THAT. IT’S SIMILAR TO GOING TO A GAS STATION; YOU KNOW THAT RATE IS VARIABLE DEPENDING ON WHAT THAT COMMODITY COST.” DAWN SCHRIEWER, NBU CHIEF FINANCIAL OFFICER NBU officials said they have col- lected the money necessary to pay off the $100 million loan but have not made the full payment yet. $15 million of the loan was paid in June 2022, and the utility company plans to pay off the remaining $35 million when the loan payment is due in March 2023. The utility company did qualify for $483,000 of funding from the Fed- eral Emergency Management Agency following 2021’s winter storm to go toward physical assets that were dam- aged but has received $30,000 of the funding so far. NBU plans to replenish the reserves over a period of eight years. Addition- ally, it has shifted the reserve policy from 90 days of funding saved to 365 days of funding in the reserves. “The reason it moved from the num- ber of [90] days is because during Feb- ruary of 2021, we spent a year’s worth of power costs in a single month. And so that’s why we went to 365 days because that’s the potential risk of cost,” said Rebekah Crouch, power supply manager at NBU. According to the July report by Fitch Ratings, a bond rating agency that analyzes the stability of a compa- ny’s financial metrics, NBU purchases the majority of its power through
short-term contracts, which may expose the utility company to signifi- cantly higher operating costs in the event of a volatile energy market. NBU was exposed to both day-ahead and real-time prices at ERCOT’s price cap of $9,000 per megawatt-hour and up to $25,000 per mWh for ancillary services, or the services necessary to support the transmission of electric power from generators to consumers, during Uri. MWh equals 1,000 kilo- watts of electricity generated per hour and is used to measure electric output. ERCOT instability NBU receives its power from ERCOT through a financial hedging program that finds ways to offset the cost of power a day ahead in the real-time energy markets. A hedging program is a risk management strategy used to counteract losses in investments. According to Hubbard, the goal of the electric grid prior to Uri was to achieve the lowest cost of power possi- ble for utility companies that purchase power. But since the storm, the goal of ERCOT has now shifted to provide reliability to the state so the power grid does not fail. “Historically the day ahead and real- time market, when we’re looking at energy contracts, they are typically the lowest cost form of power you can buy. Unfortunately, that low-cost power comes with huge risks,” Hubbard said. “Because it’s also the most volatile type of power you can buy. Because the price, especially let’s say in real time, the price is shifting every 15 minutes depending on supply and demand in the market.” Due to the shift in the energy mar- ket, NBU officials said they are eval- uating what they can do to provide competitive costs to customers. Pur- chasing power longer term or owning generation assets like a power genera- tion plant are among the options they are considering. According to the Summer 2022 Elec- tricity Industry Outlook published by the U.S. Energy Information Admin- istration, higher-than-expected nat- ural gas prices, along with the limited responsiveness of coal generation, led to increases in both wholesale and retail electricity prices this summer. In May 2021, the Texas Natural Gas Industrial Price was $3.27 per thousand cubic feet, while in May 2022 natural gas prices reached $7.64 per MCF. MCF is the US market standard measure- ment for natural gas volume, accord- ing to the EIA. While Texas produces natural gas domestically, Taylor said it
$20
2019-20 2020-21
2021-22
Winter Storm Uri
$15
$10
$5
$0
SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION/COMMUNITY IMPACT NEWSPAPER
is traded on the international market, which ultimately determines its price. “The cost of natural gas, which is up not just in Texas, but across the coun- try from what’s going on in Ukraine and other impacts,” Taylor said. “That’s driving prices up and then on top of that for the last about a year and a half the Public Utility Commission of Texas has been making changes to the ERCOT market and redesigning ERCOT mar- kets to prioritize reliability over price.” Customer support Due to the response from NBU customers, the utility company has reduced a portion of the PCRA charge from Aug. 1-Sept. 30. A reduction of $0.021 per kWh will be made in the PCRA portion of the bill, which rep- resents an 11.95% reduction to the elec- tric portion of the bill. The adjustment will delay the collection of Uri’s recov- ery funding, according to NBU. The PCRA charge will still appear on customer bills as the Uri recovery costs are collected. NBU representa- tives said they are empathetic to the effects of rising costs on customers and are working to mitigate the high prices. The temporary adjustment is intended to allow costs to be spread out over the fall and winter months when electric usage decreases, according to NBU. “There is not one person on this board, not one person that works for NBU that does not care about this city,” NBU Trustee Yvette Villanueva Barrera said. “And we know you guys don’t feel it. But this board is doing everything they can to work with NBU and to work with the city so that we can provide some relief for you guys.” The PCRA charge will remain on cus- tomers’ utility bills for the foreseeable future, but NBU officials anticipate the charge will decrease as high summer temperatures abate. According to NBU, the Public Util- ity Commission of Texas is prioritiz- ing reliability over price as it makes changes to the ERCOT market after Uri.
Customers will see a reduction of $0.021 per kWh, or 11.95% in the PCRA portion of their bill, until Sept. 30. This will delay the collection of Uri’s recovery charge. NBU has discontinued disconnections and suspended late fees on customers’ accounts until Sept. 30. The NBU Utility Bill Assistance Program is managed by the New Braunfels Food Bank. The Budget Billing program allows the customer’s utility bill to be spread into 11 equal monthly payments with the 12th month used for reconciling charges. The Low-Income Discount Program is available for NBU customers who qualify and is applied over 12-month period. NBU provides free virtual or in- person water, energy and irrigation performance assessments to customers. Customers can consider utilizing NBU rebates on water, wastewater and utilities. ASSISTANCE PROGRAMS New Braunfels Utilities offers multiple assistance programs for customers who are unable to pay their utility bills. More information on these programs and additional assistance options can be found on the NBU website.
SOURCE: NEW BRAUNFELS UTILITIES/ COMMUNITY IMPACT NEWSPAPER
The changes have resulted in higher electricity prices that are not expected to decrease to pre-February 2021 levels. “We do not control the cost of power and our costs. So as that power changes, that PCRA rate changes to reflect that. It’s similar to going to a gas station; you know that rate is variable depending on what that commodity cost. That’s the same thing with the PCRA is capturing that variable cost,” NBU Chief Financial Officer Dawn Schriewer said.
For more information, visit communityimpact.com .
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NEW BRAUNFELS EDITION • SEPTEMBER 2022
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