Dear PenTex Energy Member,
It is important to remember that the effects from Winter Storm Uri, including the extraordinary costs incurred, have not only affected PenTex Energy but all Texans connected to the ERCOT grid.
During the extreme weather event in February 2021, commonly referred to as Winter Storm Uri, outages occurred at electric generation plants across the state of Texas. The generation plants owned by PenTex Energy’s electric power supplier, Brazos Electric Power Cooperative, Inc. (Brazos) were no exception.
The Electric Reliability Council of Texas (ERCOT) allowed power prices to rise to $9,000 per megawatt-hour (MWh)/$9.00 per kilowatt-hour (kWh), in the open market during Uri, from typical prices ranging between $20-$30 per MWh/$.02 -$.03 per kWh. Due to generation failures, Brazos had to purchase power at these unreasonable prices to meet the needs of its member-cooperatives. The $2.1 billion price tag for purchasing electricity at those prices led to Brazos filing for bankruptcy in March 2021.
Power costs that Brazos incurs are billed to its member-cooperatives, which means that PenTex Energy and the other Brazos member-cooperatives are responsible for the $9.00 per kWh costs incurred during Uri. The Brazos bankruptcy reorganization plan filed in August 2022 requires that all member-cooperatives must pay their final Uri power costs after the court approval of the plan.
Over the months since Uri, PenTex Energy’s board of directors, staff and counsel have worked on behalf of our members to successfully negotiate settlement terms for the bankruptcy and gain further reduction in the amount that we owe Brazos.
In June 2021, Senate Bill 1580 was enacted by the Texas Legislature, which allows electric cooperatives to utilize a financing mechanism known as securitization to pay the extraordinary costs and expenses from Uri. On August 26, 2022, your PenTex Energy Board of Directors adopted a Financing Order pursuant to Senate Bill 1580. The financing order authorizes a securitization transaction that allows PenTex Energy to spread these extraordinary Uri costs and expenses over an extended period to keep your monthly electric bill lower than it would be absent securitization. The securitization charge will be a new line item on your bill beginning January 2023. Based on information provided to PenTex Energy, members will see an additional $0.02146 per kWh on their bill, or $21.46 per 1,000 kWh consumed. PenTex Energy is sympathetic to the additional burden this puts on our members, and we will do everything within our power to ease the burden.
One significant outcome from the bankruptcy proceedings is that Brazos’ bankruptcy reorganization plan requires Brazos to sell its generation plants. This voids the present PenTex Energy all requirements contract with Brazos. While Brazos will continue to be the transmission and distribution provider, PenTex Energy will be free of the present contract with Brazos, and we will procure all our own future power supply starting in March 2023. This power procurement will meet the needs of PenTex Energy’s specific load shape, which may be advantageous for pricing going forward. Any future savings will be passed on to PenTex Energy’s Members and will help to mitigate the impact of the securitization charges.
The Brazos bankruptcy reorganization plan also includes a “Hardship Fund” that will be available to Members who qualify for assistance to cover all or a portion of the monthly securitization charge. Additional information will be provided to PenTex Energy Members as it is available.
A copy of the approved Financing Order is available at PenTex.com.
FAQ Sheet Securitization
It is a mechanism through which charges incurred during Winter Storm Uri (February 2021) are recovered on a per kWh basis, over an extended period of time.
- ERCOT allowed extremely high pricing during the winter storm. These costs were passed on to all rate payers within the ERCOT grid in the State of Texas. For PenTex Energy members, it is listed as a separate line item on your bill. PenTex Energy is doing everything within our power to help ease this burden on our members.
- PenTex Energy does not keep the money collected from these charges. The dollars collected are submitted, to the issuer of the bonds that funded the securitization, within days of our members paying it.
The Texas Legislature passed SB 1580 to address these costs. The bill states that these charges are non-bypassable. Everyone is required to pay the charges.
Our power provider, Brazos Electric, entered bankruptcy due to the costs of Winter Storm Uri. They have now exited bankruptcy which triggered the recovery of these costs.
This will be a monthly charge on your bill. Through securitization, the Winter Storm Uri costs are being spread over many years to keep your monthly electric bill lower than it would be absent securitization.
This per kWh rate will be recalculated approximately every 6 months.
The SCRF is different than Power Cost Recovery Factor (PCRF). SCRF is for costs resulting directly from the winter storm in 2021. PCRF is for current costs of purchased power which are driven by current fuel costs.
The Brazos bankruptcy reorganization plan includes a hardship fund that will be available to Members who qualify for assistance to cover all or a portion of the monthly securitization charge. Additional information about this program will be provided as soon as it is available.