Texas committee drops appropriation for winter storm utility debt

A Texas House committee ditched an appropriation to potentially pay off $3.52 billion of recently issued bonds from a natural gas securitization deal, but left open the possibility for the funding's return.

Thursday's action by the House Appropriations Committee approving its version of a supplemental appropriations bill without the funding came the same day the Texas Natural Gas Securitization Finance Corporation bond issue closed. 

Committee Chair Republican State Rep. Greg Bonnen said while the $3.86 billion appropriation was originally earmarked for the natural gas debt, the Senate added debt electric cooperatives also incurred as a result of 2021's Winter Storm Uri to the legislation.

Bloomberg News

"It's still in play," he told the committee, adding the funding's fate is "contingent on legislation passing and what it looks like." 

A limited make-whole redemption over the next three years was added to the natural gas bond deal after the state legislature in January signaled its intent to provide funding to ease the financial hit to natural gas utility customers who face new charges on their bills to pay off the debt.  

The Senate Finance Committee earlier this month revised the supplemental appropriations bill to include rate relief for electric utility customers. The bill passed the full Senate March 15 in a 30-0 vote.

Finance Committee Chair State Sen. Joan Huffman and Bonnen introduced SB 1501 and HB 4099 as a mechanism to direct the appropriated funds to the corporation's bonds. State Sen. Robert Nichols subsequently filed a bill allowing retail customers of electric cooperatives to benefit. None of the measures has yet advanced out of committee.

Just over two years after Winter Storm Uri battered Texas with snow, ice, and high winds amid record-low temperatures, underwriters led by Jefferies priced the taxable natural gas securitization customer rate relief bonds March 8 and 9. 

The corporation put out supplements to the preliminary official statement to keep potential investors informed about legislative developments concerning the proposed appropriation.

Lee Deviney, executive director of the Texas Public Finance Authority, which created the corporation last year, said Friday the House committee's removal of the appropriation was "not relevant to the closing of the bond sale."

The deal was made possible by a 2021 state law authorizing securitization financing for natural gas providers to extend the period over which their customers pay back sky-high costs due to spikes in demand and prices for the essential commodity during the storm.