The Texas Senate authorized the use of the state’s rainy day fund to cover $2.1 billion of electric costs incurred after its power transmission system failed during a severe winter storm in February.
A Senate amendment to House Bill 4492 allows the state’s main electric grid operator, known as the Electric Reliability Council of Texas, to borrow from the $10 billion rainy day fund and make loans to the power generators and retailers that supply electricity to the grid.
The original version of HB 4492 would have created a new agency that could issue bonds to cover an estimated $6.5 billion in power costs levied by ERCOT during the storm dubbed “Yuri.”
Sen. Kelly Hancock, R-North Richland Hills, sponsor of the amendment, said that using the rainy day fund, known officially as the Economic Stabilization Fund, would be quicker than creating a new debt issuer, which he said could take months.
“The reason we wanted to move quicker on those funds is that this is the time when a lot of the maintenance is made to be ready for the extremely hot month of August,” Hancock said during debate on the amendment.
Under the amendment, ERCOT would be the borrower of the funds from the ESF, and member utilities could borrow from that fund at rates anticipated at about 4%, Hancock said.
“We tie that to the mortgage market index, which is right now about 1.5%, and then we tie another 2.5% to that,” Hancock said. “It’s a good investment for the ESF, but it’s also a good way for ERCOT to deal with these defaults and short pays.”
HB 4492 was one of several designed to preserve ERCOT and to rescue electric ratepayers from exorbitant costs for power during a 32-hour period the week of Feb. 14, when wholesale prices surged to $9,000 per megawatt hour.
A conference committee was created to work out differences between the House and Senate versions of the bill.
Texas energy executives told the Senate Business and Commerce Committee that they worked with members of the House to craft the original version of the bill, which they preferred.
Marcie Zlotnik, a former ERCOT board member and energy executive, said the market model that Texas uses to price electricity is threatened by the market failure in February.
“I’m very concerned,” Zlotnik said of the Senate version of the bill. “I see no relief for the customers — small commercial customers, schools, churches. Many retailers have not sent out those bills yet because they were waiting for relief from this bill.”
“There are roughly 10 companies that control 80 to 90% of the mass market business, and one of those is already on bankruptcy,” she said. “We’re going to lose probably 20 more retailers out of, say, 30. There will not be the continued downward pressure on prices that will benefit fixed rates.”
In the discussion of the Senate floor amendment, Hancock said the allocation of loans will be monitored by the State Comptroller’s Office.
“It’s very complicated, but at the end of the day what we’re trying to do is make sure we get the best financial option for those that would be impacted and to make sure that our consumers had the least amount of impact from Yuri as possible,” Hancock said.
Under another bill, Senate Bill 1580, rural electric cooperatives would be allowed to seek the state-supported low-cost loans.
Brazos Electric Power Cooperative, which
