Austin Energy estimates it earned $54 million during Texas freeze

Austin Energy estimates it earned $54 million in net revenue from last month’s Texas freeze, but the city-owned utility raised doubts about actually collecting that amount because other electricity providers in the state were decimated financially and might not be able to pay their bills.

As power-generating plants across Texas were failing during the wave of sub-freezing temperatures, Austin Energy was ordered by the Electric Reliability Council of Texas – the entity that oversees the grid and is commonly known as ERCOT – to shed a significant amount of energy demand as the state’s power grid came close to a full shutdown.

But at a time when residents in more than 220,000 Austin homes shivered in the dark, the power-generating plants operated by Austin Energy mostly held up and continued to pump energy into the state’s electric grid. The confluence of these events allowed Austin Energy to consistently generate more energy than it used during the weather event – and during the period when ERCOT raised wholesale prices to the maximum level allowable of $9,000 per megawatt hour. 

The city’s $54 million net revenue estimate was included in a voluntary notice filed Monday with the Municipal Securities Rulemaking Board. The disclosure did provide for a considerable deviation from that estimate, however, suggesting the final revenue total could reach as high as $104 million but also drop all the way to negative $16 million depending on market developments.

“There is already movement to begin repricing some aspects of the market, and ERCOT has begun significantly short-paying invoices owned to Austin Energy because of cash-flow issues caused by payment defaults by other parties in their payments owed to ERCOT,” the report read.

Among the unknowns is the financial impact to electric utilities that made it out of the storm worse off than Austin Energy. Last week, for instance, the Brazos Electric Cooperative filed for Chapter 11 bankruptcy with an unpayable $1.8 billion bill from ERCOT resulting from the storm. San Antonio’s CPS Energy faces a $1 billion bill, and the electric utility in Denton came out $300 million in the hole.

The city of Austin’s filing goes on to address a potential scenario by which ERCOT permanently assigns a share of defaulted amounts to Austin Energy and other purchase providers. Another scenario would also impact the utility’s net revenue if the state’s Public Utility Commission retroactively reprices market transactions for certain time periods during the storm. 

The Public Utility Commission last week said that it will not take action to retroactively reverse those prices, despite an independent monitoring firm hired by the state reporting ERCOT overcharged electric providers by a combined $16 billion by leaving wholesale prices at the maximum level for about a day and a half longer than was needed during the emergency,

“There remains a great deal of uncertainty and a lack of information,” Monday’s filing read. “Austin Energy is and will be monitoring developments to see which risk appears most acute, both from a legislative and a financial standpoint.”

More:Utility commission refuses to reverse $16 billion in ERCOT overcharges

Austin Energy is a publicly owned utility with nearly half a million customers and an annual budget well north of $1 billion. The utility transferred $114 million to the city’s general fund in the current fiscal year. Monday’s filing showed Austin Energy with $866 million in liquidity as of Thursday.

It’s unclear how money earned from the storm would be spent or if it would be passed on to consumers. However, the utility has previously said that even if it lost money – which seems increasingly unlikely – the financial burden will not be shared with customers unless the city council approves a fee increase.

More:Wondering which parts of city’s power grid are deemed critical? Austin Energy won’t say

Last week, Austin Energy officials gave a presentation on the winter weather event to an Austin City Council oversight committee. A graphic used in the presentation showed power generation totals were higher than consumption for all but a few brief periods from Feb. 11-19. The disparity was especially large after the ERCOT-directed power shed on Feb. 15. 

The reason the plants largely stayed online, Austin Energy Vice President Pat Sweeney said, was due to a winterization process used at the city-owned plants. In total, more than 180 plants statewide failed to operate, or gave little output, during the Texas freeze.

Austin Energy owns three natural gas-powered plants in the Austin area and co-owns two power plants outside Austin – one powered by coal, the other by nuclear fuel.

Unknown at this time is the impact to utility’s credit rating. On Feb. 24, Fitch Ratings placed Austin Energy and other utilities within ERCOT’s footprint on a negative watch – a concerning analysis of a company’s financial situation. On March 3, S&P Global Ratings did the same. 

“Austin Energy cannot predict any impact to its bond ratings but is committed to taking actions consistent with maintaining its strong investment grade ratings,” the report said.

On Tuesday, Moody’s issued a new report concluding Texas cities impacted by the power failure would have only “modest” credit effects.