Investor call takes down PUC chair
For nearly an hour last week, the state’s last surviving utility commissioner, Arthur D’Andrea, was remarkably candid about what he had gleaned from last month’s deadly outage.
“I mean, the failure here was really a larger statewide failure in our gas supply,” he told Bank of America investors in a private call, a recording of which was obtained by Texas Monthly. “And I am not sure who that’s on — it’s probably on me, it’s probably on the Railroad Commission. That’s who should have been seeing that, hey, when it gets down to 9 degrees … we’re gonna lose all this stuff.”
D’Andrea resigned late Tuesday over the call, in which he assured traders he was doing everything possible to protect the profits they made off the backs of millions of Texans who lost power amid freezing temperatures.
He is the latest and last of the agency’s three commissioners to quit over the fallout; his official departure won’t come until a replacement is confirmed.
But for all the criticism it has drawn, the exchange is also one of the clearest windows yet into what state officials are beginning to learn from the historic disaster.
During the crisis, power plants across the state failed to generate enough electricity to meet soaring demand. D’Andrea said he initially had been furious at municipal retailers such as Brazos Electric Power Co-op, which racked up huge bills from the week, for apparently failing to prepare for extreme cold.
As he dug more into it, though, the problem seemed to be more about Brazos’ fuel suppliers than its own facilities. Even rival electric companies with committed natural gas contracts were being stiffed at the height of the crisis, he noted.
“So I’m not even sure there was much Brazos could have done about it,” D’Andrea said. “There’s only so many molecules of gas in the pipe, and you can’t make more.”
Natural gas production fell by nearly half the week of the storms, and more than 25,000 megawatts of gas-fired electricity were taken offline, enough to power 5 million homes. Typically, gas fuels just over half the state’s power grid.
The revelations Tuesday came after a week of controversy over D’Andrea’s reluctance to retroactively lower sky-high electricity prices from the outages. Repricing would erase large profits collected by some power providers and investors but could benefit utilities that lost hundreds of millions of dollars during the freeze. That includes Brazos, which earlier this month filed for bankruptcy.
D’Andrea, a lawyer who was appointed chairman early this month after DeAnn Walker stepped down from the post, had insisted that repricing was illegal and potentially harmful to ratepayers despite objections from an independent monitor.
“I totally get how it looks like you’re protecting consumers (by readjusting electric prices),” D’Andrea said Friday during a utility commission meeting. “But I promise you, you’re not.”
In the call last week with Bank of America, he apologized for not being able to guarantee investors that their profits were safe.
“I wish I could tell you there’s no way in heck that it will ever get repriced, but I just can’t,” D’Andrea said. “If enough legislators want to get something done, they can pass a bill and get it done.”
“It’s a contentious political issue,” he added. “The best I can do is put the weight of the commission in favor of not repricing.”
As power fell off the grid last month, the utility commission raised the price of electricity to its ceiling of $9,000 per megawatt hour, a 10,000-fold increase. The issue now is whether they were justified in keeping those prices high for several days, even as reserves rebounded and the market returned to normal.
That move saddled some municipal utilities and retail electric providers with huge bills and eventually could drive up utility bills for millions of Texas consumers.
On Monday, the Texas Senate moved with uncharacteristic speed to pass a bill that would order the retroactive repricing. But the measure has been at least initially rejected by the House, exposing a deepening rift between Republicans, who control both chambers and the governor’s seat.
“I hope the House will reconsider the false witness and expressed motivation of @PUCTX Chair and correct the pricing error before Friday,” Senate leader Lt. Gov. Dan Patrick tweeted Tuesday, referring to D’Andrea. “We must act now to save TX ratepayers billions. The clock is still ticking.”
Even if they do reprice, lawmakers, including Patrick, still have yet to advance any bills that would substantively address the issues that D’Andrea raised, leaving the grid just as vulnerable to failure as it was last month.
Asked by the investors last week what might change, D’Andrea said he didn’t anticipate lawmakers passing any sweeping reforms to the state’s deregulated structure, which is intended to lower consumer costs but can also incentivize shortages in times of crisis.
“I think as we go through this they will eventually tire of market design because there’s a lot of people on all sides of that issue and it’s difficult to do right,” D’Andrea said.