6.1a1 ERMUSR 03-09-2021Talking Points on Financial Impacts of U.S Arctic Blast on
Public Power Utilities
Key Talking Points
Now that public power utilities have weathered the actual storm,
APPA wants to make sure impacted utilities and their customers
have the resources they need to handle the financial aftermath.
APPA strongly encourages a review to investigate what went
wrong, what went right, and what we can do to do better in the
future.
One key takeaway will likely be the importance of a robust and
diverse generation resource mix.
Background
For electric utilities—including not-for-profit public power
utilities—Winter Storm Uri and the arctic blast it created posed
significant challenges.
o Coldest three-day stretch on record. This stretch didn’t just
break records, it shattered them (per WFAA Dallas):
Feb. 14 the low was 9° in Dallas, which shattered the
old record of 15° set in 1936.
Feb. 15 the low was 4°, which shattered the old record
of 15° set in 1909.
Feb. 16 the low was -2°, which shattered the old record
of 12° set in 1903.
Extraordinary weather created a “triple whammy” for utilities:
o The cold weather drove high demand for natural gas and
electricity.
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o Generation in many cases was constrained due to natural
gas well and pipeline freezes, wind turbine freezes, the wind
not blowing, coal pile freezes, and freezes at power plants
themselves, although much of the freezing occurred in Texas
rather than in SPP and MISO. Nuclear and hydropower were
functioning as far as we understand at this point, but we are
aware of one nuclear plant that tripped off in Texas due to
the load-shedding and safety issues. Solar is not a major part
of the energy mix, but was unavailable in some cases
because of the lack of sun or snow/freeze on solar panels.
Diesel “peaking” “generators functioned well and were able
to aid grid stability.
o Spiking natural gas prices soared, contributing to extremely
high wholesale energy market prices in ERCOT, SPP, MISO,
and even other regions.
What are the financial impacts on public power?
First, it’s worth noting that public power’s customers really are
the utility. They have no shareholders or equity investors, so any
impact will be borne by customers.
Some members of the public power community—particularly joint
action agencies, which serve power public power utilities—have
reported spending more than their entire 2021 budget for natural
gas within days.
Similarly, public power utilities who buy power on the wholesale
market were forced to pay high prices to obtain power to serve
customers.
Not all public power utilities were negatively impacted financially.
What is the outlook?
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Impacted public power utilities are looking at high bills coming
due for fuel and power. They have no choice but to pay.
Unless relief comes, these high costs will need to be shouldered—
eventually—by customers and baked into electric rates.
This event underscores the importance of electric utilities
embracing a diverse, robust resource mix.
This situation also underscores the benefits of utilities owning and
operating their own generation resources.
o We need access to comparable incentives for developing
renewables, we are effectively not given that option.
What can be done?
APPA and APGA asked President Biden to take action by capping
the price of natural gas.
APPA and APGA asked FERC and DOE to investigate the cause of
high natural gas prices during Uri.
We are working with our members to determine longer-term
advocacy priorities, including—but not limited to—legislative
action.
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