RE: Costs of the February deep freeze to be spread over time on electric bills
I am providing you with the following information to help you estimate your electricity cost for this year and beyond. First, your electric rate in the TCEC Tariffs is not changing. However, all TCEC members will soon see a penny per kilowatt-hour (kWh) increase for every meter's energy use in the Power Cost Adjustment (PCA) line item on bills. It will increase from 1 cent to 2 cents per kWh on April and May electric bills. While the actual cost of the February deep freeze and Winter Storm Uri weather events is not yet known, the penny will help to show creditors TCEC's willingness to recover the cost. This is the equivalent of an additional $10 per 1000 kWh used. The average residential member in the U.S. uses 877 kWh per month, according to the Energy Information Administration.
Electric and gas utilities throughout the region experienced unanticipated and unprecedented cost increases for natural gas used in the generation of electricity in February. TCEC members are not alone in facing these increased costs, which were beyond local control.
Today, we know TCEC's tentative variable wholesale power cost for February 2021 is approximately $44 million more than normal. To put that in perspective, the variable portion of our wholesale power cost for all of 2020 was $16.7 million. If the cooperative passed this amount through the PCA in one month, that would mean a charge of 69 cents per kWh on every TCEC meter. Since no one could absorb this cost in one month, TCEC has elected to spread the cost over some determined time frame and that determination has not been made yet. The time frame needed should become clearer over the next two or three months. TCEC will send another notification to members soon after the TCEC Board of Trustees has made a decision as to the approach that we will be using going forward.
Defining the PCA
The PCA is derived from a wholesale component of the rate that you pay for electricity and generally reflects the cost of the fuel that is used to produce the energy that TCEC provides to you each month. The PCA is a pass-through cost from Golden Spread Electric Cooperative (GSEC).
Why wholesale power supply costs increased
In the third week of February 2021, Winter Strom Uri and the deep freeze weather event caused natural gas spot market prices to spike to a level never seen before. The Southwest Power Pool (SPP) experienced an energy emergency due to record demand and limited supply for natural gas. GSEC hedges the market to some extent but still paid higher prices for part of the fuel needed for generating electricity. Natural gas spot markets were near the $2.50 per MMBtu level before the deep freeze. During the deep freeze, natural gas prices ranged from $339 per MMBtu to over $999 per MMBtu.
The final wholesale power cost is tentative because it has not been reconciled completely and several investigations are ongoing. Oklahoma's Attorney General and our neighboring states' Attorney Generals are investigating the natural gas marketing contracts and sales for price gouging. In addition, investigations are underway by the Federal Energy Regulatory Commission (FERC), all affected State Public Utility Commissions, the Southwest Power Pool (SPP) Market Monitor, United States Congress, North America Electricity Reliability Corporation (NERC), and many more independent private investigators for various stakeholders.
TCEC is monitoring the investigations along with the Oklahoma, Texas, and Kansas statewide associations of electric cooperatives, with our wholesale power supplier Golden Spread Electric Cooperative, and with the Southwest Power Pool. We are working on securitization efforts with legislators. Securitization is a financial tool that will provide electric cooperatives with an option to navigate the financial impact from the deep freeze. This will help limit the effect on electric rates and improve TCEC's ability to extend the time frame to recover the cost from its members.
Steps to take now
Prepare your home or business now for the next weather event. Use SmartHub to track energy use, even unbilled use. You can also use SmartHub to set up notifications for power usage alerts to see when your electricity use is unusually high. Look for additional energy saving tips on TCEC's website at www.tcec.coop/ways-save.
Members can explore alternate payment options at www.tcec.coop/pay. Here are two options available.
- Levelized billing can help to make your electric bills more consistent. Instead of seeing higher bills in the winter and summer with low bills in the spring and fall, you will have a more consistent bill throughout the year. Keep in mind, Levelized billing is based on a twelve-month rolling average. That means extreme energy use swings may change your monthly payment.
- Pay As You Go is our prepaid option that puts you control of your electric bill.
Most importantly, if you're unable to pay your electric bill or you have questions regarding your electric service, please contact TCEC. TCEC can be reached at 580.652.2418 or email@example.com.
Chief Executive Officer