I’m fine with all of this, but it shouldn’t be the endpoint of the conversation. It’s not even the main point.
No longer seen at I-10 and Sawyer
A state lawmaker said Monday he was considering pushing legislation to recoup some of the $800 million CenterPoint Energy spent on massive generators that sat idle as Hurricane Beryl knocked power from more than 2 million Houston area customers.
State Sen. Paul Bettencourt said the company had “defrauded” rate payers, who were now strapped with growing utility bills after state regulators allowed CenterPoint to recoup the cost of the generators — plus a 6.5% profit. The utility company has already raised the average residential customer’s bill by about $1 per month — and the rate hikes could jump another $3 per month in the coming years.
“It’s a big problem, because we’ve got basically these boat anchors strapped around our rate payers for a long period of time,” the Houston Republican said during a contentious hearing where CenterPoint CEO Jason Wells testified that he took “personal responsibility” for the utility’s failings, but said he would not resign.
Bettencourt said he was considering legislation that would “claw back some of this expense,” though he did not say more about what that might entail.
Bettencourt accused CenterPoint of choosing to spend money on the generators rather than clearing trees that knocked out power lines, because CenterPoint can make a profit on the generators. CenterPoint has repeatedly blamed toppled trees and broken branches for leaving over 80% of its area customers without power, some for more than a week.
“Vegetation management — the utility doesn’t make profit on,” Bettencourt said. “However, they make a profit on generator expenses. If you don’t make a profit on vegetation management, you may reduce those numbers.”
The comments came during the first hearing of a special committee tasked with examining the state’s hurricane preparedness and utilities’ response after Beryl.
[…]
Bettencourt and state Sen. Charles Schwertner, who chairs the panel, questioned the contract CenterPoint struck for the generators, going so far as to suggest it amounted to “fraud.” Bettencourt said the utility passed over a competing bid with a price tag that was at least 44% lower.
“It doesn’t smell good at all,” Schwertner said, noting the company appears to be raking in a roughly $30 million profit on the massive generator purchase. “There’s more to this story that I hope comes out sooner rather than later.”
Wells said the competing bid was not in line with what the utility sought, in part because the lower bidder could not provide as many generator units and its cost to operate them was four times higher.
“It’s kind of apples and oranges, but it was a non-conforming bid,” Wells said.
See here for some background. A recent Chron editorial touched on a key aspect of this that either wasn’t part of the questioning of CenterPoint or the reporting on it.
If CenterPoint was just going to mothball [the generators] for three years, why the urgency in leasing them? They rushed through a short-term leasing bidding process so quickly, giving bidders only two days to respond to a request for proposals, that judges in a state hearing for the Public Utility Commission later determined it didn’t comply with state law. The judges recommended against allowing CenterPoint to charge consumers for the generators because the utility hadn’t shown they were “reasonable or necessary” and CenterPoint hadn’t been prudent in leasing an astronomical amount of generation from a little-known company, Life Cycle Power, whose then-CEO had been convicted for flouting environmental regulations.
Yet, despite all that, the Public Utility Commission, which has the final say on whether utilities like CenterPoint can pass costs on to consumers, ignored the judges’ recommendation and approved the short- and long-term leases.
I’m fine with beating up on CenterPoint – Lord knows, they deserve it – and I’m fine with trying to claw back some of the money they spent on these generators. But who on that committee is asking about why the Public Utility Commission approved that deal in the first place? The problem there is that the Public Utility Commission is entirely appointed by Greg Abbott. Paul Bettencourt and his buddies will not engage in any activity that might in any way cast a negative light on Abbott. But at least we all get to enjoy the yelling at hapless CenterPoint stooges.
The point here is that when something bad happens, like CenterPoint takes over a week to get everyone’s power back after Beryl or the derecho, or ERCOT couldn’t keep the grid up and running during Uri, we need to learn from what happened and take steps to reduce the risk of it happening again. That falls on the Legislature, which can and should be updating laws to put firmer requirements in place and mandate stronger oversight by the likes of the PUC. Florida is a good model for this, thanks to their more intense experience with hurricanes. The key is that CenterPoint is a regulated monopoly. The Lege sets the goals for the regulations, the PUC implements them and provides oversight. We don’t have to just yell at CenterPoint about the things they should have done. We – specifically, the Lege and the PUC – can tell them exactly what they should be doing. That’s what I want to see. The Press, Reform Austin, and Houston Landing have more.
Massive (in size and output) ‘portable’ generators ain’t gonna do a bit of good if you’ve neglected to clear the trees and tree branches running through the/your utility easements for a decade plus. Electricity won’t run through downed lines to business and residences, no matter where the power is being generated.
Priorities, CPoint, priorities.
Ok…both CenterPoint and the PUC should be held accountable. And both the state legislature and executive branches also are responsible for creating and promoting this unregulated monopoly.
My question: CenterPoint bought the big generators and passed on the cost to customers. And now CenterPoint leases them out at a profit. So, who does CenterPoint lease them out to? And have they been leased out? Since the generators are so big, how do those that lease them access them?
Uri showed the state couldn’t generate enough electricity under certain conditions to meet the demand. The governor, legislators and the PUC were all for leasing these giant generators at great cost, not giving a damn about the extra $30 million in profit CenterPoint stood to make. The state offered incentives to the companies that generated the power and harden the parts of the grid tied to them to to address the issue before them.
In subsequent storms, the capacity to generate enough power for predicted demand was not the problem despite predictions that the system might fall short next month. No, these storms after Uri showed the transmission lines, poles, and towers also needed an upgrade but the PUC doesn’t offer as much incentive to increase tree trimming in the right of way areas to encourage CenterPoint to go all in with triple the previous expenditures or more. In 2022, CenterPoint spent $32 million, in 2023 they spent $44 million for this kind of maintenance, knowing they would recoup their costs with minimal net profit. So of course we collectively beat them up when the solution to the previous problem doesn’t help with this newly prioritized problem, that’s just human nature.
Outages are not new, not even outages lasting days or weeks. They took place under Reliant before deregulation and HL&P before that. The governor has changed PUC appointees often enough for one reason or another yet the power is still unreliable after major storms. It might help if they start better regulating the utilities with all this in mind. If they okay a utility to buy something that will lead to a profit, the utility is likely to make the purchase. If they okay the utility to clear cut the right of way instead of merely making as little intrusion as possible, maybe even add incentives to do so, the utility will do that too as clearly $40 million isn’t enough to keep trees off lines.
I have no way to verify the CEO’s claim that most of the trees that fell on power lines were from outside the right of way but I saw enough of it in my area to believe he might have underestimated that issue. CenterPoint and the companies the grid belonged to before deregulation have always told homeowners that the homeowner was responsible for trimming and maintaining trees outside the right of way. They said it to me and neighbors enough times, local tree services parroting that party line.
Many of the trees that fell were over 2 to 3 feet in diameter. These were 100 feet tall and up size trees often just outside the right of way where CenterPoint is allowed to trim. The linemen were estimating some of these trees in the neighborhood were at least 100 or 200 years old and had survived storms with much higher ratings, most of them otherwise healthy.
So the real solution is going to require the PUC to act like a regulating body, force all utilities and not just CenterPoint to start clearing all rights of way, and determine how best to address the trees not in the right of way. That’s going to cost a lot of money and involve property rights on a scale nobody likes to tackle. Driving a few miles this morning showed me there are a lot more trees that are ready to fall in subsequent storms. So rather than have Bettencourt display his usual mock outrage or the governor throw his latest temper tantrum to distract from his willingness to go on a luxury trip to Asia while the rest of us suffered, make the needed changes already.
Pingback: The House gets its turn to yell at CenterPoint | Off the Kuff