No longer seen at I-10 and Sawyer
CenterPoint Energy executives said Thursday the company cannot terminate its lease for barely used generators that have already cost the utility $800 million, shocking regulators who are now turning on the investment after approving it last year.
Jason Ryan, CenterPoint’s executive vice president of regulatory services and government affairs, told the Public Utility Commission of Texas that the contract can’t be terminated unless the vendor, Life Cycle Power, fails to meet its contractual obligations. The lease ends in 2029, he said.
A provision that could’ve allowed CenterPoint to terminate the contract if regulators found the investment to be not prudent expired at the end of 2023, Ryan said at a regularly scheduled PUC meeting.
“You entered into a contract you can’t terminate unless there’s vendor non-performance. And of course, these large units seem like (they) largely haven’t been run, may not ever be run, so we don’t even know they’ll not perform,” Commissioner Lori Cobos said in response. “It just seems like we’re in this circular place where y’all are coming across like your hands are tied to this contract.”
Ryan said CenterPoint could try to negotiate with Life Cycle Power to switch out the types of generators it leases “if we believe we don’t have the right assets.” CenterPoint is also willing to discuss extending the time it takes to recover its costs for the generators through rate increases. Customers are also expected to cover the company’s costs restoring power following the May derecho and July’s Hurricane Beryl, he said.
CenterPoint is allowed by law to lease generators to mitigate the risk of widespread power outages, but Ryan said the company is open to discussing whether that policy should change.
“We think we have the right tools in the toolbox for the various risks that we uniquely face in Houston, but we’re open to having that dialogue on whether or not we should continue to mitigate those risks with these tools,” he said.
[…]
Consumer advocacy groups and municipalities immediately protested when CenterPoint tried to pass on $200 million of its generator lease costs to customers in 2022. The issue ended up in front of the State Office of Administrative Hearings, and subsequent hearings revealed that the large generators had never been used and couldn’t power facilities such as hospitals if distribution systems went down in severe weather events such as hurricanes.
A pair of administrative judges found that CenterPoint’s process for assessing bids from vendors to provide the generators on a short-term basis was not competitive, citing emails between Wells and representatives from Life Cycle Power before CenterPoint issued a request for bids. Thus, the judges ruled in early 2023 that CenterPoint shouldn’t be allowed to pass on its generator costs to customers.
State Sens. Phil King and Carol Alvarado wrote letters to the PUC urging them to approve the deal anyway. In a 4-1 vote in 2023, commissioners, including current commission members Cobos and Kathleen Jackson, did just that. Only current Commissioner Jimmy Glotfelty dissented.
The generators CenterPoint leased have already added $2.39 to the average residential customer’s monthly electric bill. CenterPoint still has a few hundred million in generator costs it could seek to recover from customers in future rate increases.
If we’re going to ask the question, a couple of ideas come to mind in answer.
1. Absolutely, do not let CenterPoint recover the costs of this boondoggle. Let their investors take a haircut. Whether that’s best accomplished via legislation or just having the PUC overturn its earlier decision (more on that in a minute) or some other mechanism, I don’t care. If there are no consequences for bad decisions, there’s no incentive to avoid them.
2. Let’s also review what got us here in the first place. Why did CenterPoint think these generators were a good idea? What changes should they make to their processes to avoid that mistake in the future? Why did Sens. King and Alvarado think it was a good idea to intervene with the PUC on CenterPoint’s behalf? They owe us an explanation. Why did the PUC fold under that pressure? Are there safeguards in place to allow them to stand behind an objectively correct but potentially unpopular (if only with certain stakeholders) ruling? If not, what can we do about that?
3. What other reform ideas should we be looking at? Other states have vastly outperformed Texas in responding to utility-related disasters. Why do we keep finding ourselves in this same position? What should we have learned by now that we haven’t?
I’m open to other ideas, but this should be plenty to get us started.
Best reform idea: municipalization! The time to try for this is right now, while the repeated failures of the corporate utility CenterPoint are inviting scrutiny.
Regular Reader, two problems come to mind with this solution. The first is who do you think is going to have the funds to buy Centerpoint out? Pardon my mistrust of state government but it won’t lift a finger to help Houston. That’s if a plan could be figured out that would benefit the city that routinely votes against them. Centerpoint’s area assets are worth a pretty penny and city finances are already struggling with the firemen giveaway, do we really want to force city utility upgrades to compete with current infrastructure needs?
Second, I guarantee you that the PUC would suddenly become very proactive in regulating any utilities in what governor Abbott considers hostile territory, and not always in a good way. We would find the rates for out of state linemen double or more after storms, requirements for upgrades to soar, and requests for rate changes would be laughed at every single time. I suspect under one term Whitmire he would continue to hire personal friends with lesser qualifications but that would be a wash with CenterPoint’s new CEO, Jason Wells appointed in January. In the big picture, we’ve faced lengthy power outages on a regular basis since the 60’s and before, comparisons to small town municipal utilities in rural areas not very helpful.
As Charles points out, each established check and balance failed with this lease of generators and we need to know why. If it was just the republicans, it would be more understandable to me but Senator Alvarado? Since the PUC and state legislature approved the move, even championed it, I do not feel comfortable suggesting we burn the company other than cut any profits derived from the lease. We get enough of those kinds of lies from state leaders but moving forward, the PUC needs to do its job and demand better maintenance from both Centerpoint and those with trees near utility infrastructure.
As to Alvardo, money talks. The more money, the louder it talks.
How does Alvardo become a multi-millionaire on the salary of a state representative and state senator?
https://buzzlearns.com/carol-alvarado/
I don’t know how having money became so demonized. Certainly obtaining it via criminal or nefarious means is problematic, but over my 45+years of being gainfully employed I’ve managed to parlay my meager salary, through wise investments and fiscal responsibilty, into a fairly substantial sum that should allow me to live comfortably in my retirement years.
Manny, do you have some evidence that Alvardo ‘stole her way to the top’, accepted bribes, or was the recipient of kickbacks in some fashion ?
Cl, did I state that, don’t you have a cult leader to go bow to?
Salary of state rep, 7500 a year. I will assume you are white, thus mucher higher paid probably than you are worth.
Manny, you know what they say about assuming.
And FYI, I bow to no one.
Yeah, C.L., whatever, pretty strong response defending someone who is not white and a female. Any vested interest there, C.L., i.e., relationship?
So are you a white male, yay, or nay? Let me make an ass of u and me.
Why not enlighten me on how someone who makes $7,500 a year becomes a multi-millionaire? My car and house insurance are nearly $11,000 yearly, so I want to know the secret.
Werd from Austin.
meme, being a state rep or senator is a part time spot. Like most of her peers, she makes her money at her real job, in her case a consulting firm she owns.
Consulting firm, wonder how that works? If she was not elected, I wonder if her consulting would be in such demand.
So, if you carry water for someone, they will probably hire you as a consultant. Not all elected officials don’t become millionaires being consultants.
So, what kind of consulting does she do?
Didn’t a senator from New Jersey get in trouble for his consulting business?
https://www.nbcnews.com/politics/congress/democratic-sen-bob-menendez-found-guilty-counts-corruption-charges-rcna159955
Conspiracies everywhere, it appears.
SMH.
C.L. the MAGA incognito poster. Why is everything you disagree with or don’t understand a conspiracy? Is it your white male privilege that makes you think you are more intelligent?
Alvarado carried Casino gambling legislation for a Casino tycoon, Sheldon Adelson. Was it because she loves casino gambling so much? Maybe there was a “consulting” contract at the end of that bill? If it looks like a duck, walks like a duck, or quacks like a duck, it is probably a duck.
I first met Alvardo when she first ran for state rep. She lost that time.
The MAGA I am gum, you are rubber showing C.L.