The last few months have been challenging for electric cooperatives as we have frantically worked on how to handle the cold weather event, resulting energy crisis, and increased energy costs created from the event of February. Lane-Scott appreciates your patience and understanding. The situation evolved rapidly, and we tried to provide you with the most up to date information we had, as we knew it. Now that we have some breathing room, I’d like to take this opportunity to explain where we are today, as we’ve nearly reached what is hopefully the conclusion of the event.
Summary of the Event
The frigid temperatures across the Midwest and plains states led to history-making polar vortex conditions across the regional electric grid. The cold temperatures created a high demand for electricity, a subsequent overload on transmission lines, constraints on natural gas, and a decrease in wind energy. The Southwest Power Pool (SPP), one of two regional transmission organizations who oversees the bulk electric grid and manages the reliability for a 14-state region, for the first time in its 80-year history, had to issue “energy emergency alerts” and order short-term, rotating power interruptions.
Increased February Wholesale Power Costs
The financial impact of this event on the wholesale cost of power was significant. Lane-Scott Electric's wholesale power bill for the month of February was close to an additional $3.5 million above our typical $600,000-$700,000. This increase in our wholesale power cost was due to the record-high demand for natural gas in the third week of February. Natural gas is one of the primary resources used to generate electricity at power plants, and as a commodity, it responds to supply and demand pricing. Prior to the winter storm, electric providers had access to natural gas ranging from $2.75 per MMBtu to $4.15 per MMBtu. During the winter storm, natural gas prices ranged from $339 to $999 MMBtu. Additionally, supply was further reduced as the extreme cold caused many gas wells and processing facilities in southern states to freeze because they were not built to withstand extreme temperatures.
Decreased February Kilowatt-Hour Sales Revenues
During the Winter Event, SPP called on all consumers to conserve, to decrease their electric usage to reduce the strain on the power grid. Lane-Scott Electric members responded, and we actually saw a 13.46% decrease in kilowatt-hour sales during the month of February. Normally, that would reduce your monthly electric bill, but significant increases in the wholesale power cost overcame those conservation savings and increased your total electric bill.
Lane-Scott Electric Trustees Voted to Help Ease Financial Burden
In a normal month, electric utilities recover the fluctuating cost of fuel for wholesale power generation – natural gas, wind, solar, coal, hydro or nuclear - from our wholesale power provider through an Energy Cost Adjustment (ECA). The ECA charge is already built into the base electric rate. Monthly variations from that built-in rate in the actual price of fuel can be a charge or a credit on electric bills. ECA allows the cooperative to respond monthly to market fluctuations without implementing a rate change.
Lane-Scott Electric recognized that recovering the entire energy bill from February would create a financial hardship for many of our members. The Lane-Scott Board of Trustees voted to spread the cost for the February excess usage over 42-months to help mitigate costs to our members. Lane-Scott does not gain any income through the ECA, it is just a pass-through charge of what we incurred from the winter event.
Your Bill and Payment Information
Beginning in April, bills include a line item titled “Feb 21 Winter Events” in the detail of charges section. This charge will recover those additional wholesale power costs incurred specifically for that account (based on data from the electric meter) from the excess kwh electric use during February. Only members who used electricity during February will receive the additional charge. Consequently, the impact will be less for meters that were able to conserve energy, switch to self-generation, or had an outage because of the rotating power interruptions in February.
- Any member can pay the Feb 21 Winter Event balance in-full at any point, or the number of monthly payments can be revised to fit your needs. In order to change from the default 42-month option, arrangements MUST be made with our billing department to ensure the bill is properly adjusted.
- The number of installments/months remaining is reflected for each account. (i.e., You have 41 months remaining of $7.40 per month for the Feb 21 Winter Event.) To calculate the total amount due, simply multiply the amount per month by the number of months remaining.
- Every meter that was in use during the event will have a Feb 21 Winter Event line. If there is not a line item for an account, then it most likely was not in use during this time. Rate Riders, such as the Residential Heat Pump Rider, do not have a ECA charge and will not have the Feb 21 Winter Event line.
- Should a member move, or choose to disconnect a meter, the entire Feb 21 Winter Event balance will be included on the final bill.
- Accounts will be eligible for disconnection for nonpayment of the Feb 21 Weather Event charges.
- The Lane-Scott Electric payment arrangement policy applies. Up to three payment arrangements can be made per year per account.
- For those members on budget billing, your budget amount was not recalculated but bills will increase by the weather event amount.
What We Know Moving Forward
The North American Electric Reliability Corporation (NERC), Southwest Power Pool (SPP), and Electric Reliability Council of Texas (ERCOT) have already issued legal data hold requests and announced investigations to answer the question of what could have been done differently to prevent the situation and high bills. These entities will work closely with electric utilities to understand the event and evaluate how various electric elements performed. Root causes and mitigation options to reduce future risk will be identified to improve the reliability of bulk electric systems in the U.S.
Sunflower Electric, Lane-Scott’s wholesale power supplier is participating in these investigations and has already started inspecting and evaluating specific systems that failed or struggled to function in the extreme low temperatures. Options to improve system operations will be identified. Natural gas fuel supply is a complex matter requiring Sunflower to balance fuel security and electric rates. Lane-Scott has two seats on the Sunflower Board of Trustees, and we are actively researching options such as market hedging while balancing competitive electric rates and system reliability based on lessons learned.
While Lane-Scott could not control the circumstances of the crisis, or the resulting fuel prices, we are here to provide solutions that meet all our member’s needs. Make sure and call our office if you have further questions or if you want to change your default 42-month payments of the February Winter Event.