Brownsville Public Utilities Board
Electricity bills have become less and less fun lately as electricity costs in particular continue to rise.
This is the case in the Rio Grande Valley, throughout the state of Texas, and across the country, and it is largely due to the extremely high cost of natural gas, which most power plants in Texas and the United States rely on to generate electricity. Before the winter storm that devastated Texas in February 2021, gas costs were about $2 per MMBtu (Metric Million British Thermal Unit). Today it’s more than $9 per MMBtu, the highest since 2008.
Officials with the Brownsville Public Utilities Board warned back in May that customers would see a slew of rate hikes beginning in June as subsidies that had kept customer bills artificially low since 2013 were phased out when the money ran out. The subsidy money was primarily generated by tariff increases BPUB implemented beginning in 2013 to pay for its share of the Tenaska Brownsville power plant, which was never built.
Those officials say they failed in May to anticipate gas costs rising to current levels, which has forced additional rate hikes as more are on the way.
Mike Perez, BPUB’s chief financial officer, said the utility’s customers have been charged $0.02952 per kilowatt-hour (kWh) for electricity since April 2013. That rate lasted until last November, when it was raised to $0.03228 per kWh. The cost has been adjusted upwards every month since, and was $0.08093 per kWh in September. Perez said BPUB has to keep raising prices “to keep up with gas prices.”
But even these tariff increases still don’t recoup BPUB the full amount the utility spends on fuel and purchase energy (FPE), i.e. the natural gas it buys to generate its own electricity plus the electricity BPUB buys on the open market to sell it to customers. FPE charges based on kWh consumption make up a portion of the bills customers receive each month.
“In July, production costs were about 11 cents per kilowatt hour and our rate was 6.4 cents,” Perez said. “We recovered $6 million too little.”
By the end of August, despite the $16 million in interest rate hikes, BPUB was “underpaid,” he said, noting that BPUB’s FPE committee, which sets interest rates each month, is preparing a plan to repay that money in full have . It includes another 5 percent hike in October, followed by a 2 percent hike in November, Perez said.
“And then we can keep that rate at just over 8 cents through July,” he said. “At that point we can make up for our under-recoveries.”
Marilyn Gilbert, BPUB’s deputy general manager and chief operating officer, said that to soften the blow to customers, the utility is charging less than the rate needed to cover all of its FPE expenses. While there’s no doubt that local customers are paying a lot more for electricity — Magic Valley Electric Cooperative customers about the same as BPUB customers — customers of several other South Texas retail electricity providers are being hit a lot harder as those utilities try to recover massive losses incurred during of the storm in February 2021.
An average residential BPUB customer using 1,000 kWh of electricity paid about $145 for that electricity in August, while MVEC customers paid about $135 for the same amount. For example, Ambit Energy residential customers paid about $215 for the same 1,000 kWh, while Direct Energy (formerly Bounce Energy) residential customers paid nearly $275.
Why the price of natural gas has skyrocketed (70 percent since late June alone), the summer heat that much of the United States has endured, including the Rio Grande Valley, is a major factor, as is the fact that natural gas supplies are struggling are low and production lags behind demand. It’s even worse in Europe, where natural gas costs seven times what it costs in the United States thanks to Russia’s drastically limited gas exports to the European Union in retaliation for Western sanctions punishing Russia for starting a war against Ukraine Has. All of this is helping to drive up natural gas prices in the United States.
John Bruciak, general manager and CEO of BPUB, said there is an abundance of natural gas in the ground in Texas and other parts of the United States, but that production fell sharply once prices hit rock bottom, with the result that it now there aren’t enough of them demanding. One obstacle to more production is the lack of affluent customers, namely power plants, he said.
“I don’t see any new gas-fired power plants in Texas,” Bruciak said. “These are one of the big users of it. If they don’t build plants that use gas, they cap it and don’t drill, don’t produce.”
Some analysts are predicting that current sky-high prices will eventually spur more production, although CNN Business reports that investors are betting prices will remain high and futures markets are suggesting prices will drop by that point next year almost 50 percent will fall. Fitch Ratings forecasts natural gas to fall to $4 per MMBtu next year, trend down in 2024 and stabilize at $2.75 per MMBtu by 2025.
For now, the hope is that nothing else comes like a Gulf hurricane to push gas prices even higher, Bruciak said, adding that he wasn’t sure what a return to “normal” would look like .
“Before (February 2021) we were under $2 for gas,” he said. “Now we’re at $9. I’m not sure. Now is $5 normal or $2?”
While valley electric customer bills will fall as winter approaches and the extreme heat subsides, demand for natural gas will increase only in the northern states that depend on it for heat, which will keep upward pressure on gas prices especially when production does not catch up.
In the meantime, there are options for those struggling to pay their bills, Bruciak said.
“We have several programs available to help customers with their utility bills,” he said. “If people are having a problem paying their bill, we will work with those customers and hopefully many of them will qualify for some of the programs that we have for some relief.”
For information on utility assistance, see brownsville-pub.com/about/public-outreach-assistance-programs/assistance-programs/.
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