A temporary rate hike of about $10 a month to pay for costs of the February winter storm is on the Aug. 20 meeting agenda for the Pedernales Electric Cooperative board of directors. The increase, which is due to begin Oct. 1, will be in place for 24 months if approved.
“We didn’t want to get into a rate discussion,” Chief Financial Officer Randy Kruger told board members during the July 16 regular meeting at PEC headquarters in Johnson City. “We didn’t want to put this on the backs of our members.”
After looking at several options and talking to rating agencies and the cooperative’s banks, Kruger said the rate increase was the only way to keep from incurring lasting and expensive debt to pay the $160 million cost of the storm.
He also pointed out that the original price tag was $180 million, most of which was paid to the Lower Colorado River Authority for increased power costs. LCRA plants were down for part of the storm, requiring PEC to buy natural gas power at a higher price.
A dispute with the Energy Reliability Council of Texas over billing was settled in PEC’s favor, resulting in a $20 million reimbursement and dropping the cost of the winter storm to $160 million.
The average co-op member uses about 1,250 kilowatts per hour a month, which costs about $126.
“When put in place, the result (of the increase) will be $10 to $12 per member on average,” Kruger said.
Other utilities are taking the same route, but most of them are extending the temporary increase over five, 10, and even 30 years, he continued.
A chart of rates over the years showed a decline in the average PEC electric bill since 2014. The proposed increase will produce a sharp incline in the graph, but “after two years expires, it will come back down to where we were before,” Kruger said.
“Pre-storm, our debt was seven times our operating cashflow,” he said. “If we absorb the storm debt post-storm and take no action, the spread gets much worse.”
That could lower the co-op’s debt rating, which is currently AA-, a good, healthy rating. Moving into the B ratings would mean paying higher interest on debt, costing members even more in the long run. Ratings in the As also mean better prices on power supply.
“We get better terms for power supplies based on our good credit rating,” Kruger said.
A final vote on the increase is expected at the Aug. 20 meeting. The meeting begins at 9 a.m. at PEC headquarters, 201 S. Avenue F in Johnson City. Meetings are held in person and can also be viewed online.