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Electric grid on edge, recession underway, says PEC chief financial officer

Randy Kruger, chief financial officer for the Pedernales Electric Cooperative

Randy Kruger, chief financial officer for the Pedernales Electric Cooperative, gave a financial report to the Board of Directors during the board’s regular meeting July 15. Screen-captured image

The economy is in a recession and electric grid conditions in Texas are tight and getting tighter as the state continues to suffer under a La Niña-induced heat wave, Pedernales Electric Cooperative Chief Financial Officer Randy Kruger told the Board of Directors at its regular meeting July 15 in Johnson City. 

“Wednesday (July 13) was the worse day in a bad week as far as tightness on the grid,” Kruger said. “All aspects of the (generation) grid were having issues.” 

Solar generation was down due to clouding and the wind quit blowing, forcing the Electric Reliability Council of Texas to resort to emergency response services, which Kruger referred to as “relying on aging thermal plants.” 

“We were about 1½ gigawatts of having to go into rolling outages,” he told the board. “We got really close. We broke an all-time record on ERCOT eight times over the last 70 days, and that was one of them.”

Gas prices hit the $5,000 cap multiple hours during that period, he continued, but because PEC buys 65 percent of its power from the Lower Colorado River Authority, which maintained its generation, the increase did not affect the cooperative. 

The thermal fleet, power plants that use natural gas or other fossil fuels to generate electricity, is aging and under strain during this prolonged heat wave, Kruger said. 

“Right now, ERCOT is dispatching the thermal fleet in ways that have not been done before,” he said. “It’s really hard on those units. The analogy I use is that it’s like giving your teenage son the keys to your sports car and expecting him to bring it back in the same shape it was in when he left. There is a risk we will see more thermal outages.” 

LCRA’s San Gideon and Lost Pines plants are two aging units to watch. 

“That’s what happened to us during Winter Storm Uri (in February 2021),” Kruger continued. “Lost Pines was down.”

June was a financially good month for PEC because of record demand that the cooperative was able to meet. Kilowatt hours were sold at about 11 percent higher than budgeted. Wind performed well, helping to keep prices stable.

“June was actually the second-hottest June in recorded history,” he said. “But we’ve got to make it through to September. We still have to get through August.” 

PEC maintained its AA- debt rating, which will help keep finances healthy, Krueger said, adding that recent financial numbers coming out nationally indicate the country is now in a recession. 

Kruger pointed to the GDPNow model used by the Federal Reserve Bank of Atlanta, which recently issued numbers indicating a negative gross domestic product for the second quarter in a row. 

“If that is correct, we are in a recession,” Kruger said. “Two consecutive quarters of negative growth means we are in a recession.” 

Inflation numbers are at 9.1 percent, “as high as it’s been since 1981,” he continued. “A four-decade high.” 

IN OTHER BUSINESS

During the business portion of the meeting, PEC directors reviewed their conflict-of-interest forms, appointed District 7 Director Amy Akers as a voting delegate to two different industry meetings, approved the allocation of 2021 net margins for capital credits, and approved a written certification of June’s election results. 

They also approved the same election services provider for this year’s vote to handle next year’s, which will seat directors in districts 2 and 3. 

Currently, Emily Pataki serves as the District 2 director and Mark Ekrut as District 3 director. Ekrut was elected by the board as the current president after the 2022-23 board was seated in June, replacing Pataki, who took her name out of consideration before the vote. 

suzanne@thepicayune.com

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