Dive Brief:
- CenterPoint Energy plans to securitize most of the cost impacts of Hurricane Beryl and a derecho storm that struck in May, likely raising monthly customer bills in Texas about 2% for a 15-year period, company officials said during a second quarter earnings call with analysts on Tuesday. Total costs associated with the storms are estimated at up to $1.8 billion, with Beryl contributing up to $1.3 billion.
- Beryl hit Texas as a Category 1 hurricane on July 8 and left almost 2.3 million CenterPoint customers around Houston without power — some for more than a week. State lawmakers were critical of the utility’s communications and recovery efforts at a Monday special hearing, and are discussing clawing back Centerpoint’s reimbursement for the $800 million it spent on mobile generation that went unused during the event.
- CenterPoint reported second quarter non-GAAP income available to common shareholders of $234 million, or $0.36/share, compared with $0.55/share in the first quarter and $0.28/share in same period last year. Looking past this year, officials said they expect to grow EPS “at the mid-to-high end of our 6% to 8% range annually through 2030.”
Dive Insight:
Texas lawmakers authorized CenterPoint to lease mobile generation to address load shedding events following Winter Storm Uri in 2021, and state regulators subsequently authorized recovery of about $800 million for the resources. Most of those mobile generators were too large, however, to assist in post-Beryl recovery and now lawmakers are looking to recover the investment.
“By leasing more expensive, massive generators, which they may never need and are of little to no use in 99% of emergencies, CenterPoint testified they will make at least $30 million in profits off the backs of ratepayers,” Texas Lt. Gov. Dan Patrick, R, said in a Tuesday statement following the Monday hearing.
The large generators can take days to move and assemble and require special permits, the Houston Chronicle reported.
CenterPoint borrowed smaller generators from other utilities for use during Beryl, Patrick said, adding that he will urge the Public Utility Commission of Texas to revoke their decision allowing CenterPoint to recover the cost of the mobile generators.
“CenterPoint will have to pay the $800 million from their own profits,” he said. “Call it potential fraud, deceptive practices, poor money management, or whatever you wish; CenterPoint purposely violated the intent of the legislation to make a profit while not helping their customers during a crisis.”
Sen. Paul Bettencourt, R-District 7, indicated he will file legislation to recoup the costs, if the PUCT does not act first.
CenterPoint has leased 15 32-MW generators that it has never used, “and the actual cost is higher than $800 million due to interest carrying with a small company that they selected on a questionable bid package,” Bettencourt said in a statement published on X. “In fact, if I was an Inspector General, I would be auditing that contract right now for fraud because of the way the bid was awarded.”
CenterPoint CEO Jason Wells told analysts Tuesday that the utility faces orders from the PUCT that it “cannot allow a customer to go more than 12 hours without power in a load shed event,” and the leased mobile generation is “necessary to comply with that order.”
However, “if policymakers want to change that direction, obviously, we will work to support the policy direction of the state,” Wells said. “There's a lot of different things being discussed now, and I think that they will come into greater focus as we approach the end of the year and, obviously, the start of the legislative session next year.”
In the meantime, Wells said CenterPoint will execute a three-pronged approach to improving its storm recovery posture.
The utility plans to speed the adoption of advanced construction standards, and will retrofit existing assets on an accelerated basis, he said. “And using predictive modeling and [artificial intelligence], as well as other advanced technologies, we will harden our distribution system to help withstand more extreme weather and improve the speed of restoration.”
CenterPoint also plans to build a “best-in-class customer communications program,” Wells said during yesterday’s earnings call. The utility’s outage tracker has not been available since May when the company’s server was overwhelmed by traffic following the derecho. A new system will launch later this week, Wells said.
And the utility will “strengthen our partnerships with government and community leaders,” he said. “We will hire a seasoned emergency response leader to help the company rapidly accelerate its planning capabilities and to develop close community partnerships to help ease the burden of storm events on our more vulnerable communities.”
Though “cost invoicing is not final,” Chief Financial Officer Chris Foster said the Beryl and the May derecho storm resulted in $1.6 billion to $1.8 billion in spending.
“We currently anticipate that we will securitize both the capital and non-capital portion of the $1.5 billion to $1.7 billion distribution costs to limit the impact to our customers on their bills, and will include approximately $100 million of transmission investments within the next T-cost recovery filing,” he said.
