Temporary Winter Storm Surcharge FAQs
To pay off the debt PEC incurred from the 2021 Winter Storm event, members will be billed a temporary surcharge through September 30, 2023. This was a difficult, but necessary decision to ensure the cooperative’s ongoing financial health and minimize the impact to members long-term. Below, we’ve answered your most frequently asked questions.
Lea nuestra información en español sobre el recargo temporal de la tormenta invernal haga clic aquí.
What is the financial impact of February’s winter storm (aka Winter Storm Uri) to PEC? Show More
The winter storm’s financial impact to PEC is approximately $160 million:
- Of this amount, $10 million is related to storm response, restoration efforts and equipment and system repair.
- The remaining $150 million is the amount PEC paid to purchase power during the storm, which was in limited supply and at a premium cost.
What will the storm’s financial impact be to PEC Members? Show More
As a nonprofit organization, PEC does not earn profits and must pay its expenses from monies collected across the entire membership. PEC will also be lowering overall expenses and seeking other reductions where possible as long as they do not negatively affect the cooperative’s mission of providing safe and reliable power.
A majority of the approximately $160 million needed to pay debt associated with winter storm costs must come from members in the form of a Temporary Winter Storm Surcharge that will appear as a line item on each bill. PEC will collect this surcharge for 24 months beginning with the October 2021 billing cycle.
Will PEC employees be required to pay the temporary winter storm surcharge if they are members? Show More
Yes, the surcharge applies to all PEC residential, small power, large power and interconnected members, including the cooperative’s Board of Directors, executives, and employees.
Why must the debt be repaid so quickly? Show More
Prior to the storm, our credit rating agency affirmed PEC’s exceptional rating of AA-, which allows PEC to borrow money at low rates (much like a good FICO score for individuals). PEC had also taken several actions to reduce debt and other cost-saving steps to improve PEC’s financial health. These pre-storm actions allowed PEC to pay these unexpected, exceptionally high winter storm bills through very low-interest borrowing. By paying the approximately $160 million storm bill now with our low-interest borrowing, we had to increase our overall debt.
PEC assessed numerous repayment options to determine best course of action for the cooperative and our members. To preserve our current credit rating and ultimately save member resources over the long-term the storm debt must be paid off within a three-year period. To support this debt repayment plan, PEC has already begun deferring or eliminating capital expenditures and reducing expenses. We will continue to do so as long as it is safe for our system.
What is PEC doing internally to offset the winter storm costs? Show More
PEC will contribute toward repayment of the approximately $160 million in storm debt by lowering overall expenses and other reductions where possible. Any expenses that do not support the cooperative’s mission of providing safe and reliable power and community support will continue to be closely scrutinized.
Will the quality and reliability of my electric power be compromised as a result of the debt PEC incurred from the winter storm? Show More
No. The cooperative and its leadership are committed to providing safe and reliable power to all members.
Why isn’t PEC asking for help from the state or federal governments? Show More
State regulators and lawmakers have not taken action that would allow PEC to recover the approximately $160 million in winter storm costs from state or federal funds. Additionally, the Federal Emergency Management Agency (FEMA) has not indicated it will reimburse PEC for energy supply costs related to February’s storm. A portion of the $10 million related to storm response, restoration efforts, and equipment and system repair should be recoverable through FEMA.
What are other electric cooperatives doing to recover their storm-related costs and debt? Show More
Not all cooperatives have taken steps to address their winter storm costs at this time. Many utilities have implemented or are considering implementing increases for longer periods of time, increases that are higher, or both.
I joined the cooperative after the winter storm event. Am I subject to the surcharge? Show More
Yes. PEC does not have the ability to implement the surcharge based on a member’s tenure with the cooperative and must charge all members equally.
How will the surcharge compare from residential to commercial members? Show More
This will be a charge per kilowatt hour of usage each month. Because everyone’s electricity use is different, the surcharge will vary from member to member and from residential to commercial members.
How much will the surcharge affect the average member? Show More
For the average PEC residential member, the surcharge amounts to an increase of approximately $8.75 per month, based on an average 1,250 kWh of use. This amount will appear as a line item on members’ monthly bills during the 24 month period beginning Oct. 1, 2021. Since everyone’s monthly electricity use is different, the surcharge will vary from member to member.
Why did PEC allocate capital credits in July 2021? Why wasn’t that expense put toward debt resulting from storm costs? Show More
The capital credit allocation is a process to attribute margins to a member’s account. This occurs when PEC earns positive margins in the previous calendar year. Because PEC’s 2020 net margins were positive, they had to be allocated to each member’s account in 2021. At a future date, the capital credits will be distributed to the members.
A capital credit allocation is not a distribution; rather, it is the recognition of the fact that, at some point in the future, those capital credits will be distributed to members.
During the winter storm, I was without power for several days. Why am I now funding costs from others who had power at a time when it was priced so highly? Show More
While some electricity providers stopped restoration efforts in the aftermath of the devastating winter storm, PEC crews worked around the clock when conditions became safe to do so. Unfortunately, some areas were impassable and our crews were not able to restore power to everyone in a timely manner. Despite this, PEC is a cooperative and must spread expenses across its entire membership equally.
Can PEC ensure members have adequate power if another devastating storm event occurs? Show More
No. If there is another event that requires rolling outages, PEC would have to participate because it is part of the Electric Reliability Council of Texas (ERCOT) system. We have revised our operations and continue strengthening them. Additionally, PEC is reinforcing its internal processes and coordination to better serve members during emergencies.
PEC is also making changes to the Delivery Charge Adjustment. Is this related to the Temporary Winter Storm Surcharge? Show More
No. PEC is also facing an increase in costs to build and maintain our electric distribution system, as construction costs have greatly increased. Consequently, the cost of maintaining and extending our more than 23,500 miles of distribution line, which supplies power to over one million Texans, has increased.
The Delivery Charge, as shown below, will include a small upward adjustment to reflect these increased costs beginning October 1, 2021.
- Increase of approximately $1.60 per month, based on an average 1,250 kWh of use for a Residential member
|Tariff class||Actual charge||New charge|
|Residential, Farm and Ranch||$0.027120||$0.028405|