Denton Energy Center

Denton Energy Center

Although the Electric Reliability Council of Texas does not expect demand to exceed supply this summer, a Denton official said residents should still be prepared for that contingency.

ERCOT “is basically projecting that they’ve got adequate resources to meet the demand,” said Terry Naulty, assistant general manager of Denton Municipal Electric. “But under certain conditions, like a low wind output or a high forced outage with generators and ERCOT, there’s a potential for what we call the [Energy Emergency Alert] 3 — like the rotating outages you saw in February.”

When February’s winter storm moved across Texas, ERCOT nearly collapsed because of frozen power plants and record demand for electricity. To prevent that from happening, the agency mandated rotating power outages among its member cities, including Denton, where residents went without electricity anywhere from 30 minutes to over an hour intermittently from Feb. 15-17 under ERCOT’s EEA 3.

‘Low probability’

But even with the Texas heat expected to reach temperatures in the triple digits in the hottest months of summer, Naulty said the odds aren’t good that ERCOT will issue an EEA 3, sparing residents from rolling brownouts.

“I think the last time that happened might have been the summer of 2011,” he said. “But they say that’s a low probability of occurring. As we all know, projecting weather five or six months into the future … is kind of an art in addition to the science.”

According to a news release, ERCOT expects enough generation will be available during peak demand, allowing the agency to avoid a repeat of conditions that prompted rotating outages in February that led to deaths across the state, lawsuits against the agency (including by the city of Denton), resignations of ERCOT board members and hearings in the Texas Legislature.

“In that [news release] are some caveats,” Naulty said. “If we see high peak demand associated with a prolonged hot spell, that could be as high as 80,000 megawatts. But ERCOT is showing a peak demand of 77,144 megawatts in the summer. Last year, I think, our peak was about 74,000 megawatts.”

The ERCOT news release shows that the grid peak-demand record is 74,820 megawatts on Aug. 12, 2019. One megawatt typically powers bout 200 homes “on a hot summer day.”

“We are positioned very well to meet any condition at a lower level,” Naulty said. “That is 610 megawatts of capacity, and we have to sell that into the market and we buy into the market. Under EEA 3, we’d be required to share across the whole market and make those reductions.”

ERCOT lawsuit

Meanwhile, ERCOT remains under a temporary restraining order following a lawsuit filed in February by the city of Denton.

“On May 10, the court heard ERCOT testimony to plea to jurisdiction,” said Ryan Adams, Denton’s director of customer service and public affairs. “The temporary restraining order is continued to June 1. And that’s when the hearing on the temporary injunction is scheduled.”

In April, ERCOT in the 353rd Judicial District Court in Travis County challenged that is not the proper venue in the suit, and a hearing was set for May 10 in the 250th Judicial District Court.

The temporary restraining order was imposed by 16th Judicial District Court Judge Sherry Shipman in February in Denton County. Weeks later, she granted ERCOT’s motion for transfer, sending the case to Travis County.

The temporary restraining order prohibits ERCOT from using the uplift mechanism by which it “spreads the cost” of municipalities unable to pay exorbitant energy bills onto other municipalities, including Denton. For example, a city unable to pay part or all of its energy bill to ERCOT because of the sky-high costs imposed during the weather event in February would have its debt pushed onto other cities.

Cost considerations

The city of Denton contends “cities are barred from making such payments.” It filed the suit after Denton Municipal Electric spent $207 million to buy electricity from ERCOT. DME’s annual budget is $231.4 million.

According to documents, the average price of energy per megawatt-hour in February was $23.73. During the rotating outages that began around the state on Feb. 15, that increased to $2,400 per megawatt-hour.

Denton staff members on Feb. 19 issued $100 million in new debt “to meet immediate cash flow needs” for DME. During the 2019-20 fiscal year, DME spent almost $64 million on power purchases. That compares with just over $97 million the previous year. The utility is carrying about $851 million in debt, in general obligation bonds, revenue bonds and certificates of obligation.

A little more than a week after rotating power outages began in February, Denton City Council members gave the OK to allow DME to borrow up to $300 million to cover costs incurred during the storm.

Ultimately, the city is seeking a permanent injunction that would, in part, keep ERCOT from demanding payments to cover others’ debts and keep ERCOT from taking action against the city for not making those payments. The temporary injunction would do the same at least until trial.

PAUL BRYANT can be reached at 940-566-6881 and via Twitter at @paulbryant_DRC.

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