FREEZE PUT P.U.B. $38 MILLION IN THE HOLE. USE TENASKA $29 MILLION? RAID PUB WORKERS' RETIREMENT FUND? RAISE FUEL SURCHARGES LITTLE BY LITTLE? DECISIONS, DECISIONS...

By Juan Montoya

First, the good news.

The Brownsville Public Utility Board made $121,488,315 selling electricity to the Energy Reliability  Council of Texas during the worst of the polar cold front February 15 through February 18 while local residents huddled in dark homes in subfreezing temperatures.

Now for the bad news.

As the statewide grid of electricity was threatened with a collapse and power outages spread across the state during and after the storm, ERCOT raised the price of energy and kept it high so that it cost providers like PUB more to produce electricity. It cost PUB $145,381,315 to produce the energy during that period and as a result they – or rather its ratepayers – ended up an estimated $38,190,065 in the hole.

And even though the totals remains "fluid," and subject to change as ERCOT settles accounts with power providers like PUB across the state, the utility's management and the city commission are looking around for loose change to pay off the debt.

Specifically in PUB's case, the $121,488,315 profits in off-system energy sales was offset by an estimated $145,381,351 in production costs at higher fuel prices to give it an initial deficit of $23,892,936. Add in the city's 10 percent share of the profits ($9,364,713) and another $7,500,000 in "short pay" charges by ERCOT, and PUB is $38.2 million in the hole that has to be paid somehow.

How to pay it?

PUB energy mavens like John Bruciak, the architect of the notorious

Tenaska Power Plant to Nowhere fiasco, has some ideas. But neither they nor the city administration really want the public to know. So on Tuesday, during a joint meeting of the city and PUB, they hid in executive session, delivered the bad news to the city commission, and suggested some "ideas" on how to address the shortfall.

And as far as the public being made aware of the PUB and city predicament, what they don't know will hurt them.

Here's a few:

The city could consider giving up its $9.4 million share of windfall profits and return it to a fuel adjustment subaccount to offset against the shortfall and the total debt would be reduced to $28.8 million.

And guess what? Remember the $29 million that was left over from the Tenaska fiasco after the private energy company decided in 2017 that the planned $500 million  gas-powered electric plant was no longer economically feasible even after the commission approved increased rate hikes foe electric by 36 percent for ratepayers in 2013? Yeah, that's the one.

The PUB went through approximately $135 million raised for the plant's construction before Tenaska pulled the plug on the project and the $29 million was all that was left of the failed undertaking. So Bruciak and his bean counters suggest: Why not use that remaining $29 million in the Tenaska Equity Fund to erase part of the debt to ERCOT? You know, continue to throw bad money after worse. And the plans to use some of that to fund fiber optic or LED lighting in the city? Fuggedaboutit!

Or, they say, if that is too cynical for the city commission, why not implement a shell game and use $20 million available cash in their existing Capital Improvement Fund (CIF) from prior years "surplus" funds and tweak the capital improvement project budgets by floating some "commercial paper" to replace the money?

That incurred debt could then be used to raise an additional $10 million. That would leave "only" a $8.2 million shortfall. 

That's where you, dear fellow PUB ratepayer, come in. Not only did you fund the PUB playing of the spot market with ERCOT and lost your shorts, but you also have an opportunity to make up for their shortfall. They sold low and bought high. It's not their money anyway. It's yours.

This is what Bruciak and Da Boys over at the PUB black hole suggest:

"Gradually raise the fuel factor charged ratepayers to cover the cost over future months. Our policy does not allow monthly increases to the fuel factor greater than 20 percent, therefore, it would take time to set fuel factor at actual recovery rate."

The game gets better. Are you watching the sleight of hand as they move the shells over the pea? Where is it? Donde quedo la bolita?

Watch closely now. 

If the commission gives PUB the go ahead, PUB could could use $15 million from their Capital Improvement Reserve Fund and another $17 million from something called Operating Reserve Fund. But there's a catch. All that loot would have to be replenished over the next 36 months. Maybe a rate hike, you think? 

Hey, maybe we could "borrow" $13 million from something PUB calls a "Plant Fund" it set aside for long-term liabilities like post-employment benefits (PEB), other than pension distributions, that employees may begin to receive once they retire. Other PEB funds can include vacation and sick leave accruals, life insurance, health insurance, and deferred compensation. In other words, dip into PUB employees retirement benefits.

You know that's not a bad idea. If the commission lets us, we could also raid other PUB workers' retirement benefits like the employee Health Insurance Fund for an additional $11.3 million. After all, they argue, "these funds are not held in an irrevocable trust." Sorry PUB workers. Now you see it, now you don't.

As a last resort, we have something called a fuel subaccount that has a balance of $6.6 million and another $9.3 million could be raised from the 2021 FIscal Year budget pending transfers for March to September of 2021. But there's a catch. Those funds are needed to maintain the current fuel factor for the remainder of the year. 

If all else fails and the mark (PUB ratepayer) catches on to the sleight of hand, the city commission could give PUB the approval to "issue commercial paper notes or other bank financing." 

You know, borrow our way out again. Plenty more where that came from.

Of course, if the city commission approves such a "commercial paper ordinance" to float say, Certificates of Obligation, it would require an amendment to add a taxable component and it will all have to be paid by...aw, you peeked!, the PUB ratepayer!

We caution you, though, things are still "fluid" and ERCOT may "forgive" some of this $38 million by owning up to its "errors" during the emergency. But we wouldn't hold our breath. 

Can you guess where the hit will come from?