The Board of Public Utilities’ power plants made more money during the February polar vortex than during the previous three years, according to a report presented at Wednesday night’s BPU board meeting.
Some of that revenue, a $5 million energy rate component overcollection, will be going back to consumers with a lowered ERC charge, according to BPU officials.
The typical BPU residential customer who uses about 800 kilowatt hours of electricity a month could see a reduction of about $8 on the ERC charge on the utility bill, according to Lori Austin, BPU chief financial officer and chief administrative officer. There will be larger reductions among industrial and business customers that typically use more electricity, she said at the board meeting.
Austin added that if residents used more electricity, they may not see a reduction in the total amount, but if their usage stayed the same, they would see it. The ERC is just about 30 percent of the bill, she said.
The revenue from the Nearman power plant during the nine-day period in February was just under $74 million, about as much as that unit earned during the past three years, according to Andrew Ferris, director of electric supply planning for the BPU. The CTE plants are generally operated sparingly, only about 20 days a year, but during this period generated almost $40 million in revenue, which equated to almost 30 years of revenue in those nine days, he said.
Everything, including wind and alternative energy, performed really well, he added, generating revenue margins greater than they had ever seen.
Revenue generation, diverse fuel mix and fuel security in resources that were already on site at the BPU plant were very important, according to Ferris.
Bill Johnson, BPU general manager, said this was not simply about profits or money the BPU was making. ERC is cost-of-service based, he said.
“When we overcollect, we send that overcollection back to the public,” Johnson said. When they undercollect, they do the opposite.
From Feb. 12 to Feb. 20, the load needed here cost BPU a little under $121 million, Ferris said. That was more money than the BPU spent on its load for the past two years combined, he added.
“This just goes to show why it’s so important to make sure our plant is always available,” Ryan Eidson, a board member, said. “That’s a lot of money.” If they weren’t producing energy, they would have been paying a lot, he said.
According to Austin, the ERC is the BPU’s projected cost of fuel used to generate electricity, and the cost of power that is purchased from the market to meet the BPU’s load.
BPU has an agreement with the Southwest Power Pool to use all of the BPU’s resources to generate energy if necessary to support the grid, in times of emergency. The BPU purchases back what it needs to support its load, according to Austin.
The ERC is typically reviewed every three months, and adjustments are made by the BPU after they get the final costs for the quarter. Then customers’ bills are adjusted under the heading, “ERC” on the bills.
The costs of coal, natural gas and purchased power are variable, according to Austin, and the weather and plant availability can affect costs.
She said the BPU also has had to adjust the ERC for 2020 because of lower demand than projected when businesses shut down during the COVID-19 pandemic. That resulted in an $11.7 million ERC overcollection in 2020, she said.
Austin said the SPP reported that 73 percent of the mainland United States was covered in snow during the February severe weather event.
The last comparable cold snap that extreme in history was in 1905, she said.
During the nine days in February, energy prices were higher than forecast because of demand, the SPP explained, with record winter energy consumption.
Because BPU sold more energy into the marketplace than its customers used, there was a positive outcome for the BPU, according to officials.
Having a mixed fuel supply for generation helped the BPU because natural gas prices were high, but coal and oil prices were not as extreme, according to Austin.
According to Austin, the overcollection from the third quarter of 2020, about $9 million, is being adjusted in the first quarter of 2020 on the ERC charges on BPU bills.
The $7.7 combined overcollection, including $2.7 million from 2020 and $5 million from 2021, is being adjusted in the second quarter, according to Austin. The 2021 overcollection is being adjusted earlier than normal, she added.
The ERC rate on utility bills from the polar vortex event will go from the current 2.6-cent per kilowatt hour rate to 1.6-cent per kilowatt hour rate in the second quarter, according to Austin.
Southwest Power Pool has been undergoing a review of the event. Only the natural gas units are getting hit with the market monitor review, according to Ferris.
According to Glen Brendel, director of BPU’s electric production operations and maintenance, they will need to have a spring outage at Nearman to take care of maintenance. It will be a 15-day outage costing around $1.5 million for capital expenses and maintenance. Rebuilding a Nearman generator transformer will be one of the major projects.
An outstanding group of employees at Nearman is the reason it kept going during the extremely cold weather, according to Brendel.
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