Benefits of Securitization (no, really!) and looking ahead
Important note: It is important to remember that the effects from Winter Storm Uri, including the extraordinary cost incurred, has not only affected CoServ but all Texans connected to the ERCOT grid. Retail Electric Providers and Cooperatives must distribute these costs to their customers and Members. Some have already started recouping these costs; others, like CoServ, have been working to find the best solution for their Members to reduce the impact.
From the very beginning 85 years ago, when Denton County Electric Cooperative electrified farms and rural areas, to today when now CoServ delivers electricity and natural gas to more than 400,000 meters, one thing hasn’t changed: Our commitment to deliver safe and reliable energy solutions.
No matter what challenges come our way, CoServ’s 500-plus Employees’ top priority is service to our Members, Customers and the communities we serve. That includes doing everything possible to reduce the unprecedented cost of Winter Storm Uri.
In September of this year, your board voted to adopt a Financing Order authorizing securitization. The securitization financing will allow CoServ to spread the extraordinary costs and expenses from Uri over a period of 25 years to keep your monthly bills lower than they would be absent the securitization financing.
CoServ worked on behalf of our Members before the storm to proactively purchase about 25% of the power supply not supplied by Brazos at much lower costs. Since then, CoServ has been able to successfully negotiate settlement terms for the Brazos bankruptcy and further reduce the debt that is owed to Brazos. When combined, these actions saved CoServ Members about $274 million.
Another benefit to CoServ and its Members, as a result of the Brazos Bankruptcy, is that under the bankruptcy reorganization plan filed by Brazos, Brazos will be selling their generation assets in 2023. If the bankruptcy court confirms this plan, CoServ will no longer have a power purchase agreement requiring us to buy power from Brazos.
This means CoServ will be able to purchase power directly from any of the more than 300 generating plants and other power traders that sell power in the Electric Reliability Council of Texas (ERCOT) market. By assuming control of our own power purchases, CoServ expects to save millions of dollars per year relative to the costs we previously paid to Brazos.
We firmly believe that this ability to buy competitively in the power market will allow CoServ to mitigate the impacts of the securitization charges that our Members will see on their monthly bills. This is because we will be able to reduce our power purchase costs, ultimately lowering the costs that are passed through to our Members, and balancing out the securitization charges.
CoServ cares deeply about our Members and while we know that higher bills greatly impact you, we are continually striving to provide competitive and fair energy prices to our Members while always maintaining our commitment to provide safe and reliable electricity.