CoServ Gas secures financing for Winter Storm Uri costs
The after-effects of Winter Storm Uri are still being felt by gas utilities statewide and CoServ Gas is no exception. There's no easy solution but CoServ Gas has taken steps that will reduce the impact the storm will have on its Customer bills long-term.
Starting on February 13, 2021, and for several days afterwards, natural gas prices rose exponentially as demand for energy for heating and other purposes increased and caused limited natural gas supply. Unprecedented low temperatures at production and compression sites caused frozen pipelines and equipment.
In the aftermath of the storm, gas utilities across Texas were left with significant gas supply costs from the once-in-a-century storm. These costs are allowed to be recovered from Customers under the terms of CoServ Gas' tariff. However, recovering these costs immediately would have been very burdensome to Customers.
At the onset of Winter Strom Uri, the Railroad Commission of Texas (RRC), the regulator of gas utilities in Texas (including CoServ Gas), issued a Notice that allowed natural gas distribution utilities to defer these extraordinary gas costs and stated that recovery of these costs would be dealt with in a future rate proceeding.
Meanwhile, the Texas Legislature was considering legislation for gas utilities burdened with the extraordinary gas supply costs from Winter Storm Uri. House Bill 1520 was introduced in the Texas Legislature, which would allow gas utilities to recover the gas costs through a state-run debt securitization program. This program would consolidate the gas costs of all gas utilities that opted into this securitization financing program and spread the repayment evenly across all participating parties. Lawmakers approved House Bill 1520 and Governor Greg Abbott signed it in June 2021.
Initially, CoServ Gas joined other Texas gas utilities in filing an application to join the securitization financing and published that notice for the public. The state-run securitization plan would have provided CoServ Gas with some financial benefits. However, as CoServ Gas received further information, as a part of applying for the securitization financing, it was discovered that the gas costs incurred by other gas utilities were on average higher than that of CoServ Gas, both on a per customer basis and per usage basis. It became apparent that CoServ Gas customers would be subsidizing other gas utility customers across the state by opting into the state-run debt securitization plan.
In November 2021, CoServ Gas made the decision not to participate in the securitization. Instead, CoServ Gas, through a combination of debt financing and an equity infusion, was able to lower both the costs and recovery period to our Customers versus being included in the combined securitization with other Texas gas utilities.
Ultimately, the gas customers in Texas will have to pay for the recovery of extraordinary gas costs incurred during Winter Storm Uri. But, by not using the securitization option, CoServ Gas Customers will benefit from a lower monthly Uri charge and from a reduction in the period of time the charge will be included on the bill. This also prevents CoServ Gas Customers from having to subsidize the Winter Storm Uri gas supply costs of other gas utilities.
Starting with the April 2022 meter read dates, CoServ Gas Customers will have a 7 cent per Ccf (100 cubic feet of gas) charge added to their bills. The charge will be added to the purchased gas factor (PGF) and will add approximately $4.38 per month to the average residential customer's bill (based on 62.5 Ccf in average monthly usage) for approximately 10 years.