Sky-high Power Rates Spark Outrage in Rural Texas
For four decades, Nancy Raney’s family has raised crops — mostly alfalfa hay right now — on wide-open land near Big Spring, about 40 miles northeast of Midland. She and her husband Hugh have run the farm for 16 of those years.
But if certain troubles persist, the couple may have to stop growing hay. Theirs, however, is not a story of drought, weevils or other typical West Texas scourges.
This family’s bank-breaking trouble: skyrocketing electricity costs.
Running pumps to irrigate their fields from January to November sucks up plenty of energy along with the water. But the Raneys were flummoxed in mid 2014 when their electric bills began running thousands of dollars a month higher than the year before. That August, for instance, their farm and home electric bills totaled more than $8,500.
“You have a bale of hay that’s $10, and your rates double. What are you going to do?” Nancy Raney said over the phone, standing outside a local stock show. “It’s not like you can sell that same bale of hay for $20.”
The soaring rates weren’t for the electricity itself. Rather, they were paying vastly higher bills to the company whose distribution system and transmission lines bring it to their farm.
The Raneys are among more than 50,000 Sharyland Utilities customers — in homes, businesses and churches in rural West and North Texas — that are contemplating tough budget choices after nearly two years of paying the highest electric transmission and distribution rates in Texas.
Delivery rates for Sharyland residents are more than twice the state average for regulated utilities. While locals — like many Texans — can choose retail electric providers on the competitive market, they’re stuck with Sharyland’s power lines.
Ironically, the best bet for relief may be if Sharyland’s owner — the Ray L. Hunt family of Dallas — can win control of a much larger share of the state's electrical distribution system.
Hunt is trying to buy another utility: Oncor, the state’s largest. But the family’s $18 billion bid is drawing heavy scrutiny, including from Sharyland folks themselves.
“I’m very skeptical of it,” said Raney. “It’s hard to be fleeced for two years, and then the people who are doing the fleecing say, 'It’s okay — you’re going to be all right.'”
A power outrage
Sharyland ratepayers have complained to the utility and organized on social media (a private Facebook group for aggrieved customers has united more than 1,400 members). They’ve flooded Texas lawmakers and the Public Utility Commission with letters and copies of their bills.
That includes the 50-member Champion Baptist Church, in Roscoe, which is wondering if it could go off-grid to ditch its high bills. And Christian Fellowship Church in Colorado City is holding off on repairing its “House of Refuge” for displaced people, citing high rates.
“I had somebody tell me the other day that politicians shouldn’t mess with churches or farmers,” said Janey Burke, who helped organize a letter-writing campaign for the Champion Baptist Church. “And this is a church full of farmers.”
The West Texas groundswell has triggered a commission investigation and promises from regulators and utility officials to find a fix.
“There’s no doubt that Sharyland’s residential ratepayers are looking for rate relief, and we support trying to find a solution,” said Jeanne Phillips, a Hunt spokeswoman.
Hunt officials said any owners would have struggled to keep rates low under the mix of economic and regulatory conditions Sharyland faces.
| Average Residential Delivery Charges (1,000 kilowatt-hour use; Doesn't include retail charges) | |
|---|---|
| Sharyland (excluding tiny McAllen division) | $90.39 |
| Oncor | $38.59 |
| CenterPoint Energy Houston | $45.78 |
| Texas New Mexico Power | $41.01 |
| AEP Texas Central | $49.07 |
| AEP Texas North | $43.56 |
The company's biggest challenge, experts say, is that it has too few customers scattered over too many miles.
On top of that, in 2010, it acquired electric co-op CapRock Energy and struggled to bring its customers into the state's competitive market. In 2013, a cheap long-term power contract expired. And in 2014, the utility commission approved a new rate structure that lowered rates for industrial consumers but raised residential rates. Under the old system, industrial users had essentially subsidized the residents. The change also bumped up some customers to a more expensive rate class.
Sharyland points out that it warned the commission of potential “rate shock” and asked it to approve more gradual changes.
Any fixes would need approval from the three-member commission, which in October approved an adjustment that could save residents just a few dollars per month, and is expected to consider a new Sharyland rate case — a full-scale re-evaluation — this spring.
But even that move would not change the fundamental economics at the utility.
Big fix for little utility?
Something could help fix the problem: Hunt’s mammoth proposal to buy and reshape Oncor, which delivers power much more cheaply to more than three million Texas homes and businesses in North and West Texas — including Raney’s across-the-street neighbor. (His rates, she said, are half of hers or less).
Hunt officials suggest that combining certain Oncor and Sharyland operations would allow scale to ease the tiny utility’s troubles.
“This Oncor proceeding presents a very real and significant opportunity — and that’s what it is, an opportunity — to bring some significant relief for Sharyland customers,” said Paul Schulze, a Sharyland spokesman.
On Thursday, Hunt filed a commitment to “prepare a proposal for a possible business combination” of the utilities, “including addressing rate disparities,” if the Oncor deal is approved.
The commission appears open to some sort of merger, though nothing is guaranteed.
“It would be relatively simple to merge the two operating companies,” Commissioner Ken Anderson said last week during hearings on the plan, which is the lynchpin of efforts by Oncor’s parent, Energy Future Holdings, to emerge from one of the largest corporate bankruptcies in American history.
Still, the Hunts' broader bid for Oncor has faced fierce pushback from consumer advocates, big industrial power users, staff experts at the utility commission, Oncor officials and even former Gov. Rick Perry.
To save on federal income taxes, Hunt wants to reorganize Oncor into a real estate investment trust, essentially dividing it into two companies: one owning the assets (power lines, trucks and transformers, for instance) while the other rents the equipment, operates it and deals with customers.
That financial structure has long served the real estate world. Shopping malls, for instance, commonly use it, as investors back a broad entity that rents space and other assets to individual stores.
The structure would initially help Oncor borrow money at lower rates, which Hunt says would help keep the utility financially healthy and potentially lead to lower rates in the long run.
But it’s nearly unprecedented in the energy world. The only other U.S. example? Little Sharyland.
Several aspects of the structure make critics nervous, and Sharyland’s troubles have done nothing to raise confidence.
The Hunts have pushed back, calling the concerns “alarmist and misguided.” The company also points out that Sharyland’s real estate investment trust structure drew no mention in the utility commission analysis of the rate troubles.
The commission is expected to rule in late March.
Meantime, Sharyland ratepayers — folks who never had reason to follow such in-the-weeds proceedings — are closely watching.
“Every night I come home, I follow the stories and everything,” Raney said.
Disclosure: CenterPoint is a corporate sponsor of The Texas Tribune. Oncor and Energy Future Holdings were corporate sponsors in 2012. A complete list of Texas Tribune donors and sponsors can be viewed here.
This article originally appeared in The Texas Tribune at http://www.texastribune.org/2016/01/23/sky-high-rates-spark-power-outrage-rural-texas/.
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