It’s complicated: BPUB officials provide more details on rate adjustments

Following its May 4 announcement that residential customers can expect to see higher utility bills after June 1, the Brownsville Public Utilities Board discussed in more detail why that’s happening in an interview with the Brownsville Herald.

The city-owned utility this month received permission from the Brownsville City Commission for adjustments to electricity, water and wastewater rates, plus the addition of a new Resaca Restoration Project fee. On the electric side, residential customers will be paying more despite a rollback of the base rate BPUB charges for electricity to the rate set on Oct. 1, 2013.

On that date BPUB imposed the second of a series of rate hikes part of which were to fund a power plant project, the Tenaska Brownsville Generating Station, though the proposal was ultimately abandoned. Of those rate hikes back then, 22 percent was designated for the power plant project, thus BPUB’s recent decision to lower its electricity base rate for customers by 22 percent, to be phased in over a two-year period beginning June 1. With the full rollback, BPUB will be bringing in $16.3 million less revenue annually than it is now.

The additional revenue generated by the rate hikes between 2013 and 2016 was put into a bill-reduction subsidy program beginning in 2016, which allowed BPUB to charge customers less for the fuel and purchase energy charge (FPEC) portion of their bills than what BPUB actually paid, even though utilities are allowed to pass the total cost onto customers.

BPUB Chief Financial Officer Mike Perez said all that extra revenue has been “pushed back to the customer” through the bill-reduction program, except for $29 million collected during the first three years of rate increases in order to cover accrued interest payments over the roughly two years it would have taken to build the power plant.

“So that $29 million, it’s still sitting in our (capital) improvement fund and it hasn’t been spent,” he said. “Everything else that had been collected from those 22 percent increases has been returned back to the customers.”

The bill-reduction program will be phased out on the same two-year schedule as the base-rate rollback. After June 1, 2023, residential customers will pay the actual fuel and purchase power charge (FPEC), which fluctuates monthly depending on the price per MMBtu (Metric Million British Thermal Unit) of natural gas.

The base-rate decrease, at current natural gas prices, will be offset by the high cost of the fuel, with the cost of energy in general a key driver of inflation. That’s according to John Bruciak, BPUB general manager and CEO, who noted that Russia’s war against Ukraine is only exacerbating the situation.

Historically, the price of natural gas is “up and down like a bobber,” he said. While current high prices aren’t unprecedented, natural gas is at a 13-year high. In this instance, the price has been trending upward since Texas’ catastrophic freeze of February 2021, Bruciak said.

“Before that major freeze we were less than $2 (per MMBtu) and it’s gone steadily up since then to almost $9 today,” he said. “What’s going to compound the issue is it’s going up significantly at a time of the year when people use more (electricity).”

Bruciak anticipates dismay on the party of customers wondering why their bills are have gone up even if their electricity, water and wastewater usage hasn’t.

“That’s going to be a challenge,” he said. “That’s why we’re trying to get out and explain this a little bit the best we can … of actually what’s occurring.”

Perez said the fuel charge for June 1 hasn’t been set yet but likely will be 20 percent above the current rate. Despite the increases, BPUB, as a municipally owned utility, is still competitive with investor-owned utilities around the state, he said. In May, the average (1,000-kilowatt-hour) BPUB customer paid $115.09, while customers of investor-owned utilities consistently pay above $160.00 per month on average, Perez said.

Based on a hypothetical FPEC, BPUB estimates the average residential customer will pay a total utility bill — electric, water, wastewater and city curbside collection fees — of $202.22 ($122.71 for electric service) after June 1, 2022, compared to $188.52 now ($119.43 for electric). After June 1, 2023, BPUB estimates that bill will be $204.49 ($116.89 for electric).

BPUB said the city-approved rate adjustments are also necessary to pay for roughly $107 million worth of scheduled capital improvement projects. About $77 million of that will be paid for with cash currently in BPUB’s capital improvement fund or cash to be allocated to the fund over the next five years, while BPUB issuing debt to cover the rest, Perez said.

On the water/wastewater side, BPUB has some $163 million worth of capital improvement projects on its to-do list, which requires raising those rates as well, he said.

Bruciak said the alternative is to defer maintenance and construction projects, which becomes even more expensive.

“If you defer it, the single-digit rate increases become double-digit rate increases,” he said.

BPUB will also begin charging a new $4.50 Resaca Restoration Project fee starting this June 1. On June 1, 2023, the fee will go up to $6.25. BPUB has scheduled an extensive series of resaca improvement projects in four phases through 2038. Phase one, which involved removing nearly 150,000 cubic yards of sediment from Brownsville Cemetery, Dean Porter Park, Gladys Porter Zoo and Resaca Boulevard resacas, is complete. Phase two is underway.

Meanwhile, the 22-percent rollback and accompanying loss of revenue effectively removes BPUB’s ability to ever fund another generation project, Bruciak said, adding that the utility has issued a request for proposals for future power supply options, such as buying electricity from wind farms. In fact, it’s unlikely the state will see any new gas-fired power plants built as long as the Electric Reliability Council of Texas isn’t offering incentives to build them, he said.

“Right now they’re not,” Bruciak said. “It’s too risky (for investors) and they’re not going to do it, and you’ve got that heavy subsidy on the wind and solar right now that the natural gas builders can’t compete with. Until that goes away, we don’t see anything on the drawing board for (natural gas-fired) plants.”