Committee crunches Tenaska numbers: Finance meeting discusses transfers from BPUB to city

An analysis by Brownsville Public Utilities Board Chief Financial Officer Mike Perez, presented at a BPUB Finance Committee meeting Oct. 28, provides more detail on the impact on residential and commercial ratepayers of related rate hikes. the failure of the Tenaska Brownsville Generating Station.

The meeting came as BPUB and the City of Brownsville move toward reimbursing ratepayers up to $40 million in revenue generated from rate increases plus transfers to the City of Brownsville, a process that has gained traction. emergency since the October 5 release of a forensic audit report into the doomed Tenaska deal and the role of BPUB senior management in it.

Of the $40 million, $29 million is held in a BPUB Tenaska equity fund and $11 million – attributable to Tenaska’s rate hikes – was transferred to the city between fiscal 2013 and the first two months of fiscal 2023, according to Perez, who said 43% of the $29 million raised for the equity fund came from BPUB’s residential electric customers and 53.5% from commercial taxpayers. The city’s payments to the BPUB for utilities accounted for only 3% of the total.

Perez noted in his presentation that after the final filing into the equity fund, in October 2016, all incremental revenue from Tenaska’s rate hikes, approximately $54 million, was returned to customers through a subsidy on fuel and purchased power costs (FPE) on customer bills. The grant program ended on June 1 once the pool was exhausted.

In addition to ongoing discussions about how to reimburse ratepayers, cash transfers from the BPUB to the city have drawn attention. According to an ordinance passed in 2005, the city is entitled to 10% of the BPUB’s adjusted gross revenue at the end of each quarter. Adjusted gross revenue is gross revenue less BPUB’s power generation costs and contributions to the Southmost Regional Water Authority.

Prior to 2005, the city and the BPUB shared equally any surplus BPUB funds remaining at the end of the fiscal year. Changing the transfer formula to 10% of adjusted gross revenue per quarter meant more revenue for the city, Perez said.

Following the winter storm of February 2021, however, BPUB’s quarterly transfer to the city skyrocketed from $11.1 million in 2020 to $20.5 million in 2021. It has did so because it was related to BPUB’s power sale during the storm at a time when the cost of electricity had skyrocketed, Perez said.

“PUB had all of our resources running, so we had excess power,” he said. “We could have provided that electricity to our customers, but because we participate in the system (Electric Reliability Council of Texas), we are responsible for sharing some of that electrical load.”

BPUB’s net gain on its electricity sales was about $100 million, and the city received 10% of that, although BPUB lost money from the winter storm, Perez said. BPUB’s total losses amounted to approximately $49.4 million, as it absorbed all of its production costs during the period instead of passing them on to customers as it would under normal circumstances, a was “overpaid” $5 million by ERCOT for the electricity it sold, plus $9 million was used to offset generation costs associated with customer usage, Perez said.

The cost of city transfers is included in the base fare paid by BPUB customers. Joseph Hollmann, a member of BPUB’s finance committee, said at the meeting that “it would be almost fair to say that we have a 10% tax on our use of utilities that is imposed by the city of Brownsville.”

Patrico Sampayo, also a committee member and vice-president of BPUB, said it is likely that most BPUB taxpayers were unaware that transfers to the city were included in their bills.

“It’s a supplement,” he said. Tax may or may be the right word. It might be easier to understand that way.

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