Issues facing America’s electric co-ops after the ice storm

The sector has taken a huge financial hit from February’s freeze and is dealing with issues around power contracts and infrastructure

The winter storms that gripped the USA in February have laid bare the strains in the country’s electrical system – in terms of its business model and physical infrastructure.

Tropical Storm Isaias left more than two million people without power, and industry observers are concerned about the ability of the country’s ageing power grid to withstand further shocks. Popular Science reports that the older power lines date back to the 19th century and most of the grid was built in the 1950s and 60s, with a 50-year life expectancy.

Outages have been growing in frequency since the 1980s and, with climate change set to increase the frequency of winter storms and summer fires, steps are being taken to renew the infrastructure, with federal support. Last October the US Department of Agriculture announced £3.1bn in loans to 45 electric co-ops for improvements which will benefit more than 1.4 million homes and businesses. Upgrades will include the introduction of smart grid tech.

Electric co-ops also face pressure to switch to renewable energy, and are being called on to provide other utilities, such as broadband, to under-served regions – and are at risk from cybercrime. 

The storms show what is at stake when the system goes down: energy costs for February 2021 are more than those for an entire normal year. The crisis in Texas has already seen the states oldest electric co-op, Brazos Electric Power Cooperative, file for protective bankruptcy after grid operator ERCOT ramped up prices. Brazos says the move will protect its members from the burden of the extra costs. Other co-ops are taking different steps. 

Related: $2bn power bill from storm sees oldest electric co-op in Texas file for bankruptcy

D’Ann Allen, manager of member relations at Amarillo-based Golden Spread Electric Cooperative, told the National Rural Electric Cooperative Association (NRECA) that the costs will “unfortunately, be borne by our members”, but it will try to spread out the cost to ease the pain. “More than likely, it will take years,” she said.

Meanwhile news station NBC5 reported that several customers from non-profit Navarro County Electric Cooperative had called in to say they had received electricity bills ranging from around $400 to nearly $1,000.

NRECA reports that other Texas co-ops are suspending late fees and disconnects for non-payment, relaxing deposit requirements, offering deferred payment plans and delaying planned electricity rate changes that were scheduled to go into effect this spring.

The crisis has left industry experts taking a hard look at the grid. Hala Ballouz, president of Electric Power Engineers, says a collaborative effort is needed to ensure the grid holds up against future disasters. In a LinkedIn post, she pointed to a number of problems – including deregulation, which has let to a siloing of stakeholder responsibilities. 

“Although these entities have processes and complex systems for handing off information to coordinate activities, we do not have the technology or transparency necessary to plan or operate a holistic system,” she warned. “The most significant disconnect today is between transmission and distribution on both the grid and resource level.”

 She says recommendations into outages from severe winter weather in 2011, in a report from the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation, were not followed. The regulators wanted “a focus on hardening the gas network and better generator weatherisation procedures”.

And she warns that the current distribution system is not adequately digitised to allow for automated switching to spare supply when an outage occurs. “We currently further lack the tools that allow the utilities to quickly develop and update their disaster response plans to meet any situation that arises.”

One solution, she argues, will be regulatory change that allows wire utilities to own generators or storage to boost their capacity, avoiding the need for expensive backup from organisations like ERCOT.

“In the last two weeks, these same companies could have had very locationally critical resources to keep the lights on for those of us who froze in the dark. Additionally, many electric co-operatives are limited to the generation that they own due to wholesale power contracts they entered a long time ago.”

Elsewhere in the States, a dispute over one of these power contracts rumbles on, with a number of electric co-ops trying to buy their way out of deals with generator Tri-State. Seven rural electric co-operatives in Colorado, New Mexico and Nebraska have filed a complaint with federal regulators saying Tri-State is refusing to give estimates on how much it will cost them to leave.

“Tri-State’s refusal to perform the calculation required … is patently unjust and unreasonable,” says the complaint to the Federal Energy Regulatory Commission.

The co-ops want to leave Tri-State so they can switch from its coal generated power to renewables, which are cheaper and will allow them to meet the environmental demands of consumers.

Tri-State sells wholesale electricity to 42 rural electric co-ops in four states under contracts that run to 2050; co-ops must purchase at least 95% of their electricity from the association. It says the co-ops’ complaint “is premature, given the current status of the case in FERC settlement negotiations”.

Other issues on the horizon for electric co-ops include cybersecurity. NRECA has received a US$6m federal grant to work with BlackByte Cyber Security and Referentia Systems on a new tech system, Essence 2.0, that monitors for cyber threats. It is now working with partner electric co-ops to develop the platform.