Service Failures During Hurricane Beryl Attract Legislative and Regulatory Attention

by Roslyn Warner and Jake Dyer

On the heels of a May 2024 derecho, Hurricane Beryl made landfall near Matagorda, Texas on July 8, 2024 leaving more than 2.7 million Texans without power and resulting in ongoing political and regulatory fallout for Houston-area utilities.

Legislative Response
Shortly after the storm, Lt. Gov. Dan Patrick formed the Senate Special Committee on Hurricane and Tropical Storm Preparedness, Recovery, and Electricity. Since its creation, the Special Committee has devoted significant attention to CenterPoint Energy (“CenterPoint”) who, among other services, maintains the electric poles and wires for more than 2.9 million customers in the greater Houston area.

In a series of hearings, Senate lawmakers invited testimony from regulators, public officials, and other utility executives. Several politicians also addressed the committee. Houston Mayor John Whitmire said that CenterPoint should reinforce its poles and take other action to prevent prolonged outages in the future. He said the city had to come up with its own online outage tracker “on the fly” because the CenterPoint outage map had failed. “I don’t have any more patience [with CenterPoint],” he said.

But it was CenterPoint CEO Jason Wells who drew the most scrutiny. The Special Committee questioned Wells regarding the utility’s faulty public communications, its lack of vegetation management, and other operational failures. Sen. Paul Bettencourt told Mr. Wells: “I know you say [the utility’s response] is inexcusable, but it’s really horribly inexcusable.” Lawmakers also took the company to task for the failure of its online outage maps, noting that many Houstonians were forced to turn to online maps created by the Whataburger fast-food chain to determine which neighborhoods had power. Wells said the utility had employed internal servers to host its own maps, but that those servers became overwhelmed after more than 1 million Houstonians lost power. CenterPoint has since implemented a more versatile cloud-based outage tracker on its website.

Throughout multiple months of investigating CenterPoint’s service failures at all levels of government, one concern has continually resurfaced: was CenterPoint’s recent $800 million expenditure for emergency generation (known as “Temporary Emergency Electric Energy Facilities” or “TEEEF”) justified? CenterPoint’s $800 million sum far surpasses similar spending by other comparable Texas utilities, and the largest of the “emergency” generators went unused during Hurricane Beryl.

Questioning the company’s priorities, Sen. Charles Schwertner, Chair of the Special Committee, noted that CenterPoint receives a rate of return — that is, profit — on its TEEEF expenditures but not on its expenditures for vegetation management. He noted that the CEO of the company that secured CenterPoint’s TEEEF contract is a convicted felon, and that the TEEEF contract amount was far more expensive than that of a second bidder. “This doesn’t smell good at all,” he said. “I don’t think it smells to anybody on this dais. Whose pockets are getting lined here?”

CEO Wells said it deployed all eighteen of its smaller TEEEF units in response to Beryl (along with such units on loan from other utilities), but that its larger TEEEF units can only be moved with some difficulty and not without proper permitting — which the company did not obtain. He said the larger units are useful for transmission-scale outages like those experienced during Winter Storm Uri in 2021, but that the company’s hardened transmission system weathered Hurricane Beryl.
In an extraordinary turn, Sen. Phil King even apologized for sponsoring the 2021 legislation that authorized the TEEEF units and pledged to revisit the issue when the Texas Legislature reconvenes next year. “I feel like I’ve been taken advantage of,” said Sen. King.

Regulatory Response
Within one week of the storm, the Compliance and Enforcement division of the Public Utility Commission of Texas (“PUC”) opened a docket dedicated to investigating the emergency preparedness and response of utilities in the greater Houston area following severe weather events. PUC issued a lengthy list of objectives, including analysis of emergency operations plans, vegetation management plans, after-action reports, and storm hardening plans.

Since the docket was opened, PUC has issued Requests for Information to numerous local governments, power generation companies, electric utilities, water and sewer utilities, and telecommunication utilities. In addition to formal discovery mechanisms, PUC Staff issued a Public Questionnaire for members of the public and small business to “share their experiences with electric service outages and restoration following Hurricane Beryl and the May 2024 derecho.” PUC Staff is expected to prepare a draft report for the commissioners’ consideration at the November 21 open meeting and finalize a report for the Governor and the Legislature by December 1.

During a PUC open meeting in mid-August, the commissioners echoed legislators’ skepticism surrounding the $800 million TEEEF expenditures, particularly regarding the lease under which CenterPoint procured the generators. Commissioner Hjaltman recommended that CenterPoint renegotiate its options to terminate the TEEEF lease and consider the possibility of subleasing the assets. Commissioner Glotfelty requested more information about the parties involved in the TEEEF lease. Stakeholders have similarly weighed in on the issue. In mid-September, the Texas Consumer Association filed a complaint with PUC requesting revocation of CenterPoint’s TEEEF expenditures.

Hurricane Beryl has additionally impacted CenterPoint’s ongoing rate applications before PUC. On August 1, 2024, CenterPoint filed to withdraw its application to increase rates, which the company filed on March 6, 2024. CenterPoint was required to file the application according to PUC’s filing schedule and a PUC order from February 2024, but the company argued that withdrawal is appropriate to focus on post-storm efforts and prepare for the next hurricane season.

When CenterPoint filed to withdraw, the case had been progressing for nearly five months and settlement discussions were ongoing. Intervenors, including municipal groups and the Texas Consumer Association, opposed the withdrawal, arguing that the company was required to file the case and does not have a unilateral right to withdraw. Municipal intervenors also argued that the company’s application showed a rate decrease is warranted. In its application, the utility sought an approximate $60 million increase; the testimony of municipal intervenors recommended a $150 million decrease. The administrative law judge presiding over the application denied CenterPoint’s withdrawal, finding no good cause for dismissing the case. On August 23, CenterPoint appealed the ruling to PUC, which has not yet been decided.

During an open meeting on September 12, 2024, PUC said that it would not decide on CenterPoint’s pending appeal until its October 24, 2024 open meeting. CenterPoint also filed to withdraw from immediate consideration its separate multi-billion-dollar Resiliency Plan, a move that was unopposed by intervenors.

Roslyn Warner is an Associate in the Firm’s Energy and Utility Practice Group. Jake Dyer is an Analyst in the Firm’s Energy and Utility Practice Group. If you have questions related to Hurricane Beryl or other Energy matters, contact Roslyn at 512.322.5802 or rwarner@lglawfirm.com, or Jake at 512.322.5898 or jdyer@lglawfirm.com.