This article looks at what happened, but more importantly, what apartment owners can do moving forward in the event Texas experiences a freeze again from a full-service energy management and consulting firm.
To state the obvious, the historic President’s Day week freeze caused major outages throughout the state of Texas and the Dallas region for numerous days. Everyone was talking about it. It caught the attention of national news and was a trending topic on Twitter for almost an entire week. But now, as the commotion has settled and the rebuilding begins, the question becomes, what now?
What Now?
As U.S. House subcommittee(s) investigate[d] the oversight and operations of the Texas electric grid there is no one answer about how to prevent this from happening again. But, ultimately, we believe this will flow down to the ratepayers – you and me, as the end-user or consumer will always end up paying for the cost to adjust and protect.
Similar to other ‘utility costs, for example, the Nuclear Decommissioning Charge, (applied to cover the cost of safely removing a nuclear generation facility from service) we believe you will see these costs included in your utility invoice. This will create legislation that will, to an extent, require generators to weatherize their equipment and generation plants. This will be passed down to the suppliers and then the consumers.
One of the biggest debates the residents and citizens are going to fall on is the green energy debate. During the freeze, there was lots of talk about green vs. brown energy, and all failed to an extent, but some more than others. Natural gas was not available due to wellheads and transportation lines being frozen but ultimately saved Texans as it was the most reliable power source at the time. Wind and solar dropped off completely and lost battery storage due to the cold weather. Nuclear was shut down due to safety precautions, which was the standard operating procedure.
The question becomes, what type of energy do we wish to focus on stabilizing and how do we ensure we have an energy supply that is secure from failures like this? Do we continue to focus on wind and solar energy? Texas generates ~28.6% of its electricity via these green sources, so this is over a 25% impact on the grid. Regardless of what energy source is used, weatherization of the equipment and battery storage is an important piece to the conversation and this will be voted on at the ballot box and paid for accordingly by the residents of the state.
How did this happen?
The simple answer is a perfect storm of bad luck, infrastructure issues, mistakes by operators, and surprises. Rolling outages for short periods of time are nothing new. But what was different, this weather event lasted almost an entire week. These outages are what prevented a major catastrophe from happening. The Texas grid was not equipped for handling this length of freezing weather, but the long, hot summer weather. This created a multitude of failures across our generators, both green and thermal energy. While folks questioned “rolling blackouts,” what was actually occurring were not blackouts at all, but outages. A blackout is a complete failure of the power grid Texas’ electricity grid, which ultimately didn’t happen due to the rolling outages.
ERCOT seemed to have made the right call to order shutdowns through local utilities like ONCOR. As stated previously, no power source was protected for weather like this. In the end, Texas’ power planning and the overseeing bodies left its citizens in a tough situation.
As stories continue to unfold for the residents in Texas regarding the energy situation and processes for moving forward, here are a few things to think about in the meantime to ensure you are secure from major costs associated with future changes.
How to prepare your community for the future?
First, build a partnership with an energy broker or a supplier. Better understand the differences between retail electric suppliers and which may be the best fit for you. There are numerous suppliers in the electricity game but only a few in Texas are geared toward multifamily clients. These electric providers can be great partners to work with on many fronts but mainly ensuring that you have a credible, credit-stable provider. This can also be a benefit to your onsite team and residents as they likely have concerns and questions regarding their accounts. Your consultant can work with your provider on any items your residents or onsite teams may have and this can help your onsite team(s) focus on leasing units.
Second, know your contract. No customer that was on a truly fixed program was [or should be] affected and will not see any major costs from February. However, it is always good to ensure you are aware of the status of your electricity contracts with your suppliers. Multifamily apartment communities usually have two main accounts, your common area meters (CAA) and your vacant units (CSA). Ensuring these accounts do not roll on to month-to-month programs is ideal.
Lastly, you are able to lock in contracts and pricing well before your contracts expire, learning about the timing and the best situation for your assets is the best approach to ensuring you get the lowest rates available.
These three items are great starting points to ensure your costs stay as low as possible. Our teams are expecting to see pricing in Texas creep upwards as the suppliers feel the weight of the costs associated with this historic event. Make sure your communities are set up for future events because we expect to see historic weather events like these more regularly than previously seen. Utilities are one of the top three costs associated with multifamily owners and understanding the energy markets and your agreements, as well as being proactive, can be the difference in thousands of dollars a year in energy costs.
Will McGinnis, CAS, Infinity Power Partners, is an AATC Member and contributed this article.
