What the PUC’s report and pending audit mean for CenterPoint – and the PUC itself

From Houston Public Media:

The Public Utility Commission of Texas (PUC) issued its report on CenterPoint Energy’s handling of Hurricane Beryl about a week before Gov. Greg Abbott’s Dec. 1 deadline.

The PUC’s report provides a long list of fixes for CenterPoint, for lawmakers and for the commission itself to prepare for future disasters like Hurricane Beryl. However, the report is far from the last hurdle CenterPoint faces in the wake of the July storm.

Franklin Allaire of Katy lost power for more than 10 days after Beryl struck. He said Texas policymakers wasted a tremendous opportunity to improve the state’s power infrastructure after 2021’s Winter Storm Uri.

“Now, we have another opportunity at another legislative session coming up,” Allaire said. “So, I will be very curious to see if there is an appetite this time around to create some changes at the legislative level.”

The PUC has also just launched an audit of CenterPoint, amid claims that the utility has overcharged customers by more than $100 million. The audit, which is set to conclude about a month before Texas’ regular 2025 legislative session ends in May, is likely to add pressure on lawmakers to make use of Beryl’s lessons.

One former PUC member is hoping the regulators will take a hard look at the commission’s own responsibility for what happened in the Houston area during the summer.

“There’s something about the regulatory and policy structure in Texas that told CenterPoint that this was in the bounds of normal behavior for a utility,” said Karl Rábago, an energy consultant who served as a PUC commissioner under Governors Ann Richards and George W. Bush.

Recommendations from the report

One of the biggest areas the report identifies for improvement is communication. The commission called on lawmakers to codify a customer’s right to speak with a live person to get updates on power outages and restoration times.

Allaire said he was able to speak with a live person most times he called, but the information he got was often far from helpful.

“I think a customer bill of rights is a great idea to ensure that there are ways for customers like me and others to reach out and ensure that we get a real person who’s aware of the situation,” Allaire said.

The report also says utilities must improve communications with neighboring utilities, local governments and emergency services as part of their preparations for major storms. Additionally, the report focuses on heading off problems that led to many of the outages during Beryl.

“It looks like they’re asking for a more standardized series of pole inspections and replacement, basically replacing poles that may not meet current standards for resilience to wind,” said Ted Kury, director of energy studies at the University of Florida’s Public Utility Research Center. “Also, something the commission noted is that there is no standard for vegetation management in Texas.”

Zanto Peabody, who lives in Kingwood, said storms regularly down power lines in his heavily wooded neighborhood. Like Allaire, Peabody was without electricity for 10 days after Beryl.

“Definitely, maintenance around the lines has got to be a priority,” Peabody said. “That’s one of the things I’m hoping most for, is that the pathways for the lines will be maintained clear of vegetation that is going to short out the lines or knock the lines down in a storm.”

The report puts responsibility for dealing with most of these problems on the utilities.

“CenterPoint has to act on it, basically, and I think they already are,” said former Harris County Judge Ed Emmett, now an energy fellow at Rice University’s Baker Institute. “CenterPoint has addressed that publicly over and over and over and said, ‘Yes, our communications were terrible. We have now got a much more robust system.'”

In a statement to Houston Public Media, CenterPoint said it’s taking steps to protect against future hurricanes and major storms. The company said it is “implementing improvements recommended by an independent third-party expert and [has] already completed or begun two-thirds of their 77 recommendations.”

The costs to CenterPoint and its ratepayers

Kury from the University of Florida said one way or another, any measures CenterPoint takes to improve service will come back to ratepayers in their bills.

“Those costs are ultimately going to be borne by the people, but the people are also the ones that bear the cost of decreased quality of service and decreased access to service [if CenterPoint were to do nothing],” Kury said.

Emmett, who previously served both as a lawmaker and regulator, said he thinks ratepayers won’t see those increases on their bills immediately.

“My guess is the CenterPoint executives and the PUC commissioners would like to push this down the road a little bit so that it’s not such an immediate pain for the ratepayers,” Emmett said.

In the aftermath of Beryl, CenterPoint sought to withdraw a rate increase it had requested from the PUC in March. That brought a formal protest from Houston-area cities and consumer groups, who argued CenterPoint was seeking to avoid a formal review that might lead to its rates being lowered. The utility ultimately agreed to the review.

Any rate increase will have to come with the approval of the PUC, which is likely to deliberate on any such rate case in the aftermath of its audit of CenterPoint. Rábago said he hopes his successors on the commission will engage in some serious introspection.

“While we’re wringing our hands and looking to point fingers, I wish some of these people would realize that they’re responsible for the climate that they created and that the PUC should start with, ‘What about our regulatory framework contributed in any way to this event and these consequences,’” he said. “Now, they may absolve themselves, but they all ought to at least ask the question.”

That’s likely to pose uncomfortable challenges to the commissioners when it comes to whether the PUC erred in such matters as allowing CenterPoint to lease mobile generators for more than $800 million, not to mention granting any previous rate increases.

“What if the PUC hadn’t been as diligent as they should have been over the years,” Emmett said. “Audits can cut both ways. If the audit turns out that, no, CenterPoint followed all the rules and they stayed within the lines of the PUC decision, then the PUC has got to look at themselves and say, ‘Well, did we make the right decision when we granted them the original rate?'”

Even if the PUC doesn’t take a financial bite out of CenterPoint in the form of lowering its rates in the wake of the audit, lawmakers could make certain that it and other utilities pay a much higher price if they allow the power to go out for extended periods in the future. The PUC’s report recommends the Texas Legislature raise the penalty cap for utilities in the event of electric service quality violations. Right now, that cap stands at $25,000 for an entire reporting year.

“I think that’s unbelievably too low,” said Peabody, the Kingwood resident. “I understand that a utility is guaranteed profit for delivering the service. So, I think that, for not delivering the service, they should not be guaranteed profit for that. I think that it should cost them.”

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