Electric utilities don’t say no to new hookups. All are welcome, except data miners, and that is negotiable.
In Texas, even without data miners, power demand is growing rapidly — and growing in ways that require a lot of electricity. New residents are pouring in from California, Florida, Georgia, Illinois, and even the bordering states of Oklahoma and Louisiana, according to a number of relocation surveys.
All have one thing in common: They want an uninterrupted electricity supply to buttress themselves against the torrid Texas summers.
Additionally, high-tech firms are moving to Texas in record numbers, lured by low taxes, a barrel of incentives and the expectation that the state will be business friendly, and regulation will be light.
Elon Musk is spreading his enterprises across Texas, from a SpaceX launch facility in Brownsville to a huge Tesla
TSLA
car plant in Austin. His tunneling company, The Boring Company, also has a presence.
These high-tech companies are computer-heavy and need electricity in abundance for every operation. The concrete and steel roots of the virtual world are increasingly in Texas.
Then there are the data miners. They are mobile; seek cheap electricity in great quantities, usually in rural areas; and create unique headaches for the utilities that service those areas. Utilities like data miners when there is surplus power but worry about the cost of new infrastructure to serve them and whether they will last in their chosen locations, or whether cryptocurrencies are here to stay.
These happenings are realities for David Naylor, chief executive of Rayburn Country Electric Cooperative, Inc., a generation and transmission cooperative based in Rockwall, Texas. Rayburn’s mission is to serve the four distribution co-ops which make up its membership.
Constant Need To Build
Naylor told me Rayburn isn’t in a supply crunch, but there is a constant need to build out the infrastructure to accommodate load growth. The immediate challenge is new transmission,
The four distribution co-op members it provides with power are in fast-growing locations north and east of Dallas. As the city grows, so, too, do demands on Rayburn and its members. Naylor told me he is talking to two data miners eyeing Rayburn’s low rates and semirural service area.
New transmission for Naylor and Rayburn is a headache, as it is for utilities everywhere. Naylor said they are very reluctant to use eminent domain and try to negotiate with landowners and jurisdictions.
Supply chain issues are increasing but not cripplingly so at present, he said.
Naylor likes to talk about the “shape” of Rayburn’s load, and, in that, the utility is lucky. It ideally fits the pattern, or shape, of solar generation. Rayburn’s peak, which is in the evening, is still compatible with the solar generation pattern – except toward the end of the peak, when solar falls away.
The utility’s load to date is 90 percent residential, so solar is ideal for new generation. It hasn’t renewed power purchase agreements for wind and has concentrated new purchases on solar. Rayburn owns only one generating source – 25 percent of the Freestone Energy Center, a 1,038 MW, natural gas plant which it bought from Calpine, which owns 75 percent of it.
“The Covid-19 lockdown was very interesting,” Naylor said. “Our load went from a peak just after dawn, when everyone gets up and turns on their electric appliances, to a peak in the evening, starting at 5 p.m. But with the lockdown, the shape was more like the weekends.”
Bond Rating Back
The devastating storm Uri in February 2021 still hangs over the Texas utility scene. Rayburn settled with the grid operator, Electric Reliability Council of Texas (ERCOT), and has paid its outstanding invoices, which were presented after electricity prices increased astronomically during the crisis.
It did this by issuing $908 million in bonds, spreading the cost recovery to consumers over many years. In choosing securitization, an option created by the Texas Legislature, Rayburn was out in front.
“We are a favored child at ERCOT these days,” Naylor said. “Our bond rating is back up to investment grade at BBB minus, but not as high as it was before Uri.”
Nonetheless, Naylor regretted what he described as the “politicization” of the debate around ERCOT at a time when it is being reimagined. He said his members couldn’t afford political contributions of the size some other Texas companies have made. “But it’s harder to get a hearing when you don’t have the resources to do that kind of thing,” he said.
You won’t find the word “yeoman” in the nomenclature of the utility world, but in studying Rayburn, that is what comes to my mind. Yeoman as defined by the Britannica Dictionary: “Very good, hard, and valuable work that someone does to support a cause, to help a team, etc.”
That description also applies to the panoply of small utilities — most of them among the 900 rural electric co-ops — that combine to play an essential role in the matrix of electric utilities, ranging from the behemoths of the investor-owned community down to the smallest rural entity.
This will be testing summer for all utilities. There have been warnings from the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation that there will be shortages, especially in the West and the Midwest this summer, resulting from severe weather and reduced hydro production in the drought-stricken Western states.
Naylor told me that Rayburn has assured supplies for its members but, of course, he can’t speak for ERCOT.
By training, Naylor is an electrical engineer. He said loved numbers, but he was determined not to follow in his accountant father’s footsteps. “Once, when I was working as a consultant, after graduating from the University of Oklahoma with a degree in electrical engineering, I was driving with my father. We were talking about depreciation, and we started laughing,” he said. The apple hadn’t fallen far from the tree.
In parting, I asked Naylor what he looks for in new employees. “The ability to think,” he replied unhesitatingly. “Unlike big utilities, we can’t afford to hire people who tick boxes. I’d put my people up against the best in the business.”
