GRDA hands down $2.7 Million costs to Miami utility customers

The Grand River Damn Authority is aiming to recover costs incurred during the deep freeze of February 2021. Read the full press release from the city of Miami below:

The six-day extreme weather event, Winter Storm Uri, of February 2021 will result in an increase for City of Miami utility customers in electric billing of an average of a monthly $4 to $6 charge per 1000 kilowatt hours used starting in May.

This Power Adjustment Cost (PCAx) is due to the subsequent $2,698,459 in wholesale power charges from the City’s electric power provider Grand River Dam Authority (GRDA) that were incurred during the February 2021 ice storm. Miami customers used 15,636,304 kWh in Extraordinary Power Costs (EPC) energy during the weather crisis. GRDA notified the City of Miami by letter in August 2021 those expenses were being passed down to the City and should be paid in full to GRDA by Oct. of 2022. The City had until Oct.15, 2021 to choose a payment plan option.

After looking at options, the Miami City Council and Miami Special Utility Authority (MSUA) agreed the total amount due to GRDA will be paid from funds from the MSUA and if necessary, the City’s Rainy Day Fund, which could temporarily impact capital improvement projects.

Miami’s industrial use utility customers were notified in December of 2021 of their $1 million portion of the total PCA and have agreed to pay in full.

In turn the remaining $1.7 million in PCA costs will result in Miami’s commercial and residential utility customers seeing an increase. A new line item labeled (PCAx) will be added to monthly bills to recoup these GRDA rider PCA costs over the course of approximately three to four years. The PCAx rate charge will remain the same but the line-item charge will be adjusted for each customer’s usage periodically and will fall into the range per 800 to 1000-kilowatt hour usage of $4 to $6 on monthly billing. The formula used to calculate the PCAx rate charge is $ 0.005226 x kWh (on customers bill). For example, .005226 x 1000 kWh = $5.226

Once the funds have been recovered to fully pay the GRDA PCA of $2,698,459, the PCAx utility charge will cease and be removed from bills.

“The idea is to spread this out to lessen the impact to our utility customers,” Miami City Manager Bo Reese said, “This is something we have agonized over for months because we know this could greatly affect our customers.”

The issue was discussed at Monday’s MSUA and City Council meeting and is scheduled to be on the agendas for the Mar. 28 meetings and is set for a vote at the April 4 meeting.

MSUA/Miami City Councilman David Davis said, “This seems as fair as we can get.”

GRDA uses hydro, wind, coal, and gas sources for generation of power to supply the City of Miami and their other wholesale customers’ energy needs. Rolling blackouts were used to conserve energy during the 2021 extreme weather event. GRDA also resorted to buying natural gas to help meet the power generation needs of their customers including the City of Miami. GRDA’s total power costs for February 2021 totaled $115 million, which is equivalent to 72 percent of the year’s fuel and purchased power budget. The extraordinary costs associated directly with Uri accounted for $102,388,191 of that $115m total.

Natural gas prices peaked at a record high during the weather event from a cost of $2.85 per dekatherm to a cost of $1,100 per dekatherm for six straight days in February, according to Public Utilities Director Tyler Cline. Cline said because the City of Miami owns the utility service and upgrades were made to the system, blackouts requested by GRDA were adjustable locally to allow for warming periods to help keep Miami residents safe during the storm.

According to GRDA this added natural gas expense increase, as well as temporary service interruptions, lack of fuel supply, rapid reduction of energy imports, transmission congestion related issues, tightening supply conditions in neighboring areas and record wintertime energy consumption were all factors in driving up costs.

GRDA also experienced a major tube leak repair which caused one of their main coal power plant generation sources to go offline for three days, and the floodgates at Pensacola Dam froze during the extreme weather event. These factors reduced generation and the Southwest Power Pool (SPP) had to rely on energy from several sources. The SPP is a regional transmission organization (RTO): a nonprofit corporation mandated by the Federal Energy Regulatory Commission to ensure reliable supplies of power, adequate transmission infrastructure and competitive wholesale electricity prices on behalf of its members.

Other utility power providers such as KAMO and REC offset some costs to their customers resulting from the widespread 2021 ice storm. KAMO’s Chief Operations Officer Tony Gott said the Associated Electric Cooperative Incorporated (AECI) responded by recognizing $130 million in deferred revenue to fund its storm costs, all of which were expensed in 2021, as well as suspending member rate discounts for two months. The outcome of these actions served to limit the impact solely to AECI’s 2021 margins.

GRDA carries a Rate Stabilization Fund of $31.7 million, as they reported, but none of this fund has been offered or was used to offset the added expenses to the City of Miami customers. This fund gives financial flexibility and the ability to set rates to members based on long-term energy price expectations with the goal of avoiding volatile price changes to members. GRDA’s Communications Director Justin Alberty said this fund is part of GRDA’s cash reserve policy but cannot be used for PCA. fund cannot be used for PCA.GRDA did offer three financing options with additional interest accrual to the City of Miami and other consumers.

“Our focus during Uri was to deliver power to customers and maintain our portion of the electric grid,” GRDA President/CEO Dan Sullivan said in a statement, “Immediately after the event, we shifted that focus to developing a plan to deal with the financial impact in a way that would not significantly impact our customer rates. By stretching the cost recovery out over a longer period of time it will help to insulate our customers, and their end-users, from rate shock. That is the goal, to minimize the immediate financial impact but still recover costs associated with this extreme weather event.”

During the February 2021 winter storm dubbed Uri by the Weather Channel, an arctic air mass brought snow, ice, and extreme cold temperatures to the Central United States, causing record winter power demand and impacting power generation.

According to news sources, five of the largest utilities, Oklahoma Gas & Electric, Public Service Company of Oklahoma, Summit Utilities of Oklahoma (formerly Centerpoint), Oklahoma Natural Gas, and Arkansas Oklahoma Gas made nearly $3 billion-worth of emergency purchases between February 7 – 21, 2021