Securitization: What you need to know
Where does the electricity come from?
CoServ is an electric distribution utility that delivers electricity to nearly 300,000 electric meters throughout North Texas.
As of March 1, 2023, CoServ controls 100 percent of our power purchases from a mix of suppliers, including power plants and renewable energy sources across the state. That gives CoServ the flexibility to meet its energy needs while saving money for our Members.
CoServ previously purchased the majority of its power from Brazos Electric Power Cooperative. CoServ’s contractual obligation to purchase power from Brazos ended on Feb. 28, 2023, as part of Brazos’ bankruptcy settlement.
From the point of generation, the electricity flows on transmission lines to the substations throughout North Texas. Brazos still owns the transmission lines and substations that deliver power to CoServ. The substations step down the voltage before it flows onto CoServ’s local distribution lines and equipment that deliver power to our Members.
The Brazos Bankruptcy
Brazos filed for bankruptcy in the aftermath of Winter Storm Uri, the extraordinary weather event that caused several Brazos power plants to fail. After its plants failed, Brazos could not meet its obligations to supply power to its 16 members, including CoServ.
Brazos’ generation failures left Brazos short on electricity at a time when prices were at the highest levels allowed in the ERCOT market at the time, $9,000 per megawatt. Brazos’ purchases of electricity at those high prices led to Brazos filing for bankruptcy in March 2021.
CoServ works for our Members
In the week leading up to Uri, CoServ anticipated severe conditions and proactively purchased additional power to serve our Members. Ultimately, those power purchases covered most of the 25% of power supply not supplied by Brazos plants. These purchases were made at much lower market prices than the prices in effect during Uri. This proactive action by CoServ saved our Members approximately $150 million, reducing the overall financial impact to our Members.
As previously stated, CoServ now has full control of its power purchases and expects to continue passing on savings to Members.
CoServ also successfully negotiated a settlement with Brazos that further reduced the debt owed by $124 million, lowering the impact on our Members.
Brazos Bankruptcy Impact to Members
As a result of Uri, the Texas Legislature enacted Senate Bill 1580 (codified at Texas Utilities Code §§ 41.151 – 41.163), which allows electric cooperatives to utilize a financing mechanism called securitization to pay the extraordinary costs and expenses from Uri. On September 14th, 2022, your CoServ Board of Directors voted to adopt a Financing Order pursuant to Senate Bill 1580 authorizing a securitization financing transaction.
The securitization financing will allow CoServ to spread these extraordinary Uri costs and expenses over a period of 25 years, keeping your monthly bills lower than they would be absent the securitization financing.
CoServ Members began seeing the Securitized Charges Recovery Factor (SCRF) appear on their bills in January 2023. At present, the SCRF adds $0.0049 per kWh to your bills or approximately $4.90 per 1,000 kWh used.
Estimated Residential Impact
This amount will be added to your bill
Average = 1,350 kWh
| 500 kWh | 1,000 kWh | 1,500 kWh | 2,000 kWh |
|---|---|---|---|
| $2.45 | $4.90 | $7.35 | $9.80 |
Estimated Commercial & Small Public Buildings Impact
This amount will be added to your bill
Average = 1,500 kWh
| 1,000 kWh | 1,500 kWh | 2,000 kWh | 2,500 kWh |
|---|---|---|---|
| $4.90 | $7.35 | $9.80 | $12.25 |
Estimated Industrial & Large Public Buildings Impact
This amount will be added to your bill
Average = 40,000 kWh
| 30,000 kWh | 35,000 kWh | 40,000 kWh | 45,000 kWh |
|---|---|---|---|
| $147.00 | $171.50 | $196.00 | $220.50 |
Calculation: kWh x Securitized Charges Recovery Factor = Total additional charges
The amount charged on a per kWh basis will be reviewed at least every six months and adjusted as needed. This ensures that CoServ is collecting the appropriate amount. As CoServ continues to grow, the per-kWh amount charged should gradually reduce due to additional contributions from new CoServ Members. CoServ has reduced the SCRF twice since 2023.
The Brazos Electric Ratepayer Hardship Fund provides bill credits to eligible low-income residential Members to help offset some of the financial impacts due to the high costs incurred during Winter Storm Uri. Click here for additional information about the program, including eligibility requirements, and to submit your application.
Looking Ahead
Under the bankruptcy reorganization plan filed by Brazos, Brazos sold its generation assets in 2023. Additionally, CoServ no longer has a power purchase agreement requiring us to buy power from Brazos.
CoServ can now purchase power directly from any of the more than 500 generating plants and other power traders that sell power in the ERCOT market. By directing our own power purchases, CoServ expects that it will save millions of dollars per year relative to the costs that we previously paid to Brazos.
We firmly believe that this ability to buy competitively in the power market will allow CoServ to mitigate the impacts of the securitization charges that our Members will see on their future monthly bills. Because we will be able to reduce our power purchase costs it will lower the costs that are passed through to our Members, ultimately balancing out the securitization charges.
ERCOT
It is important to remember that the effects of Uri and the extraordinary costs that were incurred during this time, not only affected CoServ but all of Texas under ERCOT.
Retail Electric Providers and Cooperatives alike are having to distribute these costs to their customers and Members. It's important to note that REPs may not itemize the Winter Storm Uri charge on bills and aren’t obligated to communicate about it.
Annual Securitization Notice
NOTICE: Pursuant to a securitization transaction authorized by a Financing Order adopted in September 2022 by the CoServ Electric board of directors under Subchapter D of Chapter 41 of the Texas Utilities Code (the “Financing Act”), (i) CoServ Securitization 2022, LLC (the “Bond Issuer”) used proceeds from its issuance of Securitized Bonds (as defined in the Financing Act) to purchase Securitized Property (as defined in the Financing Act) from CoServ Electric, and (ii) CoServ Electric used the sale proceeds to pay extraordinary costs and expenses arising out of the February 2021 Winter Storm Uri. The SCRF charge on your monthly electricity bill includes Securitized Charges (as defined in the Financing Act) remitted to and used by the Bond Issuer to pay the Securitized Bonds. The Securitized Property and the Securitized Charges are owned by the Bond Issuer and not CoServ Electric.
FAQ
No. We are committed to providing safe and reliable power at a reasonable cost to all Members.
There are no state or federal funds available to recover the winter storm costs. State lawmakers enacted Senate Bill 1580 allowing the use of securitization for cooperatives to address certain weather-related extraordinary costs and expenses.
The Financing Order calls for the recovery of these extraordinary costs and expenses to be spread over a period of 25 years to keep your monthly bills lower than they would be absent securitization.
The amount charged on a per kWh basis will be reviewed at least every six months and adjusted as needed. This ensures that CoServ is collecting the appropriate amount. As CoServ continues to grow, the per-kWh amount charged should gradually reduce.
CoServ has already reduced the SCRF twice since 2023.
Following Winter Storm Uri in February 2021, Brazos filed for bankruptcy and did not bill its member cooperatives for most of the costs of Winter Storm Uri pending the outcome of the bankruptcy. When the bankruptcy plan was approved in November 2022, CoServ owed $451 million, but it could have been $700 million if CoServ had not acted proactively to reduce costs (see graph above) for electricity purchased during Winter Storm Uri.
The Brazos Electric Ratepayer Hardship Fund provides bill credits to eligible low-income residential Members to help offset some of the financial impacts due to the high costs incurred during Winter Storm Uri. Click here for additional information about the program, including eligibility requirements, and to submit your application.
Most have implemented or are considering increases to recover winter storm costs. Many have higher costs to recover.
Yes. Per Senate Bill 1580, all Members in CoServ’s service area are required to pay the securitization charges.
Because everyone’s usage is different and the securitization charge is per kWh, the charge will be different from Member to Member.
The average residential Member will see an increase of about $6.62 per month based upon an average usage of 1,350 kWh.
No. The unprecedented costs from Winter Storm Uri will affect everyone, including the retail electric providers (REPs) in Texas. Based on CoServ’s analysis, REPs have increased the margins embedded in their rates to help them recover from Winter Storm Uri.
In December 2024, the average REP rate was 14.78 cents per kilowatt-hour for a fixed 12-month plan based on 2,000 kilowatt-hours of usage, as shown on PowertoChoose.org. That’s 2 cents higher than CoServ’s rate for the same month. For a true apples-to-apples comparison, both the average REP rate and CoServ's rate are calculated with all applicable energy, wires, and customer charges factored in. Click here to view the current rate comparison.
It's important to note that REPs may not itemize the Winter Storm Uri charge on bills and aren’t obligated to communicate about it. CoServ has been open and transparent about the charge from the beginning and has lowered it twice in the last two years.
Per Senate Bill 1580, all Members in CoServ’s service area are required to pay the securitization charges.
During the storm, ERCOT, which manages the flow of electric power for about 90 percent of the state, ordered all utilities, including CoServ, to conduct rotating outages to protect the integrity of the grid. As we were allowed to restore power, CoServ employees worked diligently and tirelessly in the aftermath to restore power to all Members in a timely manner.
No. Because CoServ is a distribution cooperative and does not generate its own electricity, we must buy power on the ERCOT market, along with the rest of the state. Because of this, when it comes to electricity, there must be enough supply to meet demand. If demand surpasses supply, the potential exists for the entire electric grid to collapse.
To prevent this, ERCOT has established a series of emergency actions that can be implemented. These actions can include requiring rotating outages during extreme conditions to maintain grid stability. If rotating outages are required, CoServ and all other utilities under ERCOT must comply.
To learn more, visit CoServ.com/TexasGrid.
Additional Resources:
Documents:
Related Content:
- Financial Assistance
- How is my bill calculated?
- Understanding Your Bill
- Senate Bill 1580
- Texas Utilities Code §§ 41.151 – 41.163.
Have questions? Please email Brazos@CoServ.com.