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My TX power company is bankrupt
Old 06-08-2008, 08:07 AM   #1
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My TX power company is bankrupt

Fair warning - this is a long post that describes a uniquely Texas problem, except perhaps as a lesson on how one's budget needs to have a buffer for the unexpected.

A thread ranting about describing Texas property appraisals included some side discussion on the joys of electric power deregulation:

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Originally Posted by Basenji View Post
Let's not forget to thank the previous governor for pushing through "deregulation" that took Texas from lower-than-average rates to higher-than-average rates, and let's not forget to thank the current governor for insisting that it's all going very well, thank you.

(Oh, did we forget to mention that the price decreases would go to a few very large industrial consumers, while the 50-100% price increases would be reserved for residential consumers?)

[FYI - I put "deregulation" in quotes because it really was not deregulation; it was a badly mismanaged "restructuring" and partial reduction of regulation.]

A longtime Louisiana & Texas utility company employee recently told me, "In Louisiana, we would never shove so much of the industrial customers' costs onto residential customers like Texas does. Louisiana wouldn't let us, but Texas demands it."
Well, I'm about to become a casualty of one of the nastier side effects of the deregulation - my "Retail Electric Provider" filed Chapter 11 last week. http://www.star-telegram.com/804/story/685786.html

My adventure started in March, when I selected Riverway Power as my new retail company, at 2.5 cents per KwH cheaper than my old one. (I was at 14.5 before, I am now at 12 cents fixed for 12 months.) My switchover date was in early May.

For the uninitiated, the Texas system splits power generation, power delivery and retailing into three distinct universes. The power delivery companies - remnants of the old regional "power & light" companies - own the distribution wires and meters and remain tightly regulated. The generating companies and the retailers are deregulated on price and can charge what they want. Lots of retailers (maybe 20) sell power in my regional service area.

My small retail power company, Riverway, apparently didn't hedge properly in recent weeks and had to buy some of its power at a very high spot market price. When the Public Utility Commission came around to check their capitalization ratios, Riverway's bleeding was apparent and the PUC demanded more capital. Unlike three other companies is a similar bind who just closed up shop, my company ran to the courthouse and is asking a bankruptcy judge to solve their problem...by voiding fixed rate customer contracts like mine. The PUC, probably not expecting this, has thus far held off on transferring all of Riverway's customers to a "Provider of Last Resort" as they did with the other three.

Best I can tell, these are my options:
  • Dump Riverway, go back to the market and sign up with another company at the now-current 16 cent market rate. Riverway's customer service agent in Mumbai tells me that Riverway has generously waived their transfer fees. (He also says my first bill, which I will receive next week, will be at 12 cents.)
  • Sit tight and get the benefit of the cheap 12 cent rate while the court case moves along, but with the risk of either ending up with a) an unknown higher rate set by the judge or b) Riverway deciding to close their doors anyway, putting me with the POLR at a rate that news reports put at "above" 20 cents.
If I do end up with the judge's rate or the POLR, it will take a month or two to get switched back to one of the competitive providers.

I use at least a couple of thousand Kwh during a summer month, so all of these possibilities represent swings of $50 - $150 per month in my bill.

DW is for jumping ship to a 16 cent provider immediately, but I'm not so sure. Seems to me the bankruptcy judge will be hesitant to make a quick decision in a messy case like this, so waiting might be better.

Shoot, who knows?

So here's my question...should I pay off my mortgage early?
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Old 06-08-2008, 08:29 AM   #2
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Originally Posted by Htown Harry View Post
So here's my question...should I pay off my mortgage early?
Have you considered using the money to buy an annuity?
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Old 06-08-2008, 08:46 AM   #3
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Originally Posted by REWahoo View Post
Have you considered using the money to buy an annuity?
I am afraid your sarcasm will go unrecognized by some if it isn't pointed out for what it is.

This is another reason I consider Texas to be untenable as a primary retirement residence. I used to dream about my "river home" in the Hill Country but after seeing Missouri I realize how much better my options there would be.

Like I determined when I first moved to Houston in 1973, everyone is here for the money. I know what I am. I'm just taking the cash until it's over or I'm ready to go. Of course, the demise of my FIL is probably the primary factor in my retirement timing.
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Old 06-08-2008, 09:10 AM   #4
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There is a motion pending to reject a number of customer contracts that are unprofitable--a good chance yours is included. Things might happen relatively fast. Generally bankruptcy judges don't sit on this kind of thing.

The judge won't be setting the rate. If the contract rejections are approved, and they probably will be, then the company will negotiate a new rate with the customers and you can decide whether to accept or move to another company.

The problem is not knowing what the rates will be at that point.
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Old 06-08-2008, 09:16 AM   #5
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I am afraid your sarcasm will go unrecognized by some if it isn't pointed out for what it is.
Shirley not...(I know, "Don't call me Shirley!")

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This is another reason I consider Texas to be untenable as a primary retirement residence. I used to dream about my "river home" in the Hill Country but after seeing Missouri I realize how much better my options there would be.
Nothing better than the testimonial of dissatisfied customer to help dispell the rumor this is a good place to retire.

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... everyone is here for the money. I know what I am. I'm just taking the cash until it's over or I'm ready to go. Of course, the demise of my FIL is probably the primary factor in my retirement timing.
You need a new acronym: FILDRE (FIL Dead, Retire Early)
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Old 06-08-2008, 09:33 AM   #6
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Excellent. A potentially bad thread has taken a turn for the nurse. Its got everything! Power deregulation, politics, annuities, mortgage payoffs, and a 13 year old named Shirley masquerading as a moderator.

We thoroughly enjoyed the deregulation here in CA as well. All the 'competition' went belly up, rates went through the roof, Enrons fake blackouts intended to drive up costs and the subsequent return to exactly the same suppliers as before deregulation (only at much higher rates) was very pleasing.

My monthly bills before deregulation were about $100 a month. Now they're $225. Adjusting for inflation doesnt quite pick up that gap, even with the tin foil hat 10% inflation rate factored in.

As far as what to do, unless you can get a sweet rate in a renegotiation, I'd just wait it out and get the 12c as long as possible. I've found that trying to make shrewd and intelligent decisions has no payoff. Waiting to let the legislative or judicial branch to come along with a sweet solution to a bunch of bad taxpayer decisions seems to be the way to go. Just party on dude.
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Old 06-08-2008, 09:41 AM   #7
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You need a new acronym: FILDRE (FIL Dead, Retire Early)
That's very true. I am FI enough to RE and at 56 I guess that can still be considered "early." I thought about it quite awhile but until DW stops obsessing about not visiting her father 3+ times a week there doesn't seem to be any reason to retire unless I want to join her in the visits.

DW needs to either step back a whole lot so we could actually travel for extended periods or relocate. The other alternative is for FIL to join his DW (adjoining plot being held for his use). Since I don't see my DW changing her stripes, I will keep going to my over-paid, no stress j*b. I w*rk 4 days per week, have 4 weeks vacation and an option for unpaid leave. There doesn't seem to be much of a reason to not keep taking their money.
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Old 06-08-2008, 09:45 AM   #8
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Quote:
Originally Posted by Martha View Post
Things might happen relatively fast. Generally bankruptcy judges don't sit on this kind of thing.
Thanks, Martha, that's a valuable piece of information.

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Originally Posted by Martha View Post
The judge won't be setting the rate. If the contract rejections are approved, and they probably will be, then the company will negotiate a new rate with the customers...
...which will probably not be much different from the now-current 16-cent rates posted by Riverway's larger and stronger competitors. (sigh)

Oh well. I've had more expensive experiences in getting burned on a "too good to be true" deals. But it does chap my a&# that it's via a government-run marketplace.

CFB: I'm turning the thermostat down to 68 right now...I figure I'm in good shape through June at least.
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Old 06-08-2008, 11:58 AM   #9
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Originally Posted by cute fuzzy bunny View Post
...

We thoroughly enjoyed the deregulation here in CA as well. All the 'competition' went belly up, rates went through the roof, Enrons fake blackouts intended to drive up costs and the subsequent return to exactly the same suppliers as before deregulation (only at much higher rates) was very pleasing.

My monthly bills before deregulation were about $100 a month. Now they're $225. Adjusting for inflation doesnt quite pick up that gap, even with the tin foil hat 10% inflation rate factored in.
...
You must be mistaken.

We all know that deregulation always leads to lower prices and better service (I think it's stated in Leviticus).
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Old 06-08-2008, 02:54 PM   #10
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Chapter Two, in an e-mail that arrived today from Riverway:
On June 3, 2008, Sure Electric, LLC dba Riverway Power Company took the extraordinary step of filing for Chapter 11 protection in U.S. Bankruptcy Court (styled Sure Electric, LLC case no. 80-33664-H4-11) to protect assets for our creditors and to ensure the continuation of our normal business operations for our customers, which include the prevention of moving them to the Provider of Last Resort (POLAR). Without this action, our customers would have been subjected to paying very high cost for power. We value the trust our customers have placed in us and took steps to protect them from paying extremely high rates.
The events which caused Riverway Power to file for Chapter 11 protection were certain extraordinary and unprecedented market conditions and price fluctuations in the Energy Balancing Markets managed by the Electricity Reliability Council of Texas. These pricing conditions caused a financial responsibility requirement which must be met in 48 hours; not meeting the financial requirement would have resulted in Riverway Power customers being transitioned to POLAR. We maintain, as Riverway Power has always met its financial responsibility with ERCOT and never been past due in its payments to ERCOT, that this requirement was excessive and the calculations should be subject to further review.
Riverway has filed a motion seeking to terminate (reject) many of its contracts. While Riverway is seeking to terminate (reject) the contracts and no longer be their service provider under the terms of the existing contract, that they will continue to receive power and that Riverway is working with the appropriate agencies to provide alternatives to the customer. We intend to offer a new rate to the terminating customers; in addition we may offer a choice to move to other providers at a special negotiated rate for Riverway Customers.
At this time, you should wait for our next email informing you of the next step. Your power service will continue, and there will be no interruption of your service other than due to non-payment. We urge you to continue to pay your power bill as this will ensure continued service.
Riverway Power intends to maintain business as usual throughout the Chapter 11 proceedings. We intend to maintain our leadership as a low cost provider. Many power companies have emerged from Chapter 11 protection after restructuring themselves for success. We intend to do the same.
We value our relationship with you and want to provide the assurance that we will continue same level of service and support during this restructuring period. We thank you for your continued support and business.
Should you have any questions, please email them to [snip]

Thanks,
Riverway Power Customer Care.

Looks like I will be sitting tight for now, hoping for the slowest ERCOT, PUC & bankruptcy court rulings ever. (A decision that takes until November, when summer ends, would be perfect.)
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Old 06-08-2008, 04:12 PM   #11
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Htown...

Don't expect that your case will sit and you will get the low rate...

I was with one of the other providers you mentioned.... we got a letter saying there was a material change (or whatever the exact words were)... and they were raising the rate from 11.9 to the 16.5 (IIRC)... and that we could move and not pay a penalty (I had an 18 month contract)... well, ERCOT tried to contact them, but was unsuccessful.... but after the weekend they were in their offices... and said... well, never mind... I think it was two or three days later they locked up their doors and went under... It happened fast.. so I am in the 'high' rate for the next month... and then going to GEXA on their monthly contract... I am only doing this because I am hoping to buy another home and don't want to sign up for 12 mths....


SO, good luck to you... but I think you are.... as they say... up a certain kind of creek without a paddle....
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Old 06-08-2008, 05:24 PM   #12
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16 cents??
I'd be scanning Ebay for solar panels
Or a wind generator if you can put one up.
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Old 06-08-2008, 07:10 PM   #13
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16 cents??
I'd be scanning Ebay for solar panels
Or a wind generator if you can put one up.

I had read that spot prices last month were up into the 30 to 40 cent per KWH.... the POLR can charge based on these rates.... however, they are going to be 'nice' and only charge in the 20 to 25 cent range....

It is high here... and we use a lot in the summer.... I don't think I could generate enough to cover what I need for less than $25 to $35K.... so not worth the investment....
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Old 06-08-2008, 07:21 PM   #14
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I like this--the power company goes to the judge and asks them to reject some of the contracts because they are unprofitable. I wonder if the customers would have had any luck petitioning the judge for lower rates if they had locked in at 12 cents/kwh and the market price had gone to 8 cents?

Everyone who has bought/is considering annuities or LTC insurance polices, take note. "Judge, we'd like your help with these contracts since we aren't making money as we thought we would."
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Old 06-08-2008, 08:52 PM   #15
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I agree with your point of view samclem. A company CAN go out of business if they do things that prove to be foolish and unprofitable. But either party on a contract should not suddenly be able to reneg on it, just because they now they can see it was not as good a deal as they thought it was. I pointed this out during the many discussions in the forums about the foolish sub-prime loans that people took. I now can see, and use that same argument applied to big business. The "fairness" of a contract should have nothing to do with how much money (or not) either party has.
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Old 06-08-2008, 09:48 PM   #16
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hoping for the slowest ERCOT, PUC & bankruptcy court rulings ever.
You could help it along. Go to the courthouse and as soon as they call the case pull a fire alarm or bust open a water pipe or something. Might get hit with a fine but it'd probably still be cheaper than higher electric bills.

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Htown...
SO, good luck to you... but I think you are.... as they say... up a certain kind of creek without a paddle....
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Old 06-08-2008, 10:05 PM   #17
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Normally I'd agree with armor99 and samclem without reservation, but this mess has as its root problem bad politics and poor planning on the part of our state regulators.

Why are the small REPs getting squeezed? they are not capitalized well enough to handle the recent 4x daily price swings on the spot market

Why are there price swings of 4x in a single day? transmission line capacity is inadequate in central Texas, causing "congestion" that restricts the ability to get the juice to the Houston area

Why is the (regulated) transmission line capacity inadequate? apparently, because ERCOT hasn't noticed that many of the the biggest increases in generating capacity have been from wind power in west Texas

And why hasn't the PUC / ERCOT done something about it before these companies start bailing out of the market? Too busy patting themselves on the back for the "success" of deregulation, I guess.

Ironically, I actually give Riverway a small bit of credit here. Any action that will put some of the regulators under oath on a witness stand won't be all bad.

(end of rant)

Here's some articles describing the bigger picture:

New rules may ease power crunches | Chron.com - Houston Chronicle

Higher wholesale prices cripple small retail providers | Business | Star-Telegram.com

CFB: Don't tempt me...I...must...resist... ... ...

Oh, the heck with it. Hey REWahoo, when's the next rattlesnake roundup out your way?
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Old 06-08-2008, 10:12 PM   #18
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CFB: Don't tempt me...I...must...resist... ... ...

Oh, the heck with it. Hey REWahoo, when's the next rattlesnake roundup out your way?
They leave every hour on the hour. Got an opening at 2:00 tomorrow and since it's for a good cause I'm sure we can work you in.
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Old 06-09-2008, 12:42 AM   #19
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I am not going to give them a break... they KNEW how many customers signed up for their service and they KNEW about how much these people use.... it is not like it is a secret....

They CHOSE to not buy a fixed rate at the time you signed up to hedge their contract... they were going naked in the spot market... and they got burned... which, BTW means you got burned also..

I would agree that there should be some capital requirement increase if they want to get customers... but in the end... if the company is out of money, it is out of money and that is what the BK laws are for...

The other problem I have seen is that producers are building generating capacity at locations that can not transmit this capacity.... SO, my question is why should I have to pay to get major power lines built from West Texas to HTown so some greeny can feel good about buying wind power? Let them pay for those lines if they want to buy power that far away.....

Now, if it is a 'normal' line that has a problem like the one around (forget... Lufkin?) whereever... than I say build another line to fix the congestion... soooo, now... what is the ones that are part of the good for all and the ones that are for a specific few
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I’ve been POLRized
Old 06-11-2008, 11:00 PM   #20
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I’ve been POLRized

Here’s a [long] update on the soap opera.

On Monday, I got a legal notice in the mail that confirmed that my contract was indeed one of the ones that Riverway was asking the court to void.

It included this explanation for how they got themselves upside-down:
Since May 12, 2008, the Debtor has purchased electric energy from Fulcrum Power Marketing, L.L.C. ("Fulcrum") which is a power marketer and "QSE" or qualified scheduling entity. Additionally, the Debtor on occasion has been required to buy power directly from ERCOT or Electric Reliability Council of Texas.

On or about May 19 and 24, there was an unexpected high spike in the power usage by the Debtor's retail customers. This spike in usage coincided with a substantial increase in the cost of electrical energy and resulted in a demand by ERCOT for the Debtor to make an additional security deposit to it by June 3, 2008, which, if not paid, would result in ERCOT's transfer of all of the Debtor's customer to another service provider. The Debtor filed Chapter 11 to prevent the transfer of its customers and the loss of its business.

Hmmm, they got squeezed by some outfit named Fulcrum Energy..that’s ironic.

And then things started moving even faster than Martha predicted (excerpts from the Houston Chronicle):
June 9, 2008, 10:42PM

Riverway Power asked a bankruptcy court on Monday to dismiss its case, saying it cannot continue to operate.

Riverway said in Monday's filing that it "determined that it is not feasible to reorganize" after conferring with creditors about requirements by the state's grid operator, the Electric Reliability Council of Texas, that companies post collateral equivalent to three times their wholesale power costs.

Neither ERCOT nor the state Public Utility Commission are opposing Riverway's motion, according to court documents…

June 10, 2008, 5:16PM

A judge approved the cancellation of Riverway Power's bankruptcy this morning, effectively clearing the way for state grid operators to begin shifting the company's 6,200 customers to other providers beginning later today.

The Houston-based electric retailer filed for reorganization under Chapter 11 bankruptcy last week in an effort to avoid having all its customers moved to the provider of last resort — a retailer designated to take customers of companies that go out of business or leave the market.

…Hal Morris, a lawyer for the Public Utility Commission, who took part in the hearing by phone, said all Riverway customers should expect higher rates, at least in the short term. "Not only is there a likelihood, there's a certainty," Morris said.

June 10, 2008, 10:53PM

The state's electric grid operator has started moving all of Riverway Power's customers to new providers after the termination of the Houston company's bankruptcy filing Tuesday.

By Friday all of Riverway's 6,200 remaining customers, most of them residential, will be moved to the so-called provider of last resort — another retail electric company designated to take over service when a customer's original provider goes out of business.

June 11, 2008, 8:00PM

State electric grid operators continue to scramble for ways to fix the causes of recent wholesale power market spikes that helped put four electric retailers out of business.

...during an emergency meeting of the Public Utility Commission today officials described other causes of the spikes, including shortcomings in the way software systems used by ERCOT calculate market prices.

Typically prices in the balancing market are around the $100 range, but in May it briefly spiked several times, hitting $4,000 on one day, and on June 1 it hit $3,536.

The price spikes aren't signs of actual scarcity of power in the markets, observers say, but rather represent flaws in the rules used to run the markets.

"The last several weeks have been challenging," said PUC Chairman Barry Smitherman,
referring to the role the spikes played in driving the four retailers — E-tricity, National Power, PreBuy Electric and Riverway Power — out of business.

Yea, that’s it, Barry. It’s been “challenging”. Thanks for nothing, Doofus.

Posted sometime today on the Riverway site (and apparently written by the staff in Mumbai):
We would like to inform you that as Riverway Power filed for reorganization, we have decided no to pursue the reorganization. There were many factors which led to this sad decision, but nevertheless, it was our only option. Thus, we will be no longer be able to provide electric services to our customers. We are working with the Public Utility Commission to transfer our customers to Providers of Last Resort (POLR), so your services are not interrupted. We regret we were left with this painful and unfortunate option…
Translation: “Sorry, Harry, you’ve been POLRized”.

I didn't wait for this final nail in the coffin, however. Yersterday I had called my old power company and signed up for a 15.5 cent variable rate, which is about equal to the lowest posted on the board at the PUC site. They promised a Friday meter read and switchover date.

More irony…my first bill from Riverway arrived today, for May 5 through June 5.

Fortunately (surprisingly?) the rate was 12 cents per Kwh, as it was supposed to be.

But no one seems to know how the two weeks in between the 5th and this Friday will be billed. (Uh, oh...Friday the 13th!...more irony on the way?)

It seems possible I could end up with three bills for just two weeks of electric service: 1. a bill from Riverway based on my old rate with them 2. a bill from whomever the POLR provider is for the days I’m on that plan until switching to the new provider and 3. a bill from the new provider.

Having fun, wish you were here...
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