UPDATE (9:05 a.m., Feb. 20): CenterPoint Energy CEO Scott M. Prochazka has since been ousted. The company said Wednesday that John W. Somerhalder II will be interim CEO while the company searches for a permanent replacement for Prochazka.

ORIGINAL STORY: H-E-B, the San Antonio-based grocery chain, was experiencing so many power outages at its Houston-area stores that three years ago it began installing its own backup generators to keep food at the right temperature.

So when CenterPoint Energy, the regulated utility that distributes electricity to the Houston area, asked Texas regulators to raise rates this spring by $161 million and to boost its profit to 10.4 percent, H-E-B stepped up and said the utility didn’t deserve either.

The grocer took its complaints about unreliable service to the Public Utility Commission and ended up saving Houston area residents millions of dollars in transmission and distribution rates, according to regulatory filings. The increases would have raised electricity bills by $2.38 a month for Houston-area customers using 1,000 kilowatt hours of power.

The administrative law judges who heard evidence last year in CenterPoint’s rate case agreed with H-E-B and recommended that CenterPoint’s profit be reduced to reflect the reliability problems. CenterPoint told the commission that it fixed the issues raised by H-E-B and that it would be “arbitrary” and “punitive” to reduce the utility’s return on equity — costing it millions of dollars — because of H-E-B’s complaints.

Ultimately, CenterPoint negotiated a settlement with a $13 million rate hike, a fraction of its request, and a profit of 9.4 percent, even less than the 10 percent the utility has been allowed to earn over the past decade. The three-member commission approved the deal Friday.

The changes mean customers using 1,000 kWh will see their upcoming April bills decline by about 85 cents compared with what they paid a year earlier.

The outcome has made H-E-B an unlikely hero in a utility rate case that doesn’t typically attract much attention outside of big industrial power users, consumer advocates and municipalities.

During the case, H-E-B detailed its extensive problems with power outages across the CenterPoint service territory, including some that lasted for hours, and how it had to throw out refrigerated and frozen food that had thawed and spoiled.

Years of power outages

H-E-B testified that it has routinely faced power outages in the Houston area for years and brought the problems to CenterPoint’s attention in 2015, according to H-E-B testimony.

Some of the outages lasted for a minute while others have lasted more than 17 hours, according to testimony from George W. Presses, vice president of fuel and energy for H-E-B. Some stores experienced more than one power outage a day, but CenterPoint did nothing to fix the problems, Presses testified.

H-E-B had to come up with its own solution when CenterPoint didn’t stop the outages, so the grocer began installing on-site generators three years ago. The first effort was so successful with the back-up generators turning on within seconds after each power failure that H-E-B now includes on-site generation in all new facilities in the CenterPoint service area, according to Presses’ testimony. H-E-B did not disclose how much it spent on back-up generation.

During a recent media tour of H-E-B’s new store in Meyerland, the power went off twice, leaving reporters and H-E-B officials in the dark. Back up natural gas-fired generators automatically came on in three seconds and the lights came back on.

H-E-B has documented the outages since it began installing back-up generation. From January 2017 to May 2019 in the stores with back-up generation, H-E-B experienced 521 outages that lasted for a total of 20,000 minutes or about 333 hours, according to the company’s testimony.

Enchanted Rock, the Houston company that installed H-E-B’s back-up generators and which also is putting them in hospitals, manufacturing plants and retirement homes, said companies want more reliability than the power grid provides.

“They want no outages,” said Allan Schurr, chief commercial officer for Enchanted Rock, which sells excess power generated by the backup units to the Texas grid. “More and more customers are taking it into their own hands.”

H-E-B told the commission that it didn’t support CenterPoint’s proposed rate increase or higher return on equity because the utility has not demonstrated that it provides reliable electric service.

“CenterPoint should not be rewarded for providing intermittent service,” according to Presses’ testimony.

CenterPoint officials disagreed, telling the commission that the majority of outages at the 151 stores H-E-B had in the Houston area in 2015 occurred on days with bad weather. The utility spent $250,000 to make repairs that year, including replacing poles and transformers, according to testimony from Julienne P. Sugarek, vice president of power delivery solutions for CenterPoint.

The two companies didn’t meet again until last year, a get-together suggested by CenterPoint after H-E-B brought its reliability complaints before the Public Utility Commission. CenterPoint said H-E-B’s own backup generation had melted utility transformers and caused some of the outages, according to Sugarek’s testimony. CenterPoint said it offered to hire a consultant to study the issues.

Neither H-E-B nor CenterPoint would comment for this story.

Walmart also filed a complaint with the commission over CenterPoint’s request to boost its profit, calling the increase out of line, according to regulatory filings. Since 2016, the commission in other regulated utility rate cases has approved an average return on equity of 9.68 percent, according to Walmart.

“We are always looking for ways to save money and pass on lower costs to our customers and this equally applies to the energy rates we pay,” Walmart spokeswoman Anne Hatfield said.

Paul Takahashi contributed.

lynn.sixel@chron.com

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