heating up

CenterPoint Energy faces increased pressure to quickly restore service as city sweats after Beryl

With frustration growing, a CenterPoint Energy executive faced a barrage from city leaders who wanted to know why it was taking so long to get the lights back on again. Photo via Getty Images

Pressure mounted Wednesday on Houston’s power utility as millions of residents still had no electricity nearly three days after Hurricane Beryl made landfall, stoking questions over how a city that is all too familiar with destructive weather was unable to better withstand a Category 1 storm.

With frustration growing as Houston residents spent another sweltering day in search for places to cool off, fuel up and grab a bite to eat, a CenterPoint Energy executive faced a barrage from city leaders who wanted to know why it was taking so long to get the lights back on again. Mayor John Whitmire bluntly called on the utility to do a better job.

“That’s the consensus of Houstonians. That’s mine,” Whitmire said.

Late Wednesday, CenterPoint Energy said it had “restored more than 1 million of the 2.26 million customers impacted by Hurricane Beryl in the first 55 hours of its restoration efforts, and continues to focus on restoring customers without power.”

“Based on its continued progress, the company expects to have an additional 400,000 customers restored by the end of the day on Friday, July 12 and an additional 350,000 customers restored by the end of the day on Sunday, July 14,” the utility's statement said.

Beryl came ashore as a Category 1 hurricane, the weakest type, but has has been blamed for at least seven U.S. deaths — one in Louisiana and six in Texas. Earlier, 11 died in the Caribbean.

The storm's lingering impact for many in Texas, however, was the wallop to the power supply that left much of the nation's fourth-largest city sweltering days later in hot and humid conditions that the National Weather Service deemed potentially dangerous.

“Maybe they thought it wasn't going to be so bad, but it's had a tremendous effect. They needed to be better prepared,” construction worker Carlos Rodriguez, 39, said as he gathered apples, oranges and ready-to-eat meal packs at a food distribution center. His family, with two daughters ages 3 and 7, was struggling, he said.

“We have no power, we're going to bed late and I’m using a fan made out of a piece of cardboard to give my kids some relief,” Rodriguez said.

Hospitals were sending patients who could not be released to homes with no power to a sports and event complex where an area was set up to hold as many as 250 people. As of late Wednesday afternoon, about 40 patients had arrived and about 70 to 75 others were on their way, Office of Emergency Management spokesman Brent Taylor said.

Power outages peaked at 2.7 million customers after the storm made landfall Monday, according to PowerOutage.us.

As of late Wednesday afternoon there were 1.6 million customers without power in the Houston area, including 1.3 million CenterPoint customers.

Brad Tutunjian, the CenterPoint vice president for regulatory policy, defended the company’s response while facing pointed questions from the City Council and said more than 1 million customers had their power restored by Wednesday.

“To me, I think that’s a monumental number right there,” Tutunjian said.

The company acknowledged that most of the 12,000 workers it brought in to help the recovery were not in the Houston area when the storm arrived. Initial forecasts had the storm blowing ashore much farther south along the Gulf Coast, near the Texas-Mexico border, before it headed toward Houston.

CenterPoint would not ask third-party workers from other companies and municipalities to pre-position and “ride out” the storm “because that is not safe,” Tutunjian said. Instead they are asked to be as close as possible to respond after the storm moves through.

One major difficulty with Beryl was restoring power knocked out by fallen trees and branches, Tutunjian said.

“When we have storms such as this, with the tree completely coming down … taking out our lines and our poles, that’s where all the time comes in to do the restoration work,” he said.

But council members pressed for answers about why CenterPoint, which has been the Houston area for about 100 years, hasn't been more aggressive in trimming trees during calm weather or putting more of its power lines underground. The company has been putting new lines underground in residential areas for decades, Tutunjian responded.

Two council members said they received a text about a house that burned down after reporting a downed power line. The texts reported the fire department said it could not do anything, and the utility did not respond. City Council member Abbie Kamin called the extended lack of power a “life safety concern.”

It's hardly the first time the Houston area has faced widespread power outages.

In 2008, Hurricane Ike made landfall on Galveston Island as a Category 2 storm, causing flooding and wind damage to the Houston area. It left about 2.2 million CenterPoint customers without power, according to the Harris County Flood Control District, which said that 75% of the power was restored within 10 days.

Houston was also hit hard in 2021 when Texas’ power grid failed during a deadly winter storm that brought plunging temperatures, snow and ice. Millions lost power and were left to ride out the storm in frigid homes or flee.

As recently as May, storms killed eight people and left nearly a million customers without power.

Gov. Greg Abbott, who is in Asia on an economic development trip, questioned why Houston has repeatedly been plagued with power problems after severe weather. In an interview with Austin television station KTBC, Abbott, who has been governor since 2014, said he would direct the Texas Public Utility Commission to investigate that, as well as the preparations for and response to Beryl.

“CenterPoint will have to answer for themselves, if they were prepared, if they were in position,” Lt. Gov. Dan Patrick, who was acting governor with Abbott away, said Tuesday. “Their company is responsible for that. The state was in position.”

Sharon Carr, 62, a lifelong Houston resident, was frustrated.

“Every little thing affects us that way. There’s too much wind, we don’t have power. It’s raining a long time, we don’t have power,” Carr said. ”And it takes three, four, five days to get it back up. Sometimes that’s too long for people that are sickly, can’t stand the heat or don’t have transportation to get to cooling centers.”

Raquel Desimone, who has lived in the area since about 2000 and experienced many storms, was surprised at having to scramble yet again for power and shelter.

“I went through Rita, Ike, Imelda and Harvey,” Desimone said. “That the infrastructure can’t handle a basic storm, leaving for a Category 1, (it) is sort of crazy to me that I’m having to do this.”

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A View From HETI

Lawyers for a Tesla shareholder who sued to block the pay package contended that shareholders who had voted for the 10-year plan in 2018 had been given misleading and incomplete information. Photo via cdn.britannica.com

For a second time, a Delaware judge has nullified a pay package that Tesla had awarded its CEO, Elon Musk, that once was valued at $56 billion.

Last week, Chancellor Kathaleen St. Jude McCormick turned aside a request from Musk's lawyers to reverse a ruling she announced in January that had thrown out the compensation plan. The judge ruled then that Musk effectively controlled Tesla's board and had engineered the outsize pay package during sham negotiations.

Lawyers for a Tesla shareholder who sued to block the pay package contended that shareholders who had voted for the 10-year plan in 2018 had been given misleading and incomplete information.

In their defense, Tesla's board members asserted that the shareholders who ratified the pay plan a second time in June had done so after receiving full disclosures, thereby curing all the problems the judge had cited in her January ruling. As a result, they argued, Musk deserved the pay package for having raised Tesla's market value by billions of dollars.

McCormick rejected that argument. In her 103-page opinion, she ruled that under Delaware law, Tesla's lawyers had no grounds to reverse her January ruling “based on evidence they created after trial.”

What will Musk and Tesla do now?

On Monday night, Tesla posted on X, the social media platform owned by Musk, that the company will appeal. The appeal would be filed with the Delaware Supreme Court, the only state appellate court Tesla can pursue. Experts say a ruling would likely come in less than a year.

“The ruling, if not overturned, means that judges and plaintiffs' lawyers run Delaware companies rather than their rightful owners — the shareholders,” Tesla argued.

Later, on X, Musk unleashed a blistering attack on the judge, asserting that McCormick is “a radical far left activist cosplaying as a judge.”

What do experts say about the case?

Legal authorities generally suggest that McCormick’s ruling was sound and followed the law. Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, said that in his view, McCormick was right to rule that after Tesla lost its case in the original trial, it created improper new evidence by asking shareholders to ratify the pay package a second time.

Had she allowed such a claim, he said, it would cause a major shift in Delaware’s laws against conflicts of interest given the unusually close relationship between Musk and Tesla’s board.

“Delaware protects investors — that’s what she did,” said Elson, who has followed the court for more than three decades. “Just because you’re a ‘superstar CEO’ doesn’t put you in a separate category.”

Elson said he thinks investors would be reluctant to put money into Delaware companies if there were exceptions to the law for “special people.”

What will the Delaware Supreme Court do?

Elson said that in his opinion, the court is likely to uphold McCormick's ruling.

Can Tesla appeal to federal courts?

Experts say no. Rulings on state laws are normally left to state courts. Brian Dunn, program director for the Institute of Compensation Studies at Cornell University, said it's been his experience that Tesla has no choice but to stay in the Delaware courts for this compensation package.

Tesla has moved its legal headquarters to Texas. Does that matter?

The company could try to reconstitute the pay package and seek approval in Texas, where it may expect more friendlier judges. But Dunn, who has spent 40 years as an executive compensation consultant, said it's likely that some other shareholder would challenge the award in Texas because it's excessive compared with other CEOs' pay plans.

“If they just want to turn around and deliver him $56 billion, I can't believe somebody wouldn't want to litigate it,” Dunn said. “It's an unconscionable amount of money.”

Would a new pay package be even larger?

Almost certainly. Tesla stock is trading at 15 times the exercise price of stock options in the current package in Delaware, Morgan Stanley analyst Adam Jonas wrote in a note to investors. Tesla's share price has doubled in the past six months, Jonas wrote. At Monday’s closing stock price, the Musk package is now worth $101.4 billion, according to Equilar, an executive data firm.

And Musk has asked for a subsequent pay package that would give him 25 percent of Tesla's voting shares. Musk has said he is uncomfortable moving further into artificial intelligence with the company if he doesn't have 25 percent control. He currently holds about 13 percent of Tesla's outstanding shares.

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