Energy Gang – "How a Texas electric co-op rebuilt for reliability"

Host: Ed Crooks (Wood Mackenzie)
Guests: David Naylor (President & CEO, Rayburn Electric Cooperative), Chris Addison (General Counsel, Rayburn Electric Cooperative)
Date: January 27, 2026
Sponsored by: Rayburn Electric Cooperative

Overview

This episode explores how Rayburn Electric Cooperative, based in North Texas, fundamentally transformed its approach to grid reliability and risk management in the wake of Winter Storm Uri, which exposed deep vulnerabilities in the Texas power system in 2021. Host Ed Crooks leads a conversation with Rayburn’s leadership about financial innovation, legislative action, corporate strategy, and what their journey can teach others in the industry—especially as Texas faces explosive growth in electricity demand.

Key Discussion Points & Insights

1. Rayburn’s Model: The Co-op Difference (04:18)

• What is a Co-op?
  David Naylor explains that, unlike investor-owned utilities, electric co-ops are not-for-profit and owned by the customers they serve ("members"), who vote for the board and have a direct voice in how the co-op is run.
• Rayburn’s Scale & Reach:
  • Serves ~625,000 North Texans via four member co-ops
  • Responsible for both generation and transmission

Notable Quote (David Naylor, 05:03):

"Our customers are our owners, so we call them members... If you buy electricity from a cooperative, you are also an owner of the cooperative."

2. The Shock of Winter Storm Uri (06:37 – 10:00)

• Magnitude of the Crisis:
  • Storm killed hundreds and caused massive outages and sky-high wholesale prices.
  • For Rayburn: "Three years of power cost in a five-day period" (07:10)
  • Hit the market cap price ($9,000/MWh) for days.
• Immediate Financial Fallout:
  • Rayburn faced almost $1 billion in costs due to being insufficiently hedged overnight, when prices wouldn't normally spike.

Notable Quote (David Naylor, 08:28):

"The market cap was $9,000 a megawatt hour. ... We incurred about almost a billion dollars worth of cost."

3. Responses: Securitization & Legislative Change (10:19 – 14:56)

• Securitization as Lifeline:
  • To avoid bankruptcy and protect members from an untenable cost burden, Rayburn spearheaded legislative change so it could use "securitization" (long-term bond financing) to spread costs over 28 years.
  • First co-op in the U.S. to do this.
  • Bonds were AAA-rated.

Notable Quote (David Naylor, 12:33):

"We ended up doing a securitization which had never been done before by a cooperative. ... We were the first co-op in the nation to securitize—has been very successful."

4. Rethinking Risk: From Market Reliance to Asset Ownership (14:56 – 19:51)

• Strategic Pivots Post-Uri:

  • Shifted from relying heavily on the ERCOT market to owning physical "steel in the ground" (i.e., power plants).
  • Realized depending solely on the market was too risky.
  • Purchased Rayburn Energy Station (758 MW gas plant) and committed to building RES2 by 2028.

• Enterprise Risk Management (ERM):

  • Instituted company-wide risk assessments, from energy markets to operations and disaster preparedness.

Notable Quote (Chris Addison, 15:27):

"Prior to Winter Storm Uri, it was more risky to own generation in the ERCOT market. ... For Rayburn post-Uri, it was even more important and less risky for us to now own generation."

Notable Quote (David Naylor, 16:10):

"We have a better shot of controlling our own destiny if we can help set whatever that price is..."

5. Upping Internal Expertise & Resilience (19:54 – 21:27)

• Staff Expansion:
  • Grew from ~75 to over 100 employees in 5 years; increased in-house power supply, IT, and legal capabilities.
• Physical Preparedness:
  • More linemen, improved outage management, enhanced vegetation and fire risk practices, acquired mobile generators for emergencies.

6. Asset Acquisitions: Rayburn Energy Station & RES2 (22:49 – 33:19)

• Why Buy a Plant?
  • As a not-for-profit load-serving entity, Rayburn offered certainty and stability to sellers and members.
  • The acquisition was about reducing risk and ensuring supply during market crises.
• Due Diligence and New Risks:
  • Focused on maintaining plant staff and reliability, ensuring robust gas supply contracts, and absorbing financial leap (assets grew from $450M to over $1B).
• Futureproofing:
  • RES2 will comprise ten 57 MW peaker units, ready to respond rapidly to system needs, with key equipment pre-ordered to sidestep supply chain bottlenecks.

7. Planning for Soaring Demand – Especially Data Centers (29:30 – 33:37)

• Growth Context:
  • Rayburn has been handling 10% annual growth; expects a further 25% increase over the next decade regardless of data center additions.
  • Potential quadrupling of load if current large-scale developments materialize.
• Meeting the Challenge:
  • Will rely on new dispatchable capacity and leverage site readiness (from RES1) for deployment speed.

Notable Quote (David Naylor, 30:04):

"If the data centers that we're talking to come on board ... we're going to quadruple in size."

8. The Affordability Equation & Member Engagement (33:53 – 37:32)

• Keeping Rates Stable:
  • Regularly model and communicate projected costs with members/board.
  • Use competitive market offers as a pricing benchmark.
  • Investments balance risk reduction, cost certainty, and future stability.
• Unique Governance:
  • The same people make decisions and pay the bills, creating incentive alignment and transparency.

Notable Quote (David Naylor, 34:41):

"The people who are paying the bills are the ones sitting on our board and sitting on our members' board. ... We're very mindful of the affordability."

9. Lessons for the Industry & Looking Ahead (38:52 – 44:35)

• Opportunistic & Innovative Culture:

  • Embraced never-before-tried approaches (e.g., legislative securitization, private plant auctions).
  • Will continue being "opportunistic" in pursuit of reliability and member value.

• Advice to Peers:

  1. Don’t let 'no' or tradition block needed change:
     —"Status quo is not company policy."
  2. Strong relationships matter:
     —Invest in stakeholder and employee communication and trust.
  3. Mission alignment drives resilience:
     —"Member focused, member driven" underpins all decisions.

Notable Quote (David Naylor, 41:35):

"You can't let 'no' get in your way. ... If we took that as an answer, then we wouldn't have securitization, we probably would have filed bankruptcy, which would not have been an option that we wanted."

Notable Quote (Chris Addison, 42:50):

"What I saw coming into this company out of Winter Storm Uri was the strength of relationships with your stakeholders ... and to surround yourself with good business partners that when a crisis like that comes, you can help each other weather that storm."

Memorable Moments & Quotes (Selected with Timestamps)

• On Co-op Governance (05:03, David Naylor):
  "If you buy electricity from a cooperative, you are also an owner of the cooperative."

• On the Scale of the Crisis (08:28, David Naylor):
  "The market cap was $9,000 a megawatt hour... we incurred about almost a billion dollars worth of cost."

• On Innovation (12:33, David Naylor):
  "We ended up doing a securitization which had never been done before by a cooperative..."

• On Risk Strategy Shift (15:27, Chris Addison):
  "Prior to Winter Storm Uri, it was more risky to own generation... Post-Uri, it was even more important and less risky for us to now own generation."

• On Future Growth (30:04, David Naylor):
  "If the data centers that we're talking to come on board ... we're going to quadruple in size."

• On Institutional Mindset (41:35, David Naylor):
  "You can't let 'no' get in your way. ... Status quo is not company policy. Innovation, I think, is critical to continue to move forward."

Timestamps for Key Segments

• Introduction & Rayburn Background – 00:00–05:45
• ERCOT, Co-ops, and Market Mechanics – 05:45–06:37
• Winter Storm Uri: Impact & Lessons – 06:37–10:00
• Securitization and Legislative Innovation – 10:00–14:56
• Risk Shift & Asset Ownership – 14:56–21:27
• Staff Expansion & Preparedness – 19:54–21:27
• Acquiring Rayburn Energy Station (RES1) – 22:49–29:30
• Growth, Data Centers, and RES2 – 29:30–33:37
• Affordability, Member Engagement – 33:53–38:46
• Lessons for the Industry & Outlook – 38:52–44:35

Conclusion

Rayburn’s journey from Winter Storm Uri’s devastation to industry innovation highlights why local governance, opportunism, and prioritizing reliability are vital in an era of growing grid challenges. Their pioneering securitization, embrace of risk management, and commitment to “status quo is not company policy” provide a model for co-ops and utilities facing extreme weather, market volatility, and demand shocks.

Final Words (David Naylor, 41:35):

"Innovation, I think is critical to be able to continue to move forward. ... These are probably the most exciting times we've ever had in the power industry."