After budget shortfalls, Georgetown will hand off energy management to a third party

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Georgetown will hire outside companies to oversee its energy portfolio and review its management of energy purchases that have brought several years of budget shortfalls totaling millions of dollars, according to a Feb. 8 news release.

The city’s projected energy costs between 2016 and 2018 were a combined $26 million lower than what was actually needed for Georgetown to meet its energy contract obligations and provide electric service to customers. That total includes a recent shortfall of $6.84 million for fiscal year 2017-18.

“Looking back, the focus on ensuring adequate supply to mitigate the high price of energy that was forecast overshadowed the consequences of having excess energy in a depressed market,” City Manager David Morgan said in the news release. “The city did not manage this risk well. We are focused on changing the way we do business as it relates to managing our energy portfolio.”

The city entered a 20-year, 144 megawatt-hour capacity deal with EDF Renewable Energy’s Spinning Spur 3 wind farm that began in 2015 and a 25-year, 150-mWh agreement with the Buckthorn solar plant, now owned by Clearway Energy, that began in 2018.

Georgetown also has smaller contracts with a wind farm operated by American Electric Power that expires in 2028 and a natural gas producer owned by Mercuria that will end in 2022.

To secure fixed rates from the wind and solar power producers, Georgetown agreed to buy more energy than the city needed. City officials said the strategy would account for future demand, and excess energy could be sold for profit on Texas’ bulk-energy wholesale market.

However, market projections that anticipated rising energy prices have not played out, leading to shortfalls.

Georgetown spent about $52.5 million in 2018 to buy more than 1 billion kWh of energy through all of its contracts combined. Energy usage last year was about 679 million kWh, or a little more than 63 percent of the total amount purchased, city records show.

In an effort to avoid another shortfall this year, the city increased the power cost adjustment portion of electricity customers’ bills by $0.0135 per kilowatt-hour, setting the new rate at $0.0175 per kWh. The city estimated that a utility customer using the citywide average of 949 kWhs of electricity per month will see a $12.82 bill increase.

A separate increase of $4.80 to the base rate for electricity customers began Jan. 1, which city officials said was needed to cover growing operating costs for electric service.

Georgetown City Council approved a series of budget amendments in December to account for the most recent shortfall, including a $4 million reduction in a budget fund for capital improvements.

The city compensated for previous shortfalls through rate changes as well as delays on some planned energy-related construction projects and using debt to pay for more immediate projects ready to break ground.

The city has set a Feb. 21 deadline for proposals to review the internal management of its energy contracts, and a March 7 deadline for proposals to take over management of the city’s energy portfolio.

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  1. Although they are a day late and a dollar short, this is a step in the right direction. It is, however, a classic case of closing the gate after the horses have bolted from the corral.

    Why did Georgetown Utility Systems (GUS) management and/or the Georgetown City Council not have this expertise in place before taking on the risks of long-term wind and solar contracts that apparently they did not understand?

    Why is Georgetown in the electric business is a larger question? It lacks the scale and expertise to leverage a good outcome for its constituents. For example, at the end of 2017, GUS had approximately 25,500-meter points. Comparatively, Oncor, which delivers electric energy to most of the communities surrounding Georgetown, i.e. Round Rock, Taylor, Hutto, Leander, etc., has approximately 3.4 million-meter points serving more than 10 million customers. It has the scale and expertise to avoid the mistakes made by GUS. If the city council were bent on doing the right thing, it would sell its poles and wires to one of the major T&D operators, e.g. Oncor, CenterPoint Energy, AEP, etc.

    GUS management argues that the utility adds value for the city’s residents although it is unable to be specific. The only apparent value is to hide the true cost of government. In 2017, the city council transferred $5.3 million in surplus earnings from the Electric Fund to the General Fund, thereby hiding the true cost of government.

    If the city council really believed that GUS is an invaluable asset, it would have no fear in opening the local market to competition, as is the case for 85 percent of Texans who can shop for an electric service plan that meets their needs and not those of local politicians. What is it about the people of Georgetown that makes them unlike the 85 percent of Texans that can buy electric energy in the competitive market? Why is competition good for most Texans but not for the people of Georgetown? Or Austin? Or San Antonio?

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