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.