Still in the dark on Georgetown’s energy situation? Here’s a primer

Georgetownu2019s energy contracts have the city buying more energy than needed to meet demand in present day.

Georgetownu2019s energy contracts have the city buying more energy than needed to meet demand in present day.

Georgetown electric customers are seeing a new increase on their bills this month as city officials attempt to reduce costs associated with city energy contracts.

This year, the city needs to avoid a similar situation to the $6.84 million shortfall in the amount of money that was expected to be left in the electric fund budget for Georgetown Utility Systems at the end of the city’s last fiscal year on Sept. 30.

Officials attributed the shortfall to price and demand volatility in Texas’ wholesale energy market and on the structure of the city’s renewable energy contracts.

The contracts have led to Georgetown buying more energy than the city actually needs in present day.

“Ideally, you want to be contracting for the exact amount of energy that we need here locally, but the reality of our fast-growing community and the dynamic of how energy demand fluctuates just makes that a challenge,” City Manager David Morgan told Georgetown City Council in January.

The power cost adjustment, or PCA, portion of customers’ bills increased Feb. 1 by $0.0135 per kilowatt-hour, setting the new rate at $0.0175 per kilowatt-hour until September.

Actual monthly increases for customers will depend on how much electricity they use, but city estimates show a customer using the citywide monthly average of 949 kWhs will pay $12.82 more than before.

Missed projections in the electric fund have become a trend in recent years.

Budgeted costs between 2016 and 2018 were a combined $26 million lower than what the city needed to meet its contract obligations and provide electric service to customers, according to the city.

Officials compensated in the past through PCA increases 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 latest rate change follows a separate increase that began Jan. 1 of $4.80 to the base rate paid by electric customers. Increasing the monthly base rate, which is now $24.80 per residential customer, was necessary to cover growing operating costs for the city’s electric service, according to city officials.

The city announced Feb. 8 it issued two requests for proposals: one seeking a consultant to oversee its energy portfolio and another to review the city’s management of energy purchases. City officials 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.

After proposals and bids are received, Georgetown City Council will decide selections.


New strategy


Morgan said the increase to the PCA in February would generate about $6 million and help avoid another year of cost overage.

“It is really needed to ensure the stability of the electric fund,” Morgan said.

Morgan said the city has initiated talks to renegotiate its renewable contracts, and officials are also looking for utility companies or third-party brokers that might buy portions of the excess energy Georgetown acquires.

“Market fundamentals have changed significantly since our contracts were originally proposed and originally executed,” said Jim Briggs, the city’s general manager of utilities.

The contracts include a 20-year, 144 megawatt-hour capacity deal with EDF Renewables' 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.

City officials say they are bound by the terms of the renewable contracts from releasing specific rates or other details, and the Texas Public Information Act allows exemptions of certain contract details.

According to information the city has made available, 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, according to the city.

Power and money Sources: city of Georgetown, Georgetown Utility Systems/Community Impact Newspaper[/caption]

Decision points


Prior to the most recent budget shortfall, Georgetown officials touted contracts with wind and solar power producers as both an eco-friendly move and a win for the city’s financial future.

Georgetown was lauded as the largest U.S. city to transition to “100 percent” renewable energy, a designation that in Texas is based on a comparison between the amount of power purchased by utilities through contracts with renewable producers and the amount of power utilities pull from the statewide electric grid.

While the new solar and wind contracts make up the bulk of Georgetown’s energy portfolio, smaller portions come from a nonrenewable natural gas power producer through a contract that expires in 2021 and an additional contract with a smaller solar producer that ends in 2028.
“Market fundamentals have changed significantly since our contracts were originally proposed and originally executed.”
— Jim Briggs, Georgetown's general manager of utilities.

Briggs said during a presentation to council members in January that the city’s goals when negotiations with renewable providers first started in 2013 included finding competitive pricing; locking in long-term stable energy rates; and mitigating risk from outside regulatory, legislative and financial forces. Officials also sought to find deals to manage the city’s energy needs at times of peak demand as well as future needs as Georgetown continued to see fast population and development growth, he said.

At the time, market forecasts from the Electric Reliability Council of Texas, which manages sales on the state’s wholesale market, expected increased demand and prices during summer months to continue until 2021, Briggs said.

That trend would have allowed Georgetown to sell its excess power at well above the rates the city pays through its contracts, but a series of disruptions in the energy market mainly caused by weather, including Hurricane Harvey in 2017, along with the unexpected addition of several power plants in 2018 whose operation had previously been delayed, kept energy prices low, and the previous projections proved false, Briggs said.

Briggs told council members that moving forward, the city will base its energy strategy on market activity during the previous years.

ERCOT’s forecasts showing increased demand in recent years has largely been driven by needs from increasing oil and gas extraction in West Texas, according to the agency.

“ERCOT’s ability to meet Texans’ growing power needs through the record-setting summer of 2018 was supported by the actions taken by power suppliers and consumers, and the policymakers who are committed to the success of the ERCOT market,” ERCOT CEO Bill Magness said in a statement in a Dec. 4 news release.

Covering losses


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.

Revenue amendments included adjustments to account for changes to the PCA charge, eliminating anticipated bond proceeds and reassigning a portion of the money the city is due to receive from the Bloomberg Philanthropies Mayor’s Challenge.

Adjustments to budget expenses included reducing the annual transfer of money from the electric fund to the city budget’s general fund by $1.2 million, delaying several new hires, bond issuances and equipment purchases.

Editor's note: A version of this story appears on the cover of the February 2019 issue of Community Impact Newspaper's Georgetown edition. 
SHARE THIS STORY


MOST RECENT

ACC will offer students a pass or no-pass option for spring semester classes in response to the impact coronavirus has had on classes. (Jack Flagler/Community Impact Newspaper)
Austin Community College offers students pass or no-pass options for shortened semester

ACC will offer students a pass or no-pass option for spring semester class options in response to the impact coronavirus has had on classes.

Sendero Health Plans announced a new measure April 1 to help its members receive tests and treatment for coronavirus. (Courtesy Adobe Stock Photos)
Sendero Health Plans waives all costs for coronavirus testing and treatment for members

Sendero Health Plans announced a new measure April 1 to help its members receive tests and treatment for coronavirus.

The applications for aid will be accepted until August 1 or until funds are used, and they will be reviewed and awarded weekly. (Community Impact staff)
Georgetown Chamber of Commerce, Economic Development Department creating $200,000 relief program for small businesses

The applications for aid will be accepted until August 1 or until funds are used, and they will be reviewed and awarded weekly.

Texas Tribune: Some local elections in Texas moving ahead despite coronavirus spread

A handful of towns and special districts still plan to go ahead with their May 2 votes, arranging polling places despite calls from the president on down directing people to stay at home to prevent the spread of the deadly virus.

TasteMaker Meals offers a menu that rotates every six weeks. (Courtesy TasteMaker Meals)
Georgetown-based meal prep service offering free delivery through pandemic

TasteMaker is also donating $1 for every meal purchased toward providing elderly community members with necessities.

Lake Travis Fire Rescue is one of hundreds of emergency service districts serving millions of Texas residents across the state. Firefighters, EMTs and medical professionals said they are concerned about the availability of personal protective equipment as the coronavirus public health crisis continues. (Brian Rash/Community Impact Newspaper)
First responders, medical professionals across Texas worry about inadequate personal protective equipment supplies

In a survey of emergency service districts across the state, two-thirds of respondents said they were concerned about a shortage of equipment such as masks, goggles and gloves.

Woops in Georgetown is selling macaron decorating kits for Easter. (Courtesy Woops)
3 fun ways to entertain your kids and support local businesses in Georgetown

Looking to entertain your kids? We have some ideas.

Construction in downtown Austin
UPDATE: Abbott executive order deems residential construction as an "essential service" across the state

If Austin's residential construction ban holds, housing inventory may disappear within a few short months.

Data from the Texas Center for Nursing Workforce Studies shows that Central Texas will have a shortage of more than 7,000 registered nurses by 2030. (Graphic design by Shelby Savage/Community Impact Newspaper)
With Central Texas facing a nursing shortage, new rules could help more nurses join the fight against the coronavirus

With a potential shortage of 20,000 hospital beds in the local area by June, it is unclear if hospitals will be able to provide adequate staffing.

Georgetown ISD has extended its school closures through May 1 following Gov. Abbott's recommendation March 31. (Ali Linan/Community Impact Newspaper)
Georgetown ISD extends closure through May 1 following Gov. Abbott recommendation

Georgetown ISD has extended its school closures through May 1 following Gov. Abbott's recommendation March 31.

Dojo Kyle Jiu-Jitsu is located at 111 S. Main St., Kyle. (Courtesy Dojo Kyle Jiu-Jitsu)
4 Austin-area coronavirus stories from March 31

Here are four Austin-area stories pertaining to the coronavirus that you may have missed March 31.

Gov. Greg Abbott updated Texans and issued an executive order regarding the state's response to the ongoing COVID-19 crisis during a March 31 afternoon press conference. (Screenshot via livestream)
'Now is the time to redouble our efforts': Abbott issues executive order for state on COVID-19 extending school closures, clarifying essential services

Gov. Greg Abbott updated Texans and issued an executive order regarding the state's response to the ongoing COVID-19 crisis during a March 31 afternoon press conference.