Consultant: Georgetown wise to seek third party to manage energy contracts

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Georgetown should move forward in hiring a third party to manage its electric contracts and take steps to increase oversight and accountability in the city’s decision-making, according to an outside consultant’s report presented May 14 to City Council.

The city hired Schneider Engineering this spring to complete an assessment of the city’s electric resource management after several years of budget deficits tied to Georgetown’s contracts with wind and solar power producers.

City officials will host a public meeting at 6 p.m. May 20 to present the report’s findings and answer questions. The meeting will be in the Council & Court Building, 510 W. Ninth St., Georgetown.

Schneider estimated the assessment would cost about $30,000 to complete.

Steve Moffitt, a partner with Schneider, shared conclusions, key findings and recommendations with City Council during a May 14 policy workshop.

Among the Schneider report’s highlights is a recommendation for the city to hire a third party to manage Georgetown’s existing energy contracts, Moffitt told council members.

City officials have already made progress toward that goal, issuing a request for proposals in February seeking management services for its energy contracts. City Council will need to approve whichever outside firm is selected to take the job.

Georgetown officials are trying to reduce the excess amount of energy the city is obligated to buy through its contracts with wind and solar power producers. The situation caused a $6.84 million deficit in the city budget’s electric fund for fiscal year 2017-18.

Projected energy costs for Georgetown between 2016-18 were $26 million lower than what the city needed to meet its contractual obligations and provide electric service.

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. The increase will generate about $6 million to help offset cost overages should they occur again this year, according to the city.

Report’s findings

Schneider’s report includes a variety of information on the city’s energy resources, including historical background and financial impacts as well as the city’s organizational structure and issues involving Texas’ wholesale energy market.

Moffitt told council members that having deeper expertise from outside energy consultants would help the city better manage its energy portfolio within the often-changing dynamics of the wholesale market.

In addition to hiring outside management, the report recommends the city establish oversight processes, including new reporting guidelines and contract valuation procedures. Georgetown should establish new measures to evaluate its energy contracts and make better use of the PCA to recoup costs associated with energy purchasing, the report states.

The report also recommends the city “leverage internal and external resources to increase oversight and accountability for decision-making regarding portfolio management.”

Schneider’s report states the city should develop a comprehensive risk management policy and consider creating a new oversight board for Georgetown Utility Systems, the city-owned utility.

City Council will start reviewing proposed agreements with a new energy portfolio manager this summer to begin the process of implementing new procedures based on the assessment, according to City Manager David Morgan.

Read the full assessment:



City of Georgetown Electric Resource Management Assessment Report (Text)

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  1. The report also included studying, “the implications of opting in to the competitive retail market to fully mitigate the City’s risks associated with operating the utility.”

    I am not able to attend the May 20th meeting where the report will be discussed and questions will be fielded. If I could attend, I would press for answers to the following questions:

    1. Why did it take three years and a gross loss of 26.4 million on the wind and solar contracts for the council to realize that GUS’s risk management policies, procedures, and practices are deeply flawed?

    2. Why is Georgetown Utility Systems’ in the electric service business? It is not in the gas, telecommunications, or cable businesses, which are like kind utilities. GUS has approximately 25,000 customers. Compare this number to Oncor, which has more than 3.4 million customers. GUS lacks the size and expertise to leverage the best outcomes for its captive customers. It is hard to imagine that a major electric energy service provider, e.g. Oncor, CenterPoint Energy, AEP, etc. would have made the contracting mistakes that GUS made on the wind and solar contracts.

    3. What is it about Georgetown’s residents that prohibits them from participating in competitive retail electric energy market, which is the case for approximately 85 percent of their fellow Texans? If people in Georgetown could choose an electric service plan that best meets their needs, as opposed to the needs of the city council, they would not have to worry about how GUS gets out of its current mess. They could simply switch providers; they could sign up with a Retail Energy Provider that knows what it is doing.

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