Georgetown among wholesale customers upset over LCRA rates
After at least a year of paying what they said were higher electric costs than other Lower Colorado River Authority wholesale power customers, the City of Georgetown and six other utilities in the area accused the electric provider of breach of contract and threatened to end their contracts.
"Our electric customers—their price and what they have to pay—are the catalyst for the actions that we are taking. We are doing this in the best interest of our customers," Assistant City Manager Jim Briggs said.
In the breach of contract notice, the city said LCRA charged higher rates to utility customers that did not extend wholesale power agreements to 2041 despite a provision in the contract that said LCRA would provide electric power "at the lowest possible rates."
Contract dispute
City Council voted in June 2011 to end the city's wholesale power agreement in June 2016. At the time, the LCRA had rescinded a policy that allowed wholesale power customers to purchase a portion of their electricity on the deregulated wholesale market for pricing flexibility.
Briggs said LCRA has been offering that option to utilities that have contracts to 2041.
"We believe that LCRA is intentionally discriminating against those utilities that did not extend LCRA contracts," Briggs said in a statement. "Currently, a select group of LCRA's customers have access to the competitive wholesale market, but another group doesn't."
The notice gave LCRA 30 days to fix the breach, Briggs said. LCRA officials responded with a lawsuit.
"This issue is not a new one," said LCRA General Manager Becky Motal in a statement. "It has been an ongoing point of dispute since contract negotiations began several years ago. The 10 customers that elected to terminate their contracts in 2016 had the same opportunity as the 33 utilities that chose to stay with LCRA. The utilities alleging breach of contract appear to be cherry-picking one aspect of a detailed, complex agreement."
Temporary agreement
LCRA filed a petition in Travis County District Court on July 18 to stop the utilities from ending their contracts before they expire in June 2016 and asked a judge to rule that LCRA has not breached the contracts.
"LCRA has honored these contracts since 1974 and intends to continue honoring them until they expire in 2016. We are asking these seven customers to do the same," Motal said. "There is no breach, and we are confident a judge will agree with us. If these customers are allowed to end their contracts four years early, rates for the other customers likely will go up."
The two sides met in court July 24 in front of Travis County 53rd District Court Judge Scott Jenkins. They drafted an agreement that the utilities would delay issuing notices of termination until Aug. 13 at the earliest.
"I can't say that we will or won't [send notice to terminate our contract], but we will go per consultation with our legal staff relative to that issue," Briggs said. "Our goal is to either find what we believe to be fair and equitable treatment, or we will go for something else."
The agreement also expedited a full hearing that will determine if the court has jurisdiction over the case and LCRA's request to halt ending the contracts. If jurisdiction is determined, Briggs said the utilities would like to see the hearing moved out of Travis County. The hearing is set to begin Aug. 27 and is expected to last five days.
Power generation
The City Council adopted an integrated resource plan that outlines the types of power the utility would use to determine how to proceed with the LCRA contract. The goal is to have a diversified mix of power generation by 2030 that could be modified as the electric market changes, Briggs said.
"We made a business decision that it was not in our best interest [to continue to contract with LCRA]," he said, adding that LCRA is responsible to all its customers who have different needs.
"Those customers may be focused on one thing or another. They may be interested in price and don't care where [the energy] comes from," Briggs said. "They just want a low cost. For us, it's a little bit broader than that."
Concern that electric production types generating greenhouse gases such as coal could soon have more government regulation that would drive up costs also influenced the city's decision to diversify power generation types, he said.
"I become the aggregator of energy for [our customers]," Briggs said. "I'm not able to do that under the LCRA contract for [another 30 years.] I need more flexibility."
In 2011, about 4 percent the of LCRA's power sources came from renewable energy, LCRA spokeswoman Clara Tuma said. Natural gas made up 50 percent of the LCRA's power source in 2011; about 46 percent came from coal.
Briggs said the city currently receives power from LCRA for a majority of the city's electric demand. About 8 percent to 10 percent comes from American Electric Power Energy Partners, which is wind power that is mostly used to power Southwestern University. EDFT Trading Group is used to cover the balance needed to provide power to the rest of the city's utility customers.
If the city were to terminate its contract with LCRA, the city has a plan in place to provide energy to its customers, Briggs said.
"I have energy options after 2016, and in fact, a lot of those are ready to go," he said. "If we posted notice of termination to LCRA because they failed to cure the breach, in 30 days, I am prepared to take energy from someone else. We are prepared to take energy at any time."
