GEORGETOWN, Texas (KXAN) — Georgetown city leaders are working to address the many concerns people have about the current challenges with the city’s energy contracts and the increased cost to buying power.
Starting on Feb. 1, the city announced that utility customers would begin paying higher electric bills after passing a “power cost adjustment,” increasing the average person’s monthly bill by an estimated $12.82.
One Georgetown resident, who recently underwent serious knee surgery and cannot work at the moment, contacted KXAN because she’s worried about not being able to afford the additional expense to keep her lights on.
“I’m living on the edge basically right now and having a high electric bill, utility bills, it’s not helpful at all,” the woman, who asked not to be named, said. “I’ve had to go and seek help to pay my electric bill. It’s unfathomable that it could get any higher, actually. I just don’t know what I’m going to do.”
David Morgan, the Georgetown city manager, said the city plans to keep the rate hike in place until at least the end of September.
It’s needed, he said, so that the city can build up more reserves in its electric fund. The city reported a projected shortfall of $6.7 million in the fund because of drops in fuel prices within the state and consumer demand.
“We have more energy than we actually need or demand,” Morgan said. “Because we’re a growing city, we contracted for more than we needed today in order to make sure we planned for the future. Because of a depressed energy market, we have experienced higher costs than we anticipated because of some clear excess to the market. We’re clearing it at a rate that was different than what we projected.”
In 2012 the City of Georgetown moved to become 100 percent renewable, entering into long-term contracts with wind and solar farms to create stable rates. During the last three fiscal years, however, Morgan said the city spent $26 million over its budget on purchased power, which is the city’s cost to buy electricity and bring it to Georgetown.
He stressed that the additional cost had nothing to do with the type of energy the city is now using.
“This issue is really not about the type of energy we have,” Morgan said. “It’s about the fact that the amount of energy we have. We have more energy than we need in this short period of time, and so, whether it had been a gas contract or a wind contract, we would still be in this same postition today.”
The city explained the situation further in a news release sent out last month:
Over the past few years, the energy market in Texas experienced a fundamental change. Forecasts provided by the Electric Reliability Council of Texas, the State’s energy grid operator, have proven to be unreliable. What were perceived as anomalies in 2016 and 2017, such as reduced consumption, unpredictable pricing, and unusually cold weather, masked the true impact of a depressed global energy market. The effect of depressed energy prices became abundantly obvious in 2018.
In 2016, 2017, and 2018, the City addressed these ongoing challenges with one-time solutions, including adjusting how the City financed electric infrastructure projects, such as cash versus debt financing, adjusting the timing of projects, increasing the PCA on electric bills, and completing a rate study. All these efforts were intended to resolve what was previously perceived as one-time problems.
This year, recognizing a fundamental shift has occurred in the energy market, the priority for the City is to change the on-going financial obligations of the electric fund. This could involve reducing the energy Georgetown is obligated to purchase, selling a portion of the energy to a third-party, adjusting the terms of some of the financial obligations, or some combination of all these efforts. The City is also exploring options to better manage the energy portfolio day-to-day.
“When these energy contracts were established back in 2012, the forecast for the energy market was very different than what we’ve experienced,” Morgan said. “While we had a long-term strategy, we did not anticipate well enough in the short term to mitigate risks in the case of having a depressed energy market, which is what we experienced.”
According to an informative website answering some frequently asked questions, the city has laid out the following solutions to address this issue:
- We are working to renegotiate the two long-term power contracts to extend the life of the contracts in exchange for lower costs for the next few years.
- We must curtail operating expenses in the electric department. This includes not issuing any new debt for capital projects, halting current projects, a temporary hiring freeze, and limiting non-critical expenditures.
- The Power Cost Adjustment (PCA) charge will continue for the foreseeable future. This is the charge which allows the city to recover costs associated with purchasing power. The PCA is an adjustment to rates to compensate for fluctuations in purchased power cost caused by market prices as we are currently experiencing. It is a means to pass through the impact of short-term market factors without constantly changing the energy rate.
- Lower the annual Return on Investment (ROI) payment into the city’s general fund.
The city would also like people to check out another recently created website called “Rumor Control,” where it has tried to clear up some misconceptions about this ongoing situation.