Where is the Transparency in Georgetown Electric?

Where-o-where is the transparency in the financials in the Georgetown owned electric utility?

Buried in a budget amendment document presented at a city council workshop on Tuesday, where citizens are not allowed to comment or ask questions, is the fact that the electric company exceeded its budget in FY2017 by more than $9.6M.

There are cryptic notes that say "increase expenditure authority for Purchased Power by $9.6 million due to a second year of sales in a depressed energy market".

Here is the slide that was used in the presentation.

Notice that "cooler, wetter weather" is blamed for the loss for a second year in a row.

We do know that the loss has been covered by the Rate Stabilization Reserve, $4.5M, transfers from the Water Fund of $1.5M and some unknown amount from the Purchased Power Adjustment(PCA) that was imposed as a temporary measure in February, 2017.

The total amount lost is unknown since something called a "congestion revenue credit", which is internal to the Electric Reliability Council of Texas(ERCOT) accounting system, was applied to Georgetown's losses before being reported to the city council. Georgetown purchases its electricity through ERCOT.

Remember the discussion in the GeorgetownWatchDog post of  March 22, 2017?

"Now we know why the electric fund lost more than $6M last year. On page 78 of the city's 2015-2016 Comprehensive Annual Financial Report, available on the city website, we find the following statement with highlighted words.

"In an effort to mitigate the financial and market risk associated with the purchase of natural gas, energy, and congestion price volatility, the City has established a Risk Management Policy. This policy was authorized by the City Council to enter into forward contracts for natural gas, swaps, and congestion rights for the purpose of reducing exposure to natural gas, energy, and congestion price risk. Use of these types of instruments for the purpose of reducing exposure to price risk is performed as a hedging activity.


At September 30, 2016, the City had multiple outstanding contracts, with wholesale customers to provide power supply and/or qualified scheduling entity services. For the power supply customers, the City charges an energy charge which is based on the quantity of power supplied multiplied by a fixed price, or multiplied by a fixed heat rate and a fuel index price. In order to hedge the City’s risk, the City has entered into corresponding power supply agreements with counterparties to hedge against energy price or heat rate fluctuation in the market.


These contracts meet the definition of a derivative instrument as defined by GASB Statement No. 53, Accounting and Reporting for Derivative Instruments (GASB 53). However, these contracts meet the normal purchases and sales exemption of GASB 53 as the City intends to use the physical commodity in its normal utility operations to supply energy to its customers. Accordingly, these contracts are not within the scope of GASB 53 and are not recorded on the City’s Statement of Net Position."

The appropriate questions to be asked are: Were any lessons learned from this experience? Have policies and procedures been instituted that will preclude such large losses in the future? What is the review and approval process for entering into these derivative contracts?"

It appears that the city did not learn any lessons since it is presumed that the losses during the summer of 2017 were caused by the same behavior that was exhibited in 2016 where almost $7M was lost due to hedging.

Since the summer was "cooler and wetter", and the city contracted for "near peak" power during that time and found themselves with excess power capacity which could not be sold at a profit on the market, a loss was the result. 

The question to be asked and answered is: Why is the city hedging in the electricity market?  

According to a Wilco Sun interview on March 22, 2015, Jim Briggs said the wind energy contract supplies energy for up to 34,000 homes. The wind turbines came online in early 2016 and provide 144 megawatts of electricity. The same article says that Georgetown had 20,964 utility customers as of March 22, 2015. So there is sufficient "green energy" online to meet Georgetown's current demand.

Georgetown needs to be much more transparent with what is going on in the electric company. As citizens, we should demand transparency with our money!