Georgetown needs to persue the same avenue that they and LCRA did a number of years ago. How much will it cost to abrogate those contracts? It may be worth it to the rate payers of Georgetown.
Friday, November 18, 2016
The Danger of Long-Term Utility Contracts
The Austin-Statesman is reporting that the Lower Colorado River Authority (LCRA) is about to pay $60M to get out of an 18 year contract with a wind energy producer. In 2009, LCRA entered into a contract with a wind energy producer to purchase electricity for $64.75 per megawatt-hour ($0.06475 per kilowatt-hour). The problem for LCRA today is that they can buy electricity for about $25 per megawatt-hour on the open market. That is almost 40% less than the contract cost!
They are fortunate in that there is an exit clause in their contract that allows them to get out of the contract for $60M, although they have had to spend the last 18 months in court to be able to extract themselves. Of course, the consumers of the electricity that LCRA provides will have to pay for the $60M plus legal fees and court costs through higher rates.
The ratepayers in Georgetown should remember that several years ago Georgetown was locked into a long term contract with LCRA that took time, money, and the courts to extract themselves from. Apparently the City did not learn a lesson through that experience as they have turned around and signed 20 and 25 contracts with wind and solar power producers.
Since the city is against transparency with respect to utility contracts (see previous post), we have no idea whether or not there are built-in escape clauses that would allow Georgetown to exit in the event that open market electricity costs are much lower that the contract costs.
Secret contracts also provide an environment for crony capitalism and fraud. Only with exposure to public view will the citizens of Georgetown ever know if the contracts are free from fraud and cronyism.
They are fortunate in that there is an exit clause in their contract that allows them to get out of the contract for $60M, although they have had to spend the last 18 months in court to be able to extract themselves. Of course, the consumers of the electricity that LCRA provides will have to pay for the $60M plus legal fees and court costs through higher rates.
The ratepayers in Georgetown should remember that several years ago Georgetown was locked into a long term contract with LCRA that took time, money, and the courts to extract themselves from. Apparently the City did not learn a lesson through that experience as they have turned around and signed 20 and 25 contracts with wind and solar power producers.
Since the city is against transparency with respect to utility contracts (see previous post), we have no idea whether or not there are built-in escape clauses that would allow Georgetown to exit in the event that open market electricity costs are much lower that the contract costs.
Secret contracts also provide an environment for crony capitalism and fraud. Only with exposure to public view will the citizens of Georgetown ever know if the contracts are free from fraud and cronyism.
No comments:
Post a Comment