Municipal utilities have been abusing the open records government code, CHAPTER 552. PUBLIC INFORMATION, for many years. They have used the provisions in Sec.552.133 to hide information from their taxpayers and ratepayers.
It is time to repeal the exemption for municipal utilities from the Texas State Code.
Sec. 552.001. POLICY; CONSTRUCTION. (a) Under the fundamental philosophy of the American constitutional form of representative government that adheres to the principle that government is the servant and not the master of the people, it is the policy of this state that each person is entitled, unless otherwise expressly provided by law, at all times to complete information about the affairs of government and the official acts of public officials and employees. The people, in delegating authority, do not give their public servants the right to decide what is good for the people to know and what is not good for them to know. The people insist on remaining informed so that they may retain control over the instruments they have created. The provisions of this chapter shall be liberally construed to implement this policy.
(b) This chapter shall be liberally construed in favor of granting a request for information.
SUBCHAPTER C. INFORMATION EXCEPTED FROM REQUIRED DISCLOSURE
Sec. 552.133. EXCEPTION: CONFIDENTIALITY OF PUBLIC POWER UTILITY COMPETITIVE MATTERS. (a) In this section, "public power utility" means an entity providing electric or gas utility services that is subject to the provisions of this chapter.
(a-1) For purposes of this section, "competitive matter" means a utility-related matter that is related to the public power utility's competitive activity, including commercial information, and would, if disclosed, give advantage to competitors or prospective competitors.
Notice that the code does not require the municipally owned utility to withhold competitive information, only that it is allowed.
With respect to the Georgetown Utility System (GUS), the following types of information have been withheld from the public under the guise of “competitive matters”.
1. Contract information between the City and power suppliers, including costs and duration of contracts.
2. The funding spent on lobbying the Texas Legislature to maintain secrecy.
3. The risks associated with the operation of GUS and inherent in the supplier contracts.
4. Secret contracts also provide an environment for cronyism and fraud. Only with exposure to public view will the citizens of Georgetown ever know if the contracts are free from fraud and cronyism.
In early 2015 it became clear that SunEdison was rapidly deteriorating as a going business concern. April 1, 2015 questions about the costs and risks were being asked. http://georgetownwatch.blogspot.com/2015/04/georgetowns-switch-to-100-renewable.html
The stock price was plummeting and the financial press was speculating as to when bankruptcy would occur. Given that Georgetown had signed a 25 year contract with SunEdison to supply solar generated electricity, it seemed important to try to gauge the financial risk to Georgetown.
An open records request was made by a Georgetown resident, July 9, 2015, after informal requests to the City for the contract were denied. Only by seeing the contract could the risks be assessed.
The City and the Texas Attorney General concurred that the contract could be withheld under existing state law which allows public power companies to withhold competitive information from disclosure.
This seems antithetical to the concept of transparency in government. There may be an argument for private power companies to withhold competitive information, but, public or municipal utilities should have to disclose all financial information to the public.
SunEdison did declare bankruptcy in 2015 and the company was liquidated to pay off the debt. Since the terms and conditions of the contract are still unknown, any penalty for nonperformance is unknown. However, the city’s amended budget for 2017 indicates Georgetown received $1.3M for damages associated with the solar contract.
As a side note, an open records request for the contract with the defunct Sun Edison was made in late 2018 and it was again denied on “competitive” grounds!
The solar farm near Fort Stockton was sold to NRG Energy in late 2016. A new 25 year contract between Georgetown and NRG Energy was executed for solar generated electricity. Again the costs and risks associated with this contract were withheld from the public.
By December, 2016, it became apparent that the City was losing money on their electric contracts. Here is the City statement:
"The Electric Fund experienced higher purchased power costs than projected. Capital improvement projects are also over budget due to a substation project and increased development. The fund is projected to be $6 million over expenditures.”
The City blamed the loss on lower than average temperatures during the summer of 2016. However, On page 78 of the city's 2015-2016 Comprehensive Annual Financial Report, we find “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.” These contracts are classified as “financial derivatives” and as such should only be used by experienced traders. Think ENRON!
By November 2017, the City admits GUS has lost money again. Buried in a budget amendment document presented at a city council workshop, 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".
This is the first indication that the City has contracted for more power than the city needs through the 20 and 25 year renewable energy contracts and they have to sell the excess at a loss.
The loss in 2017 was again attributed to a one-time event of cooler, wetter weather resulting in a depressed energy market.
Finally, in January 2019, the losses incurred by GUS over the last 5 years are fully exposed. The Wilco Sun newspaper has finally published City financial data that shows the City has lost $26M over the last three years by selling the excess electricity from the wind and solar farms that is purchased at fixed prices and sold at below market prices. The City has to do this since there is no way to store electricity that is excess to the City's needs and they are apparently contractually obligated to take all the electricity generated by the wind and solar farms.
The publisher has acknowledged that perhaps legislation should be enacted that allows the City to share utility contract information with its citizens.
“One thing a few city staffers have mentioned to us is that it is unfair to be scolded for not releasing information that they are legally obligated to keep secret. This is mainly the contents of the power contracts.
They have a good point. They can’t reveal what they know without legally endangering the city, or themselves, personally.
What we should do is support legislation to make these sorts of contracts more transparent.
Perhaps the city folk might ask the companies to amend the contracts to remove the non-disclosure clauses and allow them to tell their citizens what is in the contracts.”
It is clear that the City of Georgetown has been abusing its authority under the Open Records code. The City has been hiding the continuing losses incurred by GUS until it was no longer able to keep them secret.
The City has been hiding the fact that they are engaging in financial derivative trading in the electric market even though the staff does not have the necessary experience and tools.
The City has been siphoning off $7M to $9M per year into the general fund from the utilities. This has allowed the City to keep the property tax rate artificially low while expanding city services.
Finally, the City officially does want to keep utility financial information secret from the public as shown in city charts indicating their lobbying efforts for this legislative session. In addition to participating in lobbying with the Texas Municipal League, they fund lobby efforts directly with taxpayer funds.
Even though the current statue does not require a municipal utility to withhold financial information, it allows them to keep that information secret.
It is time for the legislature to end the exemption for municipal utilities to withhold financial information concerning operations. There is much experience in the general population that could have provided guidance to the City if the contracts and financial information were publicly available.
Now the rate payers and tax payers have to pay the price for the mistakes made by the city under the guise of competitive matters. The City has notified the Georgetown rate payers that the average electric bill increased about $12/month effective February 1, 2019.
If last year is any indication, the City is losing about $1M/month selling excess electricity into the energy market. Without knowledge of the wind and solar contract terms, the citizens of Georgetown at are the mercy of the City staff and Council.
In conclusion, it is time to repeal the exemption for municipal utilities from the Texas State Code.
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