More $ Numbers on Georgetown Electric Company Loss

Another set of numbers have been published by the Statesman describing the loss suffered by the Georgetown electric company during FY 2018. 

The city had budgeted $45 million for renewable energy but ended up paying $53.6 million, he said.

Georgetown was able to reduce the $8.6 million unanticipated extra to $6.8 million through savings from lower capital improvement utility project costs, Morgan said. It paid the remaining $6.8 million with reserves from the city’s energy fund, he said.

The City Council also approved a budget amendment Dec. 12 that will build the reserves in the electric fund, which helped to pay for some of the loss, from $1.9 million back up to $4 million in 2019. 

The city manager also owned up to the fact that the electric company lost money in FY-16 and FY-17, but it was covered up through clever accounting. See blog post December, 1, 2018

The city also had to pay more than anticipated in fiscal year 2016 and fiscal year 2017 for renewable energy because of depressed energy prices, he said. In 2016, the city projected the bill would be $33.6 million for renewable energy, though the actual costs were $40.3 million, Morgan said. In 2017, the city projected the power would cost $39.5 million, though it ultimately cost $46 million, according to city figures.

“These differences in projected and actual costs were previously offset by increased revenue, implementing a power cost adjustment and adjusting the timing of some large capital projects,” Morgan said.

But even this story is incomplete. Looking at the budget presentation of 11/27/18, the city lost $11.6M purchasing/selling electricity from/to ERCOT. At the same time they earned $3M in credits by buying or selling financial derivatives called Congestion Revenue Rights (CRR). A Congestion Revenue Right (CRR) is a financial instrument that results in a charge or a payment to the owner, when the ERCOT transmission grid is congested in the Day Ahead Market (DAM).

Thus we see the city still spinning the numbers that the net loss was $11.6M-$3M = $8.6M without disclosing that the city earned $3M gambling with derivatives in the ERCOT market!

There has been a pattern of losses over the last three years.

FY-16 loss was $6M
FY-17 loss was $9.6M
FY-18 loss was $11.6M

All these losses were experienced either purchasing electricity necessary to meet the demand in Georgetown on the spot market, or from trading financial derivatives in the ERCOT market.

There are still inconsistencies between the contemporaneously reported losses for FY-16 and FY-17 and those reported in the Statesman above that will be resolved in the future.