The following announcement appeared on the City website tonight.
City adjusts customer energy charge
Customers will incur an increase of $0.0135 per kilowatt hour, resulting in a new PCA of $0.0175 per kilowatt hour through September. The average customer uses 949 kilowatt hours per month and will experience a $12.82 increase on their monthly bill.
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.
The current challenge is not related to renewable energy sources. While the City has received national recognition for its move to renewable energy, it was originally a decision driven by economic considerations to stabilize long-term power rates through fixed-price contracts while reducing any regulatory risks associated with fossil fuels.
The City executed its current energy contracts based on a 20-year forecast of continued City growth. Like most city-owned utilities, Georgetown contracted for more energy than it currently needs. Georgetown continues to be one of the fastest growing cities in Texas, and the City must be ready to serve demand from consumers and businesses. The crux of the current challenge hinges on the large amount of energy the City must sell on the market that is not currently consumed in Georgetown.
The PCA is one tool to ensure the financial stability of the electric fund as the City works to address its current financial arrangements.
For more information, please review the FAQ on the City's energy contracts at Georgetown Utility System.
In the frequently asked questions the city indicates they are reducing the "ROI"/profit paid by the energy fund into the general fund. The "ROI" was reduced approximately $1.2M which leaves a balance to be transferred to the general fund of $4.0M .The question is: Why are they not eliminating the transfer of "ROI" to the general fund?
The PCA is estimated to cost the GUS customers $6M. Transfering the remaining $4.0M would significantly reduce the PCA charge to the electric customers.
The PCA is estimated to cost the GUS customers $6M. Transfering the remaining $4.0M would significantly reduce the PCA charge to the electric customers.
I am sure there are other activities that could be reduced or eliminated in the general fund so that the electric rates would not have to be increased.
"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."
ReplyDeleteBlaming the deficiencies of Georgetown Utility Systems' (GUS) forecasts of its electric energy needs on ERCOT is passing the buck. If GUS adopted them; GUS owns them!
If the City owned poles and wires business were sold to one of the state's large operators, e.g. Oncor, AEP, CenterPoint Energy, etc., Georgetown's captive customers would not be at the mercy of ERCOT's forecasts. The big boys/gals have the resources to do their projections and stress test them continuously.
Georgetown Utility Systems is a bit player. It lacks scale and leverage. At the end of 2017 GUS had 25,607 meters. ERCOT had approximately 9.3 million meters of which more than 7 million were smart meters.
Oncor, which is the largest transmission and distribution company in Texas, serves more than 10 million customers through 3.45 million metered delivery points.