December 17, 2018
Texas

Georgetown renegotiating solar, wind power contracts

Claire Osborn | Austin American-Statesman | Dec 16, 2018 | www.statesman.com

GEORGETOWN – The city of Georgetown’s bill for wind and solar energy ended up being $8.6 million more than anticipated in fiscal year 2018 because the falling prices of oil and gas meant it had to sell its surplus renewable power for less than forecast, said City Manager David Morgan.

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.

Georgetown is in the middle of renegotiating its 20- to 25-year wind and solar contracts to try to get a better deal, Morgan said.

But at least one resident and a conservative think tank said the city should not have made the contracts for so long and shouldn’t be relying on green sources of energy.

Georgetown began getting 100 percent of its power through renewable energy in April 2017. The city has received international attention for its commitment to solar and wind power.

Morgan said that when the city signed wind and solar contracts around 2012, it was looking at long-term demands and contracted for more energy than it needed to grow into it as the city of Georgetown grew. The city contracted for 20 years with a wind farm west of Amarillo and for 25 years with a solar power farm outside of Fort Stockton, he said.

“We took competitive bids in 2012 for all types of energy production and chose wind and solar because of the competitive nature of the pricing at the time,” Morgan said. “If we had chosen a natural gas project in 2012 for a long-term contract, we would still have the same situation, because it’s all about long-term contracting and where the energy market was in 2012.”

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.

Georgetown resident Richard Gottlieb said Thursday that he didn’t see wind and solar as viable sources of energy for the city. He said he was surprised the city would sign 20- to 25-year contracts for renewable energy and not hedge on them to limit the losses. Hedging is a strategy that protects an investment against loss.

Gottlieb also said he didn’t see why the renewable energy companies that the city contracted with would want to renegotiate their contracts. “Why would you negotiate? You have the city over a barrel,” he said.

Bill Peacock, the vice president of research for the Texas Public Policy Foundation, also questioned the city’s losses on its energy contracts.

“The city claims that this is just one of the challenges with doing business in an energy market and could have happened with any contract they had,” Peacock said Friday. “That’s not the case, because what they did was bought more electricity than they could use almost any day of the year. … They knew they would have to buy this and sell it, and that’s not the way most people work. It’s more evidence they are wanting to portray themselves as a green city rather than doing something for their consumers.”

The foundation has an ongoing lawsuit against Georgetown filed on behalf of a resident wanting information on how much energy is produced by solar panels on a city building.

Morgan said it is very common for municipally owned utilities “to secure purchased power agreements that exceed their current electric demand.”

“This prevents community-owned utilities from having to secure new power contracts every year or buy expensive energy during the summer’s peak demand,” he said. The city of Georgetown sells its surplus energy to customers looking for energy in the power grid managed by the Electric Reliability Council of Texas.

City Council Member Tommy Gonzalez said Friday the city was in a tough situation.

“There was a mistake made when they (city staff) accounted for the plus side of what could happen and never stopped to think what would happen if the market goes down,” he said. “It’s a lesson learned.”

But Gonzalez said he thinks the city can renegotiate its wind and solar contracts.

“For some of these locations, we are their only customers – and it’s important for us to keep buying power from them,” he said. “It’s mutually beneficial for us to rework the contracts.”