City seeking proposals for third-party review of energy management

The City of Georgetown is seeking proposals for both managing the City’s energy portfolio and for a comprehensive review of the City’s management practices related to purchasing and managing energy.

Georgetown is under contract to purchase power from four different providers. The two largest energy providers are Spinning Spur 3, a wind farm near Amarillo, and Buckthorn, a solar farm near Fort Stockton. The third source of energy is a smaller wind farm operated by American Electric Power which primarily covers Southwestern University’s energy needs.

The final energy contract is with Mercuria for natural gas-based energy. It was intended as a short-term power supply and is set to expire in early 2022.

The City’s original strategy to contain costs by contracting for fixed-priced, renewable energy was intended to mitigate the risk of spiking energy prices.

Securing long-term energy contracts that provide more energy than customers currently need is a standard practice among city-owned utilities. As a fast-growth community, these contracts allow the City to grow into increased energy demand. The contracts also reduce the number of times the City has to buy energy in a potentially volatile marketplace.

It is important to note that it is not the type of energy the City has contracted for, but the amount of energy the City is contracted to purchase, that is the current challenge. The crux of the issue hinges on the large amount of energy the City must clear to the market that is not currently consumed in Georgetown.

When the price of energy decreases, the City is still obligated to pay the price for energy it secured in the contracts. Any energy that is not used by Georgetown’s electric utility customers is cleared to a statewide marketplace.

At the same time, the utility is seeing a drop in consumer demand which is largely driven by conservation efforts, energy-saving technologies, and more energy-efficient new construction. Due to these factors, the City ended the 2018 fiscal year with a $6.84 million shortfall in the electric fund, leaving a fund balance of $1.97 million.

“Looking back, the focus on ensuring adequate supply to mitigate the high-price of energy that was forecast overshadowed the consequences of having excess energy in a depressed market,” City Manager David Morgan said. “The City did not manage this risk well. We are focused on changing the way we do business as it relates to managing our energy portfolio.”

“Our current process for managing our energy is not achieving our goals,” General Manager of Utilities Jim Briggs said. “Along with selling a portion of the excess energy to a third-party, we look forward to working with industry experts in identifying ways to better manage the energy portfolio day-to-day and putting in place policies and procedures that reduce our financial risks moving forward.”

Both requests for proposals can be found on the City’s website at purchasing.georgetown.org. Additional information about energy costs in Georgetown can be found at gus.georgetown.org/electric.

Interested parties may submit questions regarding the solicitations to nicole.abrego@georgetown.org. The deadline to submit a proposals for the review of the City’s management practices is 2 p.m. on Feb. 21. The deadline to submit questions is 5 p.m. on Feb. 15.

The deadline to submit a proposals to review managing the City’s energy portfolio is 2 p.m. on March 7. The deadline to submit questions is 5 p.m. on Feb. 22.

In 1910, Georgetown voters approved a bond to build the Georgetown Light and Water Works plant on Ninth Street. Over the past century, Georgetown Utility Systems continues to be a highly reliable, community-owned and -operated electric utility. It is owned by the people of Georgetown and it invests directly in the community.

“Having a community-owned utility has proven incredibly valuable over the past 100 years,” Briggs said. “As the City works through this current challenge, we remain committed to ensuring the stability of this asset for years to come.”