Updated: Energy cost impact + FAQ

Mar 24, 2021

City issues $48M debt issuance, no rate change for customers

Updated, March 24: The City of Georgetown issued about $48 million in a 10-year bond to pay for the unbudgeted energy costs incurred due to February’s winter storm. City Council in a special-called meeting March 2 directed staff to pay the debt over 10 years from electric utility revenues at current rates. Council approved the bond at its regular meeting March 23.

“Even as we got word on the exorbitant cost of energy while we were in the middle of the disaster, our focus was delivering electricity to our customers and controlling the variables we could,” Mayor Josh Schroeder said. “Another variable we have some control over is the burden placed on Georgetown electric customers as a result of this event, and the steps we took Tuesday will mitigate additional costs for our customers.”

As a result of the planned bond issuance, Georgetown electric customers will see no difference in their electric rates, despite the high energy costs during the storm. The City’s bill currently was due at the beginning of April 2021. Council and staff are committed to retiring this debt as soon as possible, while maintaining competitive rates for customers. Any changes to rates or the bond needed because of an amended bill will be brought before the council for discussion and direction.

At City Council direction, the City will use the existing power cost adjustment of $0.01375 per kilowatt hour to help cover the cost of the bond as it is paid back over 10 years. For the average residential customer, that amounts to about $10 a month. The current PCA generates about $6 million a year, which would cover the additional, annual debt payment of $5.3 million from the 10-year bond.

The City also is pursuing a surety policy to cover an additional $6.4 million in reserves, which may be required to maintain debt service coverage ratios after the costs from the winter storm. The one-time, up-front payment for the policy will be paid for using existing revenues.

Customers might have seen higher-than-normal electric bills for February due to increased usage. Even with the mandated power outages from ERCOT, heating and reheating of a home consumes considerable energy and is likely to result in higher bills this month. The City has multiple options to help you pay your electric bill, such as funding assistance through partner agencies and in-house customer programs you may qualify for. People can contact Customer Care at 512-930-3640 or customercare@georgetown.org to discuss options.

The City currently owes about $48 million for energy used Feb. 14 through 20. About $21 million of that is for about 3,000 megawatt hours. The remaining 13,000 megawatt hours the City used during the storm were generated by providers at contracted rates. Roughly $27 million of what the City owes is for ancillary services, which are charges for reserve or on-demand power supply by ERCOT that cost as much as $25,000 per megawatt hour during the event. For context, the City paid $710,000 in ancillary services in all of 2020. The remaining $21 million is for energy costs, which peaked at $9,000 per megawatt hour. Last month, the average cost per megawatt hour was $20.79. The $9,000 per megawatt hour maximum price was in effect in the ERCOT market for 70 hours from Feb. 16 to 19.

“We’re still hopeful PUCT and legislators find solutions that will help alleviate the financial burden being placed on utilities across the state,” Schroeder said. “I encourage you to reach out to your state representatives and trust we will be doing the same.”

How will the recent winter storm affect my electric bill?

Georgetown rates will not change, but you could see higher bills due to usage.

While it is true that the wholesale price of power increased exponentially for all Texas electric utilities during February’s extreme weather, City of Georgetown electric customers will see no difference in their electric rates at this time. At the direction of City Council, the City of Georgetown took out a loan of about $48 million, to be paid by electric revenue over 10 years, to cover our unbudgeted energy costs from the storm.  Interest on the loan will total about $5 million at a 1.73 percent interest rate. Any changes will be communicated publicly through this webpage, other City communications channels, and the media.

If your electric bill was higher than normal for this time of year, it likely was due to how much energy you used during the storm. Heating your home during cold weather uses a significant amount of energy, even more so if you experienced outages and needed to reheat your home. We know some of those outages were in response to ERCOT’s load shed/rotation outage requirements to protect the statewide electric grid from collapsing. We have multiple options to help you pay your electric bill, such as funding assistance through partner agencies and in-house customer programs you may qualify for.

The rest of this page provides more detail on what happened and answers to frequently asked questions about the situation.

Virtual Town Hall about electric costs

Watch the recording of the March 11 town hall. The event featured presentations and Q&A from Georgetown Mayor Josh Schroeder, City Manager David Morgan, and electric general manager Daniel Bethapudi.

Read the slides from the presentation here.


Please note: This information is about City of Georgetown electric customers only. If you are a customer of Pedernales Electric Cooperative or Oncor, you will need to review their information or make contact with them to determine how the storm will affect your bill. Here is a map of the different electric service providers in Georgetown if you aren’t certain.

Oncor: 888-313-4747 /  Oncor
PEC: 888-883-3379 / PEC

Electric bills and winter storm impact FAQ

Statewide issue
Why are some Texans seeing incredibly high electric bills?

The effect on residential customers will depend on where they get their energy from. Most residential electricity customers, such as City of Georgetown electric customers, are on fixed-price contracts with their power providers. As such, these customers are not exposed to changes in their rates due to scarcity-driven changes in the wholesale price of electricity.

Residential electricity prices in Texas are set in one of three ways:

1) Rates for electric cooperatives and municipally-owned utilities, such as Georgetown, are fixed and are approved by their respective city councils or governing boards. The Pedernales Electric Cooperative, which serves some Georgetown residents, also falls under this category.

2) Outside the ERCOT region, regulated utilities also charge fixed rates that are approved by the Public Utility Commission;

3) In areas with retail competition, customers have a contract with a retail electric provider that they have chosen. There is not a mechanism where a retail electric provider can go back and change the price agreed to in the contract. Georgetown residents in the Oncor service area, for example, have to pick a retail provider.

(Source: PUCT: Electricity Prices during the 2021 Winter Storm.)

How do the wholesale market prices work?

The wholesale price of electricity is set in a market in which sellers of electricity (power generators) and buyers of electricity (retail electric companies) agree to a price based on supply and demand. Wholesale electricity can be bought in long-term contracts between buyers and sellers. If a power generator cannot generate enough of its own electricity to fulfill the contract, that power generator will have to buy power in the real-time market to make up the difference.

The real-time market is another way that electricity is bought and sold. Each year, an offer cap is reviewed and placed on the wholesale market price. The maximum wholesale market price for electricity is reserved for extreme scarcity conditions to encourage any and all generation able to come online and acts as a penalty for generators who fail to show up when needed. The cap currently is $9,000 per megawatt hour.

(Source: PUCT: Electricity Prices during the 2021 Winter Storm.)

Why did the cost of energy increase so much during the storm?

During the week of the storm, freezing temperatures caused cascading problems in the state’s energy production and delivery systems, ultimately forcing both fossil-fuel based and renewable-generation plants to fail and reducing the amount of electricity available for purchase.

At the same time, people throughout the state were trying to heat their homes. Heating a home in freezing weather consumes a considerable amount of energy. Reheating a home after a power outage, like those mandated by ERCOT to save the grid from catastrophic collapse, added even more demand to an already taxed system.

As a result of that significant gap between supply and demand statewide, and the resulting need to incentivize all electric generators to come online and stay online to stabilize the grid, the price for wholesale electricity jumped to its pre-determined cap of $9,000 per megawatt hour for 70 hours from Feb. 16-19. All electric utilities that had to purchase energy from the ERCOT energy markets were charged this rate for energy used in this period. For reference, the average cost per megawatt hour in January 2021 was $20.79.

Texas natural gas prices experienced similar spikes, rising from $2 per million BTU the week before the storm to an average of $200 per million BTU, according to Fitch Ratings.

ERCOT also imposed other ancillary services rates that peaked at $25,000 per megawatt hour. Most load-serving entities in Texas, such as Georgetown, pay ERCOT a fee—the ancillary service charge—to procure reserve or on-demand generation on our behalf, in the event additional generation is needed to support the statewide grid. Normally, these costs are negligible, but during the extreme cold weather event, the per megawatt was not subject to a cap and resulted in a steep spike.

The City of Georgetown, for example, currently owes $17 million for ancillary services. For comparison, the City paid $710,000 in ancillary services in all of 2020. In other words, we were charged more for ancillary services in six days than we normally pay in 25 years.

Statewide, ERCOT estimated the wholesale market would incur charges of $55 billion during the week of the storm, which is what it normally incurs over four years. All electric utilities in Texas are being asked to share these costs relative to their usage and energy contracts.

I've heard reports of other cities, like the City of Austin, not having to do rolling outages or pay the high bills Georgetown has. Why is that?

Different municipally-owned utilities will have varying impacts from the weather event. Each city has a unique mix of generation sources and load to serve, and therefore a unique risk profile in the market. All electric utilities had to shed load during the event.

Who is profiting from the high energy bills? Is this not considered price gouging?

The State is working now to determine whether there was overpricing and, if so, how that can be addressed. We encourage you to reach out to our representatives and let them know your thoughts about the pricing.

Have energy costs ever gone up to $9,000 per mwh before, and did the City know prices could go that high?

There have been a few instances since 2015 when the price reached the $9000 per mwh. The major difference between the earlier instances and this event is how long the prices stayed at $9000 per mwh. During the winter weather event of February 2021, the prices stayed at $9000 per mwh for about 70 hours.

The City did not expect the prices to stay at $9000 per mwh for that long. This pricing event is unprecedented.

How was the $9,000 per megawatt hour maximum set?

ERCOT sets the maximum per megawatt hour pricing based on what it thinks would be a high enough incentive to bring generators into the market when supply is running critically low.

Why was the price of energy set at the maximum of $9,000 per mwh?

Energy pricing in the statewide grid is set to allow for fluctuation, so it can reflect the market. However, no one in the state ever anticipated having the amount of load shed or duration of extreme pricing as we saw this February. The cap is generally intended to last for a short period of time, to encourage generators to get into the market and increase energy supply statewide. As we know, several generators were unable to do this due to the extreme weather.

The State is working now to determine whether there was overpricing/billing errors and, if so, how that can be addressed. We encourage you to reach out to our representatives and let them know your thoughts about the pricing.

Can you explain how the rolling blackouts worked? It didn't seem like everyone experienced them equally.

Power outages experienced during the storm were tied directly to the severity and longevity of the winter weather. Temperatures in Texas reached lower than they have in 30 years, and crews worked around the clock to restore power and share updates as best we could.

This ongoing, prolonged, and widespread frigid weather across the state caused the statewide electric system — managed by ERCOT — to be strained by high demand and low operating reserves. Operating reserves are low when the capacity of available resources, such as power plants, only slightly exceeds anticipated customer demand across the ERCOT system.

In order to make sure critical infrastructure, like hospitals, retain power, ERCOT required all utilities across the state to reduce the amount of electricity to our customers. The City of Georgetown, like several other utilities across the state, accomplished this by rotating outages across non-critical customers, including residences and commercial facilities.

ERCOT requires energy providers to prepare for load shed every year, mostly to prepare for peak usage season in the summertime. Based on our system and our plan with ERCOT, Georgetown was prepared to shed up to nine megawatts across seven circuits in our system. These circuits were selected because they don’t have any critical infrastructure tied to them. Critical load circuits include hospitals, control centers, 911, the airport, and water/wastewater plants and are not subject to outages.

Initially, ERCOT asked us to shed two megawatts. Within an hour, that requirement jumped to 20 megawatts. Because Georgetown was mandated by ERCOT to shed so much additional load to help reduce demand, we quickly had to come up with a way to add more non-critical load circuits we could take offline to spread the shed requirements. Ultimately, we were able to rotate outages among 25 circuits. Areas of Georgetown that remained with power likely share a circuit with a critical load circuit.

Georgetown impact
How much does the City owe because of the increases to energy costs?

As of March 23, the City of Georgetown issued a $48 million bond for the unbudgeted power costs during the extreme winter weather event (Feb. 14-20).

How is the City going to pay that bill?

At City Council direction, the City issued $48 million of debt, which we will pay over the course of 10 years at our current rate structure, including the $0.01375 per kilowatt hour power cost adjustment (PCA). For the average residential customer, that amounts to about $10 a month.

The City issued what is known as self-supporting, tax-backed debt. In this debt structure, we will pay down the debt from the electric revenues but will pledge property taxes as collateral. This is a common practice among cities with utilities and will help the City receive a better interest rate on the bonds.

What effect will this have on the City’s finances and bond rating?

The Water Utility and Electric utility have historically pledged their debt together in order to receive higher credit ratings, and that existing debt is protected by rules called covenants. Because the $48 million owed significantly outpaces our budget and revenues, the City may have to set aside additional reserves as part of our existing bond covenants for both water and electric in order to meet its debt service coverage ratio obligations.

The debt coverage ratio is the number of times net operating revenue (operating revenue minus operating expense) covers the annual debt principal and interest payment. The ratio must cover water and electric outstanding revenue bond debt, which are co-pledged together. This is required in the rules (covenants) governing our existing bonds for both utilities. Debt coverage ratios are also used by bond-rating agencies to assess creditworthiness. Net operating revenue must cover the annual payment 1.35 times, or else the springing reserve is required.

The “springing reserve” would total $6.4 million in accordance with those existing bond agreements. The council directed staff to pursue a surety policy, which involves a one-time, up-front payment of a percentage of that amount. The insurance policy is an overall lower-cost option that will mitigate additional burdens on customers. It requires funding the policy one-time upfront. Funding the reserve would require larger ongoing payments continuously for 60 months.

On Feb. 26, Standard and Poor’s put Georgetown Utility Systems on CreditWatch negative. On March 3, the rating agency downgraded the City’s utility bond rating from AA- to A+. Standard and Poor’s may take additional action over the coming months. If we receive a lower bond rating, it will affect our ability to secure low-interest rates on future bonds and debt.

Why doesn’t the City use existing cash reserves to buy down what’s owed?

Staff did not recommend this, and Council agreed, because we need to preserve what reserves we have. The unrestricted reserves we have in the electric utility aren’t enough to make much of a difference in the large price tag we are facing. Reserves help bolster our bond rating and are needed in case another emergency happens.

What happens if the City doesn’t pay what’s owed?

If the City doesn’t pay this electric bill, we open ourselves up to several risks, including litigation and the inability to sell bonds and secure energy.

Some retail electric providers have decided to walk away from what they owe to ERCOT. As a result, there is a chance other providers, including Georgetown electric, will have to help cover the costs. If electric generators are not paid what is owed, they could stop generating electricity, limiting the amount of energy available on the state’s electric grid.

What other options does the City have?

At this point, the City’s options are limited to petitioning our Texas legislators and pursuing litigation. The City is reviewing all options and will share more if and as we are able.

What does this have to do with Georgetown’s renewable energy contracts?

During the event (Feb. 14-20), the City used 16,000 megawatt hours. Of those, our electric energy contracts covered about 13,000 megawatt hours. The remaining 3,000 megawatt hours were exposed to the $9,000 per megawatt hour prices. In essence, our existing energy contracts covered about 80 percent of our electric needs during the event, substantially insulating us from the high wholesale market costs.

The energy delivered through our renewable energy contracts is variable, as generation allows. This is due to the intermittent nature of solar and wind generation.

During the extreme winter weather event, there were periods of time when our renewable energy facilities were degraded due to icy conditions.

The City is always actively working to improve our risk management practices, including managing our existing portfolio and as our energy needs as load requirements grow.

To read more about our energy contracts and the PCA, click here.

What did the City learn from this and what is it doing to plan and prepare for the next natural disaster?

Much of what happened during the extreme cold weather event was out of our control; however, the variables we can control, we will. We have had an after-action meeting and will present our findings and recommendations to Council.

For the electric utility, we will continue to review, update, and follow our risk-management policies. This includes aligning our policies with any new market structures or changes the state imposes as a result of this event.

Does the City have any alternatives it could use to avoid rolling blackouts, like a demand reduction program or smart meters?

Some of the City’s large, commercial customers do participate in demand-response programs, and we plan on refining that program. We will be exploring the use of our advanced metering infrastructure (Smart Meters) to develop a more targeted load shedding program.

Can the City apply for any federal funding through the disaster declarations?

We are exploring all options.

What is the plan for Georgetown's energy needs as it continues to grow, and as temperatures become more extreme?

Georgetown is looking at all possible options that can help us meet our growth needs while addressing the risks posed by events like the extreme winter weather event.

Georgetown electric customers
What has the City of Georgetown done to protect its electric customers?

In a special-called meeting Tuesday, March 2, 2021, the Georgetown City Council directed staff to pursue a surety policy and a 10-year bond to cover the costs and reserve requirements resulting from the City’s $48 million electric bill. Council’s direction mitigates impacts to customers and keeps our rates flat.

The individual residential City of Georgetown consumer is not exposed to wholesale market prices and should not see extremely high electricity bills as a result of the wholesale energy costs. Georgetown customers might see higher than normal bills due to higher usage. We have multiple options to help you pay your electric bill, such as funding assistance through partner agencies and in-house customer programs you may qualify for.

Is the City going to pass those costs onto me?

Thanks to the financial stability of our electric utility and direction from City Council, we are able to pay our electric bill from the storm with the existing rate structure under the 10-year loan.

We will use the existing, monthly PCA customers pay to fund the annual debt. For the average residential customer, the $0.01375 per kilowatt hour PCA amounts to about $10 a month.

We lowered the PCA by 1 cent in January, and our goal was to eliminate it altogether in 2022, when we would see savings from having one of our purchased power contracts end. Based on current circumstances, we will use the existing PCA to pay for the debt incurred during the winter storm. That does not mean the PCA will stay at its current level for 10 years. Our goal is to provide a safe, reliable utility with competitive rates. We have been and will continue working very diligently to further reduce the PCA.

Is there anything I can do about this issue or to stay informed?

Please consider contacting your representatives in the Texas Legislature to let them know how this is affecting Georgetown.

Stay informed by following the Texas Legislature, local media, and City communications channels. As we have updates that affect our customers, we will share them.

I can’t afford to pay my bill.

We have multiple options to help you pay your electric bill, such as funding assistance through partner agencies and in-house customer programs you may qualify for. Please contact Customer Care at 512-930-3640 or customercare@georgetown.org to discuss options.

How is my usage up when I was without power for so long?

Georgetown electric customers are charged only for the power consumed and will be charged at the existing rates. Anyone without power during this time had no electric use recorded from meters during these outages. Heating – and reheating – your home for days in subfreezing temperatures consumed a considerable amount of electricity, resulting in higher electric bills.

How can I tell how much electricity I used in February and how that compares to previous months?

Georgetown Utility Analysis and Reporting Doorway is a portal that allows customers to track water and energy usage on a daily basis. This is a great tool to gain an understanding of how much water and energy you consume, and can be useful to help with conservation and reducing cost of utility bills. Click this link to view our helpful GUARD introduction video that will provide instructions for registering and utilizing this tool. Click here to register.

What do I do if I think my usage and/or bill is wrong?

Several people have reached out about high electric bills that are the result of multiple months, rather than the winter storm. If you have any questions about your bills, please contact Customer Care at 512-930-3640 or customercare@georgetown.org. Due to anticipated, larger-than-average calls, please give staff a few days to respond.

Print Friendly, PDF & Email