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LCRA facing major electric revenue loss after 2016

Tuesday, August 30, 2011 by Michael Kanin

The pending departure of 10 of the Lower Colorado River Authority (LCRA’s) 43 wholesale electric customers could spell a dramatic loss of funds for that organization. In an internal memo to LCRA staff, General Manager Becky Motal noted that “electric revenues, which make up approximately 72 percent of LCRA’s overall revenue, could drop by as much as 50 percent when the current electric contracts expire in 2016.”


The expiring contracts that Motal refers to belong to the Kerrville Public Utility Board, the Guadalupe Valley Electric Co-op, the Central Texas Electric Co-op, the San Bernard Electric Co-op, the City of Seguin, the City of Georgetown, the City of Boerne, the Fayette Electric Cooperative, the City of Yoakum, and New Braunfels Utilities. Each of those entities informed the LCRA by letter that they would be discontinuing their current relationship with the utility.


The revenue loss brought at least one significant change to LCRA already: As In Fact Daily reported on Monday, the utility announced a major reorganization on Friday, Aug. 25. In her memo, Motal linked the two circumstances.


“At the heart of these changes is the loss of electric customers,” she wrote. “Ten of LCRA’s 43 electric customers have opted not to re-sign with LCRA.”


The Austin Business Journal first reported the loss of the contracts in July without specifying the dollar amount or the importance of the contracts.


Motal further noted that, of the 33 remaining customers, some “have opted to purchase part of their load from other providers.” That loss, she noted, contributed to the predicted revenue drop.


Many of the letters—obtained by In Fact Daily through a request under the Public Information Act—sent by the 10 departing power purchasers contained standard language. However, two stood out.


In a letter dated April 15, Assistant Georgetown City Manager Jim Briggs told then-LCRA General Manager Tom Mason that an extension offered by the utility past a June 25, 2011 expiration date “does not meet the long range business goals or energy portfolio needs of the rate payers within Georgetown.”


Georgetown Utility Systems is fully committed to public power, its principles, and philosophies,” Briggs later continued. “We expect to continue working closely with the LCRA to further those principles and ideas that we all agree with. Georgetown will simply do that in a different way than we have in the past.”


Briggs’ office did not return messages asking for comment.


Central Texas Electric Co-op (CTEC) CEO Robert Loth wrote a letter to Mason on January 4. He began, “Dear Tom.”


“CTEC and LCRA representatives worked long and hard to try to find way to preserve a relationship that served cooperative members well for many years,” he wrote. “As we searched for answers, CTEC leaders came to believe that if we were going to provide the best value for our members, we would have to exercise more control over our cooperative’s power supply future than we had in the past.”


Loth was direct. “We could not continue to accept uncertain energy prices set by governing board that does not answer to us or our members,” he continued. “We could not accept a long term commitment that would bind the cooperative 30 years in the future, with the energy market shifting and changing more rapidly than it ever has. It soon became clear that our objectives were contrary to the LCRA business model.”


Loth told In Fact Daily that the move was strictly business. He cited the 30-year term of the LCRA extension, the rate, a lack of ownership of electricity generation, and the fact that the CTEC has no representation with the LCRA as motives for the change.


The Governor of Texas appoints the LCRA’s 15 board members.


According to Loth, CTEC has already agreed with San Antonio’s CPS Energy for a chunk of his utility’s power needs. “My best guess is that we will find a more competitive rate than what the LCRA can offer,” he said of the outstanding portion of the contract.


The CTEC’s contract is set to expire on June 25, 2016.


Despite all of this, Motal was optimistic. “We can find new customers – and possibly re-sign some who are leaving – if our rates are low enough,” she wrote in her memo. “We can lower our rates if we find ways of operating more efficiently. This means being more nimble in our decision-making processes, and, where it’s smart, consolidating and standardizing processes across business lines.”

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