A Project of Texans for Natural Gas

Texas City Leaders Face Wrath of Residents Over Green Energy Deal

The city’s mayor said renewable energy made good business sense, but now rates – and anger – are on the rise.

Sharon Jayson | U.S. News | March 28, 2019

GEORGETOWN, TEXAS — A few years ago, this Central Texas city was basking in the media spotlight after announcing it was one of just a handful of U.S. cities and the only one in the Lone Star State powered 100 percent by renewable energy.

But now, Georgetown’s leaders are being criticized for promising that going green was a smart business move for the city.

The city had pinned its hopes on wind and solar when it started negotiating 20-year and 25-year contracts with two wind farms and a solar facility that required the city to purchase far more energy than it could immediately use. The original idea in 2012 was to sell that surplus and recoup the costs while maintaining stability for the city’s power needs. But market volatility and decreased demand for electricity meant that losses piled up, leaving the municipally owned electric utility facing a shortfall of almost $7 million by the end of 2018 – and now residents are left paying more per month to make up for it.

“We’re selling (the surplus electricity) at a loss. That’s why rates have to be raised to pay for this indiscretion,” says Joe Plunkett, a retired electrical engineer who moved to Georgetown almost seven years ago from the Boston area. While he can afford the higher bill – an average of $12.82 more per month as of Feb. 1 – Plunkett says many cannot.

Mayor Dale Ross – the champion of the city’s renewable energy movement who was featured in former Vice President Al Gore’s 2017 documentary “An Inconvenient Sequel: Truth to Power” – is trying to convince Georgetown’s 74,000 residents that the city is focused on the long-term benefits of going green, not short-term savings.

“I think people are a little bit premature in their criticism,” he says. “We’re working the challenge. People have to be patient. It wasn’t a five-year strategy. It’s a 20- to 25-year strategy.”

“This was a decision that was to create two things: one, cost certainty over the long-term, and two, to have a strategy that mitigates regulatory and governmental risk. It was a business decision,” Ross says. “And I still believe this is going to be immensely successful.”

At issue with many residents are those long-term power purchase contracts. Officials believed buying more power than the city needed at the time would account for future growth and would allow them to sell the excess to buyers on the wholesale energy market. Ross adds that the city was obligated to buy a certain amount of power in order for the companies to build the green facilities.

“We had to take X amount of megawatts or else the wind farm would not be built and the solar farm wouldn’t be built,” Ross explains. “Our contracts for 20 and 25 years allowed them to go to their investors and get money to build these two (facilities).”

“But wait until mid-2022,” he says. “All the power that we’ve purchased will be consumed in Georgetown in mid-2022.”

At the time those contracts were signed (in 2008 , 2013 and 2015) market forecasts from the Electric Reliability Council of Texas, or ERCOT, which manages the flow of electric power through the state’s energy grid, projected strong energy prices and greater demand overall in the state. ERCOT doesn’t forecast at the city level. However, city officials say Georgetown’s utility staff and their paid consultants’ analysis didn’t differ from ERCOT’s.

“All of the projections were showing increases in energy costs and a shortage (in supply), which is why the city moved in the direction it did,” says City Manager David Morgan.

But that situation failed to materialize. Instead, energy prices have dropped, and industry trends toward more energy-efficient homes have resulted in a decrease in overall energy use.

Economist Joseph Aldy, an energy policy expert at Harvard University’s Kennedy School, says such long-term power purchase agreements are “quite common, especially for renewable sources.” But cities often find ways to take market volatility and local demand into account.

“The thing that struck me about Georgetown is that they had contracted for more than 100 percent of the power,” he says. “They could have contracted for 80 percent of their power and could go on the spot market for the rest. That’s one way to manage the risk.”

Georgetown’s leaders are now looking for new consultants to manage the city’s energy portfolio and have already hired one firm to review its energy management practices. Morgan says they’re looking at a “shift in directions.”

In the meantime, the city ended fiscal 2018 with a $6.84 million shortfall in the electric fund instead of a projected $8.8 million cushion, and some residents say they are losing faith in city leadership.

“These long-term contracts have gone under water because they’ve bought about twice as much renewable energy they can use, so they have to sell it and they have to sell it at a loss,” says Bill Peacock, vice president of research for the Texas Public Policy Foundation, a nonprofit conservative think tank that has hosted two town hall meetings about the issue. “The people of Georgetown are losing millions of dollars every year because of this misguided attempt to go 100 percent renewable.”

Ella Moorer, a Georgetown native and retired nursing home caregiver who attended one of the town hall meetings, says ratepayers on fixed incomes can’t afford the nearly $13 a month increase.

“I’m 82 years old. I can’t get a job anymore. I live on my Social Security,” she says. “We’re just barely making it as it is. I’m not mad, but a little upset because us elderly people can’t afford more.”

Chick Gladwin, who lives in the age-restricted Sun City community in Georgetown, says what’s happened with the utility contracts “was misjudgment.”

“Can I pay $12 a month more, yeah, if that’s what it is. But I also expect that they’re going to be able to fix it,” he says.

That’s exactly what the mayor is counting on.

“I don’t think I’ve let citizens down,” Ross says. “We did what we believe was the right thing. I was very effective at spreading the message of green and our success story. I think the long term is going to prove that to be true.”