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Home My WebLink AboutMIN 03.02.2021 CC-RNotice of a Meeting of the Governing Body of the City of Georgetown, Texas Tuesday, March 2, 2020 The Georgetown City Council will meet on Tuesday, March 2, 2020 at 5:00 PM at the Council Chambers at 510 West 91h St., Georgetown, Texas. The City of Georgetown is committed to compliance with the Americans with Disabilities Act (ADA). If you require assistance in participating at a public meeting due to a disability, as defined under the ADA, reasonable assistance, adaptations, or accommodations will be provided upon request. Please contact the City Secretary's Office, at least three (3) days prior to the scheduled meeting date, at (512) 930-3652 or City Hall at 808 Martin Luther King, Jr Street for additional information; TTY users route through Relay Texas at 711. Mayor Schroeder called the meeting to order at 5:00 p.m. The following Council Members were in attendance: Mayor Josh Schroeder; Mary Calixtro, Council Member District 1; Shawn Hood, Council Member District 2; Mike Triggs, Council Member District 3; Steve Fought, Council Member District 4; Kevin Pitts, Council Member District 5; Rachael Jonrowe, Council Member District 6; and Tommy Gonzalez, Council Member District 7. All Council Members were present via videoconferencing and a roll call was performed. Mayor Schroeder recessed into Exec Session at 5:01 to start at 5:10 p.m. Gonzalez joined during Executive Session. Mayor Schroeder reconvened into Regular Session at 6:41 p.m. A role call was performed, and all council members were present and accounted for. Regular Session (This Regular session may, at any time, be recessed to convene an Executive Session for any purpose authorized by the Open Meetings Act, Texas Government Code 551.) A. Overview of the impacts of the energy market outages from the February 2021 winter storm and options for the resulting financial obligations -- Daniel Bethapudi, General Manager of Electric and Leigh Wallace, Finance Director Bethapudi presented the item and reviewed the Electric generation, transmission and distribution process. He stated that ERCOT oversees the flow of power from power plants to substations and then provided an overview of the recent cold weather event noting: record - setting, sub -freezing temperatures and wind chills across the state; approximately 48.6% of generation was forced out at the highest point due to the impacts of various extreme weather conditions; controlled outages were implemented to prevent statewide blackout where electric demand had to be limited to available generation supply; and local utilities were limited in their ability to rotate outages due to the magnitude of generation unavailability and the number of circuits with critical load. Bethapudi reviewed the following timeline in detail: Sunday, February 14 — Monday, February 15 1 2Pam 12:151m EMERGENCY EMERGENCY OPERATIONS OPERATIONS LEVEL 3: LEVEL I RnmtrVck r R-:�r:rii"d' 10.f+DM,Aiov 1:07 am rk'" EMERGENCY OPERATIONS LEVEL 2: i 1 1 12,12im 10:54am 95p10 5:19Pm MATCH VrATCH krs dw:trt Nom Cadre re WA►CH F!tv:. ;, _•s;=.lr �tr 3dfy ;xs �rL'CSM:deon F urL�j 9:59 Pm 630xn Fnrrresifmrgrrr:y • 1l5FrS fae F�s�nitie i�ar,,m�:�r:wvives CANCELLED �Jr�+r'•dl rr• C1pc•�fns :'.;pa,P, t4:f.`� 9 MC64 Voo pin �P[+�1 19:99 tm 3:1T `prraG:irs Pw k�e Ahrrnvvn 11,11 pm WATCK R,r irC � .fw krpdw �� =1r.Ms1•I� -•- W, iPsies "'PjRr rTer, ktst*Srll'.dp3tx!f r'.twA"A''►' oy. rnrk;+rr;l 4 .. yb om 11 wpm. usv, ADV1SdiRY °nrsra P4spc~ iti ei��nr Less ihAn i 0�71Tih` Us PM Nr_W N".! Pek Note: All times are approximate 6422?MIN Bethapudi then reviewed visual representations of the following: how the rapid decrease in generation causes frequency drop; generation capacity out of February 14-19, 2021; generation capacity out by fuel type; and available generation and estimated load without load shed. He than reviewed key events of Monday, February 15 - Friday, February 19 and highlighted: on Monday, February 151h the state was up to an additional 24.000 MW net generation unavailable due to extreme weather: loss of generation was 52,277 MW (approximately 48.6%) at the highest point, 20.000 MW peak load shed, limited gas availability for gas -fired power plants, and multiple DC -Tie constraints due to neighboring area emergencies; on Tuesday, February 161h there was no net gain in generation as some generators were restored and others became unavailable; and on Thursday, February 181h at 12:42 a.m. ERCOT canceled the last controlled outage orders but some outages remained due to ice storm damage, and there is a need for manual restoration and return of large industrial facilities. He then provided a 2011 versus 2021 event temperature comparison, a 2011 versus 2021 event comparison, load shed ordered by transmission owner, and real-time and day -ahead system -wide pricing. Bethapudi then reviewed the City's Energy Portfolio noting that it consists of max peak on February 14, 2021 at HE 19:134 MW (before load shed) and in summer 2020 max peak was 165 MW. He then reviewed the City's energy contracts and noted: energy under contract is different from energy available at any given time, and this is due to the variable/intermittent nature of the PPAs with Spinning Spur, Buckthorn and South Trent; Georgetown's Energy portfolio is net long with regards to supply and the price is fixed; and the Generation Portfolio is volumetrically long energy but, due to the intermittent nature of supply, has volumetric risk. He also provided the following table: Contract type Energy under Contract Contract Type Generated during Event Mercuria 20 MW Firm Delivery Yes Spinning Sur 144 MW Variable (As Generated) Variable (As Generated) I Variable (As Generated) Yes Buckthorn 150 MW Yes South Trent 1 11 MW I No (negligible Bethapudi stated that going into the event the City was monitoring the overall energy portfolio, both resources and the load. He added that based on the short positions for February 15th — 171h the City explored the bilateral trades for 25 MW off peak for the three days, and the bids were approximately $3,000 per MWH. Bethapudi explained that the ERCOT DAM on February 131h (for operating day February 14th) changed dramatically; on February 141h the market fundamentals reports started showing generation being net -short for February 151h; and critical events included: Energy Emergency Alert (EEA) Level 3 and load shedding started on February 15th at 1:20 a.m., load shedding ended on February 18 at 12:15 a.m., and the PUCT order to use the maximum offer cap price of $9,000/MWH went into effect on February 151h, HE 18 through February 19th HE 9. Mayor Schroeder asked for clarification on ancillary services and the ability to hedge them. Bethapudi responded that ancillary services can be procured by either self -arrangement or by letting ERCOT arrange services. He added that those services are usually cheap throughout the year, so entities will let ERCOT arrange the services for them. Bethapudi added that the market went out of the ordinary. Bethapudi resume the presentation and noted that for the entire duration of the event, February 14ih — 201h, 2021, the actual load and the off -setting generation were as follows (note: information presented is preliminary and represents the best available data at the time it was created, and unless specified, all data used is non-settlement/preliminary data): 16,109.64 12,956 3,153,58 20% Bethapudi stated that for the entire duration of the event, February 141h — 2011, 2021, the actual off -setting generation are as follows (note: information presented is preliminary and represents the best available data at the time it was created, and unless specified, all data used is non-settlement/preliminary data): Mercuria (20 MW FD) 26% Buckthorn (Solar) 26% ■ Buckthorn (Solar) ■ Spinning Spur ( Wind) ! Mercuria (20 MW FD) Total L I d 16,110 Total Geaemtion BtrMioni(Soh) SpnnuugSn(Wgxi} Metal is (20MWFD) Total Geaenkon 3,317 6,279 3,360 12,9561 Bethapudi provided the dollar magnitude of this past week's energy purchases as follows (note: information presented is preliminary and represents the best available data at the time it was created, and unless specified, all data used is non-settlement/preliminary data): Net Energy Purchases S26,991,465 Ancillary Services S 171779,149 Total Cost of Energy Purchases $ 44.770.614 Bethapudi stated that the dollar magnitude of this past week's energy purchases was so high because: the Ancillary Services costs (one week) the City $17.8 million; for 2020, the Ancillary Service cost was $710,000; the Ancillary Service costs incurred were 25 years' worth; while there is an energy cap ($9000/MWH), there is no cap on Ancillary Services; the average cost per MWH in January 2021 was $20.79 (RTM); the Maximum price cap was set at $9000/MWH; and the max price cap lasted from February 161h — 201h, 2021 at approximately 9:00 a.m. Discussion between Council and Bethapudi related to ancillary services cost, what is included in the ancillary services, frequency of use for ancillary services, what fund is used to pay for ancillary services, the possibility of a price break for ancillary services, expected response from ERCOT related to possible changes in pricing, the justification from ERCOT for the dramatic increase in these ancillary costs, and the possibility of the total cost for ancillary services being reduced. Bethapudi resumed his presentation and noted that risk management is a tool when there is a market that works and what happened during the week of February 14,2021 was a breakdown of multiple markets. General discussion among Council, Bethapudi, and David Morgan, City Manager, related to the awareness of electric companies of the $9,000/KWH rate, how electric companies chose to serve their customers despite the high rate, when the $9,000/KWH rate was determined, ERCOT protocols and review of processes, awareness of the consumer on the rates that were charged, implication on future user bills, what can be done to prevent these high charges from happening again in the future, staff recommendations on new items that citizens should follow, what could happen at the State legislative level, City's plan going forward to protect from a risk management perspective, what factors the City could control versus what the City couldn't control, winterization of equipment at the City and State level, and that City rates are set and will not be increase due to the weather event. Wallace presented and reviewed the Electric Fund financial conditions pre -event, Electric Fund financial conditions post -event, funding the springing reserve for $6.4 million, and the staff recommendation for springing reserve to initiate steps to cover the $6.4 million and seek a surety policy and pay one-time fee. General discussion among staff, bond counsel, and Wallace on total costs of associated fees, requirements of the springing reserve, debt service coverage, what triggers the springing reserve, number of bond holders of City debt, if the City can request a waiver, Wallace resumed the presentation and reviewed Purchase Power debt financing options via either revenue bond or tax supported debt, if the City should "buy down' the $47.8 million with cash, timeline of debt financing, possible repayment sources, an example of an annual debt payment amount with principle and interest, revenue bond option, and a tax supported option. General discussion between Gonzalez and Wallace regarding total annual cost of debt service, if a change to the current electric date would be required, and possible worst -case scenario. Wallace reviewed the recommendation for Purchase Power which was to initiate steps for a $47.8 million tax instrument so the City can still repay with Electric revenue and the City's property tax pledge secures better interest rate and does not count toward revenue debt coverage reserve requirements. consideration: A: 7 year term; Flat PCA PCA: 1.38 Wallace provided the following options for Council Projected Cash Target Cash Balance Balance 2022 20,529,045 18,347,510 2023 22,876,807 18,538,864 2024 24,756,108 19,008,726 2025 26,542,197 19,708,375 2026: 28,704,130 19, 978,737 B: 7 year term; PCA increase .50 cents PCA: 1.88 Projected Cash Target Cash Balance Balance 2022 20,529,045 21,348,454 2023 22,876,807 24,608,273 2024 24,756,108 28,215,378 2025 26,542,197 32,122,328 2026 28,704,130 35,671,348 C: 10 year term; Flat PCA PCA: 1.38 Projected Cash Target Cash Balance Balance 2022 18,869,045 20,347,510 2023 21,216,807 22,548,864 2024 23,096,108 25,038,776 2025 24,882,197 27,768,576 2026 27,044,130 30,079,238 D: 10 year term; PCA Increase .50 cents PCA: 1.88 Projected Cash Target Cash Balance Balance 2022 18,869,045 23,348,454 2023 21,216,807 28,618,273 2024 23,096,108 34,245,428 2025 24,882,197 40,182,528 2026 27,044,130 45,771,850 Projected Target Debt Debt Difference Coverage Coverage (2,181,535) 1.35 1.86 (4,337,943) 1.35 1.87 (5,747,382) 1.35 1.80 (6,833,821) 1.35 1.78 (8,725,393) 1.35 1.77 Projected Target Debt Debt Difference Coverage Coverage 819,409 1.35 2.11 1,731,467 1.35 2.12 3,459,270 1.35 2.06 5,580,131 1.35 2.03 6,967,218 1.35 2.04 Projected Target Debt Debt Difference Coverage Coverage 1,478,465 1.35 2.23 1,332,057 1.35 2.24 1,942,668 1.35 2.16 2,886,379 1.35 2.12 3,035,108 1.35 2.12 Projected Target Debt Debt Difference Coverage Coverage 4,479,409 1.35 2.54 7,401,467 1.35 2.55 11,149,320 1.35 2.46 15,300,332 1.35 2.42 18,727,719 1.35 2.43 General discussion among Council, staff, and the City's financial consultant regarding what happens if the City doesn't pay the bill and how it would impact other entities not wanting to do business with the City and possible issues with creditworthiness; probability of the City's financial rating being downgraded; how the City's decisions will impact the City's debt portfolio; and the history of the City's financial ratings. Wallace then reviewed what the City can do if things keep changing noting that the City can: back out of the sale up until the approval date March 23, which would result in the loss of $9,500 in Attorney General fees; try to negotiate call options, giving the ability to refinance or repay sooner than the maturity; and that the City has the ability to change the amount financed up until approval date March 23 adding that there could an increase (uplift charges) based on the uncertainty around Attorney General opinion to debt fund uplift charges or decrease based on government intervention. She reviewed the recommendations for Regular 2021 debt which is to continue on schedule with rating meeting and regular GO/CO competitive sale April 271h for parks, roads, facilities, public safety equipment for $31.4 million; move Water projects of $16.3 million and Electric projects of $6.6 million from the Revenue Bond private placement to public CO sale on May 11th; and if the mobility bond is approved by the voters, continue summer sale of first approximate $20 million in July/August. Wallace stated that staff needs the following direction from Council: determine the funding source for springing reserve $6.4 million, with staff recommendation is to seek surety policy first and research revenue impacts as a back-up; if Council wishes to buy down the $47.8 million amount with cash, with the staff recommendation being no; Tax Instrument or Revenue Bond for the $47.8 million, with staff recommendation being tax supported debt; does Council want a 7 or 10-year term and to assume PCA treatment; and include Water and Electric regular project sales Revenue Bond or CO's, with the staff recommendation being CO's. Robyn Densmore, City Secretary, read the following comment that submitted via online form: Bradley Wuthrich 03-02-21 Financial Impact of Winter Storm on GUS No Councils Items can be found Listed. There is also another meeting on the 4th but 1 reference 03-02-21 If not for Facebook this meeting would seemingly been in secret since not listed with other meetings on the GTX website, probably an oversight but shady still. What steps have we taken to investigate the deficit in supply of our specific suppliers to our city that we are in contract with? If we did not have excess energy to sell in the winter storm could this not be considered a breach of contract for failure to provide? Excess electricity was not only bought for our growth but resale and failure to provide it when we would have opportunity defeats the purpose of contracted excess. I noticed Georgetown has re branded the excess electricity as planning rather than acknowledging current and previous managements failure to run our grid like a business rather than a government run utility company to which the city's citizens eat the overbought electricity when they chose to run our contracts like a business to generate revenue. This is not planning for growth and so what is the city reviewing as far as avenues to make sure we buy only a little over what we need for growth vs the 6 million deficit that was created before our electric bills were spiked when we absorbed leadership's failed business venture? General discussion regarding what options the Council prefers with the consensus being that Council supports the recommendations of staff. Mayor Schroeder recapped the clear direction from Council which is to move forward with the surety policy, using no cash, a 10-year option at the current PCA, and breaking up the City's COs over two different sales. Council had no other questions or comments. Executive Session A. Sec. 551.071: Consultation with Attorney Advice from attorney about pending or contemplated litigation and other matters on which the attorney has a duty to advise the City Council, including agenda items - Litigation Update - Purchase Power Agreements Sec. 551.086: Certain Public Power Utilities: Competitive Matters - Competitive Matters — Purchase Power Update Adjournment Motion by Hood, second by Fought Calixtro — Yes Hood — Yes Triggs — Yes Fought — Yes Pitts — Yes Jonrowe — Yes Gonzalez — Yes Approved 7-0. Mayor Schroeder adjourned the meeting at 8:35 p.m. Appro}`y the Georgetown City Co cil on / Date Mayor Attes ry Secretary