HARLINGEN — As natural gas prices climb to a 14-year high, officials here are banking on holding down their annual electric bill to about $1 million while shielding the city from the mind-boggling record costs its paying for last winter’s historic freeze.
For more than 10 years, the city has contracted with TCAP, now charging about $1 million for the 26 million kilowatt hours it takes to run the city, the WaterWorks System and Valley International Airport every year.
But after winter storm Uri hit last February, City Hall has been stuck paying an extra $649,128 charge to foot the bill for six days of power during the deep freeze.
Now, City Manager Gabriel Gonzalez is monitoring the fluctuating energy market to lock in a good rate with TXU Energy for the next five years while the company plans to safeguard the city from paying record bills in case the next winter storm overloads the state’s electric grid.
“The rates will be comparable to what we’re paying now,” he said Thursday, referring to a rate slightly below 4 cents a kilowatt. “We’re anticipating a better deal if we get another winter storm like we got during winter storm Uri, when he got hit with a $649,000 bill.”
Negotiating with TXU
At City Hall, Gonzalez is negotiating with Irving-based TXU to lock in a rate of about 0.0399, just over the current rate of 0.0389.
“We’re anticipating hitting that mark,” he said.
Earlier this week, city commissioners requested Gonzalez negotiate a five-year contract with TXU after reviewing proposals from Direct Energy, Priority Power and RAVE. Meanwhile, the city’s contract with TCAP expires Dec. 31, 2022.
During a meeting, Eric Holtz, representing TXU, told commissioners rising natural gas prices and concerns surrounding the next winter freeze are rattling the energy market.
“We’re seeing some skyrocketing near-term electricity prices,” he said during Monday’s meeting. “As you see, the rise of natural gas, which effectively drives the prices of electricity 10 months out of the year here in Texas — it’s up to a 14-year high.”
In less than two months, natural gas prices have soared 35 percent, Commissioner Michael Mezmar said.
“The market is laser-focused on what’s going to happen this winter with regards to weather in Texas, what’s going to happen in the summer of 2022 with regards to weather in Texas and, fundamentally, what is going to happen with this natural gas supply chain issue, which is a global phenomenon,” Holtz said.
Safeguarding against winter storm bills
As part of the proposed agreement, TXU, which contracts with Edinburg and Pharr in the Rio Grande Valley, offered the cities credits to help offset their electricity charges during last winter’s six-day storm, Holtz told commissioners.
“We actually want to partner with the city. There are a lot of additional resources we provide to our customers,” he said. “You all got hit with a pretty nasty February electricity bill. Some of the other cities that we serve in the Rio Grande Valley — Edinburg and Pharr — we actually gave bill credits during that storm period. We want to ensure that the quote that we’re giving you is not only as transparent as possible but that we are protecting the city from the possibility of seeing a repeat of what happened in February.”
Mind-blowing electric bill
About six months after the storm, commissioners agreed to pay the Electric Reliability Council of Texas’ $649,128 bill “under protest.”
In May, GEXA Energy billed the city $649,128 to cover ERCOT’s charges based on unrestricted record rates from Feb. 14 to 20.
During the storm that dropped temperatures below freezing, factors including frozen gas pipelines led electricity generators to pump insufficient power into the state’s electric grid.
So ERCOT turned to “ancillary” electricity providers, who charged $25,000 per megawatt because the industry doesn’t require them to keep costs at the state’s cap of $9,000 per megawatt.
Through the storm, power outages blacked out much of the state as ERCOT ordered AEP Texas and the state’s electric companies to pull power from the electric grid to avoid overloads that could damage the network made up of power lines.
