LCRA tries to head seven of its power customers off at the exit

Texas-based Lower Colorado River Authority is not in breach of contracts to supply power to several of its customers and will not give up its contracts to serve those customers easily, LCRA General Manager Becky Motal said in an Aug. 30 statement.

A flurry of recent news releases and articles about some electric utilities’ disputes with LCRA can be confusing, Motal wrote. “Despite various court actions and the pronouncements that followed, the heart of the matter is pretty simple,” she added. “LCRA has contracts with 10 wholesale electric customers that extend to 2016, contracts that we have significant financial investments in, expecting them to be followed for their duration. We are honoring those contracts and expect the customers to honor them as well.”

Earlier this summer, seven of the wholesale customers notified Motal that they consider LCRA to be in breach of contract for not giving them the option to buy their power from other wholesalers, she said. The seven utilities are the cities of Boerne, Seguin and Georgetown, the Kerrville Public Utility Board, Central Texas Electric Cooperative, Fayette Electric Cooperative and San Bernard Electric Cooperative.

In response to those seven customer notifications, LCRA sought to have a court determine that it is honoring its contracts. Initially, LCRA sought a temporary injunction to prevent further actions by those customers. After that filing, it decided to pursue a permanent solution, not a temporary one, and on Aug. 27 withdrew its request for an injunction. Several other matters of venue and jurisdiction with some customers are being decided, but the basic question of breach of contract is still pending, Motal noted.

“I hope those customers will decide to honor their contracts,” Motal added. “But if they don’t and try to terminate them before 2016, LCRA will continue with its initial pleading for a judicial decision on the question of breach, which is still before the court. Those seven contracts are still valid, in our opinion.”

Everyone should know that LCRA has adopted the same, competitively-priced rates for all 43 wholesale power customers, Motal said. If the electric companies want to buy their power on the open market, there is no guarantee the market price will ultimately be lower than their contract price with LCRA, Motal noted.

In addition to a stable, price, LCRA customers have a reliable supply of power and a balanced portfolio of coal, gas, hydro and wind that keeps prices competitive, Motal added. “Our customers are also contracting with a local provider that has served them well for many decades, not an unproven start-up or a company with foreign ties,” she added. “By trying to get out of their contracts early, those customers are taking a sizeable, and potentially costly, risk. They are not only venturing away from LCRA’s price stability to gamble on the open market, but running up legal bills and potentially having to pay LCRA for its costs. That could get quite expensive for their ratepayers.”

Customers say they are nailing down alternative power supplies

A statement on the Fayette Electric Cooperative website said: “Hours prior to an injunction hearing on August 27 in Travis County, LCRA attorneys notified Fayette Electric Cooperative (FEC) that LCRA was dropping its pursuit of a temporary injunction. FEC, along with six other utilities, provided LCRA with an opportunity to cure contract breaches in a written notice sent on June 28. Without advance notice or even attempting to address any of the customers’ concerns, LCRA sued the group of utilities in Travis County district court seeking declaratory judgment and an injunction to stop the utilities from terminating the contract. At no point was FEC or any other wholesale customer enjoined from taking action. Since LCRA did not attempt to cure anything, FEC and the other utilities issued notices of termination on August 13 as allowed by the contract. LCRA’s decision to drop the temporary injunction clears the way for FEC to purchase power from a more competitive supplier beginning on September 13.”

The Kerrville Public Utility Board (KPUB) said in an Aug. 28 statement that LCRA’s decision to drop the temporary injunction clears the way for it to purchase power from another supplier beginning on Sept. 13. KPUB Chairman of the Board John Sample described the development as “a significant step forward for KPUB and its customers. We now are allowed into a deregulated competitive market to seek the lowest price possible for our customers.”

Tracy McCuan, KPUB General Manager and CEO, said: “KPUB is taking steps to put a new power contract in place. The switch to a new provider will be seamless and customers will not notice any change.”

Texas-based LCRA sells wholesale electricity to more than 40 retail utilities, including cities and electric cooperatives that serve more than 1 million people in 55 counties. LCRA also operates more than 3,300 miles of transmission lines statewide.

LCRA’s power generation portfolio includes two traditional natural gas-fired power plants, one coal-fired plant (Fayette), a combined-cycle gas-fired plant, six hydroelectric dams and long-term purchase contracts from three West Texas and Gulf Coast wind farms. LCRA is replacing its 420-MW Thomas C. Ferguson Power Plant in Horseshoe Bay near Marble Falls with a new 540-MW, combined-cycle, natural gas-fired power plant to be on-line in 2014. Additional long- and short-term purchases from other ERCOT suppliers round out the energy mix LCRA provides its wholesale electric customers, said the LCRA website.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.