HomeMy WebLinkAboutAgenda CC 03.02.2021 SpecialN otice of M eet ing of the
Governing B ody of the
C ity of Georgetown, Texas
M arch 2, 2 0 2 1
The G e orgetown City Council will meet on March 2, 2021 at 5:00 P M at 5 10 W. 9 th Street
Georgetown, Texas 78626 and Virtually
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De sc r iption: A S pe cial M e e ting of the Geor getown C ity C ounc il re late d to
the impac t of the e ne rgy mar ke t outage s from the F e br uar y 2021 winte r
storm. The mee ting will be c all e d to order at 5:00 p.m. but public may l og
in e ar li e r. The C ouncil will be c onve ni ng to e xec utive sessi on at the
beginni ng of thi s mee ting and wil l r eturn to the r e gular se ssion afte rwar ds.
Citize n c omments ar e ac ce pte d in the fol lowing for mats:
Submi t the fol lowing for m by 12:00 p.m. on the date of the me eting and the
City S e c r etar y wi ll re ad your c omme nts into the r e c ording during the ite m
that i s be i ng discussed –
https://r e c ords.ge orge town.or g/F or ms/A ddr essC ounc i l
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Re gular Se ssion
(This Regular Session may, at any time, be recessed to convene an Executive Session for any purpose
authorize d by the Open M eetings Act, Te xas Go vernment Code 551.)
A Overview of the impacts of the ene rgy market o utages from the February 20 21 winter storm and
o ptions for the resulting financial obligations –Daniel Bethapudi, G e ne ral M anager of Electric
and Leigh Wallace, Finance Direc to r
Exe cutive Se ssion
In compliance with the Open Meetings Ac t, Chapter 5 51, Government Code, Verno n's Texas Codes,
Annotated, the items listed below will be disc ussed in closed session and are subject to action in the
regular se ssio n.
B Sec. 5 51 .07 1: Consul tati on wi th Attorney
Advice fro m attorney about pending or co ntemplated litigation and o ther matters on which the
attorney has a duty to advise the City Co uncil, including agenda items
- Litigation Update
- P urchase P ower Agreements
Sec. 5 51 .08 6: Certai n P ubl i c P ow e r Uti l i ti es: Competi ti ve M atters
- Co mpetitive M atters – P urchase P ower Update
Adjournme nt
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Ce rtificate of Posting
I, R o b yn Dens mo re, C ity S ec retary fo r the C ity of G eorgetown, Texas , d o hereb y certify that
this No tic e of Meeting was posted at C ity Hall, 808 Martin Luther King Jr. S treet,
G eorgeto wn, T X 78626, a p lace readily ac ces sible to the general pub lic as required by law, on
the _____ day of _________________, 2021, at __________, and remained s o posted for
at leas t 72 c ontinuous ho urs p receding the s ched uled time o f said meeting.
__________________________________
R o byn Dens more, C ity S ecretary
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City of Georgetown, Texas
City Council Special M eeting
March 2, 2021
S UBJEC T:
Overview o f the impacts of the energy market o utages fro m the February 2021 winte r storm and options for the resulting
financial obligations –Daniel Bethapudi, General M anager of Electric and Leigh Wallac e, Finance Director
I T E M S UMMARY:
F I NANC I AL IMPAC T:
.
S UBMI T T ED BY:
Karen Frost, Assistant City Secretary
AT TAC HMENT S :
Description
Elec tric Works hop P res entation
C ounc il S pec ial Meeting - Energy C o s t F inanc ing
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City of Georgetown
Review of
Extreme Winter Weather Event
(2/14/21-2/20/21)
Daniel Bethapudi, General
Manager of Electric
3/02/2021
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Review of
Extreme Winter Weather Event
•Review of February 2021 Extreme Cold Weather Event – ERCOT
•Review of Extreme Winter Weather Events:
– City of Georgetown’s Energy Portfolio
– Review of Financial Impacts of the Winter Weather Event
City of Georgetown
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Review of February 2021 Extreme Cold
Weather Event – ERCOT Presentation
Information shared in the following slides was presented by Bill Magness
(President & Chief Executive Officer, ERCOT) during the ERCOT’s Urgent Board of
Directors Meeting on February 24, 2021.
City of Georgetown
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Review of Extreme Winter Weather
Events
• City of Georgetown’s Energy Portfolio
• Review of Financial Impacts of the Winter Weather
Event
City of Georgetown
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CONFID
ENTIAL
Georgetown’s Energy Portfolio
• Georgetown Electric Power Portfolio consists of:
– Max Peak on 2/14/2021 @ HE 19 : 134 MW (before load shed)
– Summer 2020 Max Peak: 165 MW
- Energy under contract is different from energy available at any given time. 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. The price is fixed.
- Generation Portfolio is volumetrically long energy but, due to the intermittent nature of
supply, has volumetric risk.
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Georgetown’s Energy Portfolio
• Going into the event we were monitoring our overall energy portfolio.
Both resources and our load.
– We increased our load forecasts to account for increased heating load.
– The wind generation forecasts generated by ERCOT accounted for
maximum icing potential for wind forecasts (as per ERCOT). In other
words the resource forecasts were discounted for potential icing.
– Going into the week of February 14
th , based on resource and load
forecasts from 2/13/2021, showed us to be energy short during the
following periods:
• 2/15/2021: HE 1 – 9
• 2/16/2021: HE 4 – 9, HE 19-24
• 2/17/2021: HE 1-8 and HE 19-24
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Georgetown’s Energy Portfolio
• Based on the short positions for 2/15,2/16 and 2/17 we explored the
bilateral trades for 25 MW off peak for the three days. The bids were
approximately $3000/MWH.
– As of 2/11 and 2/12 the DAM market was in line with the bilateral trade
market and in some cases lower than the bilateral trade.
– With our energy hedged with our resources and based on energy trades
on Inter-Continental Exchange (ICE) we expected the thermal
generation to show up in RTM.
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Georgetown’s Energy Portfolio
• The ERCOT DAM on 2/13 (for operating day 2/14) changed dramatically.
– Ancillary Services were priced approx. $1M
– Energy was approx. $3,800/MWH.
• On 2/14 the market fundamentals reports started showing generation being net-short
for 2/15.
– The markets changed so significantly that the DAM, RTM and ICE markets converged on the pricing.
– We decided not to take our resources and load to RTM as there was hardly any spread between the DAM
and RTM markets. This eliminated the forecast risk.
– With the icy conditions we were not confident about the resource forecasts and did not want to offer our
resources in the DAM and find ourselves short in the RTM.
• Critical Events during the event:
– Energy Emergency Alert (EEA) Level 3 and load shedding started on 2/15/2021 @ 1.20 am.
– Load shedding ended on 2/18/2021 @ 12.15 am.
– PUCT order to use the maximum offer cap price of $9000/MWH went into effect on 2/15, HE 18 through
2/19/2021 HE 9.
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Georgetown’s Energy Portfolio
For the entire duration of the event, 2/14/2021 – 2/20/2021, the actual
load and the off-setting generation are as follows:
Note: Information presented is preliminary and represents the best available data at the time it was created. Unless specified, all data
used is non-settlement/preliminary data.
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Georgetown’s Energy Portfolio
For the entire duration of the event, 2/14/2021 – 2/20/2021, 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. Unless specified, all data
used is non-settlement/preliminary data.
Buckthorn (Solar)
26%
Spinning Spur
(Wind)
48%
Mercuria (20 MW
FD)
26%
Actual Generation by Contract Type
Buckthorn (Solar)
Spinning Spur (Wind)
Mercuria (20 MW FD)
Total Load 16,110
Total Generation
Buckthorn (Solar)3,317
Spinning Spur (Wind)6,279
Mercuria (20 MW FD)3,360
Total Generation 12,956
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Georgetown’s Energy Portfolio
What is the dollar magnitude of this past
week’s energy purchases ?
Note: Information presented is preliminary and represents the best available data at the time it was created. Unless specified, all data
used is non-settlement/preliminary data.
Cost of Energy
Net Energy Purchases $26,991,465
Ancillary Services $17,779,149
Total Cost of Energy Purchases $ 44,770,614
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Georgetown’s Energy Portfolio
Why is the dollar magnitude of this past
week’s energy purchases so high?
– The Ancillary Services costs (one week) was $17.8 M.
– 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.
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Georgetown’s Energy Portfolio
Why is the dollar magnitude of this past
week’s energy purchases so high?
- The average cost per MWH in January 2021
was $20.79 (RTM)
- The Maximum price cap was set at
$9000/MWH.
- The max price cap lasted from 2/16/21 –
2/19/21 (~ 9.00 am)
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Georgetown’s Energy Portfolio
• Risk Management is a tool when there is a
market that works
• What happened during the week of
2/14/2021 was a breakdown of multiple
markets
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Council Special Meeting
Purchase Power Financial Impacts
March 2, 2021
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Electric Fund Financial Conditions
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Electric Fund Financial Conditions Pre-Event
•S&P Rated AA -
•Meet combined debt coverage ratio requirements: 2.48x
•Total annual purchased power budget: $60 million
•Total outstanding Electric utility debt principal $34.6 million
•FY2021 amended budget ending fund balance $18.1 million
•90 day operating contingency reserve $4.0 million
•Non-operating reserve $10.6 million
•Restricted debt service reserve $3.5 million
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Electric Fund Financial Conditions Post-Event
•S&P put us on “negative watch”; additional action possible
•Owe a $47.8 million payment April 1
•Need to preserve existing cash reserves
•Liquidity to bolster bond rating
•Liquidity for other unknown emergencies
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Electric Fund Financial Conditions Post-Event
Cont’d
•Will not meet revenue bond covenant debt coverage requirements in 2021
•Purchase Power operating expenses will increase by $47.8 million
•Operating revenue will not be able to cover operating expenses
•Coverage falls below minimum required 1.35x
•Triggers a new “springing reserve” that equals the average annual
payment of water and electric outstanding revenue debt combined
•Must be completely separate and restricted from other reserves
•2021 springing reserve amount is $6.4 million
•Monthly contribution of $106,666 for 5 years
•Water share 66%; $71K
•Electric share 34%; $36K
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Funding the Springing Reserve $6.4M
•May purchase a surety policy
•One -time up-front cost as percent of coverage
•Recommended first step to try as overall lowest cost option
•May be funded with increase in revenue from rates/fees, sale of assets, or
operational savings
•Increase electric rates only
•Increase electric and water rates based on their pro-rata share of the
reserve
•When reserve is no longer needed, funds can be used to pay off existing
debt
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Recommendation for Springing Reserve
•Initiate steps to cover the $6.4M Springing Reserve
•Seek a surety policy and pay one -time fee
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Purchase Power Debt Financing Options
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Two main options to finance $47.8 million
Revenue Bond
Tax Supported Debt
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Should we “buy down” the $47.8M with cash?
•Not recommended
•Need to preserve liquidity to bolster ailing bond rating
•Need to preserve reserves for other unknown emergencies
•Don’t have enough cash to buy down a significant amount
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Timeline of Debt Financing
Same timeline for either instrument
•Recommendation today March 2
•Financial Advisor Distribute term sheets to banks March 5
•Bond Counsel Prefile with Attorney General’s Office March 15
•Finance Advisor Receive bank bids March 19
•Council approve sale March 23
•Close and receive proceeds no later than March 31
•Invoice to Shell due April 1
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Repayment Source
Same repayment source for both instruments
•Power Cost Adjustment on electric bills to customers
•Current PCA is 1.375 cents per kWh
•1 cent of PCA generates ~$6 million in revenue per 12 month period
•1 cent PCA = ~$10 per month per average residential utility bill
•As Electric fund was recovering pre-event, we planned to continue reducing
PCA through summer 2022 when the gas contract terminates
•Need to leave 1.375 cent PCA in place and review potential increase
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Example Annual Debt Payment Amount (P&I)
Revenue Bond or Tax Supported; estimates only
•7 year term -$7.4M
•10 year term -$5.4M
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Revenue Bond Option
•Bank placement –max term 15 years
•Rating agencies put negative watches on several entities, surveying each one
for possible downgrade
•Higher interest rate because utility revenue is pledged
•Strict bond covenants
•Adds burden to revenue bond debt coverage ratio
•Increases the amount needed in the Springing Reserve by another ~$4
million ($6.4M + $4M = $10.4M)
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Tax Supported Option
•Bank placement –max term 15 years
•Property taxes are pledged (still repay with Electric revenue)
•Better interest rate
•No requirement to meet additional utility bond springing reserve
•Relieves pressure on debt coverage ratio
•Will require disclosure on the regular CO/GO spring sale
•Based on historical treatment of CO’s, not anticipated to affect rating or
interest rates as long as we demonstrate self-supporting with Electric
revenue from PCA
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Recommendation for Purchase Power
•Initiate steps for a $47.8M tax instrument
•Can still repay with Electric revenue
•Property tax pledge secures better interest rate and does not count
toward revenue debt coverage reserve requirements
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A: 7 year term; Flat PCA
PCA: 1.38
Target Cash Balance
Projected Cash
Balance Difference
Target Debt
Coverage
Projected
Debt
Coverage
2022 20,529,045 18,347,510 (2,181,535) 1.35 1.86
2023 22,876,807 18,538,864 (4,337,943) 1.35 1.87
2024 24,756,108 19,008,726 (5,747,382) 1.35 1.80
2025 26,542,197 19,708,375 (6,833,821) 1.35 1.78
2026 28,704,130 19,978,737 (8,725,393) 1.35 1.77
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B: 7 year term; PCA increase .50 cents
PCA: 1.88
Target Cash Balance
Projected Cash
Balance Difference
Target Debt
Coverage
Projected
Debt
Coverage
2022 20,529,045 21,348,454 819,409 1.35 2.11
2023 22,876,807 24,608,273 1,731,467 1.35 2.12
2024 24,756,108 28,215,378 3,459,270 1.35 2.06
2025 26,542,197 32,122,328 5,580,131 1.35 2.03
2026 28,704,130 35,671,348 6,967,218 1.35 2.04
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C: 10 year term; Flat PCA
PCA: 1.38
Target Cash Balance
Projected Cash
Balance Difference
Target Debt
Coverage
Projected
Debt
Coverage
2022 18,869,045 20,347,510 1,478,465 1.35 2.23
2023 21,216,807 22,548,864 1,332,057 1.35 2.24
2024 23,096,108 25,038,776 1,942,668 1.35 2.16
2025 24,882,197 27,768,576 2,886,379 1.35 2.12
2026 27,044,130 30,079,238 3,035,108 1.35 2.12
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D: 10 year term; PCA Increase .50 cents
PCA: 1.88
Target Cash Balance
Projected Cash
Balance Difference
Target Debt
Coverage
Projected
Debt
Coverage
2022 18,869,045 23,348,454 4,479,409 1.35 2.54
2023 21,216,807 28,618,273 7,401,467 1.35 2.55
2024 23,096,108 34,245,428 11,149,320 1.35 2.46
2025 24,882,197 40,182,528 15,300,332 1.35 2.42
2026 27,044,130 45,771,850 18,727,719 1.35 2.43
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What if things keep changing?
•Can back out of the sale up until the approval date March 23 -would lose
$9,500 in Attorney General fees
•Will try to negotiate call options –the ability to refinance or repay sooner than
the maturity
•Have the ability to change the amount financed up until approval date March
23
•increase (uplift charges) –uncertainty around AG opinion to debt fund
uplift charges
•decrease (government intervention)
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Recommendations for Regular 2021 Debt
•Continue on schedule with rating meeting and regular GO/CO competitive
sale April 27
•Parks, roads, facilities, public safety equipment for $31.4 million
•Move Water projects $16.3 million and Electric projects $6.6 million from
Revenue Bond private placement to public CO sale on May 11
•Council approves public notice of CO’s on March 9
•Better interest rate because property tax pledge and competitive sale
•Longer terms likely (20 years as desired)
•CO’s not included in test for debt coverage reserve of utility revenue
bonds
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Recommendations for Regular 2021 Debt Cont’d
•Continue on schedule for refinancing May 13
•Delegated from Council to staff on April 27
•2012 GO/CO’s, $2.7 million total estimated savings ($170K per yr.)
•If the mobility bond is approved by the voters, continue summer sale of first
~$20 million in July/August
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Direction Needed from Council
•Funding source for springing reserve $6.4 million?
•Staff recommendation is to seek surety policy first and research revenue
impacts as a back-up
•Buy down the $47.8 million amount with cash?
•Staff recommendation is No
•Tax Instrument or Revenue Bond for the $47.8 million?
•Staff recommendation is tax supported debt
•7 or 10-year term?; Assumed PCA treatment?
•Water and Electric regular project sales Revenue Bond or CO’s?
•Staff recommendation is CO’s
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