Agenda

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City Council Regular Meeting

Meeting Date:

05/04/2021

BACKGROUND

The state had an unprecedented winter storm that left much of the state with freezing temperatures and power outages between February 10 and 20, 2021. During this time, the Electric Reliability Council of Texas (ERCOT)set the price of electricity at the $9,000-a-megawatt-hour maximum for nearly two days due to high demand. This led to high electric costs to providers.

Due to the high electric costs, Guadalupe Valley Electric Cooperative (GVEC) must spread its costs for the winter storm to its customers. GVEC had a special fund balance that it spent down in order to avoid large swings in prices to its residential customers based on the prices ERCOT sets. Residential customers will see a small increase in their rates going forward as GVEC replenishes its emergency fund.

Commercial customers, like the City, have ERCOT's fee changes passed directly on to them. GVEC waited until they received their charges for power usage before assigning the charge to their commercial customers. Based on the calculation by GVEC, the City's outstanding charge for the winter storm is $63,188.10.

For Fiscal Year 2019-20, the total payments to GVEC were $460,038.51. This additional charge would be an estimated 13.7% increase in fees and staff is not confident the budget can account for those overages.

There could be an option to submit these charges for federal relief through a grant program and help offset some fiscal impact of this charge. Staff is waiting on clarification from the state to see if these charges are applicable for reimbursement.

GVEC has offered to let the city spread these charges over a 48-month maximum with a 2.33% financing charge on top of the balance. If the city pays off the entire portion upfront, there would be no additional charges.

Since these charges are for services within the current fiscal year, the city must recognize the entire expense on its financial statements even if it spreads out the payments over the next 4 years. Since the city does have enough cash on hand to pay the charge up front, Staff recommends paying the balance with the upcoming bill.

Staff wanted council's input before such a decision was made and has GVEC Chief Operating Officer Sean Alvarez to help answer any questions on the fee calculations.

City Council approved this on first reading indicating to pay the total amount of $63,188.10 to GVEC.

GOAL

To adjust the budget to compensate for the Winter Storm fiscal impact.

COMMUNITY BENEFIT

By approving this adjustment, it will remove any downward service pressure on existing facility maintenance programs.

SUMMARY OF RECOMMENDED ACTION

Staff recommends approval of Ordinance 21-T-17 on final reading.

FISCAL IMPACT

As of September 30, 2020, the city's annual financial report has $10,126,057 in the available fund balance which is $750,000 over the required 26%.

RECOMMENDATION

Approve Ordinance 21-T-17 and adjust the budget to recognize additional electrical utility fees due to the winter storm.

Attachments
Ordinance 21-T-17
Schertz Winter Freeze Charge
City of Schertz Hourly Data