PEC board gets look at new LCRA contract
PEC directors discussed the contract, which could be approved by the co-op and LCRA this month, at a special meeting at their Johnson City headquarters Monday.
The co-op, which focuses purely on delivering electricity to its 220,000 members, purchases nearly all of its energy from the LCRA. The current contract between the two power giants was negotiated in 1987, and PEC officials say the new agreement will stabilize the co-op’s energy prices for the next 25 years.
“This contract is the culmination of years of work with LCRA and the Association of Wholesale Customers,” PEC Deputy General Manager Paul Hilgers said. “Our history and LCRA’s are intertwined. We used to be the LCRA before we became PEC and the LCRA used to operate us.”
Hilgers said the new contract would benefit both agencies, adding the agreement gives PEC more control over how it’s charged by the authority, while giving LCRA financial stability for the next two decades.
The contract would take effect in 2016 and last until 2041, with a possible extension that would allow it to still be in effect in 2066.
Of the hundreds of agencies that purchase power wholesale from LCRA, the lion’s share is bought by PEC and the Bluebonnet Electric Cooperative. Hilgers said PEC’s continued business will keep the authority in the black for years to come.
Hilgers said the existing contract was ratified before the Legislature deregulated the state’s power industry, making many of the clauses obsolete.
“This amended agreement will also provide a new and vastly improved business model for our relationship with LCRA,” he said.
While the actual rates for PEC customers were not discussed, Hilgers said co-op representatives will have a greater say in how LCRA sets those fees.
“The contract establishes a Rates and Resources Council, providing unprecedented access to information and a collaborative approach on costs, rates and resource planning,” he said. “This essentially establishes a formal process that allows for full vetting and analysis on what’s going on at LCRA, in the event of a dispute.”
The new contract would also allow PEC to reduce its power purchase from LCRA by 35 percent, which Hilgers said could come into play if the authority is unable to meet PEC’s alternative power requirements.
The co-op last month pledged to reduce its power consumption by 20 percent, while exploring ways to obtain at least 30 percent of its total power from eco-friendly alternative sources. PEC directors hope to reach those goals by 2030.
“If, for some reason, LCRA is not able to secure all the renewable resources we want, we have the ability to go out and secure that power somewhere else,” Hilgers said. “We’re allowed to scale back our power purchase from the LCRA.”
The load-reduction rights also allow PEC more flexibility to seek out new means of power generation besides the LCRA.
“That includes progressive power sources,” Hilgers said.
The new contract could be approved at a PEC directors’ regular meeting Nov. 17, and LCRA directors may give their approval Nov. 19.
chris@thepicayune.com
