Council Approves Agreement with the Texas Coalition for Affordable Power for Wholesale Energy and Service Agreement with GEXA Energy

In 2002, the State's electric deregulation legislation authorized the creation of electric aggregation groups to consolidate city electric procurements and thereby negotiate beneficial pricing. The Texas Coalition for Affordable Power (TCAP) now aggregates the electric needs of 165 members, including the Town of Addison.  

 

In previous TCAP contracts, the aggregation group signed contracts for up to five years with one generator. The challenge was always when to lock-in for the next contract term. Electric costs are directly tied to present and future natural gas costs in the commodities futures markets. A weather event like a hurricane in the Gulf of Mexico or international tensions in the Middle East can affect oil and natural gas prices and make finalizing an electric deal at the wrong time significantly more expensive.

 

With the hope of reducing future electric costs, TCAP studied past natural gas cost trends to explore ways to take advantage of trends in the natural gas futures market. This led to a new contracting proposal that TCAP termed its "Strategic Hedging Program" (SHP). The goal of the SHP is to look ahead for advantageous future natural gas costs and over time award shorter-term electric supply contracts to up to five highly qualified generators rather than just award the contract to a single vendor for many years at one point in time. Not only does this provide the lowest pricing in the market, but it helps the Town avoid certain expenses resulting from long-term contracts. Addison currently pays 3.684 cents per kilowatt hour and hopes this program will bring that cost down over time.

 

At its August 25 meeting, the City Council approved a professional services contract with TCAP to participate in the SHP. You can watch the Council's SHP discussion here.

 

In a related item, Council also approved a Commercial Electric Service Agreement (CESA) between the Town and GEXA Energy, the current Retail Electric Provider of TCAP to begin after January 1, 2023. GEXA schedules the purchased electricity on the ERCOT grid to meet member demands, bills member cities, settles the market at ERCOT, assists with new individual account establishment and account termination, and interfaces with Addison's Transmission and Distribution Company, ONCOR electric.

 

You can watch Council's GEXA discussion here.