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LCRA and Utilities Fight Over Contracts

River authority could lose half of its electric revenues

By Mike Kanin, Fri., Sept. 14, 2012

LCRA GM Becky Motal throws down the gauntlet.
LCRA GM Becky Motal throws down the gauntlet.
Photo by Jana Birchum

This summer, the Lower Colorado River Authority has seen the costly departure of some of its wholesale electric power customers complicated by a dispute over the way it treated seven of those utilities on their way out the door.

The story goes back to a decision by 10 of those utilities not to extend their contracts past their 2016 expirations. With that news came an internal memo written by LCRA General Manager Becky Motal that read, in part, "electric revenues, which make up approximately 72 percent of LCRA's overall revenue, could drop by as much as 50 percent when the current electric contracts expire in 2016."

By June of this year, seven of the soon-to-be-former LCRA wholesale electric customers were ready to leave more quickly. Collectively, they suggested that, in the wake of their departure announcements, they had been punished by LCRA with (according to a letter from one of the parties involved) "punitive rates." Pricing, argued the seven rogue outfits, had become less fair when compared to the utilities that had agreed to continue their relationships with LCRA – under agreements renewed through 2041. As such, the departing utilities – the Fayette Electric Cooper­at­ive, Central Texas Elec­tric Cooperat­ive, and San Bernard Electric Cooperat­ive, as well as organizations in George­town, Boerne, Seguin, and Kerrville – declared that LCRA had breached their respective contracts, and declared their intent to sever their relationships this year.

LCRA sought a temporary injunction against the utilities that would have prevented their departure, but withdrew that request on Aug. 27. When asked about the situation, LCRA spokeswoman Clara Tuma referred me to an Aug. 30 release penned by Motal. Under the tsk-tsk headline "LCRA Power Customers Should Honor Their Contracts," Motal wrote that "despite various court actions and the pronouncements that followed, the heart of the matter is pretty simple."

She wrote that LCRA had "significant financial investments" in its contracts with the 10 departing utilities, and had expected them "to be followed for their duration." Motal explained that withdrawing the request for a temporary injunction reflected a decision "to pursue a permanent solution, not a temporary one" and that though "several other matters of venue and jurisdiction with some customers are being decided ... the basic question of breach of contract is still pending." She also touched on the rate dispute: "Every­one should know that LCRA has adopted the same rates for all 43 wholesale power customers," she wrote.

City of Georgetown spokesman Keith Hutch­inson stuck to his guns. "Since we notified them that we were not going to renew [our contract], we feel like we were treated unfairly," he said, adding that Georgetown Utility Systems "will be seeking other power suppliers" as of Sept. 13. Seguin Mayor Betty Ann Matthies expressed similar sentiments, telling the Seguin Gazette that the departing utilities "do not currently have the same opportunity [as other customers] to take advantage of favorable pricing in the wholesale power market."

Late Friday, the Statesman reported that a district judge ruled that the LCRA could sue the city of Georgetown over the matter. It doesn't appear either side is ready to walk away quietly.

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