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CTEC Goes to Court with LCRA
Utilities assert their claims to protect customers as LCRA requests injunction.
Wednesday, August 22, 2012 • Posted August 22, 2012

FREDERICKSBURG, TX - At a hearing held on July 24, Central Texas Electric Cooperative (CTEC), along with six electric customers of LCRA, agreed to an expedited court hearing beginning August 27 in Austin. LCRA is asking the court to stop the customers from ending their wholesale power agreements. CTEC’s change of venue request to bring the case to Gillespie County will be among the first things likely to be considered by the Judge. Depending upon the outcome of the Judge’s ruling, the Court may then consider whether an injunction should be granted, prohibiting the seven customers from early termination of the LCRA wholesale power agreement. The court date follows on the heels of CTEC and the other utilities issuing notices of termination to LCRA on August 13. The termination advises LCRA of CTEC’s intent to terminate the contract on September 12, 30 days after the notice. The seven utilities have followed a legal process prescribed in the LCRA Wholesale Power Agreement, which provides for notification of Breach of Contract, followed by a right to send Notice of Termination if the breach is not cured.

On June 28, CTEC, along with the six other utilities, sent LCRA a letter informing LCRA that they were in breach of the longstanding Wholesale Power Agreement. In accordance with the Breach Notice, LCRA was given a 30-day opportunity to cure the Breach. “To date, we have heard nothing from LCRA. There has been no attempt to cure the breach. Therefore, we took the next step by issuing a termination notice to LCRA,” explained Gerald Kaspar, Board President, Central Texas Electric Cooperative.

CTEC’s Claims

The argument made by the seven utilities is over provisions in the Wholesale Power Agreement requiring uniform rates among LCRA’s wholesale customers. The wholesale customers who signed an “Amended and Restated Wholesale Power Agreement” with LCRA are given an option to purchase a portion of their power needs on the competitive market, which at present is more attractive than the price LCRA charges. Those utilities that did not agree to extend the Wholesale Power Agreement beyond 2016 were not given the same opportunity to take advantage of favorable market pricing. “Not only are we paying higher prices, we are also picking up the associated costs of LCRA allowing other customers the opportunity to shop elsewhere to satisfy a portion of their customers’ electric load. LCRA will be made whole regardless of how many customers release load because our members are forced to cover a greater share of LCRA revenue needs and generation costs than those customers who shop elsewhere,” claimed Bob Loth, CEO Central Texas Electric Cooperative. “Simply put, we’re treated differently than those that signed the new agreement,” Loth added.

The hearing starts August 27 and may last up to five days.

LCRA also Refuses to Refund Over-Collected Monies

In recent action, the LCRA Board of Directors met on August 15. Ignoring appeals from CTEC and six other wholesale electric customers, the LCRA Board authorized using over-collected electric funds to pay down LCRA’s debt and make other use of the monies. In the past, LCRA has refunded the monies to the wholesale customers.

“Once again, the ten wholesale customers leaving LCRA in 2016 are paying to reduce future debt of LCRA. This action further demonstrates why those of us that are terminating the contract early can expect relief for our members by getting energy from sources other than LCRA,” Loth said.

At the end of each fiscal year, LCRA is required to evaluate its fiscal circumstances. In 2012, LCRA was facing a surplus of about $25.9 million. “We contend, along with six other utilities, that those monies belong to our members. They were overpayments by

our members,” claimed Kaspar. “Unfortunately, the LCRA Board of Directors did not agree and chose to use some of our members’ money to pay off future debt.”

LCRA is supposed to set rates based on the requirements to cover costs of service, including the normal debt service coverage costs. A portion of the funds will now be applied to accelerate payment of LCRA’s long-term debt above and beyond normal debt service costs. Loth explains, “LCRA has over-collected and we expect it to be returned. It would seem that LCRA continues to assist us in making our case as they continue their discriminatory use of our member’s money,” concluded Loth.

The seven utilities include, City of Boerne, City of Seguin, City of Georgetown, Kerrville Public Utility Board, Central Texas Electric Cooperative, Fayette Electric Cooperative, and San Bernard Electric Cooperative.For more information, please contact Bob Loth, CEO, Central Texas Electric Co-op at 830-997-2126.

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