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LCRA Power Customers Should Honor Their Contracts
LCRA General Manager
Wednesday, September 5, 2012 • Posted September 5, 2012

The flurry of recent news releases and articles about some electric utilities’ dispute with LCRA can be confusing. Despite various court actions and the pronouncements that followed, the heart of the matter is pretty simple. LCRA has contracts with 10 wholesale electric customers that extend to 2016, contracts that we have significant financial investments in, expecting them to be followed for their duration. We are honoring those contracts and expect the customers to honor them as well.

Earlier this summer, seven of those wholesale customers notified me that they consider LCRA to be in breach of contract for not giving them the option to buy their power from other wholesalers. The seven utilities are the cities of Boerne, Seguin and Georgetown, the Kerrville Public Utility Board, Central Texas Electric Cooperative, Fayette Electric Cooperative, and San Bernard Electric Cooperative. I said then and say now, we have abided by their contracts and will continue to do so.

In response to those seven customer notifications, we sought to have a court determine that LCRA is honoring its contracts. Initially, we sought a temporary injunction to prevent further actions by those customers. After that filing, we decided to pursue a permanent solution, not a temporary one, and on Aug. 27 withdrew our request for an injunction. Several other matters of venue and jurisdiction with some customers are being decided, but the basic question of breach of contract is still pending.

I hope those customers will decide to honor their contracts. But if they don’t and try to terminate them before 2016, LCRA will continue with its initial pleading for a judicial decision on the question of breach, which is still before the court. Those seven contracts are still valid, in our opinion.

I realize all that back and forth can be hard to follow, particularly for those individuals and households who pay their electric bills to those seven power providers. Everyone should know that LCRA has adopted the same rates for all 43 wholesale power customers. And those rates are competitively priced. If the electric companies want to buy their power on the open market, that’s always a risk. There is no guarantee the market price will ultimately be lower than their contract price with LCRA.

In addition to a stable, competitive price, LCRA’s customers have a reliable supply of power and a balanced portfolio of coal, gas, hydro and wind that keeps prices cost-effective and competitive. Our customers are also contracting with a local provider that has served them well for many decades, not an unproven start-up or a company with foreign ties. By trying to get out of their contracts early, those customers are taking a sizeable, and potentially costly, risk. They are not only venturing away from LCRA’s price stability to gamble on the open market, but running up legal bills and potentially having to pay LCRA for its costs. That could get quite expensive for their ratepayers.

LCRA has served its wholesale customers – all of them – conscientiously. We have provided them and their bill-paying customers with a cost-effective and stable source of power, excellent service, and grants to their local fire departments, libraries, ball fields and more. LCRA has assisted many of their communities by offering economic development projects, which have been greatly appreciated.

It’s sad that after all that and years of active negotiations, seven customers want to break their contracts, lose the great service LCRA has provided for so long, and run up significant legal bills and possibly higher power costs that their customers will pay for in their rates. LCRA will honor its contracts and those customers should, too, for the certainty it will bring to their customers and their communities.

Becky Motal has been LCRA General Manager since July 2011.

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