City of Dallas considers starting own power company
12:00 AM CDT on Saturday, August 7, 2010
Dallas could become an electricity provider.
The city is considering creating its own retail electric provider to procure power for city-owned facilities. That could lop $4 million off the city's annual budget but would require expertise to operate.
A city-owned power company could eventually serve customers outside of city government, but that's not the initial goal.
"The primary purpose is to serve their own facilities, to control their own destiny in terms of what they pay for electricity," said John Bick, managing principal for Priority Power Management, which is advising the city on creating an electric company.
Organizing the company will take a couple of years.
So the city signed a three-year contract with TXU Energy to buy electricity for "much" less than 9 cents per kilowatt-hour, said Bick, who also negotiated the deal for the city.
He declined to give an exact figure, but the deal saves taxpayers as much as $7 million a year. The city uses about 2.2 billion kilowatt-hours a year to juice up more than 800 facilities, traffic lights and water pumps.
Dallas will also buy renewable energy credits to cover 40 percent of the power.
Last year, those credits cost the city about $1 million, according to a June slide presentation posted on the city's website. Next year, the cost would be between $500,000 and $1.1 million, according to the presentation.
TXU will also pay for up to $812,000 in energy-efficiency upgrades.
TXU and Priority Power declined to give other terms of the contract. City staff members also didn't provide the information.
Even though the renewable-energy credits cost extra money, council member Ann Margolin said they're worth it.
"I had some doubts about whether it was worth the cost, but I became convinced," she said. Buying renewable-energy credits makes Dallas a more likely candidate for federal grants, she said.
Once the three-year contract ends, the city would be free to create its own electricity provider. Electricity retailers must be licensed by thePublic Utility Commission and must meet certain credit standards to operate.
Dallas, with its sterling municipal credit rating, could meet the credit standards at a lower cost than other major Texas power companies that carry junk ratings.
The city would also have to hire people or find contractors with the expertise to trade wholesale power and hedge against swings in prices. Poor operation could leave the city with losses.
"Basically, it's removing one level of middleman," Margolin said. "Ultimately it would shave about 3 percent off of our total electric bill. And our electric bill being in the 70, 80 million-per-year range, that's a significant amount of money."
Once Dallas establishes the electric company, it could begin to sell power to outside customers.
Bick with Priority Power, which is researching the issue for the city, said Dallas could use the power company to help lure big companies to town. The city could offer a major company cheap electricity for a certain amount of time, he said.
Or, the city could sell power to regular customers. Residential operations could create a revenue stream for the city.
"If they have already invested in infrastructure and technology to send bills out for water bills, then maybe it's just a natural extension to do the other," Bick said. But he emphasized selling power beyond city facilities is just an idea at this point.
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