PUB RATEPAYERS FIND TENASKA PROJECT "BARRIL SIN FONDO"

By Juan Montoya
The week of December 11-17, 2012, proved to be a fateful period for the electric, water and waste water rate payers of the Brownsville Public Utilities Board.

In that week, a unanimous city commission board rammed through two public hearings at two special meetings and passed two ordinancnes that resulted in adoption of upwards rate hikes in utilities that totaled 36 percent increase in electric rates over the next three years, a 20 percent increase in water rates over the same period, and a 6 percent hike in waste water costs over two years.

Under the plan approved by both bodies  (COB and PUB), electric rates alone went up by 14 percent by October 2013 and another 22 percent by October 2016.

Yet, if one looks at the agenda items and minutes, there is no hint that the passage of these two ordinances had anything to do with indebting the rate payers with one-quarter interest (200 MWs) in a 800-MW gas-fired electric power generating plant in partnership with a private company with a price tag of $345 million. The total cost of the plant was tagged at $500 million. Even though PUB ratepayers were paying more than half of the cost, they were only entitled to one-quarter of the power generated.

Instead, the scheme was cloaked in the passing of an ordinance (2012-1568) that would allow PUB to "establish a gas utility system and appointing the PUB with authority to control and manage same, including to enter agreements regarding same, to develop facilities, and potential location for facilities, and to apply for and obtain permits and licenses associated therewith."

There was no mention of Tenaska, no mention of the Memorandum of Understanding (MOU) between the PUB and the private energy producer, and no mention of the fact that the utility gave Tenaska the option of delaying the project until it had sold the remaining 600 MWs of power to unidentified customers. Martinez was a member of the PUB board as an ex-oficio member. And current Cameron County Judge Eddie Treviño, a local attorney and former mayor, was its legal counsel when the MOU was written and approved.

And how was PUB going to pay for this staggering a mount of debt?

That was included in the other ordinance passed along with 2012-1568). That ordinance (2012-1569) where that amended Chapter 102 of the Code of Ordinances which provides for rates and charges to "provide for upward adjustments of electrical, water and waste water rates, fees and services;"

Both the ordinances were passed on second reading on Dec. 17. The plan was rushed through the commission so fast that there was not one member of the public to voice their concerns or opposition in that week before the 2012 Christmas holiday.

On January 28, 2013, just a little over a month after the PUB and COB approved the deal with Tenaska, a proud Mayor Tony Martinez and the commission presented their plan with a press conference where the plant was sold as the best option the city had to procure electric power and "energize" the local economy.

Mayor Tony Martinez described the proposed power plant as “a terrific deal for Brownsville.”

“We looked at a lot of things,” said John Bruciak, BPUB general manager and CEO . “We did an integrated resource plan on the power supply that looked at everything in the state that was available. This hands down was the most economical and efficient for our residents.”

On the sidelines, United Brownsville under the leadership of executive director Mike Gonzalez and his executive secretary Deborah Portillo lead the cheerleading. Gonzalez has since been fired and Portillo was elected to the city commission.

Under the agreement, BPUB was to be responsible for building a water pipeline from the waste water plant to the power plant, a distance of roughly five miles, as well as a gas pipeline from Edinburg – about 50 miles – to supply the power plant with fuel.
Buying additional power on the open market was not a feasible option in light of the state’s current electricity shortage, Bruciak said.

How things have changed. Apparently, PUB's "integrated resource plan" and its energy gurus lacked the ability to look into the future of electric energy supply even locally.

Fitch Ratings came in on May 2015 and stated its analysis "reflects diminished interest in the remaining capacity of the project, which is likely the result of very favorable energy prices available in the ERCOT market. Low natural gas prices and the addition of substantial wind generation capacity have contributed to low energy prices and the lack of new non-renewable capacity construction in the region."

So far, the increased rates to customers has resulted in a pile of money accumulating in the coffers of the PUB and eyed hungrily by the city commission. Already, the city raids the PUB annually with a "transfer" of more than $7 million to offset the annual deficits in their budget. Will they go to the well even more now that they know there is money to be had there? PUB rate payers, in effect, are paying a double (or triple) tax: one is property taxes, another sales taxes, and now higher utility rates.

PUB has generously stated that it might used the accumulating pile of cash to off-set customer bills through the fuel factor by about $15 million annually in order to offer electric rates that are competitive with other regional providers. Management anticipates that the use of reserves to offer rate relief will continue only until the time that the revenues are needed to support debt service on the TBGS-related debt.

How much money is there as a result of the higher rates?

As of May 2016, Fitch states that the PUB reserved $19 million into an equity reserve in fiscals 2014 and 2015, and budgeted another $10 million deposit in fiscal 2016. In other words, the rate payers have given PUB and extra $30 million so far and the PUB "may" adjust the fuel factor to lower their bills by $15 million sometime in 2016. Have you noticed your electric bill decrease?

At the meeting where the rate hike ordinance was approved on second and final reading, the voting went like this:

Motion to adopt: Ricardo Longoria, Commissioner District 1
Second: Melissa Zamora, Commissioner, District 3
Ayes: Antonio Martinez, Mayor, John Villarreal, Commissioner District 4, Estela Chavez-Vasquez, Commissioner At-Large "A", Rose B.Z. Gowen, Commissioner At-Large "B"
Nays: None
Absent: Jessica Tetreau, Commissioner District 2

Zamora and Chavez-Vasquez are no longer on the city commission. Martinez just won reelection. Gowen, Villarreal and Portillo are up for reelection in May 2017.