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Is Denton's electric rate relief a live wire?

Denton Municipal Electric has proposed a slight rate decrease next year, a change that could save $1.33 on the average homeowner's $116 monthly electric bill.

Commercial customers could save more, from $20 to $500 or more each month, depending on their electric usage.

The rate decrease may signal a new era for DME, where ratepayers finally enjoy the savings coming from renewable energy generated at wind and solar farms.

Or, it could be the lull before the storm.

Denton's Public Utilities Board is scheduled to review the proposed rate change Monday; the Denton City Council's review comes Tuesday. Then, behind closed doors, both bodies will be briefed on contracting irregularities at DME.

City officials and outside investigators began examining the problem about a month ago. Three high-level DME employees were ousted as investigators examined how contracts for the Denton Energy Center came together.

The Denton Energy Center is a new, natural-gas fired power plant under construction northwest of Denton Enterprise Airport.

Crews recently finished the foundation for the Denton Energy Center, a natural gas-fired power plant that should be operational by summer 2018.DRC
Crews recently finished the foundation for the Denton Energy Center, a natural gas-fired power plant that should be operational by summer 2018.
DRC

An increasing number of residents and ratepayers say they want to know what happened with the controversial project and why, as well as what the future holds.

The project is the city’s largest-ever capital purchase, costing an estimated $265 million. The city issued revenue bonds to pay for the project, which means a portion of every customer’s electric bill will be dedicated to repaying those bonds, perhaps for 20 years or more.

Currently, about $17 of the average homeowner’s $100 light bill helps pay off DME debt. In three years, that could climb to $37 because of the cost of the power plant as well as new transmission lines and new substations, according to city records.

Today, nearly half that average electric bill, about $49, pays for the cost of purchasing power, primarily from the city's coal-fired power plant. In three years, DME officials projected the "cost of power" portion of the average electric bill would drop to about $16, primarily because of its new way of doing business.

Last year, DME proposed the Denton Energy Center as part of a major change in the way it does business. The utility negotiated more wind and solar contracts. But unlike other utilities, DME didn’t buy insurance for those contracts to hedge against price spikes on the deregulated Texas electrical grid.

Instead, DME officials set up their own trading group to buy and sell electricity. Making and selling electricity from the Denton Energy Center became a major part in that new way of doing business.

Since the city began its investigation into the contracts, the city manager has proposed that Deloitte, a multi-national audit firm, assess and report the financial risks the city has assumed by setting up the trading group and the energy center. 

The coal-fired power plant at Gibbons Creek Steam Electric Station is owned by the Texas Municipal Power Agency, created by the cities of Denton, Garland, Bryan and Greenville to produce electricity. The plant, 20 miles east of College Station, is viewed here at a distance from the lignite mine property next door, which was closed in 1995. The plant now burns coal from the Powder River Basin in Wyoming. DRC file photo
The coal-fired power plant at Gibbons Creek Steam Electric Station is owned by the Texas Municipal Power Agency, created by the cities of Denton, Garland, Bryan and Greenville to produce electricity. The plant, 20 miles east of College Station, is viewed here at a distance from the lignite mine property next door, which was closed in 1995. The plant now burns coal from the Powder River Basin in Wyoming. 
DRC file photo

The Denton Energy Center is supposed to begin generating electricity next summer. However, the city remains a partner in a coal-fired power plant near Bryan, which is also expected to operate from June to September next year.

The four-city partnership that owns the coal-fired power plant, including Denton, has tried for more than a year to sell the plant. 

Several City Council members expect the city to make a full statement about the findings of the contract investigation after the council meeting on Tuesday. 

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881.