Cities hope to save on power

The proposal by Cities Aggregation Power Project, a coalition of more than 80 cities, calls for a decadelong contract with a coal plant to supply electricity to the communities. Under the proposal, CAPP would issue a bond to pay the contract's costs upfront and member cities would reimburse CAPP.

The bond's price tag or how much cities could save have not been worked out, said Arlington City Attorney Jay Doegey, coalition co- founder.

Buying electricity in bulk should result in lower costs than what communities typically pay, Watauga City Manager Kerry Lacy said.

CAPP's plan comes at a time when recent studies have shown that after 10 years of reasonably inexpensive rates, Texans under deregulation are paying among the highest rates in the nation for electricity.

State deregulation laws were passed in 1999, allowing groups such as CAPP to move in and negotiate lower rates for cities.City and town councils in Arlington, Burleson, Euless, Flower Mound, Mansfield, Richland Hills and Trophy Club have approved resolutions supporting the CAPP proposal.

Tonight, Watauga City Council will consider a nonbinding resolution supporting the plan.

Colleyville, Grand Prairie and Hurst are expected to consider similar resolutions in April.

If enough member cities agree to the proposal, the CAPP board of directors will begin securing an agreement with a coal plant that would take effect in October 2007. Officials estimated that at least 77 of CAPP's 85 members report that they support the plan.

"This is not a firm commitment," Doegey said of the resolution.

"It's more of an aspirational thing that says they want to seriously be included."

If a 10-year agreement were reached, it would set a precedent in Texas, said bond attorney J. Bart Fowler, representing CAPP with the law firm McCall, Parkhurst, & Horton of Austin.

"This is a large purchase that hasn't been done in Texas, but it has been done in other states," he said.

If Watauga participates, it would cover its portion of the CAPP bond either in cash, through a city bond or by issuing tax notes, which typically have shorter repayment terms than bonds, city Finance Director Janina Jewell said.

Last year Watauga spent $271,819 on electricity, up from $181,753 in 2001. While rates have increased over the years - from 0.04 cents per kilowatt hour in 2002 to as high as 0.1186 cents this year - the city's increase in electric bills also comes from new projects, including a new City Hall, Jewell said.

Doegey said his group is looking to cut electricity costs by using a fuel other than natural gas, which utilities have blamed for the rise in electricity rates.

"The current electric retail market is pegged to natural gas," he said. "It has been the most expensive and volatile at this time. Coal is more stable, and the price doesn't fluctuate as much."

Some Watauga council members said the proposal is still risky because energy prices fluctuate so much. And there are other unknowns about the plan, they said.

"If we don't do anything, we'll have to pay so much over a 10- year period for electricity," Councilman Jerry Adams said.

"If we participate in this plan, we'd get savings. But if the amount of the savings is not enough to offset the cost of the bonds we would have to issue, then I wouldn't be interested."

The length of the proposal also raises concerns, Councilman Mike Steele said.

"It could be a lot of money, and it's a long-term contract," he said. "The energy market is kind of a crazy market these days."

CAPP has proposed striking a deal with Sempra Generation, which owns the Twin Oaks CFB coal plant in Central Texas.

"There's always going to be a risk when entering a 10-year commitment," Fowler said. "We're talking about buying in bulk because that's how we get the reduced rates. The (CAPP) board is looking for the best deal they can get."