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Dallas Officials Sneak $450 Million Power Contract through Approvals

June 17, 2015 By Josh Kessler

An op-ed in the Dallas Morning News questions why Dallas City Council members are rushing to finalize a contract with retail energy provider TXU valued at up to $450 million over seven years. If enacted, the contract would cover all power for City-owned facilities from 2016 through 2023 – a very long term for an energy contract. Contrary to popular practice at both public and private organizations for large-scale contracts, City staff have opted not to open the contract to bids from other suppliers.

The Front Burner blog in D Magazine Appear suggests that City Council members may be trying to avoid scrutiny of the deal by adding it as a last-minute addendum to the council agenda. The addendum was posted less than two days before the Council meeting, in contrast to the primary agenda, which was posted two weeks in advance.

The firm Priority Power Management (PPM), which is run by ex-TXU executives, managed the negotiation process. Under the terms of the agreement, TXU would provide a price to City managers 2 to 3 weeks after the Council approves the contract, at which point the City Attorney and City Manager have one hour to approve the price. According to Front Burner, no explanation was given of how the prices will be calculated.

A presentation to the City Council explains that the City has a current deal that expires May 31, 2016. This deal would supersede the current contract, offering a price that is 3 percent below current prices. It would also ensure that the city receive 100 percent of its energy from renewables (primarily wind, potentially with some solar added in the future), up from 50 percent under the current contract. The presentation shows that the contracted rate would save $3.0 to $3.5 million from October 2015, when the deal would take effect, through May 2016. Throughout the contract life, it purports to save $23.1 to $32.1 million.

However, these savings assumptions compare contract prices to prices under the current contract. As the Front Burner article explains, electricity prices have fallen since the current contract pricing was established due to falling gas prices. Therefore, any new contract should offer reduced pricing compared with the currently contracted price. Nevertheless, the presentation failed to provide transparency into how the pricing was established – a final rationale for questioning the validity of the deal and the deal-making process.

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