FUTURE GENERATION
It’s been a few months since I discussed the future of generation in Texas. As you may recall, in the April issue of the GVEC Review, we provided a chart that illustrated the anticipated shortfall of required generation for Texas as early as 2009 and continuing through 2016. We also discussed the length of time it takes to construct baseload generation units and the regulatory and environmental constraints surrounding the permitting of new facilities which has put Texas in a predicament for the upcoming years. I would like to take this opportunity to inform you of some steps GVEC has recently taken to secure prices for future generation in an effort to mitigate the high prices associated with this anticipated shortfall. Although we are currently bound by an all-requirements contract with the Lower Colorado River Authority (LCRA) through 2016, we have the ability to purchase up to 10 percent of our energy requirements on the open market. This year, GVEC lobbied other LCRA customers that didn’t utilize their 10 percent market pricing option, to have their options allocated to GVEC for 2008. Through these efforts, GVEC gained the ability to purchase 20 percent of our energy requirements for 2008 from suppliers other than the LCRA through the open market. We went through a formal request for proposal process and received favorable bids from several market participants. Ultimately, GVEC entered into a contract with City Public Service (CPS Energy) of San Antonio that extends through 2010. The CPS contract allows us greater flexibility and hedging options that create price certainty for the next three years. Although the CPS contract is only for a small percentage of our load, it is a step we can take toward mitigating short-term price risk. As for long-term planning, GVEC is continuing its contract discussions with the LCRA in hopes of amending and restating the current contract. GVEC has also entered into discussions with various entities regarding longterm purchase power agreements and possible equity positions for future baseload facilities beyond 2016 and outside the LCRA. These discussions have been encouraging, and we look forward to the end results. In summary, the outlook for the short-term power market is tight as demand continues to grow and supply is limited. As market fundamentals come in to play, history tells us that prices will increase. Through our efforts, we hope to soften these increases, however the reality is – prices will increase in the upcoming years.

QUESTIONS OR COMMENTS
Please contact me anytime you have questions, comments or suggestions. Email me at info@gvec.org, call me at 1-800-223-GVEC (4832) or write to me at P. O. Box 118, Gonzales, Texas, 78629. I look forward to hearing your thoughts.

View our archived "Thoughts from the CEO"

The information provided on this website is for informational purposes only,
and is subject to change. The official documentation can be obtained by
contacting the GVEC headquarters office at 800-223-4832.