Electric Purchased Power Costs BACKGROUND AND CURRENT STATUS OF THE CITY S ELECTRIC FUND

Electric Purchased Power Costs BACKGROUND AND CURRENT STATUS OF THE CITY S ELECTRIC FUND

28 Purchased Power Goals Current policy direction on power portfolio goals Competitively priced Long-term stable rates on energy Mitigate regulatory, legislative, and financial risk 3% renewable by 23 28 Integrated Resource Plan (IRP) 3% Renewable 3% Coal 3% Gas 1% Market Substitute Nuclear power for Coal or Gas if available

Contract History LCRA Primary Provider of energy from 194-212 Did not renew as they couldn t meet purchased power goals Aging fleet New investments were expensive No rate guarantees to the City 28 Signed small wind contract with AEP as a pass through deal for Southwestern University Utility had no other sources of power at this time

State of markets in 28-212 All forms of power were expensive to acquire City evaluated multiple options in wind, coal, and gas Every option was above electric rate targets MWs 16 14 12 1 8 6 4 2 Blocks of Power versus Load 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 21 22 23 24 Hours of the Day Base Load Intermediate Peak Short Long Actual Load

Competitive Procurement of Purchased Power 212 LCRA contract terminated Began competitive procurement for energy (gas, coal, wind, solar, and nuclear) Philosophical design for the utility Targeted peak vs. base load protection Targeted future vs. current needs 28-212 had shown a high frequency of price spikes during peak demand

Competitive Procurement of Purchased Power 212 Mercuria (MEA) contract approved through 221 (Gas Contract) No long-term contracts available due to ERCOT forecasting shortage and resulting high energy prices 213 Spinning Spur 3 (SS3) contract approved through 235 (Wind Contract) 215 Buckthorn Contract approved through 243 (Solar Contract)

Competitive Procurement of Purchased Power 25 Blocks of Power versus Load 2 15 MWs 1 BkTH $$ 5 SS3 $ MEA Block $$$ 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 21 22 23 24 Hours of the Day Base Load Wind Solar Short SS3 Long Solar Long Actual Load

35 Annual Peak Supply 3 25 2 15 1 5 216 217 218 219 22 221 222 223 224 225 226 227 228 229 23 231 232 233 234 235 236 237 238 239 24 241 242 243 MEA EDF BkTH Peak *MEA block ($$$) expires at the end of Dec. 221

Why the long position? Georgetown s energy demand was growing rapidly High frequency of price spikes for peaking energy in 28-214 ERCOT was forecasting energy shortages past 221 Forecast for energy market predicted increasing prices

State of the energy market in 216 Mild weather depressed power prices throughout the year 5 Power 5 Natural Gas $/mwh in SLZ 4 3 2 1 $/mmbtu 4 3 2 1 213 Power Forward curve Actual Price 213 GAS price forward Actual Price

State of the energy market in 217 Hurricane Harvey disrupted all of ERCOT Energy prices crashed 5 Power 5 Natural Gas 4 4 $/mwh in SLZ 3 2 1 $/mmbtu 3 2 1 213 Power Forward curve Actual Price 213 GAS price forward Actual Price

State of the energy market in 218 Return to normal weather patterns Normal market performance in late-may and all of June $/mwh in SLZ Prices crashed as more generation came online 5 4 3 2 1 Power $/mmbtu 5 4 3 2 1 Natural Gas 213 Power Forward curve Actual Price 213 GAS price forward Actual Price

State of the current energy market Market fundamentals have changed significantly since our contracts were originally proposed 16 14 12 Power 213 Power Forward curve Actual power and current forward 217 Forward 218 Forward 1 8 6 4 2 1/29/216 3/29/216 5/29/216 7/29/216 9/29/216 11/29/216 1/29/217 3/29/217 5/29/217 7/29/217 9/29/217 11/29/217 1/29/218 3/29/218 5/29/218 7/29/218 9/29/218 11/29/218 1/29/219 3/29/219 5/29/219 7/29/219 9/29/219 11/29/219 1/29/22 3/29/22 5/29/22 7/29/22 9/29/22 11/29/22 1/29/221 3/29/221 5/29/221 7/29/221 9/29/221 11/29/221 $/mwh in SLZ

State of the current energy market Market fundamentals have changed significantly since our contracts were originally proposed Natural Gas 6 213 GAS price forward Actual GAS and current forward 5 $/mmbtu 4 3 2 1

219 electric fund actions Budget based on rate target Took advantage of November natural gas price spike to sell 219 MEA gas and energy into the forward market Initiated discussions with SS3 and Buckthorn on contract structure Actively soliciting proposals from other utilities and brokers on selling remaining long position Updating management strategies Seeking alternatives for portfolio management going forward

Electric Rate Structure Base Monthly Charge (1% of fixed costs) Currently $24.8 per month (up from $2. to offset increased investment) Variable per kwh Charge Target for all Power and Transmission Costs including ERCOT Fees and Charges $.629 per kwh Power Cost Adjustment Factor (PCA) $.4 per kwh Delivery costs, fees, and charges incurred by the City $.329 per kwh Transmission Cost Adjustment Factor (TCA). per kwh Used when unexpected increases to transmission rates occur during a budget year

PCA Adjustment Effective Feb. 1 the City will adjust the PCA by $.135 per kwh through the end of September The average customer uses 949 kilowatt hours per month and will experience a $12.82 increase on their monthly bill. The PCA adjustment will generate $6 million in FY219, and is needed to ensure the financial stability of the electric fund should steps to reduce the long position take longer to implement than expected