18-B CAPP Board - Price Lock for 2007

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Page 2 September 27,2006 subdivision has complied with Section 2162, Texas Government Code and all applicable contracts awarded by the Council on Competitive Government regarding the bidding or awarding of this Agreement. Section 2162 of the Texas Government Code requires state agencies (with the exception of institutions of higher education and state university systems) to procure energy through contracts awarded by the Council of Competitive Government (CCG). The CCG has awarded LPB Energy Consulting (LPB) an exclusive contract to procure energy for state agencies through 2010. While state agencies are required to procure energy through the LPB contract, Section 2162 permits local governments to voluntarily elect to participate in the LPB contract. It is extremely unlikely that any CAPP member has voluntarily elected to procure power through the CCG and LPB. However, legal counsel for DEBS seeks this affirmative warranty from all local governments with whom it contracts because LPB has informed DEBS that LPB will move to dissolve any energy contract entered into by local governments that have opted into the CCG process. We have agreed to accommodate DEBS' concern. If your political subdivision has agreed to procure energy through the CCG, please inform our office immediately. 2008 Prices While the gas prices for the first two quarters of 2008 were locked down last week, it is too early to calculate the price that will be experienced during 2008. The electric energy price for the first two quarters of 2008 will be slightly higher than the above-referenced 2007 price, but less than the average price experienced during 2006. It is expected that some time during the next 12 months, CAPP will be able to capture a further decline in the gas futures market for the second half of 2008, which will lower the overall 2008 electric contract costs. Lloyd Gosselink Blevins Rochelle & Townsend, Pc. r' ~