19-MOTION TO APPROVE RESOLUTION AUTHORIZING THE TEXAS COALITION FOR AFFORDABLE POWER TO NEGOTIATE AND EXTENSION TO THE CURRENT ELECTRIC SUPPLY

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STAFF REPORT The current energy supply agreement with Next Era (Florida Power & Light) expires December 31, 2013. Energy prices for each year of the current five-year coniract were locked or1 at the time the contract was signed in the fall of 2008. Prices vary by ERCOT zone and for 2011, the energy prices are scheduled to be only slightly higher than 2010 prices. The contractually scheduled prices for 2011 are: North Zone 7.895¢ per kWh South Zone 8.044¢ per kWh West Zone 5914¢ per kWh Houston Zone 8.447¢ per kWh The City of Paris is in the North Zone. New Offer Results in Savings The City has an opportunity to reduce next year's price and achieve significant savings over the next tlv'ee years by amending and extending the existing supply agreement. Our supplier, Next Era, has offered to liquidate the natural gas futures contracts it secured in 2008 to give TCAP fixed electric rates for five years. Next Era would then purchase new gas futures contracts to secure fixed pricing for an eight-year period at rates less than rates that must be paid next year under the existing ternis and conditions of the contract with Next Era. For most TCAP members, Next Era's offer to "blend and extend" would reduce 2011 prices by approximately 1¢ per kWh. For Paris, that reduction should result in savings of approximately $175,000 per year. Background The current contract is referred to as a four-party agreement. It contractually convnits TCAP to Next Era as supplier and Direct Energy Business Services ("DEBS") as retail electric provider responsible for customer accounts and billing. Each TCAP member was reguired to pass a resolution agreeing to be bound by the four-party agreement and pledging to sig» an individual customer energy supply agreenlent with DEBS. The current contract became effective on January l, 2009 and will expire December 31, 2013. Under ordinary circumstances, bids for power to meet member needs in 2014 and beyond would not have coniinenced until sometime in 2012. In June, TCAP received an unsolicited offer for a block of base load energy to be available in 2014 from distressed generatian assets to be purchased by some West Texas investors and backed by J.P. Morgan. The indicative pricing looked favorable for a five-to-twelve-year commitment. The TCAP Board was interested in the proposal. The TCAP Board directed R.J. Covington Consulting to perform a due diligence evaluation of the proposed pricing. Consultants were able to obtain several comparable offers, including an offer from Next Era. However, Next Era indicated that wliile they were 149