Hearne Utilities Update

Hearne» In 2013 the City of Hearne entered into an energy contract that was meant to protect the city from climbing energy prices. Soon after, renewables began to put pressure on the market. Wind power and the latest oil and gas crash have pushed the market to some of the lowest levels seen in years. In 2018 the City Council and Staff started the research necessary to renegotiate the current contract, and lock in prices that would safeguard Hearne's future as an Electricity provider.

The City of Hearne is one of only a handful of cities that owns a substation. Having previously entered a deal to lease to own the equipment, a balloon payment was due in the last quarter of 2018. Staff performed a cost-benefit analysis and determined that savings of upwards of one hundred thousand dollars a year would be realized with the purchase of the substation.

Council authorized spending and the balloon payment of two hundred and seventy-six thousand dollars was made. The City now owns the substation and expects to purchase an additional transformer in three to five years. Currently, the substation contains two transformers with one serving as back up.

The city has partnered with Absolute Testing to help monitor, maintain, and make any repairs necessary. The cities' distribution system will continue to see improvements. Utility poles will soon be inventoried, mapped, and placed in our GIS system to help staff take the necessary steps needed to continue to serve the citizens of Hearne. A phased plan is now being worked and expected to be finished in mid-2019.

Council and staff began to research options available to a small city like Hearne. The council determined renewables seemed to be the best option and ordered a feasibility study for Natural Gas Generation to be completed by First Power Energy.

Staff and Council visited several cities with natural gas generators. While the technology is truly amazing the feasibility study determined that current market pricing is much too low to support the building of such an expensive facility. Hearne was better off shopping on the open market and possibly mixing in wind or solar.

Staff and council were determined to find the best partners to assist with renegotiate the current contract and take advantage of current low market pricing. The City hired Dale Jones with McCord Engineering. Mr. Jones has 34 years of progressive electric utility experience, managing power supply, business development, ERCOT regulatory monitoring, wholesale and retail electric pricing, and transmission/distribution/substation engineering and construction.

Mr. Jones sent out an RFP to several companies and began the process of negotiating. He asked these companies to think outside of the box. He used his years of experience to ask the right questions and help guide staff and council in all negotiations.

The City of Hearne is satisfied with the new contractual agreement that will not only decrease rates in 2023 but will include a structured extension of wind energy to adjust our current contract in 2019 and 2021.

City council decreased both residential and commercial rates for the second year in a row in a January council meeting. The city is now certified 30% green energy and expects to be one of the most competitive providers in the area by 2023. McCord Engineering and Dale Jones will continue to monitor the market to help staff make recommendations to council.