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As natural gas prices continue to surge, Pearsall councilors have given the green light for the city manager to enter into an energy agreement for up to ten years with a supplier before June 30.
“I wish I had better news,” city energy consultant Marco Arredondo said. “but you all have seen the gas prices.”
Arredondo said that when he started the legal process of seeking bids for energy contracts for the city in February, rates were indicative of 4.5 or 4.6 cents per kilowatt-hour.
At the February rate, a one-year contract would have represented a ten-percent increase to the city’s natural gas budget.
Arredondo predicted that after five years, the rates would level out to five cents per kilowatt-hour and he would propose building a budget that would allow for an eight-percent increase. However, after the war in Ukraine broke out, a one-year contract is now 11 cents per kilowatt-hour.
“At those rates you would see a $200,000 budget increase with a one-year contract,” Arredondo said. “When they shut down oil and natural gas and put a pinch on eighty percent of the supply in Texas, now we are looking at 5.7 cents for a one-year contract.”
Arredondo said his company is hoping that the market would stabilize; however, he noted that it is looking as though the “US is sending more and more natural gas out and the market is looking like it is continuing to climb over the next three years.”
The city has until June 30 to accept a bid for an energy contract and Arredondo said he plans to continue to watch the bids daily. He does anticipate at least a 14-percent increase to the city’s natural gas budget line item. The increase would equate to roughly $15,000.
“We are still in the bidding process and the market is so tight,” Arredondo said. “We want them to compete; everyone is [competing] because everyone is having a hard time right now to gain contracts. Right now an eight-year contract will suit you.”
After learning the quotes provided by energy companies can change up to three times a day, councilors voted unanimously to allow the city manager to execute an agreement recommended by Arredondo.
