Rate Stabilization Fund
The Rate Stabilization Fund is a fund that was established in 1997 by the Bryan City Council to help mitigate future increases in energy costs primarily associated with the Gibbons Creek generating plant. The City, through BTU, is a 21.7% owner in the coal unit operated by the Texas Municipal Power Agency (TMPA) with the remaining 78.3% of the plant owned by the cities of Garland, Denton and Greenville. TMPA currently supplies approximately 60% of BTU’s energy needs.
Prior to the initiation of the Fund, TMPA took steps to defer and extend to future years, debt service payments related to the plant. This had the effect of reducing existing costs for BTU, but ensuring even higher costs in the future. An additional consideration at this time was the expectation that electric utilities in Texas would be forced to enter retail competition in a few short years. Given these circumstances, the Bryan City Council created the Rate Stabilization Fund to offset the future increases in TMPA debt service that were scheduled to occur at a time when competitive retail electric rates went into effect. Monies were deposited in the Fund from 1997 until 2002, when it reached a balance of $37.8 million. With accrued interest, the fund reached a peak of $41.0 million of 2006.
With the finalization of the rules governing retail electric competition in Texas, municipals were exempted from mandatory participation. As a result, BTU currently competes only in the wholesale energy markets. While this reduced one of the initial concerns of the Bryan City Council of 1997, the higher TMPA debt service was still a reality. Beginning in 2007, the Fund has been utilized annually to offset energy cost increases, keeping BTU rates lower than its peers. The balance in the fund at the end of Fiscal Year 2011 was $1.7 million.
The Rate Stabilization Fund has been reviewed by outside auditors since its inception and continues to be reported as a separate line item on BTU’s audited financial statements.