For more than 80 years, the Tarrant Regional Water District (TRWD) has provided quality water to its customers, implemented vital flood control measures and created recreational opportunities for residents of Texas' Tarrant County and its communities. Led by a publicly-elected, 5-member board, the TRWD owns and operates four major reservoirs in the area, including Lake Bridgeport, Eagle Mountain Lake, Cedar Creek, and Richland-Chambers Reservoirs. TRWD has also constructed more than 150 miles of water pipelines, 27 miles of floodway levees, more than 40 miles of Trinity River Trails, and a 260-acre wetland water reuse project aimed at increasing future water supplies for the area. TRWD is one of the largest raw water suppliers in the state of Texas, providing water to more than 1.7 million people in the North Central Texas area.
TRWD is an organization that naturally focuses on its long-term objectives and targets because its service plan and capacity for its own customers is forecasted out 50 years. In addition to budget stability, the TRWD also needs flexibility in its strategy so that they are not obligated to lock in a long-term contract for all of their load at one point in time, but rather are able to capitalize on some downward market movement as market conditions present opportunities.
To meet their objectives with a balanced approach, Direct Energy Business recommended the PowerPortfolio product, which allows for a combination of layered fixed price hedges, along with index purchases, for the appropriate amount of risk exposure. With PowerPortfolio, a product they have been using since 2005, TRWD has taken advantage of regular reporting and consultative phone calls with their Direct Energy Business Portfolio Strategy Team. These strategy sessions and reports led to TRWD’s strong desire to execute a forward hedge to cover a portion of their future load. After reviewing how current pricing trends compared with historical prices, it was clear that the market was showing significant value for a longer-term purchase.
With this strategy in mind, Direct Energy Business recommended that they consider PowerBuy®, a patented online purchasing tool, as part of their overall PowerPortfolio strategy, because:
As an organization that reports to a Board of Directors, TRWD found that PowerBuy was the perfect tool to help their engineering department, which includes the decision-makers for energy supply, document and justify the decisions behind their energy purchases.
Once the decision was made to conduct a PowerBuy event, the Direct Energy Business Portfolio Strategy Team worked closely with TRWD and wholesale counterparties to come to a realistic consensus on the reserve price for the auction and to pre-qualify interested suppliers for participation in the event.
Based on market conditions and the guidance and analyses provided by the Direct Energy Business Portfolio Strategists, TRWD set the initial reserve price for wholesale energy and took about one-third of their load to auction using PowerBuy.
After four participating wholesale suppliers placed 48 bids during the descending-clock auction, TRWD transacted at a final price that was $3.65/MWh lower than their reserve price. This will result in almost $1m in total savings for TRWD over the 5-year term of the hedge.
According to the TRWD engineering department, their continued satisfaction with Direct Energy Business can be attributed to three key factors: