Background & Overview

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.

Objectives & Approach

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:

• It’s easy to use
• The purchases are completely transparent with no mark-up and are made through participating wholesale counterparties that meet pre-qualification standards
• The parameters set prior to the auction provide a post-auction record that fulfills the compliance requirements for most company RFPs and includes records of wholesale pricing offers, fully documented terms and conditions and complete transaction reports. 
• The process provides clear justification behind purchasing decisions

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.

Strategy Execution

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. 

Strategy & Relationship Outcome

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:

• The ongoing level of service they receive through the PowerPortfolio product
• The guidance and information they receive from their Portfolio Strategists, which allows them to report back to their Board of Directors with accuracy and make better buying decisions
• The level of transparency that the PowerPortfolio strategy and PowerBuy purchasing platform provide

Savings Recap

• The winning bid was $3.65/MWh lower than the reserve price set by the TRWD for the auction
• Over the term, TRWD will save nearly $1m on this purchase over what they would have paid without using the PowerBuy tool