Schmandt, Herbert and Webber: Why the proposed generation plan is the right path forward for Austin

February 9, 2010

Phillip Schmandt, Chris Herbert and Michael E. Webber, Local Contributors
Austin American-Statesman

The City Council soon will consider Austin Energy’s proposed plan for its future mix of fuels for power generation. We believe Austin Energy’s proposed generation plan threads the needle in balancing the competing needs to protect the environment, ensure a robust economy, meet social justice priorities and achieve high standards for reliability.

Some highlights:

  • The plan has been thoroughly debated, and it will continue to be. Austin Energy held its first meetings to receive public input on the generation plan well more than one year ago. At the end of that process, both the Electric Utility and Resource Management Commissions endorsed the plan.

A task force appointed by the mayor scrutinized the plan, and a majority voted to endorse it. The task force unanimously voted that the plan should be revisited every two years and before any significant purchase of new generation capacity. It’s rare that so many commissions and task forces can agree on a plan this important.

  • It’s the Goldilocks Plan. Environmentalists want Austin Energy to commit today to abandoning the 600 megawatts of capacity we receive from the coal plant. Cost-conscious consumers see the coal plant as cheap, reliable power. The plan strikes a course in between those two concerns, weaning Austin Energy to just 60 percent of today’s total capacity at the coal plant.
  • It yields significant actual reductions in carbon emissions . By ramping down the coal plant and ramping up on low-carbon fuels (solar, wind, biomass, natural gas), Austin Energy’s absolute emissions of global warming gasses in 2020 will be reduced by approximately 22 percent from 2009 levels, setting a global standard.
  • It’s the best value for our money. Of the dozen or so alternative scenarios that have been developed by stakeholders and consultants during this lengthy debate, the Austin Energy proposal is nearly the cheapest. No, it’s not the bare-bones cheapest. But the cheaper ones don’t have all the benefits listed here, and they all depend on certain assumptions going their way.
  • It spreads the risk. In preparing an investment portfolio, diverse investments minimize risks. The same is true for a generation portfolio. For example, the plan calls for 36 percent of Austin generation capacity to be supplied by renewable energy sources, which hedges against volatility in fuel prices and rising costs of carbon. Having a broader portfolio of available energy alternatives means that spikes in cost in any of them will have less impact on consumers. That’s a smart investment.
  • It leaves the door open for nuclear. The plan does not call for Austin Energy to be an owner in the expanded nuclear plant, which avoids the risk of cost overruns and debt associated with capital costs. But if the project comes in under budget, then Austin Energy is well-positioned to buy purchase power agreements for nuclear power as a low-cost, baseload source of low-carbon electricity.
  • It calls for a re-evaluation of Austin’s electricity rates. Austin Energy has not changes its rates for electricity since 1994. Any speculation today about the impact of the generation plan on bills is just that – speculation. The decisions on how costs should be allocated and the impact on individual electric bills can and should be made only in the context of deliberations that the Electric Utility Commission and Austin City Council use to collect public input when they consider changing rates.
  • It’s time to "giddy up" on Energy Conservation. The plan calls for reducing demand by 800 megawatts through conservation and demand reduction. To put that in perspective, since peak demand on a hot summer afternoon is about 2,500 megawatts, we will have 10 years to reduce demand by an equivalent of one-third of total current peak demand. That saves ratepayers the cost of building 800 megawatts of new capacity, but we need to get started soon to secure those savings.

The backdrop to this decision is the national struggle to redefine the existing model of all electric utilities. The model called for making money by building new power plants and selling more energy. That’s contrary to the social goals of saving money by reducing demand and reducing emissions. How do we change that model? Hold your hats, because we don’t know yet. But that’s where the real political debate will be – and not in this generation plan.

 

Schmandt is an attorney with McGinnis, Lochridge & Kilgore and is chairman of the Electric Utility Commission and former chairman of the mayor’s task force evaluating the generation plan. Herbert is chairwoman of the Resource Management Commission and served on the mayor’s task force evaluating the generation plan. Webber is an assistant professor of mechanical engineering at the University of Texas, co-director of the Clean Energy Incubator and is a member of Austin’s Electric Utility Commission.

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