Hadden: Don’t rush toward unaccountable utility board

March 24, 2013

By Karen Hadden, Electric Utility Commission
Austin American-Statesman

Changing the way Austin Energy is governed and handing control of our public utility over to an unelected board would be a serious mistake, yet this is what Mayor Lee Leffingwell and others propose. They would throw utility doors open to special interests and industry insiders who just might want their hands on our $1.3 billion per year asset.

The plan is essentially a theft that we should halt immediately, one that could lead to higher electric rates, investment in expensive and polluting forms of electric generation, and the loss of programs to assist those in need.

There’s absolutely no good reason for the rush to create a separate, less accountable board. There is no major crisis to solve. Public pressure on the City Council helped to reduce the first rate hike we’ve had in 18 years. The utility rate case is being settled and legislative threats have abated. Austin Energy is financially strong. Electric rates are low compared to other cities. Customer satisfaction is high, and utility profits are helping fund our parks, libraries and city programs.

So why the rush to change governance? Is this a thinly-disguised opportunistic attempt to secure more and greater rate breaks for the wealthiest members of our community and their business interests, while the rest of us pay for it?

Citizens can and do hold our utility accountable through pressure on the City Council members that we elect. Creating an unelected board would remove accountability, adding a layer of bureaucracy to insulate decision-makers. The council would likely defer to a board, rubber-stamping recommendations without adequate consideration.

With less accountability, we could expect ill-advised pet projects costing up to $100 million to sail through like greased lightning.

Opposition to an unelected board is growing. Nearly all speakers at a recent council meeting opposed letting headhunter-nominated appointees take over Austin Energy. Only an industry group, the Coalition for Clean Affordable and Reliable Energy, spoke in favor.

Unfortunately, Sen. Kirk Watson’s SB 410 would shortcut the path toward governance change. It would allow appointment of an independent board without the charter amendment vote that would otherwise be required.

This undemocratic bill is supported by Leffingwell, Commissioner Phillip Schmandt of the Electric Utility Commission, the Texas Public Power Association, Data Foundry, the Coalition for Clean Affordable and Reliable Energy, and Samsung. A House companion bill has been filed by Rep. Eddie Rodriguez, D-Austin.

So, not only could our utility be stolen and given to unelected appointees, but if Watson’s bill passes, a drastic change in governance could occur without a single vote by the public.

Wait a minute. Austin Energy is our public utility. We own it. Shouldn’t we be able to vote on something as major as changing who controls it?

A great Statesman editorial on March 5 pointed out that no study has determined the potential impact of changing Austin Energy governance. Last week, all seven City Council members agreed to require this analysis.

Nothing so far indicates that utility performance would improve by changing governance, but San Antonio’s experience shows that things could definitely get worse.

Council members and citizens struggled for years to get a rogue utility under control, even though it was comprised of smart "business professionals." Austin should take heed, because we’re not immune to similar problems.

Several years ago the CPS Energy board defied council directives, sinking millions of dollars into a project to build two nuclear reactors. No one could stop them. Days before a rate hike, news was leaked that a $4.2 billion nuclear cost increase had been hidden by the utility, resulting in massive public outcry.

The utility sought a way out of the nuclear expansion in court, and the utility ended up writing off nearly $400 million in losses. Partner NRG Energy also lost $400 million.
Austin escaped financial devastation because our City Council wisely voted to stay out of the nuclear project. Accountability matters.

According to our City Charter, unless citizens vote for a change, utility control must remain in the hands of elected City Council members. With a new 10-member city council coming soon, why not get studies done now to analyze the impacts of changing utility governance and let the new council make decisions after getting settled in?

Those who seek to capture our utility and those who would deny us the right to vote on control of the utility we own should expect a real fight. It is crucial to keep Austin Energy accountable, not throw accountability away. We must keep the power in our hands.

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