March 20, 2013

By Editorial Board
Special to the American-Statesman

The Austin City Council finally seems interested in getting the facts about how Austin Energy stacks up to other municipally-owned utilities before making big changes. A resolution on Thursday's agenda is a positive development that would permit council members to make an informed decision about whether the city's utility would benefit from a radical change in its governance structure.

The City Council has so far failed to make a case that handing off Austin Energy to an independent governing board would improve the utility's performance. In several editorials, we've noted that it's worth exploring the concept of an independent board for Austin Energy. So do the homework first and make a case based on facts.

That case could be forthcoming if the City Council passes the resolution to direct the city manager to get the facts. It's overdue but welcome and should pass unanimously. Anything less than that would be an affront to Austin residents, who own the utility valued at $3.8 billion. It's an asset that powers 420,000 homes, with 55,000 homes outside the city. And Austin Energy annually pumps more than $100 million into the city's general fund to help finance city police and fire departments, streets and other city services.

Although residential utility rates were raised significantly last year, Austin Energy customers generally have fared well compared with others in Texas in the private or public utility markets. Decisions about the utility's future should be based on facts and made with a focus on what is best for the utility and taxpaying owners.

The resolution sponsored by Council Members Kathie Tovo and Laura Morrison would direct City Manager Marc Ott to prepare a report comparing Austin Energy to other municipal utilities managed at least in part by an independent board, both in Texas and those of similar size across the nation. The report would evaluate each utility in terms of the goals critical to Austin Energy's stated mission.

Tovo and Morrison told us that much of the information is readily available, so the task of putting it together in a comparative fashion would not be burdensome. Nonetheless, it should not be rushed to meet a political deadline.

"Austin Energy is an award-winning utility," Morrison said. "We have to do some assessment of where we are headed if we are moving to an independent board. I don't see how we can pass along that responsibility."

She is right. Aside from numerous state and national awards, Austin Energy's bond ratings recently were raised by financial institutions, signaling Austin Energy's good financial health. We're aware that the utility has stumbled on occasions — such as investing $2.3 billion in a wood-burning plant in East Texas whose electricity is too expensive for Austin Energy to buy at the moment. Establishing an independent governing board of paid members who are appointed might help avoid such blunders or increase revenue.

But that change should be made with eyes wide open, through an assessment as we've mentioned in the past, which looks at benchmarks over time — such as electric utility rates, customer bills, transfers to city budgets, bond ratings, earnings, green initiatives, conservation programs, affordability measures, accountability/transparency, wasteful decisions, management, lawsuits, salary structures and other related factors.

It is unfortunate that some council members want to do a deal with eyes wide shut. It has become clear that some Austin council members made up their minds months ago based on legislative politics. The push for an independent governing board has been explained by the mayor and council members mostly as a pre-emptive strike to fend off legislation to deregulate Austin Energy's market rather than a change needed to improve the utility.

We agree with Council Member Sheryl Cole, who this week said "we can't operate out of fear," and should therefore be able to do the homework on the city's most valuable asset while keeping good faith with the Legislature.

Legislative bullying regarding Austin Energy has been going on for more than a decade, ever since lawmakers deregulated most of the Texas electric utility market. It gave municipally-owned utilities the option of opting in to competition. Many cities jumped in, but others, including Austin and San Antonio, did not. Many electric cooperatives also declined competition. It's too bad that such strong-arm tactics continue as a new trend is emerging: The New York Times reported last week that cities across the country are showing a renewed interest in taking the electricity business from private utilities as those contracts expire. They are doing that, according to the Times, for similar reasons that Austin has tightly held on to and defended its utility — to ensure that the utility reflects community values, including green initiatives, affordability concerns — along with the utility's financial health. Not surprisingly, private utilities are fighting back.

Lest the council be snookered, it should realize that Austin's move to an independent governing board won't stop the push to deregulate all Texas markets in the future. But it might weaken an entity that has by most measures performed well for Austin residents.

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