As Ott prepares to name new GM, Austin Energy works to balance budget

As City Manager Marc Ott prepares to name his choice for general manager of Austin Energy — Larry Weis, general manager of the Turlock (CA) Irrigation District — the utility’s current staff is scrambling to make up for a projected shortfall.

 

Yesterday, Mayor Pro Tem Mike Martinez and City Council Member Bill Spelman told In Fact Daily that Ott has indicated that he plans to hire Weis to lead Austin Energy and is offering him a salary higher than what Ott makes.

 

Martinez said that Ott left him a voice mail on Tuesday night saying Weis would be the city’s highest paid employee, making more than Ott’s $240,000 per year.

 

At the same time, after months of work, Austin Energy has managed to whittle a projected $83 million deficit down to $46 million. The utility plans to draw from its ending fund balance to plug the remaining shortfall and balance next year’s budget, Chief Financial Officer Elaine Hart told the Electric Utility Commission on Monday. The ending fund balance is, basically, rainy-day savings accumulated over years when revenue was greater than spending.

 

Hart told the commission that the ending balance would be drawn down to $123 million from $169 million during the 2011 fiscal year, which begins Oct. 1. The utility is also facing a potential 2012 customer rate increase.

 

“(Drawing down the ending balance) will get us farther down the road toward that rate case,” Hart told the commission, a seven-member citizens’ advisory group appointed by the City Council. “However, we are not dipping into strategic reserve to balance the budget.”

 

The “strategic reserve” is a fund set aside for catastrophic emergencies.

 

Any rate increase would take effect for the 2013 fiscal year, utility spokesman Carlos Cordova said.

 

The $37 million in savings that have been identified to date range from shaving the travel and training budget by $1 million to deferring multi-million-dollar capital projects, such as new substations that are not immediately needed.

 

Hart explained that a number of factors have converged to create the financial dilemma. Among them are a sluggish economy and less income from interest due to lower interest rates.

 

“One of the biggest forces is the slow growth in revenues,” Hart said. “Our operating expenses are growing faster than our revenues. That is the easiest way to explain it.”

 

Hart pointed out that the utility has a long list of programs and offerings today that it “didn’t even think of” in 1994, when the last rate increase occurred.

 

“In 2007 we told the Council we needed a rate case,” Hart told the commission. “We were able to put it off because we had a couple of good years. We will not be able to grow programs if we don’t start getting additional revenues.”

 

She also told the commission Monday night that the utility restored, at City Manager Marc Ott’s urging, money that had been cut from energy efficiency programs in an earlier version of the budget.

 

“We feel like we have not only restored our energy efficiency programs budget but funded them at a historic high and will continue to monitor the customer demand and make changes in the future as needed,” Hart said.

 

An additional $2.5 million is budgeted for energy efficiency programs, bringing the total to $14.5 million. The additional funding will allow the utility to fully fund energy efficiency programs this year and meet its goal of reducing peak energy demand by 37 megawatts — a target that fits into the city’s overall goal of reducing peak energy demand by 800 megawatts over the next decade.

 

Hart also clarified that Austin Energy will continue to use door hangers to notify customers of impending disconnection 24 hours prior to action being taken and will continue to notify them of tree trimmings initiated by the utility.

 

Last month, those two programs were mentioned as potential reductions. Eliminating the door hangers would have saved $500,000 a year, and doing away with the tree-trimming notification could have saved up to $1 million a year, according to Hart’s presentation materials.

 

After receiving feedback from the commission, the utility decided to keep them in place.

 

“We were not recommending them but we wanted to offer them for your consideration and feedback,” Hart told the commission.

 

The proposed budget has been submitted to Ott for his review. The Council will hear a briefing on the entire budget next Wednesday. Currently, they are scheduled to hear about Austin Energy specifically, as well as other enterprise fund departments, on August 25. Hart said there would be additional opportunities for input on the budget before final adoption in September.