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AE advisors tell city to cut funds to economic growth office

Wednesday, August 18, 2010 by Michelle Jimenez

The Electric Utility Commission, an advisory board to the City Council, rejected Austin Energy’s proposed 2011 budget during its meeting Monday night, setting the condition that millions in funding be shifted from economic development to programs directly related to the city-owned utility.


“The gist of what the EUC was saying is it’s not fair for the ratepayers to pay electric bills but then have their money used for services not related to electric services,” chairman Phillip Schmandt told In Fact Daily on Tuesday.


Six of the EUC’s seven members approved a resolution Monday night urging that the proposed budget be revised so that $9.8 million allocated to the Economic Growth and Redevelopment Services Office instead be reallocated to the Customer Assistance Program ($3.2 million), to increase the rebate cap for energy efficiency projects ($3.2 million) and reduce the expected 2011 budget deficit ($3.4 million).


Commissioner Steve Taylor was absent from the meeting.


The EUC has passed similar resolutions before, including some protesting the annual triple-digit transfers from Austin Energy to the city’s General Fund, an expected $103 million next year. But commissioners and supporters of this change say that now, more than ever, the city should carefully consider how Austin Energy’s revenue is spent: The utility, which has a $1.3 billion annual operating budget, is facing a $46 million deficit next year.


In addition, it is preparing for a rate case in 2012.


“Our concern is the 2011 budget is going to be used for the base year for the rate case,” John Sutton, past president of the Building Owners and Managers Association of Austin, Inc., and chairman of that group’s sustainability task force, told In Fact Daily. “If the 2011 budget is inflated…that’s going to drive the rates up.”


Sutton said his organization supports the work done by EGRSO, which manages the city’s economic development policies, but has concerns about how it is funded.


Schmandt said that the Texas Ratepayers’ Organization to Save Energy (Texas Rose) is also backing the EUC. 


The utility commission wants the city to fund EGRSO and, in its resolution suggested the proposed budget be modified to give the office the $300,000 currently allocated to the Customer Assistance Program, which helps low-income customers, and instead allocate to that program $3.2 million.


EUC Commissioner Shudde Fath told In Fact Daily that Austin Energy’s share of funding for that office has grown each year so that it now funds most of its budget.


Fath, who has served on the commission since its creation in 1977, said the proposed 2011 budget allocates $9.9 million in utility money to EGRSO — up from $4.2 million in 2001. The proposed total EGRSO budget is $10.2 million.


That office has budgeted 46 employees for the coming year, up from 19 in 2001.


“The money has doubled since we took it over,” she said. “The employees have nearly doubled. When Austin Energy was flush, it probably wasn’t such a big deal, but we are short of monies this year” and will be again next year.


Kevin Johns, director of EGRSO, didn’t have time for an interview Tuesday but responded to the EUC resolution through a spokeswoman.


“We look forward to an opportunity to respond to questions raised by the Electric Utility Commission and to present information that supports the value and benefit of economic development programs for leading electric utilities across the country.”


Budget Officer Ed Van Eenno said that while Austin Energy covers the majority of EGRSO’s budget, it is not the only source of funding for economic development, which benefits the utility, as well as the city as a whole.


The proposed budget includes $9.9 million for the Economic Incentive Reserve Fund, which is used to provide incentives to industries that locate in Austin, Samsung being a prime example, Van Eenno said.


“I think it’s maybe lost a little that the General Fund does spend a lot of money to stimulate the economy and to incentivize economic growth.”


Fath, for her part, said the city has much more to gain from economic development than Austin Energy does.


“When economic development comes in, Austin Energy gets one more ratepayer,” she said. “When economic development comes in, (the city gets) more property taxes and more sales taxes and more people in town to spend money.”

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