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Utility Commission wants to restrict AE revenue contributions

Thursday, March 3, 2011 by Josh Rosenblatt

As Austin Energy prepares to raise its rates for the first time since 1994, the Electric Utility Commission is pushing to eliminate general city expenses from the utility’s 2012 budget. The biggest single expense in that category is funding for the city’s Economic Growth and Redevelopment Services Office—about $9.5 million for the current fiscal year.


At their meeting Monday night, the commission unanimously approved a resolution that, if adopted by the City Council, would eliminate general city expenses from the utility’s 2012 budget.


For the current budget year, Austin Energy’s transfer to the General Fund is 9.1 percent of the utility’s revenue, or $103 million, said spokesperson Leslie Sopko, meaning Austin Energy’s revenue accounts for about 16 percent of the city’s spending on parks, libraries, and other services. While that may be justified by the city’s ownership of the utility—much like stockholders getting a dividend—it may be more difficult to maintain the other expenditures.


In addition, Austin Energy spent $350,000 on the Chamber of Commerce’s job-creation initiative Opportunity Austin in 2009 and 2010.


The utility is facing an $83 million shortfall.


On Tuesday, Electric Utility Commission Chair Phillip Schmandt, who proposed the resolution, expressed his concern that Austin Energy’s use of revenue funds on non-utility projects could hurt its chances of securing a rate change should a customer file an appeal with the state Public Utility Commission.


Austin Energy customers outside Austin’s city limits can appeal any rate increase through the PUC by securing a petition signed by 5 percent of those ratepayers or 10,000 ratepayers, whichever is less.


“Residents can appeal the rates to the PUC and at that point the PUC has to review AE’s proposals,” Schmandt told In Fact Daily. “And one of the factors the PUC will look for is whether the revenue that’s projected from the rates will be used for the purposes that are approved by the PUC — those having to do with running the utility company — or whether they’re being diverted to other purposes, in which case they may potentially be disallowed. And that’s what we’re concerned with.”


Hence the Electric Utility Commission’s resolution, proposed by Schmandt, which would seek to strengthen Austin Energy’s case to the Public Utility Commission by doing away with any expenditures not directly related to the business of a utility.


According to the resolution, “City Council should direct the City Manager to work with Austin Energy’s attorneys to identify items in the Austin Energy 2012 budget that are most likely to make Austin Energy’s approved rates in 2012 subject to an appeal to the PUC and, in the event of such an appeal, are most likely not to be approved by the PUC when calculating Austin Energy’s rates.”


The EUC has asked the city manager report back by April 15.


“In general, it’s a matter of good governance to have the revenue of the utility being spent on the expenses of the utility,” Schmandt said. “We’ve been saying that for years, and – lo and behold – we now have a utility that’s running a deficit. What’s been a matter of good governance for the past few years is now a matter of what we consider to be more of a dire emergency: that we clean up Austin Energy’s house before it walks into the PUC rate hearings.


“If we don’t take out the improper expenses from Austin Energy’s budget, we run the risk of a much more expensive and much less positive outcome in any rate appeal.”


In 2007, the Electric Utility Commission passed a resolution asking that City Council address the issue of Austin Energy’s funding of EGRSO, which was then at $6.2 million for the year. Then, in 2010, the commission passed a resolution advising that the 2010-11 Austin Energy budget not be approved unless the $9.8 million allocated that year for EGRSO be deleted.


“The EGRSO does great work, but it’s gone from a $6 million budget in 2007 to $10 million plus being funded from Austin Energy in 2011,” Schmandt said. “Unfortunately, it’s not supportable to have a utility pay 100 percent of the city’s costs for economic development.”


The Electric Utility Commission voted unanimously in favor of the resolution, with Commissioner Gary “Bernie” Bernfeld absent.

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