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Austin Energy governance question off ballot

Wednesday, August 15, 2012 by Michael Kanin

Members of the Austin City Council declined to include two questions on the November 2012 ballot that, if approved, could have spelled big changes for the city’s electric utility.


In so doing, Council members delay for at least two years any public vote on proposals to change the city’s charter to allow for an independent governing board to oversee Austin Energy and a measure that would have given the utility the right to sell off assets without voter consent.


However, that may not be the end of the idea of an independent Austin Energy board. Assistant City Attorney Andy Perny, who specializes in legal matters for Austin Energy, told Council members at their Tuesday work session that an administrative move to an independent energy utility board is theoretically possible.


“There’s an argument that could be made that, without the charter amendment, a board could be set up that could exercise … perhaps ratemaking authority or debt issuance, or eminent domain,” Perny told Council members.


Perny added, however, that in creating the utility board via administrative decree, the city would be in unclear legal territory. “The problem is that when you get in to the details of the charter, there are any number of places where our city charter would conflict with that statute,” he said. “And the statute is not at all clear as to what powers that board could have vis-à-vis the administration of the utility as far as what’s already set forth in our city charter about management.”


A potentially limited administrative move to create an independent Austin Energy board may not be the city’s only option. Late Tuesday, Statesman reporter Marty Toohey reported that State Senator Kirk Watson (D-Austin) will attempt to change state law in such a way that would allow the city to create a fully independent board without a referendum.


The Austin City Council currently serves as the de facto governing body for both Austin Energy and the Austin Water Utility. That arrangement could have been changed by the proposed charter amendment, if approved by voters.


The issue of who acts as Austin Energy’s governing body is a fraught one. It extends past the local political strife brought by such divisive actions as the utility’s rate increase that will go into effect Oct. 1 all the way to the Austin-targeted political reality of the Texas State Legislature. Indeed, there are concerns that a failure to shift the utility’s oversight to an independent board would hasten some sort of legislative intervention; a change in governance could also stave off any state attempt to deregulate Austin Energy.


Any push to ask city voters to give Council members the authority to make the switch died Tuesday when the item was withdrawn. “Based on the advice of legal counsel … and knowing that we have lots of items on the ballot, and that we do want the flexibility of being able to have (a series of upcoming reports on the matter) … I don’t think that we should take action right now,” said Mayor Pro Tem Sheryl Cole.


After the hearing, Perny elaborated on the governance issue for In Fact Daily. “The fundamental problem is that, if you look around at the Texas industry, most cities have – to some degree or another – specified how their boards will work and they’ve done it through their charters,” Perny said. “The problem is that when you get into creating a board beyond what’s clearly in the statute you’re going to run into issues about what powers that board can legitimately wield and what they can’t – particularly since our charter has a lot of very specific provisions about how the city is managed (and) how budgets are set.”


“A charter (amendment) is certainly, by far, the best way to go,” Perny continued.


If it had landed on the ballot, the second utility measure passed over by Council members would have allowed the utility to unilaterally sell off assets, most notably its stake in the coal-burning Fayette Power Plant, without voter approval. Austin Mayor Lee Leffingwell was the only Council member to vote against withdrawing this asset question from the ballot.


“I still think it’s very important that the utility have the flexibility to make these decisions, make these changes, in an environment that has the potential to be changing very rapidly in the near time frame,” said Leffingwell. “I think to not have this flexibility puts the utility at very significant risk.”

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