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Austin Water says conservation measures cutting into bottom line

Thursday, February 6, 2014 by Michael Kanin

Austin Water Utility officials reported to the Council’s Audit and Finance Committee Wednesday that the utility had overestimated its FY2013 revenue figure by nearly $10 million. The culprit, according to utility Chief Financial Officer David Anders, was a drop in both residential and commercial water use thanks to Stage 2 drought restrictions.


Though the utility had planned for that event, the drop in usage eclipsed that work.


In an exchange with Council Member Laura Morrison, Anders suggested that “the recovery of the consumption back to the levels of pre-drought is very slow, if non-existent.” Morrison picked up on that point.


“It’s funny that you call it ‘recovery’ of consumption – from the water utility’s point of view, it’s about meeting the revenue,” she said. “From my point of view it’s we’re all getting used to living with less water, and more and more people are, and it’s adaptation, basically.”


Anders conceded the point. “Right. That’s exactly true,” he said. “And that’s what (studies) see, there are landscape changes and different things that go on during that drought that permanently change people’s practices.”


Morrison continued on to imply that another serving of a gloomy budget could well be in the utility’s future. “I would expect that commercial practices change more and more – and they’re not going to go back,” she concluded.


Conservation advocates have suggested that this very fate awaited the utility. At the heart of the issue is an apparent conflict in the business model on which Austin Water relies: Though the utility needs to encourage conservation to pull it through in times of drought – and perhaps more generally as the water situation in Texas becomes bleaker – it also relies on revenues derived from sales of water.


This, advocates have argued, could bring on just the sort of situation before the city as reported by Anders: A utility in need of both revenues and conservation, and unable to settle the difference.


Indeed, a $16.5 million savings in cost expenditures saved the utility from a negative bottom line. And the revenue shortage has pushed into the FY2014 budget, despite utility planning for Stage 2 restrictions.


According to Anders, the utility projected 2012 fiscal year results for 2014. Though that number did include Stage 2 restrictions, as it turned out, 2013 – also under Stage 2 – saw much sharper revenue declines. “We had not anticipated (that) in the 2014 budget.”


As a result, Anders reported that actual FY2014 AWU usage numbers were below even the conservative 2014 budget.

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