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Council members push plan for AE to recover cost of line extensions

Wednesday, April 30, 2014 by Michael Kanin

A resolution from Council Members Kathie Tovo, Laura Morrison, and Mike Martinez on Thursday’s Council agenda would instruct City Manager Marc Ott to “plan for full cost recovery of (Austin Energy) line extensions” beginning Oct. 1.

 

Though the Council members included some provisions for the exemption of certain affordable housing” entities, the measure would otherwise increase the amount that the utility recovers for service extensions from a fraction of costs to the full amount in the very near future.

 

Austin Energy itself is pushing for a gradual increase in line extension cost recovery that would phase in over a period of about five years, and end with the utility seeing a return of 75 percent of the costs. Senior Vice President of Electric Delivery David Wood told Council members that the 75 percent figure is more in line with what amounts to the utility’s competition.

 

“The reason for stopping at 75 (percent) is that that’s really the highest contribution that we’re seeing from our surrounding utilities,” he said. “That (75 percent) would actually put us above Pedernales (Electric Cooperative) and Bluebonnet (Electric Cooperative), as well as the other major utilities that we’ve actually surveyed across Texas.”

 

However, when pressed on that point by Council Member Bill Spelman, Wood could not come up with a direct answer about why other utility operations settle on that figure. “It’s a policy decision,” Wood continued. “Part of it is based on economic growth, part of it is based on – I’m sure – discussions with the various stakeholders that the other utilities have had.”

 

Veteran Electric Utility Commissioner Shudde Fath has long pushed for the resumption of line extension cost recovery. In a recent letter, Fath noted that those serving on the 1981 Council voted to collect the entire fee. However, she said Council reversed the policy in the mid-1990s. She told Council members that it is “high time for electric ratepayers to stop subsidizing growth.” (See Austin

Monitor, April 16)

 

As the Monitor first reported, Fath called for full cost recovery implementation by October 1 in her letter.

 

Austin Energy Chief Operating Officer Cheryl Mele told Council members that full recovery of line extension costs could net the utility as much as $20 million in a high-use year. Still, Mayor Lee Leffingwell noted that his priorities were to keep the utility, as he put it, “fair and competitive.”

 

Leffingwell continued: “I think we’ve got to realize that we are surrounded by competitors and even though we are a monopoly…we still are in competition and we have to act that way.”

 

Council Member Laura Morrison questioned that notion. “How is it we are in competition?” she asked, “Our customers don’t necessarily have a choice.”

 

“But our developers do have a choice of where they decide to invest,” Mele fired back.

 

“It’s one factor,” Morrison said.

 

“You’re giving something up,” continued Mele, “It’s called a commute down I-35.”

 

Leffingwell also hinted at the ever-present specter of deregulation, an oft-threatened legislative move that would open the Austin region to electric competition.

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