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AE officials deeply concerned over Riley resolution

Wednesday, August 27, 2014 by Michael Kanin

Austin Energy General Manager Larry Weis told the Monitor Tuesday morning that a resolution from Council Member Chris Riley would be a negative for the utility. “This IFC speaks to actually acting, to actually carrying out and acting — and this is a real similar set of circumstances that got us into making a decision like the biomass facility,” Weis said before Council members’ Tuesday work session.

“I’m very concerned about it.”

If approved, Riley’s resolution would implement a host of policy recommendations offered by the city’s recent Generation Task Force with regard to emissions reduction and renewable resources. It would also instruct management to shut the utility’s Decker Creek power plant.

Weis’ comments come on the heels of similar concerns raised by other Austin Energy officials about the Riley resolution. “We are studying the Generation Task Force proposals,” utility spokesman Robert Cullick told the Monitor Monday. “Until we have the facts and have done the math, we cannot advise the Council on what impact the resolutions, if adopted, would have on ratepayers and the Council goal of affordability.” (See Austin Monitor, Aug. 26)

Weis minced no words Tuesday. “Replacing Decker with solar energy does nothing but raise rates,” he continued.

When offered the suggestion that election season might play a role in the resolution, Weis was just as blunt. “Obviously it is” politics getting in the way of the utility management, he said. “Obviously there’s environmental action that people want to take, but it’s very hasty. It hasn’t been researched. And Austin Energy, we’re the experts. We need to do the analysis. We told Council that we’d be done with the analysis in September. And when we’re done with that, we’ll probably have to sit down in closed session with them and show them the numbers.”

Weis added that the issue is one that touches on the competitive side of the utility’s business, and underscored the notion that any vetting should be done behind closed doors.

Riley responded in an email. “Affordability is always a concern, and we’re committed to honoring the same affordability goals we put in place in 2011,” he wrote. “There’s good reason to expect that stepping up our use of renewable resources will put us in a better position to adhere to those affordability goals over time. Austin Energy has acknowledged that it expects our recent solar purchases to have favorable impacts on our Power Supply Adjustment, and that the recent PSA increase was largely due to the volatility of the natural gas markets and unplanned outages of our thermal plants.”

As for Weis’ suggestion about politics getting in the way of running the utility, Riley offered the following: “The Affordable Energy Resolution is one more step in a longtime, ongoing effort among various working groups, task forces and advisory committees focused on updating our generation plan. It has been a thorough and diligent public process with all stakeholders, including Austin Energy, having the opportunity to participate actively throughout. Maintaining affordable rates through smart adoption of clean energy has been a staple of city council policy going back over a decade.”

Weis’ comparison to the biomass facility will almost certainly raise hackles. The utility buys power from an East Texas plant that produces energy by burning forest waste products, a more ecologically friendly fuel. However, the cost of power generation from the plant has brought criticism.

Tuesday afternoon, after a broad coalition of environmental interests held a rally at City Hall in support of the resolution, Austin Energy continued full-tilt to express its concerns. In a news release sent by Cullick, the utility expanded on Weis’ statement, with special attention paid to the shuttering of the plant.

“Under the Task Force plan, Decker’s capacity would be replaced by contracts with solar providers,” says the release. “Decker and solar plants are not comparable: Decker is available for use day or night and is operated only when it lowers costs for ratepayers. Solar works only when the sun is shining and often raises costs for customers through the Power Supply Adjustment.”

The release offered another strong statement from Weis.

“Notwithstanding any analyses we may conduct in the future, I can tell you that replacing Decker with solar power contracts would be an economic disaster for ratepayers,” he said. “Austin Energy made $44 million from Decker in 2011. We cannot afford to lose that income without replacing it with rate increases or elimination of programs that do not produce income.”

In the release, Weis goes into the math behind the utility’s position. “We’re obligated to buy solar power at (a reported) $160 a megawatt hour and we’re selling it — at midday August 26th — for less than $47 a megawatt hour. Ratepayers are tapped to make up the difference,” Weis said. “New solar power may cost as little as $50 per megawatt hour, but that is still often higher than market. Austin Energy is pro-renewable. We have become national leaders in producing renewable power in a very short period of time when we use good business practices to make decisions.”

As is frequently the case with competitive Austin Energy matters ripped open for public inspection, whispers fluttered Tuesday that moves with questionable financial substantiation could bring closer inspection from the Texas Legislature. With closer inspection, goes the logic, comes greater threat of deregulation.

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