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Adler suggests changes to AE business model

Friday, April 24, 2015 by Audrey McGlinchy, KUT

Mayor Steve Adler says City Council members are open to shifting how Austin Energy makes its transfers to the city, a move that may quiet talk in the Texas Legislature of deregulating the municipal energy company.

“There is some support of us to looking at a CPS (Energy) model where they handle their transfers in two parts,” said Adler at an Austin Energy Utility Oversight Committee meeting Thursday. CPS Energy is San Antonio’s city-owned utility.

Adler explained that CPS makes its transfer, or payment, to the city in two parts: the first is the revenue owed the city as the utility company’s owner, and the second is payment for direct expenses to either the city or third parties. Austin Energy instead makes its transfer in one large chunk — 12 percent of its total revenue, not to exceed $105 million. In comparison, CPS pays San Antonio 14 percent.

However, the transfer Austin Energy makes not only covers revenue owed the city, but funds other nonenergy services such as the fire department and EMS. Should Austin Energy make this transfer in two parts, the advantage, some say, is transparency when it comes to knowing where the money is going, and also that the utility would function more as a private contractor regarding how it pays the city.

Edging closer to resembling a private company may quiet Texas Republicans who have been trying to deregulate Austin Energy for years.

Last week, members of the Senate Committee on Natural Resources & Economic Development passed Senate Bill 1945, filed by Sen. Troy Fraser (R-Horseshoe Bay), that would allow certain customers to end their service with Austin Energy and purchase from a utility on the deregulated market. If signed into law, the bill would essentially deregulate Austin Energy.

At the same committee hearing, Sen. Kirk Watson (D-Austin) said he shared Fraser’s views, but that local entities should make those decisions and they are not matters of the state. Watson, a former mayor of Austin, reiterated this idea to the Austin Monitor on Thursday.

“I have been advocating that, while I am upset with the length of time it’s taken Austin Energy to pay attention to certain issues, the Legislature should let this new board govern — if it governs in a new way,” Watson wrote in an email. “The mayor’s statement is a positive sign that this new board is, in fact, looking to govern in a new way.”

Sen. Judith Zaffirini (D-Laredo) was one of three legislators to vote against Fraser’s bill. Zaffirini, whose sprawling district includes part of Austin, told the Monitor on Thursday that she was encouraged by Adler’s comments, but that if the city is serious about a change, it should set that into motion quickly.

“If Senate Bill 1945 does not pass and the problems are not resolved, the legislature inevitably will pursue a legislative corrective measure when we reconvene in 2017,” Zaffirini wrote in an email. “In other words, the mayor and city council would have a two-year grace period to resolve the issues.”

And perhaps modeling Austin Energy after CPS is a way to ward off the looming possibility of deregulation.

At the Senate hearing last week, Fraser gave San Antonio’s municipal energy company his blessing. “They today are very, very, very competitive with the normal market, and I would say because they run it as a business, they run it independent of the city and the city doesn’t drive its environmental policy through the city of San Antonio,” Fraser said. “We have just the opposite happening in the City of Austin.”

 

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