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Council extends certain hospital energy contracts

Friday, May 29, 2015 by Tyler Whitson

Following up on last week’s decision to extend contracts for large Austin Energy customers, City Council voted Thursday to expand the treatment to St. David’s HealthCare and Seton Healthcare Family.

The six-month extensions for contracts that were set to expire at the end of the month apply to each of the providers’ primary facilities, which are St. David’s North Austin Medical Center and Seton Medical Center. The extensions keep rates for the providers lower than what they would be under the current rate structure that Council adopted in 2012.

The contract extensions do not cover the providers’ secondary facilities, such as St. David’s South Austin Medical Center and Seton’s University Medical Center Brackenridge.

Council approved the measure in a 7-3 vote, with Mayor Pro Tem Kathie Tovo and Council members Greg Casar and Ora Houston dissenting. Council Member Delia Garza was absent.

Greg Hartman, who is Seton’s president for external affairs, academic medicine and research, told the Austin Monitor that the extension for his company is worth approximately $300,000.

Attorney Michael Whellan, who represents St. David’s, did not provide the Monitor with a cost figure.

The decision and preceding discussion were indicative of larger issues related to Austin Energy, with Council members speaking to the financial needs of low-income residential customers and the costs the health care providers incur when providing uncompensated treatment.

Hartman and Whellan stated on May 21 – when Council tentatively adopted the contract extensions – that the hospital systems each provide at least $10 million per year in uncompensated care, much of which benefits low-income residents.

Council Member Ann Kitchen highlighted these services and made a motion to extend the contracts to the two providers’ primary and secondary facilities, though that motion failed.

Debbie Kimberly, Austin Energy’s vice president of customer energy solutions, told Council that although she was unable to discuss the costs of the energy contracts publicly, Kitchen’s motion would have cost the utility roughly five times what Council ultimately adopted.

Prior to voting in favor of the prevailing motion, Kitchen asserted that she believes it is possible to address both issues. “I do not consider my vote in favor of this to be choosing between … health care services to people in the community and assistance with energy (costs for residents),” she said.

Casar, on the other hand, motioned to deny all extensions to the two providers, and also to direct staff to bring forward ways in which Council could enroll into the Customer Assistance Program all customers who are currently on the waiting list or fulfill some of the qualifications identified by a task force for low-income consumers. That motion failed as well.

According to Mark Dreyfus, Austin Energy’s vice president of regulatory affairs and corporate communications, there are currently 2,089 customers on the Customer Assistance Program’s waiting list.

Casar argued that his motion was a preferable means of supporting low-income residents rather than extending the hospital contracts. “I do respect the work that our hospitals do every day, whether it’s indigent care or not. I don’t think there is a direct benefit of giving these utility rate breaks,” he said, noting that the hospitals already receive economic development incentives significant rate breaks from the city.

Casar also said that rates for residents and small businesses went up in October 2012, when Austin Energy overhauled its rate structure, and that the hospitals and most other large industrial customers have been aware for nearly three years that their rates would increase in June.

That 2012 overhaul marked the first time that Austin Energy raised its rates in 18 years. Austin Energy spokesperson Robert Cullick told the Monitor that, during that time period, the utility exhausted the reserve funds that strengthen it financially and help it weather unexpected difficulties without raising rates. As a result, the utility has a current shortfall of $400 million that it has asked Council to fill.

The hospital contract extensions follow Council’s decision, also on May 21, to extend contracts for six months to Austin Energy’s two largest customers – Samsung and Freescale Semiconductor – and create a reduced tariff for customers that own electrical substations, a category into which only Cypress Semiconductor falls.

That move, which Cullick said cost the utility about $4 million, gives Council an opportunity to work out a way to address concerns that the two companies have raised publicly about their rates.

Council has taken all of these recent actions under the watchful eye of the Texas Legislature, particularly that of Sen. Troy Fraser (R-Horseshoe Bay), author of Senate Bill 1945. That legislation, which is currently on the Senate’s intent calendar, would provide large customers or customer groups a route to break off from Austin Energy, which could result in its deregulation.

This article has been corrected.

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