Lawmakers again target Austin Energy, but what would that mean for you and me?

Lawmakers again target Austin Energy, but what would that mean for you and me?

When an ice storm hit Austin in February, downing tree limbs and leaving hundreds of thousands without power, Republican state Rep. Ellen Troxclair was quick to offer a solution: private enterprise.

“Breaking AE’s monopoly to allow Austin Energy customers to choose their own energy provider,” the former Austin City Council member tweeted while the outages were underway. “This would eventually lead to better services and rates and force more competent management.”

In the months that followed, Austin residents and city government engaged in an often contentious public debate over things like burying power lines, revamping tree-trimming policies and improving emergency response.

Austin’s city manager and the head of Austin Energy quit their jobs amid the uproar.

During that time, Troxclair and other conservative lawmakers drafted and filed a series of bills targeting the city’s public utility — and public power in Texas more generally.

The legislative proposals would do everything from reorganizing Austin Energy’s management structure to potentially dismantling the utility by forcing it to sell off parts of its publicly owned infrastructure.

Bill sponsors have framed their legislation as a way to improve service after the massive power outage. But many public service experts warn that the opposite would happen. They say the proposals are part of a long-running push to weaken and ultimately privatize public power in Texas, which would lead to higher bills and less responsive service.

A cow to be milked

When it comes to how people get electricity, Texas is a land of contrasts.

About 85% of Texans—including residents of Houston and Dallas—get their power from companies called “retail electric providers.” These retailers serve as middlemen, buying electricity from power companies and selling power contracts to consumers at a price. That electricity moves through power lines that are owned by another transmission and distribution company.

All these companies are regulated by the State Public Utilities Commission and the transmission and distribution company operates as a monopoly in the areas it serves. Despite this, this arrangement is often referred to as a deregulated retail electricity market.

The rest of Texans get their energy according to an older, simpler model. They live in countries where a public or consumer-controlled company runs the show. This utility often owns everything from power plants to the poles and wires over which the energy travels.

Utility customers in these areas — which include Austin, San Antonio and regions served by rural electric cooperatives — also own the power company. There are no retailers to sell them energy; thus, they have no choice in who they take their power from.

That Texas utilities operate in these two ways is the result of a political compromise when Texas deregulated its electricity market in 1999. And since then, some proponents of deregulation have sought to disrupt public power utilities, often with the companies’ support. that can benefit from acquiring new customers.

Karl Rábago, a former Texas Public Utilities commissioner and Austin Energy executive, says for-profit companies have long sought control of publicly owned energy infrastructure, a possible result of Troxclair’s House Bill 4211.

“In the past [the transmission and distribution companies] wanted our distribution system because it’s a cow you can milk regularly,” said Rábago, who now directs the Pace Energy and Climate Center and works as a consultant. “Is it likely that someone out there will jump up and say, ‘I want the service territory to expand into Austin so I can get a million customers?’ Hell yes!”

Rábago said the privatization of broadcasting would not translate into lower rates, as the broadcasting company would still work to maximize profits from customers while also paying a substantial franchise tax to the city.

Who calls the shots?

Not all of the proposals introduced this legislative session would go so far as to have Austin sell off parts of its energy infrastructure. But, opponents say, many would give up the city’s power to manage its services.

State Sen. Charles Schwertner and others are proposing bills that would bar public utilities from putting some of their profits toward city spending on things like parks, libraries and public safety.

Schwertner says the bill would lower fees. Public power advocates say that removes a key benefit of having a city-owned system.

“All electric utilities compensate their owners,” Mark Dumbrowski, Austin Energy’s deputy general manager,
he told a legislative committee reviewing the bill. “Municipal enterprises make a general fund transfer to their city [just like] Public enterprises owned by investors pay dividends to their shareholders.”

Austin’s budget chief says the bill would only guarantee tax increases in cities with public electric utilities as local governments try to find new ways to fund the programs.

Another bill, proposed by Troxclair, would shift management of Austin Energy from the Austin City Council to a designated board of experts.

The city has considered this idea before. Troxclair says this would lead to more competent service management. Opponents say that would weaken citizen input on things like affordability programs and renewable energy policies.

Another bill, by Republican state Sen. Kelly Hancock, would allow small groups of Austin Energy customers to protest their electric bills with the state’s Public Utilities Commission, something critics — and PUC representatives — – say it can cloud the operations of public services in the bureaucracy.

At the heart of many of these proposals is the idea that the Public Utilities Commission of Texas, the state agency that regulates retail electricity providers, is a more receptive and effective oversight body than local governments.

After the state deregulated its market, “the Public Utilities Commission was able to respond to customers who had very high rates or poor service,” Troxclair said in an interview with KUT before introducing her Austin-focused bills Energy.
“Austin Energy customers are having none of that.”

Others don’t share such a rosy assessment of the PUC’s track record when it comes to helping ratepayers. They say it’s unclear how state oversight would have better prepared Austin for the winter ice storm.

A recent state report on the PUC describes an agency overly dependent on industry (called “market participants”) when it comes to making “strategic decisions that affect the entire state.”

“Market participants have private interests to protect that may conflict with the broader public interest in providing reliable electricity to all Texans,” the report states.

The same report also found the PUC lacking when it comes to public communication, public access and transparency. State lawmakers are crafting a plan that addresses some, though not all, of the findings.

In Austin, even some who recognize weaknesses in the city’s preparation and response to the major ice storm say they would prefer to retain oversight of local utilities.

“Only big money interests can hire lawyers to engage in this [Public Utility Commission] is likely to be included. Not normal, ordinary people,” said Cyrus Reed, with the Lone Star Chapter of the Sierra Club, in testimony in the Legislature against Hancock’s bill.

Reed serves on the Austin Electric Utilities Oversight Board and is a frequent critic of Austin Energy’s policies.


In the end, much of the debate over the future of Austin Energy comes down to how much confidence people have in the Texas energy market.

“I think the competitive market in general brings more accountability and transparency,” Troxclair said.

Opponents disagree. And they warn that opening Austin to retail competition would almost certainly lead to higher bills.

Austin Energy recently raised its electric rates. But the company says its customers still pay, on average, 17 to 34% less per kilowatt-hour of power than customers in parts of Texas with deregulated retail electricity.

“I think what would happen is that the amount that the citizens of Austin were paying for their electricity would slowly move to balance with the rest of the market” if Austin lost its utilities, Rábago said.

He said another way Austin Energy customers save is simply by using less energy, thanks to energy efficiency programs, incentives and rebates. These programs are not as prevalent in Texas’ competitive retail market, which thrives on selling more power to more people.

Austin Energy “has driven an investment in energy efficiency,” Rábago said. “This looks like a sore thumb to the guys who want to pass on tens of billions of dollars in excess costs to Texas consumers.”

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