Council backpedals on Austin Energy board


The City Council won’t place Austin Energy under the supervision of an independent board any time soon, reversing course on a decision that had appeared all but made as recently as February.

At the council’s Tuesday work session, Mayor Lee Leffingwell said he was pulling his support for a board because, in crafting its responsibilities, council members had effectively neutered the board and “muddled (the proposal) up into an almost unrecognizable mess.” The council might vote Thursday to give an existing volunteer advisory board a somewhat more significant role, but council members tentatively agreed Tuesday to drop the board idea and simply create a council subcommittee to give Austin Energy matters more attention, including whether to place Austin Energy under a board sometime in the future.

“The council is directly accountable to the public, and we’re in the best position to make sure our utility operates in accordance with our community values,” Council Member Kathie Tovo said. “We’ve gotten good input, and it’s been a good discussion. Fundamentally, our system works.”

Debate over Austin Energy has persisted because the utility is the city government’s most valuable asset, with annual revenues of more than $1.2 billion, more than $150 million of which is spent each year by the council on parks, libraries, street lights and other municipal services. Austin’s environmental reputation is due in no small part to Austin Energy programs such as GreenChoice, the landmark program through which the utility sells wind-generated electricity to willing buyers.

The heart of the debate is whether Austin Energy would serve its 420,000 customers better if it were run by a board of public power experts that could buffer the utility from the day-to-day political influences that the council and city manager must navigate. The back-and-forth has crystallized into competing worst-case narratives based on events in 2009.

Those skeptical of a professional board point to troubles at that time at San Antonio’s CPS Energy, which is managed by a board. Recently elected Mayor Julian Castro was trying to oust two members of CPS’s board of directors, objecting to the board’s insularity and complaining that top officials hid the true cost of a proposed nuclear plant expansion from the public. CPS scaled back its role in the expansion as part of settling a messy and expensive lawsuit.

“The board ignored direction from the City Council, they ignored citizens, and they were advised it would be more expensive than they thought,” Karen Hadden, a member of the Austin’s Electric Utility Commission, told the American-Statesman. “We shouldn’t let that happen here.”

As San Antonio’s nuclear deal unraveled, Austin council members were asking how Austin Energy had gone from flush to nearly broke. Council members, focused on the myriad issues of a burgeoning metropolis, hadn’t noticed that the utility’s finances were eroding even as it spent ever-larger shares of revenue on municipal services.

“Austin Energy has lost more than $370 million since 2008. That is not an example of good management,” said Phillip Schmandt, another member of the Electric Utility Commission who contends that many Austin Energy questions, such as whether the utility should cut ties with a coal plant, have languished because of council inattention.

Which case is a more apt warning signal that should guide the future of the utility?

A council majority initially favored the pro-board arguments. But environmental activists and other board skeptics raised numerous worst-case scenarios — for instance, that a board would be more inclined to renew discounts that a dozen large businesses enjoy but which Austin Energy plans to let expire in 2015. Gradually, a council majority came around to warnings about entrusting the board with much power.

“I understand the mayor’s concern about a board not having enough sovereign authority,” said Council Member Chris Riley, a swing vote who ultimately decided a board should have limited power that the council could later expand.

The apparent council consensus comes days after the death of state legislation that was necessary to create a board with actual independence.

The legislation, from state Sen. Kirk Watson, D-Austin, would have allowed Austin Energy to function as a publicly owned business removed from the city bureaucracy, similar to CPS Energy. The council could retain say over major decisions, such as rate increases, but the board would be able to hire and fire the general manager. That is an authority that board advocates say is needed to ensure that the utility cannot ignore instructions from the board. The board is also intended to disarm critics who sometimes use Austin’s liberal politics as a foil while asking conservative lawmakers to end Austin Energy’s monopoly.

But City Manager Marc Ott’s legal staff determined that Austin Energy must remain a municipal department unless voters amend the City Charter.

Watson, a former Austin mayor, is skeptical of the legal staff’s opinion and earlier this year filed the legislation that would allow the council to make such a change without a referendum. But, after passing the Senate, the proposal never made it to the House floor.

“The bill would have provided clarity,” Watson said, “but it is dead for this session.”

That legislation’s demise illustrates the tangled web of Austin politics. It was initially endorsed by a council whose members later grew skeptical of the ends Watson wanted to achieve. The proposal ultimately died after Travis County Republicans who want an independent board decided to oppose the legislation. They said such efforts should be tabled until Austin’s new political system takes effect in 2014 and a new council, elected from districts around the city, can decide how to handle Austin Energy.


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