Cole Hosts AE Forum at ACC
Panel discusses rate proposal, consequences, possible alternatives
By Michael King,
6:00PM, Sat. Jan. 28, 2012
At a spirited if not entirely illuminating Saturday morning forum at Austin Community College-Riverside, Mayor Pro Tem Sheryl Cole and a panel of experts engaged the public on Austin Energy's proposed rate changes
Cole opened the forum by noting that a rate increase is essentially inevitable after 17 years going without, but that the City Council wants to do everything possible to cushion the impact on the poor, schools, and churches -- many of which also serve the poor. She reminded the audience (perhaps 75 people at its peak) of the importance of a public utility, and the potential loss of the municipal utility if its finances can't be stabilized. (Interference from the Lege was never quite explicit, but that's the storm looming if the city can't get AE's house in order, or if the threats of deregulation from conservative pols are finally realized.)
Cole's panel of experts included Steve Smaha of the Electric Utility Commission, Dan Pruett of One Voice Central Texas (and Meals on Wheels), former AE director (and former Council Member) Roger Duncan, and CM Emeritus Betty Dunkerley (whom Cole introduced as her mentor and the institutional whiz on the city's overall finances). Also in the audience were CMs Laura Morrison, Kathie Tovo, and eventually Chris Riley (no consultations among CMs, or even direct contribution, with the dread specter of quorum violations always in play at unposted public meetings -- Mike Martinez tweeted that's precisely why he couldn't attend).
Cole attempted to run the two-hour meeting primarily as a Q&A session, and though it was intermittently hijacked by the usual suspects from Citizens Communications (to remain unnamed for once by NewsDesk), that's more or less how it went. While there was much general bluster about all bills being too high, an uneven consensus conceded that after 17 years with no bump in rates, some increase is inevitable. The question remains whose oxen are going to get gored, and Cole and others insisted that whatever comes out of the discussion, the city will do its best to reduce the impact on low-income citizens, churches, and schools. It's still very unclear how that will happen -- but it's also clear that the Council, while scheduled to address the matter in the next couple of meetings, is nowhere near a vote yet on an actual rate schedule.
In response to audience questions about overall AE rates and expenses, the panel members, especially Smaha and Duncan, found themselves in the unlikely position of defending the utility. (Later Smaha, who is a volunteer on the advisory EUC and not an AE employee, noted that he's not terribly comfortable speaking on behalf of a billion-dollar company -- AE's budget is roughly $1.3 billion.) The panel noted that public ownership of the utility enabled this very discussion -- should the utility founder or be sold privately, only shareholders and boards would have a say. Smaha said that based on the EUC's review (confirmed by independent consultants), AE's current rates (having taken advantage, for example, of historically very cheap coal) are on the very low end of comparable city rates statewide, and the new rate structure would place us "in the middle, or somewhat below the middle." He also responded to arguments that AE executives make too much money by saying that although AE is the 9th biggest municipally owned utility nationwide, its executive salary range is 46th; Dunkerley added that recruiting competent managers with low salaries is no easy task and counterproductive, and that the salaries are and must remain competitive.
Duncan acknowledged that the rate proposal might seem drastic because of the long interval since the last one, but that over the years, when AE came to Council with proposals, they were repeatedly rebuffed because the utility was not at crisis or in emergency circumstances — Council wanted to keep rates low. But now AE is on the verge of financial emergency, its reserve fund is very low, costs continue to rise, and new rates are needed.
Cole and others added that AE is the third largest source of the city's general funds budget (after property taxes and sales taxes), and Smaha said the AE fund transfers amount to roughly half the current property tax rate. That tradeoff for fundamental city services — parks, libraries, public safety, streets, and a relatively low property tax rate — is much of what's making the rate discussion so difficult.
Much audience opposition focused on the proposed "base rate" increase, publicized as now $6 moving to $22, Susana Almanza of PODER arguing that represented a week's groceries for a poor family. Cole and others proposed various ways to address that issue, most focusing on getting more money into AE's Customer Assistance Plan, currently at $7 million. Cole hopes to double it or more. The number of people in urgent need approaches 50,000, to help that number would cost $27 million.
Cole also emphasized more energy efficiency, that larger institutions, especially churches and schools, need to direct more attention to conservation that would not just save energy but lower bills. AE will do outreach, but institutions need to take initiative, she said, while the city works on discounting the new rates, phasing them in, and creating a proactive conservation program at AE. She also noted that AE has been weatherizing annually about 1,000 low-income homes at no cost. (That was the program that briefly got in trouble at year's end over lost federal funds, since restored.)
There was rough consensus in the room that whatever the new rate schedule might eventually look like, this current proposal still needs a lot of work. CM Morrison told NewsDesk that Council has "a ton of work" to do on this subject, and that the revenue estimate and the allocation schedule needs extensive review. She said much of the public reaction stems from "sticker shock" at the new base rate, and that what might be needed is a "tiered" rate system as proposed for Austin Water. "We do need to keep Austin Energy healthy," Morrison said. "As the owners of the utility, we as a city get great benefit from it."
Dan Pruett said he was encouraged by Cole's suggestion that the CAP funding should increase substantially. "I think a rate increase is inevitable," he said, but the question is, "how do we put love and compassion for the poor, into the process." He added that particular attention needs to be paid to those nonprofits that sustain "basic needs" services for the most vulnerable.
Smaha said that based on his work on the EUC, he was not convinced that the needed revenue estimate is too high. "There was a consensus on the commission that the total amount of revenue that needs to be raised is accurate and correct," Smaha said. "The decision of who gets stuck with bill is essentially a policy decision. So the City Council has a huge amount of flexibility and latitude to decide whether one group benefits, and another group pays." He also said the perception that the problem could be solved by cutting executive salaries is unrealistic. "If you added all the executive salaries together, and cut them in half, you might be able to save a million dollars," he said. "When the budget is 1.3 billion dollars, that $1 million is something less than one-tenth of one percent. I don’t think that’s going to have any material effect."
Cole said she was pleased with the forum turnout and the results, and believes that city officials and the public can eventually "move forward" to an understanding. Considering the long period since the last rate increase, she joked, "I have a long list of previous council members I want to talk to." She said the most difficult part of the discussion is making people understand that the utility belongs to us, and the money troubles are our own. "The concept of a municipally owned utility takes a while to wrap your brains around. The fact that you own it, and the taxpayer is the stockholder, and that without it, we simply could not have one-third of the amenities we now enjoy – from parks, to libraries, to affordable housing, to police, to streets." She continued, "We have a ways to go to make that connection. As people start to hear that we might lose that asset, and we have to make some changes, whether that’s efficiency or an increase in rates … they will come around."
How soon they will come around is another question. The Council is officially scheduled to address the rates this week, but a final decision on a rate schedule seems weeks if not months away, although AE has requested a March deadline. Morrison suggested there might be an interim rate approval while the longer-term questions are addressed; Cole said she hopes the matter can be resolved satisfactorily in the next three months.
Commented Tovo: "We need to get the message to the public that it’s one or the other – either it’s much higher taxes, or we get the benefit of being shareholders in Austin Energy."