The LCRA and the City

Times change. Ten years ago, the city and the LCRA were in a blood feud over water quality in the Colorado River. The city was dumping raw sewage into the river and the river authority was threatening to give the city a good spanking at the Texas Water Commission. Now the two are in the midst of an odd courtship. Don't call it dating, yet. But the two are talking about dating. Marriage might come later.

The dowry, of course, includes the City of Austin's electric utility. And with a potential selling price of up to $3.4 billion, it's quite a catch for any suitor. Last August, LCRA general manager Mark Rose gave the city a pitch that caught most people by surprise. While Mayor Bruce Todd was pushing for an outright sale of the utility to one of the big investor-owned utilities, Rose and lobbyist David Armbrust visited several councilmembers in their offices and offered to simply partner up with the city.

At first blush, it's a reasonable idea. The city keeps its most valuable asset. City electric customers could continue to enjoy the benefits of having a utility that is tax-exempt. And both agencies could reap the benefits of eliminating redundant positions while consolidating the ownership of generation facilities like the Fayette Power Plant. The city owns 40% of the facility, which burns Wyoming coal.

Of course, Rose didn't make the pitch just in order to curry favor with the city. He makes it clear in his interviews that he wants to distance himself from Austin city politics as much as possible. "I'm not mad at Austin," Rose says, "But we don't serve Austin."

A former city councilmember, Rose says Austin's city council "has one and only one question that they are going to have to answer: `Who are we going to represent? The ratepayers or the city as an institution?' That's the only question."

By selling the utility, Rose says, the city will get a few billion dollars which could then fund the portion of the budget that was formerly made up by transfers from the utility to the general fund. If the city does that, he says, city ratepayers will pay the price over the long term in the form of higher electric rates.

Suitors abound, at the right price of course. Texas Utilities and several others have expressed interest in the utility. But Rose's suggestion has started people thinking about what kind of partner might make sense for the city. The City of San Antonio - which has already partnered with the city on the lawsuit against Houston Lighting & Power over the South Texas Project - has been one suggestion.

So, the LCRA is just one of many possible partners for the city. And several potential buyers are queuing up for a possible purchase. But Robert Floyd, the former chair of the city's Electric Utility Commission, is one of many who believe an outright sale of the utility will be bad for the city over the long run. "I don't care what the price is," he said. "There couldn't be a stupider move on the planet." - R.B.