MoreThan It Can Chew?

City Plans to Create Energy Services Business



illustration by Doug Potter

For over a decade, the city of Austin has been giving cash rebates to residential and commercial electricity customers who buy high-efficiency heating and cooling equipment. Now, there are plans afoot to end the commercial rebate program and replace it with a city-owned energy services company that will provide a wide range of energy efficiency programs.

But the plan -- which will be included in the budget process now being considered by the city council -- is risky. And it is facing opposition from the city's heating and cooling contractors.

The planned energy services company, or ESCO, is the brainchild of Roger Duncan, a former city councilmember who heads the Planning Environmental and Conservation Services Department. Duncan's plan calls for the creation of an ESCO that will be funded by capital transfers from the Electric Utility Department. The ESCO will target small and medium-sized commercial customers who want more energy-efficient products. Those customers will pay the ESCO to install, finance, operate, and maintain high-efficiency lighting, heating, ventilation, air conditioning, and other systems. The new ESCO -- if approved by the council -- will be launched this fall. Duncan's objective is to create a self-sustaining, city-owned business that will eventually be able to fund all of the city's residential energy conservation programs. At present, the city's efficiency programs are funded by the Electric Utility Department (EUD). Duncan wants to end those capital transfers. Doing so, he believes, will allow the utility to compete more readily in the looming era of deregulated electricity.

But to get started, Duncan's program will need money. The EUD, which had $633.6 million in revenues last year, has agreed to transfer $6.7 million into a new fund that the ESCO will use to finance its projects. In addition, the EUD will pay Duncan's department another $13.2 million which will be used for residential rebates and low-income housing weatherization projects. "We are going to invest more money than ever in energy efficiency," says Duncan. "Not because it's right, but because we think we can make money."

But local heating and air conditioning contractors are not so sure that Duncan's plan will work. One manager of a prominent local company, who asked not to be named, doubted that the city will be able to make enough money through the ESCO to fund the residential rebate program. The manager said the average heating and air conditioning business runs on a net profit margin of about 2%. If that margin holds true for the city, he says, the city's ESCO would have to generate $500 million per year in revenues to generate the $10 million the city needs for the residential program. "Unless we think the city is so much more efficient than anybody else -- and we all know that's ludicrous -- they aren't going to get $10 million to fund that program," said the manager. "It's ludicrous to believe they will. And if they do, then it's obviously unfair competition because they are using taxpayer money to finance the marketing and the financing and operations."

Another industry official, who works for a company that specializes in energy retrofits throughout the state, said, "No utility has ever entered the energy services business and survived. It's not their core business." City officials, says the contractor, are "just trying to invest in a business they are not qualified to operate. It's a very competitive, mature industry that is saturated."

Paul Robbins, a longtime proponent of the city's energy efficiency programs, also has doubts about the proposal. "I don't think if you drop commercial rebates, that everybody will flock to this other program," said Robbins, who would prefer that the council retain the commercial rebate program and launch the ESCO as an experiment to see if it works.

Duncan says he doesn't expect local heating and air conditioning contractors to endorse his plan, even though he plans to use local contractors for most of the installation and maintenance work that the ESCO will perform. Even so, the ESCO will be competing with some of the contractors for business. Says Duncan, "I can't make the electric utility competitive without some competition."

According to Duncan's department, since 1982, the energy efficiency programs have reduced the city's electricity demand by more than 300 megawatts. More on this later.


Four More Dead at Freeport Mine

At least four local tribal people have been killed in the latest conflict at Freeport-McMoRan Copper & Gold's huge mine in Irian Jaya. According to wire reports and reports from London-based TAPOL (the Indonesia Human Rights Campaign), Indonesian soldiers shot and killed two people who were protesting the company's policies in the area on August 21. The two other locals were reportedly killed on August 20 by blows to the back of the head after they had accepted a ride in a Freeport vehicle. According to a press release from Survival International, local police are treating the deaths as homicides.

While details of the deaths are still murky, the unrest appears to stem from Freeport's offer to distribute 1% of its annual revenues among local tribes. Freeport came up with the "1% solution" in the wake of several dozen cases of torture and murder in and around the company's work area that have occurred over the past two and a half years. Freeport blames the human rights violations on the Indonesian military.

The deaths came shortly after three Christian churches in Irian Jaya rejected Freeport's 1% offer. The August 20 deaths occurred on the same day that lawyers for Tom Beanal, a leader of the Amungme tribe, re-filed a $6 billion class action lawsuit against Freeport in a federal court in New Orleans. A previous version of Beanal's suit had been dismissed on August 8 by U.S. District Court Judge Stanwood Duval, who ruled that Beanal's second amended complaint exceeded the boundaries set up by the court. But Duval gave Beanal's lawyers the opportunity to re-file the complaint, which, among other things, alleges that Freeport spent close to $1 million in 1995 "for the support of the Indonesian military within the Freeport mining concession."

According to reports from TAPOL and the Indonesian news agency Antara, on August 21, a thousand tribesmen from several tribes, angry about the deaths of the two members of the Ekari tribe, blockaded the main road from the coast to Tembagapura, the center of the giant mining operation. That action brought in hundreds of Indonesian soldiers, who then clashed with the tribal people.

Calls placed to Freeport spokesmen Garland Robinette and Bill Collier were not returned.

For more information about the clash, and to read the statements by the three churches online, go to Robert S. Boyer's home page at: http://www.cs.utexas.edu/users/boyer/fp.

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