Austin @ Large: Austin at Large: Chuck, We Hardly Knew You
Departure of Austin energy GM May Leave City High and Unplugged
As the new year begins, the biggest item on the city's plate won't be found on the City Council agenda. Cast your eyes instead, observers of the local scene, toward the shiny halls of Town Lake Center (the former Sumiken building, for you old-timers), where Austin Energy General Manager Chuck Manning is leaving at a most interesting and inopportune time for the city.
That's not to cast any aspersions on Manning, whose three years at the helm of Austin's city-owned power company have been generally well regarded and whose announced reason for leaving was to move back to his home state of Georgia to be closer to his aging and ailing father. But other than the city manager (hired by the council) and the police chief (hired by the council and manager in tandem), the top job at AE is about as important a staff gig as exists in city government.
And City Manager Jesus Garza will get to replace Manning all by his lonesome. The head of AE works directly for Garza, unlike almost all the other city department heads, who report to one of the assistant city managers. Garza has no particular experience in the mysteries of running an electric company, but he does have a keen interest in the massive amounts of money AE makes, spends, and borrows, especially since some of that money -- transferred annually from AE into the city's General Fund -- is what keeps Austin from going bankrupt.
Even though we-the-people will likely have next to no say in the decision to hire Manning's replacement, we should still pay attention, because the stakes are high -- for us and for Garza. Some of the issues at hand:
As a municipally owned utility, AE got (and the City Council has exercised) the option to stay out of electric-power deregulation, which begins for real in Texas on January 1. Since other public power entities, like the Lower Colorado River Authority and the Pedernales Electric Co-op, can (and will) also keep their retail markets closed to competition, that means that only the handful of locals who get their power from a private utility -- mostly Reliant Energy, the former Texas Utilities -- will have a choice of power providers.
But as was seen in the horrific chaos that followed power deregulation in California, wholesale electric supplies can also be disrupted and prices pushed to ridiculously high levels, by the clumsy gyrations of a free power market. Austin Energy depends enough on spot-market power to leave it in a very bad way should those supplies become unavailable or unaffordable, which means its costs will go up, which will put pressure on the transfer into the General Fund, which ... well, it just gets ugly. Should such terrors come to pass, Manning -- who doesn't actually leave until the end of January -- may be around long enough to see them. A worse fate would be for madness to erupt while his position is still vacant -- not the sort of thing that encourages qualified applicants.
The current deregulation exemption for public power companies is a creature of the Legislature and, as Garza is wont to remind citizens and council, is subject to removal with every legislative session. Plus, there's always the possibility that Austinites may decide they want the option of choosing their power company -- or that they want AE to compete head-to-head with other providers in fast-growing suburban markets.
The Utility Transfer
All of these scenarios would translate into a direct hit against the AE transfer into the General Fund, which is, in effect, a dividend paid to us as shareholders, and which like any dividend is only as big as AE profits will allow. The consultants hired a few years ago to get the utility into shape for competition recommended the city cut the utility transfer in half, which it has not done, though it has worked to pay down some of AE's outstanding debt. If a decline in AE revenue leads to a $20 million or $30 million cut in General Fund services -- which have already been cut nearly to the bone in the current tight climate -- it will be Garza's (and the council's) problem rather than Manning's successor's, but it's sure to cross the city manager's mind when he does interviews.
Manning's most controversial move at AE was to lobby the council to restart and put off its plans to shut down permanently, the generators at the Holly Power Plant, which looms over a poor Eastside neighborhood that has been fighting to shut it down for decades. Since the plant seems to catch fire every year or so, it's not at all certain that the city can keep Holly operating -- either politically or practically -- until 2009, the currently proposed date for its retirement. Yet unfortunately, the city uses the power that Holly generates and will need to replace it. A freshly deregulated electric market -- especially one that's already clouded by the stench of the meltdown of Enron, the one-time poobah of energy trading -- is not the best time to go sell big-ticket bonds to build a new power plant, so Manning's replacement is going to have to get creative.
Holly Power Plant
All these issues suggest it would be good for the new AE general manager to plan to stick around for a good long while, but considering Manning is the third GM in seven years, the precedent is not great. It also would seem that citizens might want to push for a larger role in this hiring decision than they may otherwise have, but Garza's recent move -- with the council's grudging acquiescence -- to keep a host of AE "competitive information" confidential makes that unlikely also. But since most of you probably had no idea who Chuck Manning is, any increased attention would be an improvement.