The Austin Chronicle

Council Plows Into Rate Review

By Amy Smith, March 9, 2012, News

City Council members set off on the first lap of marathon work sessions this week as they begin to sort through a complex electric rate increase proposal with a goal of wrapping up a final rate deal by the end of May.

The council's work session on Wednesday, March 7, followed last week's 6-1 vote to take a $35 million temporary rate increase off the table. The short-term cash infusion was originally part of a resolution brought by Council Members Laura Morrison, Kathie Tovo, and Mike Martinez, which also called for taking additional time to study the rate structure and hiring a consumer residential ratepayer advocate. Following a lengthy, intriguing, and at times confusing back-and-forth between council members, they worked their way to a solution in the end, with Mar­tinez dissenting on the final vote after his substitute motion – to pass the original motion – failed to garner a fourth vote.

Morrison moved to scratch the temporary increase from the resolution after AE General Manager Larry Weis, under questioning from Bill Spelman, said he'd prefer to pass on the $35 million stopgap and hold out for a permanent rate hike. "One of the things I had heard loud and clear was [AE] needed some funding right away," Morrison said before moving to strike the quick-cash language from the resolution. (The day before, Weis had sent a memo to the council saying the short-term increase "does not sufficiently meet Austin Energy's immediate financial needs and could result in long-term financial risks for the utility.")

Martinez was clearly irritated that AE would walk away from a $35 million offer (generated by a 3.5% systemwide increase) on the premise that the council and AE would have a final rate design in place by May 24. "We're making a pretty bold assumption," he said, noting that the temporary increase was a key reason why he added his name to the Morrison-Tovo draft. "I supported this because I thought it's a fair position to generate a little bit of revenue" while the council takes the time it needs to weigh the rate design options. Martinez then made a substitute motion to stick to the original Morrison-Tovo-Martinez resolution. Tovo seconded it "for purposes of discussion."

Chris Riley spoke first, arguing against Martinez and in favor of Morrison's amended proposal to pursue an aggressive work-session schedule with the help of a consumer advocate. "If for some reason the wheels fall off and we're just not anywhere near ready [by May 24] we would still have the option of approving [a temporary rate increase]. My preference would be to buckle down and plow through these issues." He added that, if the city were to approve a 3.5% temporary hike followed by a permanent rate increase, it could be facing two separate challenges at the Public Utility Commission.

Mayor Lee Leffingwell echoed Riley's sentiments about the potential risk of two rate appeals from customers outside the city limits. Martinez bristled, telling the mayor there's the same chance that the city won't end up with two rate cases. Spelman and Sheryl Cole also signaled they wouldn't vote with Martinez. Although it was clear his motion would fail, Morrison and Tovo voted with Martinez, perhaps to show their gratitude for adding his name to their resolution in the first place. With one motion down, that left the amended resolution, which won the day.

Consumer advocates and environmentalists, who have spent the last few months campaigning against AE's proposed 12.5% increase, largely considered council's action a victory. "The result was that Austin Energy turned down $35 million," said consumer advocate Carol Biedrzycki in an email to members of the opposition group. "I've never before seen anyone turn down $35 million. I believe Austin Energy's actions support our position that the utility may not need as much money as it is seeking."

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