Then There's This: AE: The Plot Thickens

City manager and consumer advocates finally agree on something

Marc Ott
Marc Ott (Photo by Jana Birchum)

One of the most surprising things to emerge from the ongoing debate over Austin Energy's governance structure is the recent revelation that City Manager Marc Ott opposes shifting oversight of the city-owned utility to an independent board.

That's surprising for a number of reasons. Ott's position is in rare alignment with consumer advocates, who last week urged Council not to head down the restructuring path. Ironically, advocacy reps had spent the better part of last year blaming the city manager and AE officials for bungling a contentious, high-profile rate case, which in turn caught the attention of the Legislature and ignited talks of restructuring. Instead of holding the city manager and AE leaders accountable for their handling of the rate case, as critics had wanted, the city is now considering throwing the baby out with the bathwater, by way of a major overhaul.

Opponents argue that an independent board made up of people with legal, financial, and utility expertise would translate to less public oversight and participation – and perhaps a shift away from the city's renewable energy goals. They point to the recent failings of an independent board at CPS Energy in San Antonio as an example of what could go wrong.

In his six-page Dec. 5 memo to the mayor and Council members, Ott outlined a long list of logistical challenges and potential obstacles to be considered before making such a drastic move, including budget oversight, human resources and employee benefits, environmental compliance, procurement decisions, and the overall costs of implementing the restructuring changes, among other things.

He also pointed out that the utility remains in good standing with bond rating companies and is financially solid, even after the tumultuous rate case, with new electric rates taking effect Oct. 1 – the first increase in some 18 years. Words like "transparent, open, collaborative government" seem to spring from the pages of the memo without sounding like bureaucratic buzzwords.

"Austin is all about process, communication, collaboration, and transparency," Ott wrote. "Yes, this can be messy sometimes, but ultimately the resulting 'open government' is worth it."

Either the city manager is finally starting to appreciate Austin as a unique community that thrives on public process, or he doesn't relish the idea of relinquishing his authority over AE. Perhaps it's a little of both. While the utility has historically answered to the city manager and Council, Ott took his authority to a whole new level – including tighter control of how information is communicated to Council – when he assumed the CM post in January 2008.

Proactive or Reactive?

The proposed governance change has been endorsed by Mayor Lee Leffingwell, state Sen. Kirk Watson, a host of business and industry leaders, and a coalition of suburban ratepayers who have taken their fight against the utility's recent rate hike to the Texas Public Utility Commission, where the case is under review. The movers and shakers who endorse the plan argue that the switch would improve AE's ability to grow and prosper in a rapidly changing market, give suburban ratepayers a seat at the table, and possibly head off legislative attempts to deregulate the utility.

The findings of a consultant hired by Ott to study the feasibility of an independent board also suggest that the governance shift would be an improvement over its current structure in which AE reports to the city manager (with direction from Council). The consultant's report included interviews with four former AE general managers, including recently retired GM Roger Duncan, all of whom supported some variation of an independent board. (In his memo, Ott blames former AE general managers for not pushing for a rate increase sooner.)

Additionally, the Electric Utility Com­mis­sion, a largely ignored Council-appointed advisory board, has unanimously endorsed the governance switch, although Commis­sioner Karen Hadden later clarified her vote as an endorsement of a board made up of Council members, along with one or two representatives from outside the city limits.

Judging from Ott's past record of recommending approval of proposals regarded as business-friendly – giving oversight of construction contracts for Water Treatment Plant 4 to a private firm, for example (see "WTP4: What's $15 Million Among Friends?") – you'd think the city manager would be right there in the thick of plans to let an independent team of people with utility and financial expertise run AE.

It's unclear at this point where the Coun­cil will ultimately land on this matter, or whether the question will be decided at the Lege, assuming Watson sticks to his guns – as he usually does on issues he champions – and continues driving his proposal to establish an independent governing board.

Clearly, Ott's memo has thrown a monkey wrench into the proposal, and consumer advocates are, for once, largely in agreement with his counterargument to scrap the restructuring plan.

Now that the "ship has been righted" in the wake of the rate case, Ott wrote, why try to fix something that isn't broken?

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