Last
Thursday, the
council took the first bleary-eyed step towards recovery: “We all have drinking
problems,” Gus Garcia admitted to a captive audience. While the elder
councilmember was metaphorically highlighting the problems of the Electric
Utility Department (EUD), some thought that the self-help program approved for
the EUD may indeed indicate excess blood alcohol levels. Threatened with being thrown headlong into the drunk-eat-drunk holding tank of
a deregulated electric utility industry, EUD staff proposed drastic cuts over a
five-year period. On the chopping block last week lay the city’s electricity
conservation program and the EUD transfer to the general fund. Presumably,
cutting the conservation program will lead to more pollution, and cutting the
$57 million EUD transfer could mean less basic city services. But the proposed
cuts were made easier to swallow because they would amount to $40 million that
could be applied to a “debt management fund” to help pay off the EUD’s $1.8
billion debt.
But while the EUD staff undertook desperate penny-pinching on one end, they
offered a $21 million, five-year rate break to six corporations, the EUD’s
biggest customers, of which four — AMD, Motorola, Texas Instruments, and IBM
— are members of the Federation of Austin Industrial Ratepayers (FAIR). The
other two corporations that would receive the break are Seton Hospital and
Applied Materials. Another proposal was a $6 million contract to
Chicago-based Metzler & Associates for EUD consulting services.
According to staff proposals, then, the “debt management fund” they so
earnestly want to build would be depleted by $27 million. To many consumer
advocates and council watchers, this is corporate subsidy at the expense of
clean air and basic city services.
To make time to slog through the complexities of the staff’s EUD proposal, the
council held a special meeting that started at 9am Thursday — a full four
hours before council usually has to take their seats. The understanding at city
hall earlier in the week was that the vote on the proposal would be delayed
until 6:30pm, after the scheduled public hearing on the FAIR rate reduction.
But when Daryl Slusher attempted to make a formal motion to hold the vote until
after citizens had a chance to have their say, Mayor Bruce Todd wouldn’t hear
of it. After Slusher wouldn’t pipe down, Todd finally called for a second to
Slusher’s motion for the delay. But none came. The silence was deafening.
And that’s a crying shame. This very column, in last week’s issue, encouraged
citizens to rush down to council chambers last Thursday to voice their opinions
with regards to the biggest decision to hit the city in years. But it turns out
those Austinites took a trip downtown for nothing. They were shut out. “I
thought they were going to give us due process before they hung us,” remarked
attorney W. Scott McCollough, the consumer advocate hired by the city to
represent residential ratepayers.
With the nastiness of potential public discussion out of the way, the part of
the proposal that had to do with giving $6 million to out-of-town consultants
went well. Quickly, and with little discussion, the council awarded the $6
million contract. Despite the high price tag, the council only had a blueprint
contract to approve. Slusher motioned that the contract return to council for a
second approval after it had been negotiated by the staff. Garcia, who had last
week told the media he was a “No” vote, strangely led Thursday’s charge for
Metzler, thwarting Slusher’s request. Garcia, who had been expected to second
Slusher’s motion, said he had been swayed at a meeting with the company the
night before. He did not say whether it was over drinks.
And though Metzler is based not only out-of-town, but out-of-state, and has
little experience teaching public utilities about deregulation, the council
bought into the firm’s promise of a 15% to 20% reduction in operating costs.
Then, too, there was the fact that staff and the Electric Utility Commission
had recommended the company. And that was all five councilmembers
needed. Slusher gave it the only thumbs down. Mitchell abstained for a lack of
minority subcontractors.
Whether this is a waste of money has yet to be seen. The EUD has already spent
$2 million on other out-of-town consultants to get ready for deregulation. Very
little of the information proved useful, and even the most reliable info was
taken with a dose of skepticism, since even the council complained that the
contract seemed geared to promote an EUD sale. That suspicion stemmed from the
fact that Bruce Todd has friends and family working for Texas Utilities, the
lead EUD suitor, including lobbyist Don Martin, who ran the mayor’s last
campaign and attended last week’s meeting. The suspicion also stemmed from
Todd’s attempts to force city staff into his hip pocket on EUD matters, a
practice that continues to this day (see “Naked City”).
Next up, the council treated the proposed cuts to the transfer and the
conservation program. Todd, Mitchell, and Ronney Reynolds favored staff’s
proposal to reduce the transfer from $57 million to $42 million, and the
conservation program from $13.2 million to $6.6 million by the year 2001.
Slusher and Beverly Griffith countered with “The Balanced Approach,” a plan
that focused on reducing operating and maintenance expenses instead, and used a
surgeon’s knife rather than a guillotine with the transfer and energy
conservation program. The G-S proposal had significant bargaining leverage with
Jackie Goodman and Garcia, since they weren’t inclined to “gut” the energy
conservation program. A compromise approved by those four councilmembers will
reduce the transfer from $57 million to $51.5 million, and the energy
conservation program to $11.2 million. Todd, Reynolds, and Mitchell voted
against the compromise.
The impact of the cuts will not be felt until budget deliberations begin in
the summer. The council will have $1 million less to work with in the general
fund, and if new revenues don’t fill in the gap, council must either raise
taxes or take some existing city programs to the slaughterhouse. At that time,
the council will also have to deal with the first $500,000 reduction to the
energy conservation program, and conservationists fear that the reduction,
though relatively small, will have a major effect on Austin’s air quality.
When $13.2 million was spent in fiscal year 1996, the program prevented 34,500
tons of carbon dioxide from going into the air. That’s the gas primarily
responsible for global climate change. If there’s a direct correlation between
funding and results, the vote of the so-called environmental majority on the
council would allow an extra 5,308 tons of carbon dioxide to be released a
year, noted Paul Robbins, who recently helped write a report on the study of
air pollution in Texas for the Sustainable Energy and Economic Development
coalition (see “Naked City”).
Besides cars, the top air polluters in the Austin area are the three electric
utility power plants. Proponents of the conservation program fear that the cuts
will make it tougher for Austin to comply with federal requirements for clean
air, especially once the Environmental Protection Agency enacts tougher
regulations. If Austin exceeds the limits, new or expanding businesses will be
required to install energy-saving equipment, and even the Chamber of Commerce
realizes that Austin’s economy will suffer.
Robbins says the effects will be “horrible.” To make up for the loss, Robbins
suggests putting more funding into building code enforcement, to ensure that
buildings and homes meet the city’s requirements for weatherization. There has
been concern that the codes are not being routinely enforced, and there’s never
been an audit to determine if that’s the case. As an aside, Robbins points out
that Griffith promised the Sierra Club during her campaign that she wouldn’t
cut the conservation program. But she joined the majority in approving the cuts
last week, and also agreed to cut the conservation budget by $2 million during
the September budget deliberations.
As the clock struck nine in the evening, the council took up the rate
reduction to the six big companies, including the FAIR coalition. A leading
scare story from the local daily and big business is that when deregulation
arrives, behemoths like Motorola or Applied Materials will desert our humble
electric provider for cheaper rates offered by sleek, private electric
companies. Never mind that Austin currently has cheaper rates, and that
deregulation is at least three years away. The firms say they have been
subsidizing residential rates for years, and they want a five-year reduction
promise by January 1 or they’ll leave.
Reynolds, Todd, and Mitchell liked staff’s $21 million rate cut proposal.
Jackie Goodman did too, until she discovered a number of things about the
proposed contract that disturbed her. Griffith, Slusher, and Garcia also seem
worried. For one, the Jan. 1 deadline, many suspect, was imposed before the
legislature starts so the city can’t know the direction of the legislative
debate on utility deregulation. If it looks like it won’t happen with the 1997
legislature, the city would be less likely to approve a rate cut. Slusher
requested that the vote be held after the legislature meets, but only Griffith
tuned in. Also, the companies just happen to be part of a coalition that has
proposed a state legislative bill pushing deregulation. According to consumer
advocate McCollough, the bill contained a clause that would have exempted those
companies from paying “stranded investment” costs — capital debt that most
consumers who leave the EUD system will likely be required to pay.
Most disconcerting to Goodman was the fact that since deregulation isn’t
expected to occur until at least 2000, the five-year contract would really only
be necessary for two years. After a complex debate, Goodman called for a delay,
and the council postponed the rate break proposal until today’s end-of-the-year
hoedown.
This article appears in December 20 • 1996 and December 20 • 1996 (Cover).