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Lawmakers again target Austin Energy, but what would that mean for you and me?

An Austin Energy truck behind a truck with a bucket lifting someone up to power lines
Michael Minasi
An Austin Energy crew clears branches from power lines and repairs cables in South Austin after an ice storm in February.

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When an ice storm struck Austin in February, downing tree limbs and leaving hundreds of thousands without power, Republican state Rep. Ellen Troxclair was quick to offer a solution: private enterprise.

“Break up the AE monopoly to allow Austin Energy customers to choose their energy provider,” the former Austin City Council member tweeted while outages were ongoing. "This would ultimately lead to better services and rates and compel more competent management.”

In the months that followed, Austin residents and city government entered into an often contentious public debate over things like burying power lines, revamping tree-trimming policies and improving emergency response.

Austin's city manager and the head of Austin Energy both left their jobs amid the uproar.

During that same time, Troxclair and other conservative lawmakers drafted and filed a slew of bills targeting the city’s publicly owned utility — and public power in Texas more generally.

The legislative proposals would do everything from reorganize the management structure of Austin Energy to potentially dismantle the utility by forcing it to sell off parts of its publicly owned infrastructure.

The bills' sponsors have framed their legislation as a way to improve service in the aftermath of the mass power outage. But many utility experts warn the opposite would happen. They say the proposals are part of a longstanding push to weaken and ultimately privatize public power in Texas, which would lead to higher bills and less responsive service.

A cow to be milked

When it comes to the way people get electricity, Texas is a land of contrasts.

Around 85% of Texans — including residents of Houston and Dallas — get their power from companies called “retail electric providers.” These retailers serve as middle men, buying electricity from companies that generate power and selling power contracts to consumers at a markup. That electricity is moved over power lines that are owned by yet another transmission and distribution company.

All these companies are regulated by state’s Public Utility Commission, and the transmission and distribution company operates as a monopoly in the areas it serves. Despite that, this arrangement is often called a deregulated retail electricity market.

The rest of Texans get their energy under an older and simpler model. They live in places where one public or consumer-controlled power company runs the show. That utility often owns everything from power plants to the poles and wires on which the power travels.

The utility customers in these areas — which include Austin, San Antonio and regions served by rural electric cooperatives — are also the owners of the power company. There are no retailers to sell them power; thus, they have no choice about who they get their power from.

The fact that Texas utilities operate in these two ways is the result of a political compromise when Texas deregulated its electricity market in 1999. And ever since then, some proponents of deregulation have sought to break up public power utilities, often with the support of companies that could profit from acquiring new customers.

Karl Rábago, a former Texas Public Utility commissioner and Austin Energy executive, says for-profit companies have long wanted control of publicly owned energy infrastructure, a potential outcome of Troxclair’s House Bill 4211.

“In the past [the transmission and distribution companies] wanted our distribution system because it's a cow you can milk on a regular basis,” said Rábago, who now heads the Pace Energy and Climate Center and works as a consultant. “Is there a likelihood that there's somebody out there chomping at the bit and saying, ‘I want the service territory expanded into Austin so I can pick up a million customers?’ Heck yeah!”

Rábago said privatization of transmission would not translate to lower rates, as the transmission company would still work to maximize profits from customers, while also paying a significant franchise tax to the city.

Who calls the shots?

Not all the proposals introduced this legislative session would go so far as to have Austin sell parts of its energy infrastructure. But, opponents say, many would chip away at the city’s power to manage its own utility.

State Sen. Charles Schwertner and others are proposing bills that would stop publicly owned utilities from putting some of their profits toward city spending on things like parks, libraries and public safety.

Schwertner says the law would lower rates. Public power advocates say it removes a key benefit of having a city-owned system.

“All electric utilities compensate their owners,” Mark Dombroski, Austin Energy’s deputy general manager, told a legislative committee reviewing the bill. “Municipal utilities make a general fund transfer to their city [just like] investor-owned utilities pay dividends to their shareholders.”

Austin's chief budget officer says that bill would all but guarantee taxes go up in cities with public electric utilities, as local governments scramble to find new ways to fund programs.

Another bill, proposed by Troxclair, would move management of Austin Energy from the Austin City Council to an appointed board of experts.

The city has considered this idea before. Troxclair says it would lead to more competent utility management. Opponents say it would weaken citizen input over things like affordability programs and renewable energy policy.

Yet another bill, from Republican state Sen. Kelly Hancock, would let small groups of Austin Energy customers protest their electric bills with the state’s Public Utility Commission, something critics — and PUC representatives — say could bog down utility operations in red tape.

At the heart of many these proposals is the idea that the Public Utility Commission of Texas, the state agency that regulates the retail electric providers, is a more receptive and effective oversight body than local governments.

After the state deregulated its market, “the Public Utility Commission was able to be responsive to customers who had too high rates or dismal service,” Troxclair said in an interview with KUT before she introduced her Austin Energy-focused bills.
“Austin Energy customers have none of that.”

Others don’t share such a rosy assessment of the PUC's track record when it comes to helping ratepayers. They say it's unclear how state oversight would have better prepared Austin for the winter ice storm.

A recent state report on the PUC described an agency overly dependent on industry (called “market participants") when it comes to making “strategic decisions that affect the entire state.”

“The market participants have private interests to protect, which may be at odds with the broader public interest in providing reliable electricity to all Texans,” the report asserts.

The same report also found the PUC lacking when it comes to public communications, public access and transparency. State lawmakers are crafting a plan that addresses some, though not all, of the findings.

In Austin, even some of those who recognize weaknesses in the city’s preparation for and response to the big ice storm say they would prefer to keep oversight of the public utility local.

“Only big moneyed interests that can hire the lawyers to be involved at the [Public Utility Commission] would be likely to get involved. Not normal, everyday people,” Cyrus Reed, with the Lone Star Chapter of the Sierra Club, said in testimony at the Legislature against Hancock's bill.

Reed serves on Austin’s Electric Utility Oversight Board and is a frequent critic of Austin Energy policies.

The cost

In the end, much of the debate over the future of Austin Energy comes down to how much trust people have in the Texas energy market.

“I think the competitive market generally brings more accountability and transparency,” Troxclair said.

Opponents disagree. And they warn that opening Austin up to retail competition would almost certainly bring higher bills.

Austin Energy recently raised its electric rates. But the utility says its customers still pay, on average, 17 to 34% less per kilowatt hour of energy than customers in parts of Texas with retail electric deregulation.

"I think what would happen is that the amount that Austin citizens paid for their electricity would slowly move up to equilibrate with the rest of the market" if Austin lost its public utility, Rábago said.

He said another way Austin Energy customers save is by simply using less energy, thanks to energy-efficiency programs, incentives and rebates. These programs are not as prevalent in the Texas competitive retail market, which thrives on selling more energy to more people.

Austin Energy “has leveraged an investment in energy efficiency,” Rábago said. “That sticks out like a sore thumb to the guys who want to pass tens of billions of dollars in excess cost to Texas consumers.”

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Mose Buchele focuses on energy and environmental reporting at KUT. Got a tip? Email him at Follow him on Twitter @mosebuchele.
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