Austin City Council members were in turns threatening and pleading last Thursday in their first major public discussion over how to fight a big residential rate hike proposed by the Texas Gas Service, the for-profit utility that delivers natural gas to the area.
The rate change was first proposed in June. But, since then, the debate over how the city should respond has taken place mainly in closed-door legal discussions and obscure city commission meetings.
Last week, a required public hearing on the issue gave Austinites their first major opportunity to voice their anger.
It also gave City Council members a need to respond.
Texas Gas Service says the rate hike is necessary to invest in infrastructure and keep up with rising costs due to inflation. The company says the proposed change will bring in an estimated $25.8 million in added revenue annually.
“The proposed rate adjustments would increase the average residential bill by less than 15% for both small and large usage customers,” Texas Gas Service spokesperson Safeena Walji wrote in an email to KUT News.
This wouldn't be the only recent rate increase
Critics point out that the rate hike is just the latest one implemented over the last four years. They also accuse Texas Gas Service of giving an inaccurate picture of how much bills would go up.
Local consumer advocate Paul Robbins has conducted his own analysis of the rate change. He says, if enacted, it would bring a $306 average increase for residential customers. "It’s like the numbers for the gas company were just cherry-picked out of the air," Robbins said. "My calculations show a 31% rate increase."
Some of that money, he points out, would not go to infrastructure investment, but to increasing gas service investor profits.
Last Thursday, he urged City Council to explore buying out the gas system and turning it into a city-run retail utility like Austin Water or Austin Energy. “San Antonio and Corpus Christi have municipal gas utilities,” he said. “Their rates are less than half of [Austin’s rates under] this proposed gas hike.”
While residential customers would see higher rates under the proposal, commercial and industrial gas buyers would actually receive lower rates.
Stacey McTaggart, rates and regulatory director at Texas Gas Service, told the City Council that was because commercial and industrial gas buyers have traditionally paid more than their fair share for natural gas service.
“Their rates are higher than the cost to serve them,” she said. “We would like to bring rates and costs into alignment to send clear economic signals to the commercial sector.”
Austin is trying out negotiation before more drastic options
In Austin, Texas Gas Service is the only major utility that is not owned and managed by the city government. It is an investor-owned utility to which the city has awarded a contract to serve the Austin market.
As a private company, it is not as beholden to progressive city policy goals as Austin's publicly-owned utilities.
Speakers at last week's hearing, many representing environmental or ratepayer advocacy groups, blasted the proposed rate change as not in keeping with Austin’s community values of conservation and consumer protection.
They took aim at what they called the utility’s “regressive” rate structure which reduces the cost of gas for consumers that use more of it. “The rate structure is particularly heinous since it incentivizes using more gas and [disincentivizes] better gas conservation measures, meanwhile sacking the lowest gas users with the highest gas rates,” Craig Nazor, conservation chair of the Lone Star chapter of the Sierra Club, said.
The City of Austin has already joined a coalition of 17 other cities served by the Texas Gas Service to challenge the rate change before the state.
Under this process, city lawyers are negotiating with the utility to arrive at new rates that all parties can agree on.
If the utility and city cannot reach an agreement, the dispute will head to the Railroad Commission of Texas, the oddly-named state agency responsible for Texas oil and gas regulation.
Austin officials question future of Texas Gas contract
The Railroad Commission is led by conservative politicians who proudly tout their support of the oil and gas industry — and many of whom have financial connections to it. Some Austin City Council members despaired that the city would not find any sympathy there.
“I think that we all recognize our power is a little limited in this situation,” Council Member Ryan Alter said from the dais. “If we say ‘no’ [to the rate change] it’s going to go to the Railroad Commission, and my faith in them doing the right thing is zero.”
That is not to say the city doesn’t have options.
In two years, Texas Gas Service’s contract to serve Austin will be up for a renewal. Alter, and others, suggested that if the city and utility can’t reach an agreement over new rates that Austin may find a different gas company.
“Please, please, please, work with the city, our representatives and the outside stakeholders to meet the moment,” Alter said, “and not motivate us two years from now to really question whether this is a good partnership.”
