Austin City Council formally rejected a proposed gas rate increase for customers of Texas Gas Service, the for-profit gas company that serves the city.
The move, coming after months of negotiations, likely leaves the decision over new rates in the hands of state regulators. It could also prompt Austin to seek different ways to get gas to its over 260,000 gas customers.
The dispute over costs started last June, when Texas Gas Service released an initial proposal for new rates.
That plan would have lowered gas rates for industrial and commercial ratepayers while putting a steep increase on residential bills. The added revenue was necessary, Texas Gas Service said, to make needed infrastructure investments and keep up with rising costs.
The Texas Gas Service said its plan amounted to a 15% increase on average residential gas bills in the city. Local consumer advocates opposed to the plan said Austin residents could find themselves paying as much as 31% more.
Either way, the number was too high for City Council members, who joined other cities served by Texas Gas Service in challenging the rate hike.
A second plan, with a smaller rate increase, was brought to Council last week.
The so-called "settlement" plan reduced the amount of added revenue Texas Gas sought to pull from Austin customers by about 25%. It also canceled plans to lower rates for industrial and commercial customers.
But the proposal still included rate hikes and higher fees. It boosted profits for utility shareholders and retained a payment structure that opponents said went against the ideals of Austin ratepayers.
Under the plan “the more you use, the less you pay,” local environmental and consumer advocate Paul Robbins told KUT. “This discourages conservation, and it hurts low-income people the most because they use the least energy.”
For these reasons, and others, the settlement agreement became a pill too bitter for council members to swallow.
“We all felt like it just wasn’t consistent with what Austinites have told us they want in terms of rates and protecting the environment,” Council Member Ryan Alter, who introduced the motion to reject the plan, told KUT.
Next stop: Railroad Commission
In Texas, the state agency that decides on rate disputes between cities and gas utilities is called the Railroad Commission of Texas. It is due to consider the Texas Gas Service rate case next month.
The three Republican commissioners who lead the agency are elected statewide and receive campaign contributions from gas utilities. They all proudly align themselves with the oil and gas sector.
Some observers, including Alter, suspect the commission may take a dim view of Austin's desire to see its environmental and consumer-focused values reflected in its gas rates.
“I have very little faith that the Railroad Commission is going to do the right thing by ratepayers and the environment,” Alter said. “At least we are representing our constituents.”
Even if the commission chooses to accept Texas Gas Service’s rate proposals, Alter and others say the city has options.
For one, Austin could seek a new gas company to partner with in two years, when the current contract with Texas Gas Service is up for renewal.
The city could also explore buying the local gas distribution system outright and operating it as a public utility in the same way it does with its water and electric service.
Proponents of that plan point to San Antonio, which operates a public gas utility and, they say, boasts lower rates than those in Austin.
But, Alter notes that operating a gas utility could be a tricky financial proposition in a city where many voters want to get off gas completely for environmental reasons.
“If we were to undertake the significant capital investment in making it a city-owned gas service, would that be with the ultimate intention of basically running it into the ground?” he said. “We’re gonna have a lot of conversations over the next few years [about] our utilities, and this is one of them.”
