City Council debates possible shift in control of electric utility

Austin Energy has been governed by Austin City Council since 1902, but a debate has been heating up over the past few months about who should govern the electric utility in the future.

“This is one of the most important, monumental decisions you’ll make as a City Council member, primarily because of the vast amount of revenue [AE] generates, but also [because of] what this means to the City of Austin, its governance and its general reputation around the nation,” said Tom Smith, director of the Texas office of Public Citizen, a consumer advocacy group, during a council discussion on the topic.

At a May 9 council meeting, council members received information on a proposed amended ordinance that would establish a governance board that would have oversight of AE’s operations while advising council on all matters when appropriate or upon council request. The proposed ordinance also stipulates that “all board actions require council review and adoption.”

Original proposal

The original draft of the ordinance, presented to council April 11, proposed the creation of an independent seven-member governance board that would be separate from council. City Council would have retained some of its authority under the proposal, such as approving the budget of the utility, exercising eminent domain, amending board powers and making decisions on expenditures exceeding $100 million. The council also would have retained the right to review and approve rates.

Worry over independent board

The proposal to create a separate AE governing board has met opposition from some council members and residents. Austin resident Jerre Locke spoke to City Council on the topic at its May 9 meeting, saying he and the community are against the action to change the governance of the utility.

“You all have done a very good job of being the governing body of Austin Energy, and I want you to continue to be the governing body of Austin Energy and not have it mucked up with another board, whether it be an advisory board or a board with more authority than that,” Locke said.

Other residents have expressed concern to the council about the prospect of allowing AE to be run by an unelected board rather than the elected City Council.

During the April 11 meeting, council amended the original ordinance so that council “retained its general powers and duties” to govern the utility while still delegating some authority.

“I think that there’s a lot of potential for improvements that could make this move more smoothly without giving away the accountability that the people of Austin put us in this position to achieve,” Councilwoman Laura Morrison said.

Morrison is wary about the shift to an independent board because of the implications in allowing the utility to be governed by an unelected board.

“My main concern, though, is about what it would mean in terms of accountability to our community’s broader values,” Morrison said. “Austin Energy is our most valuable resource—’our’ being the residents of Austin—and we need to make sure it’s run in a way according to business policies that are important to us, but also that it addresses those community values.”

Support for independent board

Mayor Lee Leffingwell said he supports the move to an independent board because it would allow the utility to be governed like a private entity.

“It’s an over $1 billion a year business, and it needs to be run like a business because it’s not supported by taxpayer funds. It’s supported by the fees that people pay for electricity,” he said.

A few of the concerns raised by council about keeping the utility’s governance include the need for professional oversight into the utility’s management, transparency in the utility’s operations and ensuring fairness in the utility’s management.

“I think the board should basically do all the business with certain things subject to council oversight,” Leffingwell said. “If the council chose to revisit [an] issue—some action the independent board had taken—they could do it, but they wouldn’t do it on a routine basis. They would only do it in an unusual situation.”

Leffingwell cited the rate increase in 2012 as a catalyst for his support of an independent governance board, a time in which council had to wrestle with a significant AE budget deficit that still has not been fully resolved.

Those who support AE’s change, including the Austin Board of Realtors, said they support the measure because they believe the independent board would be able to best manage the utility.

“I think the benefit to the ratepayers and the citizens of Austin who own the utility is that they’d see a much better-run organization, and potentially, that would yield lower rates,” Leffingwell said.

Looking forward

May 23 is the next scheduled date for the council to discuss and possibly vote on the issue of AE’s governance.

Whether the council votes to go with an independent board or a system in which the council continues to retain its authorities, AE Public Information Officer Ed Clark said the utility will go forward with any outcome.

“Whatever the City Council decides, we will fully embrace and implement [the plan],” Clark said.


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