First step in Austin Energy's independent governance approved by council

Austin Energy is one step closer to seeing independent governance after Austin City Council passed 7-0 a resolution Feb. 14 directing the city manager to create an ordinance defining and creating an independent board to run the municipal utility.

AE is currently run by City Council, and Councilman Bill Spelman said he and other council members could use some help to effectively run the utility because of its size, the competitive nature of the industry and knowledge required to do the job well.

"We can be energy-efficient at the same time we're being economically efficient," Spelman said. "We can be lean at the same at the same time we are being green, and I think the best way to do that is to have a board focusing on management stuff while the City Council continues to do what I'm pleased to hear [community members] say we have done well. We are going to continue to do rates well, we are going to do bonds well [as well as] looking at the long-term plan of the generation plan. That's part of this proposal. But I need some help with the management, and that's what this proposal is all about."

Spelman stressed that the resolution passed by the council was to research and draw up the framework for an ordinance addressing AE's governance.

A few of the characteristics of the board outlined in the resolution include it being composed of seven members—including the mayor—with one board member being a customer residing outside city limits, as well as the board holding meetings at least once per month, which will be subject to the Texas Open Meetings Act, and members serving four-year terms.

The resolution states the council will hold the final authority to approve electric rates, major capital projects costing more than $100 million, debt issuance, eminent domain proceedings and selling property.

Tom Smith, the Texas director of Public Citizen—a consumer and environmental group involved in issues including energy, ethics, campaign finance reforms and urban sprawl—was one of many community members to speak to the council and said he feels the city should not create an independent board for AE and keep the governance of the utility with the council and residents.

"Our fundamental point here, and that of many people in this room, is that this system isn't broke. Don't fix it," Smith said. "You all have served this community well. You have adopted policies that have kept rates low, that have won award after award and created business after business in this community that have made Austin one of the solar capitals in the nation. Why walk away from that?"

Councilwoman Kathie Tovo said there are several aspects of the resolution that she likes, but she still has "grave concerns" about the proposal, including paying salaries to board members, the authority of the board and the $100 million spending cap.

"I will not approve having them set, when the ordinance comes back to us, having them set policies that are rightly the responsibility that elected officials have to make," Tovo said. "I think about some of the comments that people have made tonight and the resolution we passed last year as a council to look at alternatives to coal and investigate those. Those are the kinds of things that elected officials need to listen to their constituency and continue to make policies about, and that is not something we should turn over to an unelected board."

Mayor Lee Leffingwell said moving to an independent board is the right course for the city and the utility and follows the recommendation of the Electric Utility Commission, which reviews policies and procedures of AE and advises City Council and city staff.

"I think all of us, again, are in this for the same reason," Leffingwell said. "We want to establish responsible, good management that's accountable not only to our customers, but to maintain our position as below the average in our rate structure while maintaining as best we can our green power and other goals."

The city manager will come back to council March 21 with a draft resolution to establish the independent governing board.

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