EUD's Self-Help Program

Last Thursday, the council took the first bleary-eyed step towards recovery: "We all have drinking problems," Gus Garcia admitted to a captive audience. While the elder councilmember was metaphorically highlighting the problems of the Electric Utility Department (EUD), some thought that the self-help program approved for the EUD may indeed indicate excess blood alcohol levels. Threatened with being thrown headlong into the drunk-eat-drunk holding tank of a deregulated electric utility industry, EUD staff proposed drastic cuts over a five-year period. On the chopping block last week lay the city's electricity conservation program and the EUD transfer to the general fund. Presumably, cutting the conservation program will lead to more pollution, and cutting the $57 million EUD transfer could mean less basic city services. But the proposed cuts were made easier to swallow because they would amount to $40 million that could be applied to a "debt management fund" to help pay off the EUD's $1.8 billion debt.

But while the EUD staff undertook desperate penny-pinching on one end, they offered a $21 million, five-year rate break to six corporations, the EUD's biggest customers, of which four -- AMD, Motorola, Texas Instruments, and IBM -- are members of the Federation of Austin Industrial Ratepayers (FAIR). The other two corporations that would receive the break are Seton Hospital and Applied Materials. Another proposal was a $6 million contract to Chicago-based Metzler & Associates for EUD consulting services. According to staff proposals, then, the "debt management fund" they so earnestly want to build would be depleted by $27 million. To many consumer advocates and council watchers, this is corporate subsidy at the expense of clean air and basic city services.

To make time to slog through the complexities of the staff's EUD proposal, the council held a special meeting that started at 9am Thursday -- a full four hours before council usually has to take their seats. The understanding at city hall earlier in the week was that the vote on the proposal would be delayed until 6:30pm, after the scheduled public hearing on the FAIR rate reduction. But when Daryl Slusher attempted to make a formal motion to hold the vote until after citizens had a chance to have their say, Mayor Bruce Todd wouldn't hear of it. After Slusher wouldn't pipe down, Todd finally called for a second to Slusher's motion for the delay. But none came. The silence was deafening.

And that's a crying shame. This very column, in last week's issue, encouraged citizens to rush down to council chambers last Thursday to voice their opinions with regards to the biggest decision to hit the city in years. But it turns out those Austinites took a trip downtown for nothing. They were shut out. "I thought they were going to give us due process before they hung us," remarked attorney W. Scott McCollough, the consumer advocate hired by the city to represent residential ratepayers.

With the nastiness of potential public discussion out of the way, the part of the proposal that had to do with giving $6 million to out-of-town consultants went well. Quickly, and with little discussion, the council awarded the $6 million contract. Despite the high price tag, the council only had a blueprint contract to approve. Slusher motioned that the contract return to council for a second approval after it had been negotiated by the staff. Garcia, who had last week told the media he was a "No" vote, strangely led Thursday's charge for Metzler, thwarting Slusher's request. Garcia, who had been expected to second Slusher's motion, said he had been swayed at a meeting with the company the night before. He did not say whether it was over drinks.

And though Metzler is based not only out-of-town, but out-of-state, and has little experience teaching public utilities about deregulation, the council bought into the firm's promise of a 15% to 20% reduction in operating costs. Then, too, there was the fact that staff and the Electric Utility Commission had recommended the company. And that was all five councilmembers needed. Slusher gave it the only thumbs down. Mitchell abstained for a lack of minority subcontractors.

Whether this is a waste of money has yet to be seen. The EUD has already spent $2 million on other out-of-town consultants to get ready for deregulation. Very little of the information proved useful, and even the most reliable info was taken with a dose of skepticism, since even the council complained that the contract seemed geared to promote an EUD sale. That suspicion stemmed from the fact that Bruce Todd has friends and family working for Texas Utilities, the lead EUD suitor, including lobbyist Don Martin, who ran the mayor's last campaign and attended last week's meeting. The suspicion also stemmed from Todd's attempts to force city staff into his hip pocket on EUD matters, a practice that continues to this day (see "Naked City").

Next up, the council treated the proposed cuts to the transfer and the conservation program. Todd, Mitchell, and Ronney Reynolds favored staff's proposal to reduce the transfer from $57 million to $42 million, and the conservation program from $13.2 million to $6.6 million by the year 2001. Slusher and Beverly Griffith countered with "The Balanced Approach," a plan that focused on reducing operating and maintenance expenses instead, and used a surgeon's knife rather than a guillotine with the transfer and energy conservation program. The G-S proposal had significant bargaining leverage with Jackie Goodman and Garcia, since they weren't inclined to "gut" the energy conservation program. A compromise approved by those four councilmembers will reduce the transfer from $57 million to $51.5 million, and the energy conservation program to $11.2 million. Todd, Reynolds, and Mitchell voted against the compromise.

The impact of the cuts will not be felt until budget deliberations begin in the summer. The council will have $1 million less to work with in the general fund, and if new revenues don't fill in the gap, council must either raise taxes or take some existing city programs to the slaughterhouse. At that time, the council will also have to deal with the first $500,000 reduction to the energy conservation program, and conservationists fear that the reduction, though relatively small, will have a major effect on Austin's air quality.

When $13.2 million was spent in fiscal year 1996, the program prevented 34,500 tons of carbon dioxide from going into the air. That's the gas primarily responsible for global climate change. If there's a direct correlation between funding and results, the vote of the so-called environmental majority on the council would allow an extra 5,308 tons of carbon dioxide to be released a year, noted Paul Robbins, who recently helped write a report on the study of air pollution in Texas for the Sustainable Energy and Economic Development coalition (see "Naked City").

Besides cars, the top air polluters in the Austin area are the three electric utility power plants. Proponents of the conservation program fear that the cuts will make it tougher for Austin to comply with federal requirements for clean air, especially once the Environmental Protection Agency enacts tougher regulations. If Austin exceeds the limits, new or expanding businesses will be required to install energy-saving equipment, and even the Chamber of Commerce realizes that Austin's economy will suffer.

Robbins says the effects will be "horrible." To make up for the loss, Robbins suggests putting more funding into building code enforcement, to ensure that buildings and homes meet the city's requirements for weatherization. There has been concern that the codes are not being routinely enforced, and there's never been an audit to determine if that's the case. As an aside, Robbins points out that Griffith promised the Sierra Club during her campaign that she wouldn't cut the conservation program. But she joined the majority in approving the cuts last week, and also agreed to cut the conservation budget by $2 million during the September budget deliberations.

As the clock struck nine in the evening, the council took up the rate reduction to the six big companies, including the FAIR coalition. A leading scare story from the local daily and big business is that when deregulation arrives, behemoths like Motorola or Applied Materials will desert our humble electric provider for cheaper rates offered by sleek, private electric companies. Never mind that Austin currently has cheaper rates, and that deregulation is at least three years away. The firms say they have been subsidizing residential rates for years, and they want a five-year reduction promise by January 1 or they'll leave.

Reynolds, Todd, and Mitchell liked staff's $21 million rate cut proposal. Jackie Goodman did too, until she discovered a number of things about the proposed contract that disturbed her. Griffith, Slusher, and Garcia also seem worried. For one, the Jan. 1 deadline, many suspect, was imposed before the legislature starts so the city can't know the direction of the legislative debate on utility deregulation. If it looks like it won't happen with the 1997 legislature, the city would be less likely to approve a rate cut. Slusher requested that the vote be held after the legislature meets, but only Griffith tuned in. Also, the companies just happen to be part of a coalition that has proposed a state legislative bill pushing deregulation. According to consumer advocate McCollough, the bill contained a clause that would have exempted those companies from paying "stranded investment" costs -- capital debt that most consumers who leave the EUD system will likely be required to pay.

Most disconcerting to Goodman was the fact that since deregulation isn't expected to occur until at least 2000, the five-year contract would really only be necessary for two years. After a complex debate, Goodman called for a delay, and the council postponed the rate break proposal until today's end-of-the-year hoedown.