TateAustin Energy

illustration by Doug Potter

Did you know you are the proud owner (part owner, at least) of one electric utility company? That the utility is actively involved in research and development, especially in the area of sustainable energy? That the company returns a portion of its annual profits - $57 million this year alone - to the city's general fund? The Austin City Council and the aforementioned utility company, the recently renamed Austin Energy, suspect you may not know these things, and they've hired someone to tell you: A recently approved city contract will pay the public relations firm of TateAustin $750,000 this year, with optional $500,000 extensions for each of the next two years, to do market research, advertising, and development of a "brand identity and loyalty" for Austin Energy. While shelling out good money to develop customer loyalty to the only electric company in town would be senseless, the council has signaled that it believes deregulation (or restructuring, depending on your angle) of the state's electric industry is imminent.

But despite the impressive levels of hype achieved during the last legislative session, deregulation may or may not be just around the corner. By approving the TateAustin contract, the city is casting its lot with the many in the private sector who are gearing up for the transition to competition, just as the momentum among those lawmakers who have the authority to approve it is slowing down. As it turns out, the irresistible force of competition that the council is betting on could find an immovable object personified in the members of the Texas Legislature.

Though many regarded the Lege's failure to pass a bill last session as a minor delay on the road to deregulation, others believe that crucial momentum - and the bill's best chance for passage - has been lost. Local consumer rights attorney Scott McCullough said the legislature is "exuberant in its ambivalence" about the electric deregulation issue, in large part because of the dismal outcome of deregulation in other industries. "Look what happened with telecommunications. We're two years into the process - have local rates gone down? No. Do we have more providers? They're merging. The same thing has happened with cable."

If these are the same results we can expect from electric deregulation, then it's not worth doing, says one member of the Texas Senate's Interim Committee on Electric Utility Restructuring, which will make recommendations on how the state should deregulate - if at all. "The reason we need to do it is to provide better rates," said Sen. Jane Nelson (R-Dallas). "If we don't do that, then I don't know why we're spending all this time on it." Nelson said committee members' recent trip to California to study that state's recently deregulated system "showed us a perfect example of how not to do it." Citizen movements are afoot in both California and Massachusetts - two of the states that led the electric deregulation charge - to repeal their respective deregulation laws.

Nelson believes a successful transition to deregulation in Texas is still a real possibility, and that the Lone Star state could learn from others' mistakes to create a system that is fair to everyone. But for this session at least, nobody's making odds. Without a compelling success story to look to outside the state, without a passionate champion inside the legislature, without even a crisis in electric rates (Texas utility rates are only about 60% of what California's were before it deregulated), deregulation may simply be a pipe dream for the time being. "If I were a betting person," Nelson said, "I wouldn't bet on anything right now."

Meanwhile, back at our citizen-owned electric utility, preparations for competition are shifting into high gear. And though a look at the statewide picture makes those preparations seem premature, potential competitors with deep marketing and advertising pockets lurk behind every corner. At least that's how the city tells it. Officials from the city utility - er, Austin Energy - say that investor-owned utilities are already spending their own marketing research dollars to study the Austin market, positioning themselves to jump in at the first opportunity.

"Other utilities are researching our own customers to find out what they're willing to pay" for various services, said Ben Ornales, an Austin Energy marketing official. "If we wait until a deregulated market happens, we'll be way behind." Ornales said that one potential competitor, Entergy, has purchased American Ranger, an Austin home security company. In the name of building brand recognition and loyalty among Austin electric customers, they've replaced all American Ranger employee uniforms, trucks, and yard signs with the Entergy name. And in what some consider our own little competition test case, Austin Energy is losing out: In the small part of north Austin that is served by two utility companies, Austin Energy and Texas Utilities, Austin Energy serves only 40% of residential customers.

Councilmembers said that even if competition doesn't come to Texas, the kinds of things we do to prepare for it will improve the service Austin Energy provides its customers: making it more efficient, more customer-oriented, more proactive and forward-looking. It was basically these kinds of activities the council was endorsing by voting for the TateAustin contract. Money on research would not be wasted, the consensus was, especially research that led to improved customer service and product development. But research isn't all the TateAustin contract is about: With deregulation an uncertainty at best, the council has signed on to a corporate-image advertising campaign which, in the absence of competition, will serve only to give citizens a warm, fuzzy feeling about their electric utility company. Such a scheme seems especially unnecessary for an outfit that already has a ready-made monthly platform - the electric bill - to introduce itself and its message to all its customers.

On the face of it, the TateAustin contract bothers some members of the council. Daryl Slusher cast the only nay vote on the contract because a deal to contract only for research, and delay any advertising, fell through. Councilmember Bill Spelman raised concerns about the "half-life" of any campaign designed to make people feel good about the utility, done years in advance of consumers having to choose. In the end, though, the city decided to take the bad - potentially pointless and wasteful corporate-image advertising - with the good of preparing for the possibility of competition.

The council does not have an easy job here. The issues are unbelievably complex (stranded costs, anyone?) and the variables that could affect the outcome of deregulation just keep getting more variable. In this case, the council clearly feels that the best defense is a good offense, and that TateAustin is the best candidate to lead the charge. Kerry Tate, the woman behind TateAustin, said that while she's not about to embroil herself in the hows and whens of electric utility deregulation, she is prepared to make the city ready for whatever comes, to avoid getting caught off guard by the competition. With the advent of deregulation, she said, public utilities can get "blinded by headlights. They see the light but they don't know if it's the end of the tunnel or an oncoming train."

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This Week in Council: Lots of nuts-and-bolts issues on this week's agenda, including the airport loading bridge contract and water/wastewater matter pertaining to Waller Creek improvements.