City Hall Hustle: Milk Cows and Cash Cows

With apologies to federal "Cat Food Commission" chair Alan Simpson, the municipal milk's going bad at the city utilities.

Opponents of Water Treatment Plant No. 4 have drawn a straight line from the project's $500 million price tag to Austin Water's planned rate increases, if not the flagging fortunes of the utility in general. (See "All Things Budgetary ... and WTP4.") But as budget adoption nears, there's another battle brewing in the city's enterprise departments.

The city's Electric Utility Commission has called for Austin Energy to stop funding the Economic Growth and Redevelopment Services Office. In the proposed budget, AE has allocated $9.9 million to fund EGRSO, but in light of the utility's changing business model – and a gaping budget deficit – the EUC recommended in mid-August that the agency spend the cash on the Customer Assistance Program, conservation measures, and deficit reduction.

On paper, AE's funding of EGRSO makes sense: The more business and investment the city attracts, the more customers to sell energy to. However, EGRSO's budget has grown substantially over the years, from just more than $3 million in the 2000-2001 fiscal year to more than triple that amount in this year's proposal. As its budget expanded, so did the department's mission, which now includes offices promoting the cultural arts and a recently added music office.

The EUC is questioning whether, with AE facing a $46.5 million budget gap (down from an estimated $83.2 million short­fall this spring), EGRSO money could be better spent on the utility's core mission. To that end, the commission proposes:

• $3.2 million of EGRSO-earmarked funding be directed instead to energy conservation programs, • another $3.4 million toward reducing the debt, and • $3.2 million to the Customer Assistance Program. And $300,000 currently allotted for the Customer Assistance Program can be dedicated instead to EGRSO, a program, according to the EUC's resolution, that "is worthwhile and important, so much so that the City should pay for it directly." The commission also passed an additional resolution calling for the creation of a public budget oversight ombudsman to report to the EUC and answer stakeholders' questions.

You'd think wrangling over some $10 million in the midst of a tight budget year might be newsworthy, not to mention the broader issue of the utilities' endangered operations as they endeavor, with mixed success, to shift to a conservation-based paradigm. A recent installment of FOX 7's "Money Train" segment, highlighting some of AE's expenses not related to coal and turbine electricity generation, should convince you otherwise: The report covered parade waivers, Christmas lighting, and apparently outrage-worthy ("Get this!" said anchor Loriana Hernandez) funding for sickle-cell anemia research, among other programs. Fox 7 also quoted an outraged Pflugerville customer of AE who, the Hustle wagers, must personally pave his own roads in order to maintain appropriate intellectual consistency in his opposition to government programs that don't directly affect him.

That said, the 50,000 or so AE ratepayers who live outside of the city may have the last laugh. AE is in the beginning stages of a stem-winding rate-review process, which will last all of next year until a new rate structure is implemented in October 2012. When that occurs, only customers beyond the city limits will have the standing to bring a complaint to the state Public Utility Commission, which can alter the rates for them – and only 5% of those customers, or approximately 2,500 of them, need to provide their signatures in order to appeal the process – a quick enough campaign for anyone looking to berate the city at the less sympathetic state level. (We're looking at you, Carole.) Should that happen, the utility would certainly want to have its finances in order.

That's not to say it isn't already trying. Among the budget cuts proposed by AE this year: $4.9 million in maintenance contracts, $1.5 million in the travel and training budget, and a freeze on new positions. AE is also asking Solid Waste Services to shoulder $4 million worth of funding for the city's 311 call center, which AE has previously covered entirely and which is arguably of less relevance to its mission than is EGRSO; a memo from EGRSO Director Kevin Johns to the members of the EUC says, "This past year resulted in $45.0 million of annual electric revenue brought forward by previous and current business development projects through EGRSO."

While that may be the case, it's also clear that the city utilities aren't the cash cows they once were. As part of AE's rate realignment, they'll be performing a massive unbundling exercise, differentiating the cost of energy generation (fuel, etc.) from the cost of delivery (wires, infrastructure, etc.), and delving down even further to separate residential energy needs and infrastructure from commercial ones. In that spirit, council might want to consider unbundling the utility from an office (as with all matters growth-related) that's supposed to pay for itself.

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