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Nolan Hicks
By Nolan Hicks May 8, 2017

Adler vow to reshape utilities is half-launched

In the near-perpetual boomtown that is Austin, the debate over how best to address the city's rising cost of living isn't new. Promises of property-tax relief took the spotlight during the 2014 mayor's race.

But then-candidate Steve Adler also promised to "initiate long-term changes" to the city-owned electric and water utilities as a way to lessen the local cost of living.

And how have those utility promises fared? The Adler-led City Council approved a significant revamp of Austin Energy's electricity rates, we found, while most other initiatives noted by Adler aides when we inquired struck us as continuations or expansions of plans set in motion by previous Austin councils.

Adler spokesman Jason Stanford, asked to assess progress on this campaign promise, said by phone: "You can hang a big ol' 'Work-In-Progress' sign on the mayor's office. We're not done yet."

For our part, we didn't spot signs of the mayor acting to change Austin Water's operations. In its own right, though, Austin Water in September 2016 started gathering input for a fresh review of its business including its rates, the utility's financial manager, Joseph Gonzales, told us by phone this April. He said the council would likely field results by August.

An undated Austin Water document states the previous latest "cost of service" review occurred in 2007. "While the cost of service methodology principles remain unchanged," the document says, "Austin Water believes the methodology used to determine equitable and defensible rates should be strengthened to ensure all customer classes pay for their cost of providing service."

The Adler-led council has focused on Austin Energy. Notably, council members voted in August to cut Austin Energy's revenues, reducing bills by $42.5 million annually, settling a years-long rates fight between the utility and its major industrial and commercial customers.

Industrial and commercial customers were expected to enjoy the bulk of the savings, $36.5 million, but the average residential customer was predicted to save $62 a year, though those savings weren't expected to be evenly shared. Customers with the heaviest and lightest usage would save far less than customers in Austin Energy's middle pricing tiers. The average Tier 1 customer (lightest usage) would save $4.12 a year, according to the utility, and the average Tier 5 (heaviest usage) customer would save $9.69 annually. The average Tier 3 customer would save $69.30 annually, when compared to the previous rates. The new rates took effect Jan. 1, 2017, according to Austin Energy spokesman Robert Cullick.

So, credit Adler with helping to put rate reductions in motion.

We looked next at progress on Adler's vow to change the utilities' business models.

Adler elaborated on this part of his promise in his 2014 campaign platform: "Innovations such as shifting toward local distributed power generation, accelerating water reuse practices, and placing even greater emphasis on conservation will help us avoid recurrences of the massive expenditures we have seen in recent years for power generation, water supply, and conveyance."

To our query, Adler adviser Frank Rodriguez emailed web links to three Austin Energy efforts: the push to expand its renewable energy sources; a new electricity storage effort; and the utility's energy efficiency programs.

Let's start with the push to expand Austin Energy's supply of renewable energy.

In 2015, Adler and the council approved power-purchase deals expanding Austin Energy's potential solar power production by more than 20 times — adding 450 megawatts to the utility's then-30 in that year. That move fell in step with pro-renewables actions of previous councils. In 2014, the pre-Adler council signed off on contracts to purchase a combined 450 megawatts of solar and wind power.

There's a long-running debate, though, over whether the push into renewables actually saves customers money. Opponents of the deals maintain they saddle Austinites with unnecessary costs.

In April, state Rep. Paul Workman said in a commentary critical of the city's decisions that the renewables push simply costs too much: "(The Austin City Council is) so concerned with being 'green,' they're burdening their citizens with higher rates. "I'm fine with renewables, but don't make your customers pay for it."

That view was rejected by former Austin Energy executive Michael Osborne, who helped engineer Austin Energy's renewable energy push. "The average cost for producing energy for Austin Energy is somewhere below $50 megawatt/hour," Osborne said by phone. "So anything below $40 is saving the consumer money."

As of April, the most recent solar energy purchases approved by the City Council had cost less than that. However, some previous "green" energy deals had proved far more expensive. The 2009 deal to purchase power from a solar farm in Webberville, for instance, cost about $165 per megawatt/hour. And generally, Austin Energy, citing competitive reasons, refuses to release its power production or purchase costs, making it impossible to independently verify related claims.

Rodriguez, returning to the other cost-saving efforts identified by the mayor's office, pointed to Austin Energy's two electrical storage experiments — in East Austin and at Mueller — that provide a small step toward effectively distributing locally generated power, as mentioned in Adler's promise.

Both projects are partly funded by grants from the U.S. Department of Energy and Texas Commission on Environmental Quality. The technology allows Austin Energy to store relatively small amounts of locally generated solar power to be distributed when the sun isn't shining. Adler and the council voted to approve the purchase of the East Austin battery in October 2015 and the Mueller system in 2016.

Rodriguez also pointed to city programs promoting weatherization and other energy efficiency improvements in homes, which can reduce power use and, by extension, electric bills.

Worth noting: Those programs are a continuation of the utility's efforts, which stretch back to at least 2007, to reduce power consumption, with annual city spending on the programs remaining relatively constant, ranging between $34 million and $39 million between 2013 and 2017, according to utility official Debbie Kimberly. Records show the $39 million budgeted in 2017 was the largest amount in five years, largely thanks to $2 million provided in the August 2016 rate deal, Cullick said.

Figures provided by Cullick show that from average power use by residential customers has declined by about 10 percent over the last decade, falling from 943 kilowatt/hours per month to 863 kilowatt/hours a month in 2016.

We rate this Adler promise IN THE WORKS.

Our Sources

Website, "An Affordable New Way Forward," Adler for Mayor, undated (accessed May 7, 2017)

Telephone interview, Jason Stanford, communications director, Office of the Mayor of Austin,

News stories, Austin American-Statesman, "Why Austin Energy's next big wind contract could be the last for a while," Feb. 20, 2014; "As Austin approves massive solar power deal, could it do more?," March 27, 2014; "Austin Energy pushes back against renewable energy goals," Aug. 1, 2014; "Lawmakers give Austin Energy a verbal beating," April 14, 2015; "Austin Energy poised to test its first energy storage system," Sept. 23, 2015; "Austin Energy poised to secure its biggest solar power contract ever," Oct. 1, 2015; "Austin City Council takes middle road on solar energy purchase," Oct. 15, 2015; "City Council nixes Austin Energy's base rate hike, approves new rates," Aug. 29, 2016; "In windswept West Texas, Austin Energy's future is powered by the sun," April 8, 2017

Document, "Cost of Service Rate Study History," Austin Water, undated (accessed May 4, 2017)

Email, Frank Rodriguez, senior policy advisor, Office of the Mayor of Austin, March 23, 2017

Telephone interview and emails, Robert Cullick, communications director, Austin Energy, March 27 through April 19, 2017

Telephone interview, Joseph Gonzales, financial manager, Austin Water, April 28, 2017

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