88th LegislatureEnergyStatewide NewsAustin Energy Targeted in Reform Bill for City-Owned Utilities

Back when most of Texas deregulated its electricity market, Austin chose to keep its municipally-owned utility.
March 13, 2023
A month has passed since hundreds of thousands of Austinites sat for days without power due to an ice storm, and the fallout has snowballed: the city manager canned, city-owned utility scrutinized, and now reforms filed at the state Legislature.

Falling branches from the weight of ice caused recurring issues throughout the week of outages, and it was discovered that then-City Manager Spencer Cronk had not implemented all of the post-2021 blackout recommendations from the city council —  for which he was eventually fired. The event led to a bevy of criticism, including from state legislators.

Rep. Ellen Troxclair (R-Lakeway), a former Austin city councilwoman, has filed a six-bill package of reforms aimed directly at Austin Energy, the city-owned utility that has a monopoly on electricity service in the state capital and surrounding area. The group of bills includes:

  • House Bill (HB) 4207 – prohibits the transfer of utility revenue to the city’s general fund if its vegetation management is found to be deficient
  • HB 4208 – requires any municipally-owned utility to be governed by a board of trustees, applies only to cities above 750,000 in population
  • HB 4209 – allows customers to petition their city-owned utility’s rate increases, restricts general fund transfer
  • HB 4211 – forbids a city-owned utility from participating in the wholesale electricity market if it’s lost money in the previous five years
  • HB 4212 – breaks up the service monopoly by requiring “customer choice”
  • HB 4213 – precludes a municipally-owned utility from charging rates that are 50 percent of the average in areas already with “customer choice”

“This legislative package is the result of years of Austin Energy’s refusal to follow best practices in the electric industry, and central Texans are forced to pay the price,” Troxclair said in a release. “85% of Texans have the right to choose their energy providers. It is time for central Texans to be freed from Austin Energy’s monopoly, and to enjoy reliable service and sensible operations.”

Across the state, there are 72 municipally-owned utility companies that supply power to more than 5 million people — the largest chunk of which are in Austin and San Antonio. These utilities are often cash cows for their municipalities, providing a steady stream of revenue through ratepayers. And many of them use the utility to supplement their general funds, the portion of the budget used for a litany of different miscellaneous purposes.

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Austin Energy transferred $114 million to its general fund in the last fiscal year.

The biggest criticism of the utility centered on what caused the outages in the first place: falling branches. Troxclair’s first bill takes aim at that along with the general fund transfers, the money that was not used to trim branches. If the Public Utility Commission (PUC), the state agency that oversees electricity services, determines an entity’s vegetation management actions are lacking, that municipality would be prohibited from transferring the utility revenue to the general fund.

Last October, the city approved an Austin Energy rate hike to pay for its costs incurred from purchasing wholesale electricity on the Electric Reliability Council of Texas (ERCOT) market. Electricity costs are up substantially after the 2021 blackouts due to the state’s operational changes and the higher cost of natural gas after the pandemic’s shock to the market.

According to the city, it amounted to about $15 more per month for three years from the average customer. Troxclair’s HB 4211 would prohibit the entity from dabbling in the ERCOT market with the stated purpose of limiting its ability to lose money.

“They can — and do! — lose money on electric generation, but [because] they are a vertically integrated monopoly (owning generation, polls, & retail service), they can raise customer’s rates to hide the losses,” Troxclair said back in February. “They have a history of poor investment decisions [and] customers pay the price.”

Troxclair believes added oversight from an independent board of directors and the deregulation would provide consumers with more choice in the market, and thus lower electricity costs.

State code defines “consumer choice” as “the freedom of a retail customer to purchase electric services, either individually or through voluntary aggregation with other retail customers, from the provider or providers of the customer’s choice and to choose among various fuel types, energy efficiency programs, and renewable power suppliers.”

If passed, customers would be able to shop around to different utility providers like occurs in other areas of the state, like Houston and Dallas-Fort Worth.

The city-owned utility has existed since the late 19th century and rebranded as Austin Energy in the 1990s. When the state “deregulated” its electricity market at the turn of the century, the city maintained its status by declining to adopt the “customer choice” protocols. According to the PUC, once a municipally-owned utility decides to deregulate, the decision is irreversible.

Within its legislative priority list for this session, the City of Austin says: “Oppose legislation that attempts to diminish the City’s ability to govern its residents’ investment in municipally owned utilities or that negatively impacts the current status of Austin Energy, including City Council’s authority to set rates.”

The City of Austin declined to comment further.


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Brad Johnson

Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.