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Mis-understanding Austin's Electricity Planning

by Chris Searles 2/11/10

This is not a piece attacking Austin's politicians, big moneyed interests, City employees, the press, the environmentalists, or anyone else. . . Recent weeks have brought to light an important public process. Two years ago, Austin's electric utility and governance instituted a long form citizen review in order to best define Austin Energy's generation planning, 2010-2021. At first blush, this well-intentioned effort seemed "enough," but today that process is helping us all see that a) the work of a democracy is never done and b) it's messy.

These notes are observations compiled from the last several months of activism regarding Austin Energy's Generation Plan, 2010-2021. . . Our community will engage in town hall discussion on the subject Feb. 22, and KLRU is featuring a round table on the subject around Feb. 18. Here's some insight into "how we got here" --

 

Part 1.

Unfortunate Exclusions
Invitations: Austin Energy and City Council left out a few fundamental players last year when they made appointments to the citizen body responsible for reviewing all scenarios related to electricity generation planning, 2010-2021. (1)

Just ask "Carol B" at Texas Rose. The "Rose" in Texas Rose stands for "Rate Payers Organization to Save Energy." Neither Carol, nor any other low income advocates, nor any small business advocates, neighborhood advocates, citizen advocates, health advocates or etc were invited to participate in the citizen scenario review process. Whoops. The review board was made up of 2 clean energy advocates, 2 environmental advocates, 2 corporate business employees, 1 building manager's advocate, and the chairs of the Electric Utility Commission and the Resource Management Commission (which are also volunteer citizen review boards). These appointments were a great start, but not a fair cross-representation of the whole community. Of course, how does one fairly represent the whole community?

Information: Furthermore, the folks who sat on the citizen review task force were shocked and frustrated to no end by resistance Austin Energy's staff showed in answering some of their questions. It's probably completely unintentional, but AE has yet to explain why certain info is secret in Austin that may not be secret in other cities or competitive markets.

And meanwhile -- the more financially oriented thinkers in the review process were further exasperated, because they were never given some essential framing for the way utility scenarios are traditionally carried out. Now, this may or may not be true -- but apparently energy utility planning is often modeled entirely off of proxy data, even in private companies. Colin Meehan of Environmental Defense tells me that when he worked in a consulting firm that performed scenario modeling services for large utilities some years ago -- all of the projects were run off proxy data, that indeed "proxy data" is industry standard. But here in Austin, without explanation to the citizen reviewers, the squishy process catalyzed distrust about AE's financial know how. Many of the reviewers are absolutely unconvinced that the monetary projections they were shown have any teeth or basis in reality. Hundreds of "bill impact" questions remain. If only Austin Energy had explained "proxy data" to their citizen reviewers and prioritized a clear reveal on bill impacts.

 

Communication Breakdowns
Meanwhile, we are fortunate to have very talented and committed staffers at Austin City Hall and the utility who are doing their daily best to manage a flurry of incoming requests from a wide variety of concerns and knowledge bases. (We might need a few more resources devoted here.) Ironically, its a few of the things I've heard our leaders say offhand that are defining some of today's anger.

Leadership Ain't Easy: Roger Duncan's infamous late Summer quip, "We need coal to keep the lights on," was quickly rescinded after local environmentalists (like me, the Sierra Club and a number of UT student leaders) responded incredulously. Mr. Duncan was of course referring to the idea that unless people are willing to pay more for their electricity -- coal is an fortunate fact of life, but it made him sound pro-coal to those of us who don't know him. (2)

Another example, Mayor Leffingwell's recent remark, "We don't have to do anything for the next two years," has also upset local enviros because it sounds like he's fleeing the scene. But the Mayor is probably referring to a very complicated series of ideas. Given that the current plan so many environmentalists are endorsing doesn't call for any strategic changes in Austin Energy's electricity generation policy for at least the next three years, and the fact that the City has some relatively clear environmental policies in place, and the fact that Austin Energy is in serious financial trouble, and the fact that the Mayor's office is currently managing fears regarding deregulation (Austin Energy is a citizen-owned monopoly responsible for generating about a third of the City's operating revenue), it would appear the Mayor might be trying to say (without alarming anyone), "please be patient - the green plan you're supporting is already effectively in place, and I plan to continue operations carrying that out while we sort and solve AE's financial viability issues." But, again, that's not what it sounded like.

 

Unfortunate Assumptions
Treehuggers like me. Enviros like conspiracy theories. Corporations are evil and the government is full of spiritually-dead self-preservationists.  I don't know why, but we're quick to assume the worst about those who don't share our priorities. And that's true of just about everybody. Humanity is under an awful lot of stress right now. So, we're often driven to assume that when someone is not sharing something, they're hiding something. That may or may not be true.

Maybe it's because I've been the squeakiest of hinges in the local blogosphere, insinuating that Austin Energy was addicted to fossil fuels and blindly ignorant of coal's community costs, but I haven't had as much trouble getting my questions answered as I thought I would. Roger Duncan, General Manager of AE, has been welcoming and supportive of any efforts to help AE move off of its most destructive habit (burning coal), and he's a busy guy. I imagine there are others, like me, who would assume the worst before trying to build a relationship with their accused...

Suffice to say, there's a lot to know about electricity generation;

personal contact, effective communication, and getting your questions answered are more fun than darkness.

 

Part 2.

Moving Parts
Costs are Constantly Changing: One thing our local press seems yet to have voiced accurately is costs in relation to these various electricity generation scenarios. Granted, there are literally thousands of data points and potential interpretations, but more to the point: Austin Energy's total costs are always changing, and --

a) Austin Energy is in trouble
The business itself is currently losing money and will likely go belly-up within the next 10 years if AE doesn't start recouping for its transmission costs. How they got into arears here I don't know, but energy bills are going up no matter what. Sorry folks, sorry local press -- it's not the green stuff that's raising our bills -- the utility is spending more money than it makes. (3)

b) More Squishy #'s: Proxy Data causes confusion
As mentioned in Part 1, all of the modeling AE has been doing regarding its electricity plan, 2010-2021, has been based off of proxy info. Two types, basically: how much our electricity has cost in the past and how much it'll cost in the future. This allows AE to say, "We just don't know" what things will cost in the future and say "Bills will increase by 25% if we do nothing, 20% if we follow the greener, Staff Recommended Plan" and say "Bills may increase anywhere from 0% to 50%" over the next 10 years regardless of which plan we take. It stinks, and makes me wonder why AE spent so much money (4) on the damn modeling...

Either way, the Staff Recommended Plan does an admirable job of incorporating all of the specs it was assigned, i.e.: minimal bill increase to all rate payer classes, consistently reliable electricity for a growing local economy, at least 30% renewable generation by 2020 (not my favorite spec, believe it or not - 5), and strategic positioning of the utility's generation mix so that it avoids having to take on additional expenses after 2020 caused by new/likely greenhouse gas regulation. Take Away: bills are going up no matter what. Green generation, if properly timed and integrated, can cost (a lot) less and help stave off future expenses. (Times have changed.) AE's current generation plan is focused, somewhat conservatively, around all of those realities. Unfortunately Austin Energy and City Hall have done a very poor job of communicating those strengths in relation to AE's plan and the big picture. Friends in the press, please help untangle some of that confusion.

 

Un-opposed Forces?

The Factions May Not be Fighting: Generally speaking, there are two concerns regarding Austin's generation plan, 2010-2021: some activists believe Austin Energy has not been rigorous enough with their financial management and want better guarantees that their interests will be protected, some activists believe that before a new General Manager is brought in at our utility Ausitinites need concrete guarantees regarding the utility's next 11 years commitment to environmental protection.

This has been portrayed as a battle -- but is it?

Austin Energy's business model is in serious trouble, both now and long-term. (6) Now is the time for the whole community to educate itself as best it can, and get involved in building the community-owned electric utility 2.0 it wants. Austin needs its community-owned utility to continue to provide affordable, reliable electricity and a significant general fund transfer to the City, so that we have parks, police, traffic lights, and all the rest. We've also made a commitment to leading the nation in climate protection. We've got to work together to find ways to implement greenhouse gas reduction that make sense for each of our community's stakeholders. (7)

I don't hear anyone involved in this process debating any of these ideas: that low income folks need to be cared for with respect to electricity costs, that the environment is in crisis largely because of unintended consequences related to electricity generation's impacts, that Austin should help lead the world out of that crisis, that AE's big investments should be made carefully and in the open, that AE's business model needs to begin evolving now, that large employers should have confidence in AE's financial management and be able to expect reasonable bill increases as the economy changes, that AE itself needs to become solvent -- priority one, that our City needs its general fund transfer to continue in order to provide a high quality of life to Austinites, that electricity generation is in many ways an ethical issue connected to global personal religous and spiritual convictions, that we accept these challenges and integrate them into the ways we work from now on.

 

Eyes on The Ball
My view: I'm supporting my friends and colleagues who believe the current AE Plan needs to be voted-in by Council, but I believe there's a better scenario out there; one that does a better job of reducing costs, keeping bills stable, and implementing carbon reduction. I hope we continue to engage. Uncovering that scenario would require paradigm shift, but in many ways Austin can either lead or follow on that front. More to the point, note that Cary Ferchill, chair of Solar Austin, created a generation scenario which shut down Austin's coal plant -- our dirtiest, most toxic, most destructive, and most affordable form of reliable electricity, in the year 2020. The scenario was first run at UT's LBJ School of Public Affairs before being added to Austin Energy citizen review process last year. The results of this scenario are ground changing: Cary's "quit coal" generation plan costs less than the current Austin Energy Plan (which keeps the coal plant open). Why? Cary's plan exchanges variable (and highly volatile) fossil fuel generation costs for a portfolio of cleaner capital costs, i.e. well-timed purchases of solar and energy efficiency equipment. (8) Cary's plan also assumes geothermal base-load generation comes online in a few years, Austin Energy's plan assumes biomass becomes more viable as baseload. Both are unknown.

The net result? According to Austin Energy's analysis: Cary's plan provides a 62% reduction in CO2, tremendously greater local economic investment, and a lower annual cost during each of the next 11 years compared to AE's plan.

Can we do better?

 

 

 

Notes

> (1) aka, The Austin Generation Resource Planning Task Force
> (2) We can replace coal today - but it would require more Nuke or Natural Gas to cover the bases. More wind is coming online fast,

but here in Texas we're waiting for transmission lines to be laid out to the Gulf, South Texas, and West. AE has already committed

its rate payers to some pretty expensive Bio Mass, but that's not due to come online till at least 2012, and its total supply is very small.

Geothermal would be an excellent replacement resource, but nobody's building any right now. Wave and hydro are in the same position.

(Question: smarter to finance geo or water-driven electricity plants, instead of biomass?) Energy Efficiency is the way forward for now,

but keep in mind, AE doesn't like to spend money en masse incentivizing things that reduce its revenue en masse -- and coal is ultimately

what's there at the "base" -- even when your building is 99% energy efficient, to provide electricity when the sun goes down and the wind

stops blowing. So, replacing coal means going to a less impactful form of thermal generation: nukes or natural gas. Nuke rates in TX are

about twice as expensive, unavailable at the moment, carbon neutral and full of potential catasrophe. Natural Gas rates in TX are about

3 times as expensive, but incredibly volatile, about half as carbon heavy -- and linked to numerous other environmental concerns such

as aquifer damage.
> (3) AE currently does not charge for "transmission" costs required by the state of Texas to operate and help build our portion of Texas's

new grid infrastructure. AE is also suffering financial stress due to the amount of debt it has tied up in "poles and wires" locally. Note that

for the last couple of years the utility has been going into the red even as its general fund transfer to the City has increased. Add to those

financial issues the aggrevator that AE is currently needing to replace 30+% of its managerial staff and 30+% of its workforce (2010), including

General Manager and CFO. During the next 4 years, 60%+ of AE's managerial staff is up for retirement, and still more of its staffers. Add to

those burdens the fact that the electricity-utility business model of the nearfuture looks to be all about eliminating the electricity utility by

reducing consumers' dependence on it. How? More implementation of energy efficiency and more availability of affordable self power generation

(as in solar panels). These two movements will reduce consumer dependence on last century's "centralized generation" (as in coal and nuke plants)

model. . . Today: In the immediate future, we consumers should soon learn the value of investing in highly-recoupable energy reduction,

aka "negawatts." Tomorrow: 5 to 15 years from now technology should make it financially feasible for us to make our own kilowatts through

small scale solar, geothermal, and more.
> (4) Rumor has it AE spent well over $200,000 on the whole modeling and town hall process. I have no idea if that's even remotely correct,

please share info on that if possible.
> (5) The Austin Climate Protection Plan's calling for a renewable generation goal may be the most expensive way to make Austin "the
leading city in the fight against climate change" (stated in the City's Climate Protection Plan mandate 2007). Perhaps that goal was idealistic
for its time and should have refocus itself firmly on carbon reduction goals. I personally believe it's time to revisit and update the fundamentals
of the climate protection plan in order to make them more feasible.
> (6) see #3.
> (7) Dear Respected Climate Skeptic friends - You're absolutely right to question consensus and yes the IPCC has made some terrible
mistakes over the last 20 years. I admire your independent intelligence and understand most of the wholesale questions regarding the climate

change industry's motives, but when it comes to the science surrounding global warming -- we've either got an enormous global crisis on our

hands or no problem at all. Your choice, but please keep in mind -- that's a heckuva gamble.

> (8) Note that when compared to nukes/coal/natural gas/oil, energy efficiency and solar panels have zero fuel costs and potentially far

fewer operations and maintenance costs.

Thanks.

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