EUC backs plan to shift all franchise fees to suburban customers

For months, consumer watchdog Paul Robbins has been pushing a proposal to have suburban customers of Austin Energy pay the total cost of franchise fees that the utility pays to six suburban municipalities for use of public rights-of-way in those communities.

 

Robbins received a modest measure of support in his quest this week thanks to a resolution approved by the city’s advisory Electric Utility Commission. But it is questionable whether the resolution will get any serious traction from the Austin City Council, especially given the strong opposition to the proposal from Austin Energy officials. 

 

The commission narrowly approved the resolution from Commissioner Shudde Fath urging the City Council to renegotiate, to the extent contractually allowable, franchise fees with outlying cities in its service area so that the fees are collected from ratepayers in those cities, not from Austin ratepayers. Currently, all Austin Energy ratepayers, whether they live inside or outside the city limits, pay for the fees in their electric bills.

 

The vote was 4-1-2. Joining Fath in voting for the measure were Linda Shaw, Karen Hadden and Brent Heidebrecht.  Dr. Varun Rai was opposed, with Clay Butler and Commission Chair Bernie Bernfeld abstaining.

 

Two utility officials, Jeff Vice, Director of Local Government Issues, and Mark Dreyfus, Vice President for Regulatory Affairs and Corporate Communications, told commissioners that the proposal was not practical and would run counter to case history by the Texas Public Utility Commission. 

 

Bolstering their position is a recent memo from the city Law Department stating that it has been a longstanding position of the PUC, which has appellate jurisdiction over Austin Energy’s service territory outside the city, that municipal franchise fees are a systemwide cost that should be paid by all ratepayers.

 

“Were we in a rate appeal before the PUC, we would be in a legal vulnerability that we would not want to enter,” Dreyfus said.

 

Austin Energy currently has 10-year franchise agreements with six suburban cities – West Lake Hills, Rollingwood, Bee Cave, Lakeway, Sunset Valley and The Hills. Under each franchise, the utility pays those municipalities 3 percent of the gross revenues from electric customers within those cities, or roughly $1 million a year. West Lake Hills, Lakeway and Bee Cave get about 75 percent of the payments.

 

Franchise agreements are common in cases where utilities use public streets and other public rights-of-way for power lines, cables, poles or other infrastructure. Private utilities pay Austin franchise fees for use of city property.

 

Robbins has been complaining for some time that Austin ratepayers are subsidizing suburban electric ratepayers as a result of a settlement of a rate case brought to the PUC by a group of suburban residential customers when the city raised electric rates in 2012.

 

Robbins made a similar argument at to the city commission this week, calling it “a policy of suburban appeasement.” The settlement, approved by the Council in March, provided an overall discount on electric rates paid by the roughly 50,000 customers who live outside city limits. The franchise fees paid by Austin Energy to the suburban communities make the disparity even greater, Robbins argues.