Commission resolution aims to slow down sale of district chilling system

City Council is scheduled to consider hiring J.P. Morgan Securities LLC to advise on the potential sale of Austin Energy’s district cooling system, but not everyone thinks that is a good idea.

The Resource Management Commission will likely ask Council to postpone evaluation of the sale of the chilling system at its meeting next Tuesday, Commissioner Paul Robbins – the environmentalist for whom the downtown district chilling system is named – told the Austin Monitor on Thursday. The system provides chilled water to help air conditioners efficiently cool large buildings occupied by thousands of people downtown.

The commission’s resolution says the proposal “was not discussed with community stakeholders in advance of its consideration by the City Council” and that “sale of the system could adversely affect peak demand and energy efficiency” in more than 60 large buildings. One reason Austin Energy developed the chiller system was to keep customers and diversify revenue sources at a time when deregulation was threatening to cut the utility’s customer base. If Austin Energy sold the business now, it would lose the revenue from the current chiller customers and not be able to add chiller customers in the future.

Additionally, the resolution points out that a sale could have an adverse impact on rates for chiller customers. Robbins said members of the commission and the general public “were blindsided” by the appearance of the item on Council’s July 18 agenda.

“This is really bad form on the part of the utility to do it in this manner,” he concluded.

At Monday’s meeting, the Electric Utility Commission is scheduled to consider approving a resolution supporting passage of the item to contract with the securities firm. Commissioner Kaiba White said Thursday that she was not satisfied with the amount of information staff had provided about the possible sale of part of the utility.

“I personally think the utility is perhaps putting the cart before the horse,” she said.

In his memo to Council about the potential sale of the system, City Manager T.C. Broadnax wrote, “Building on the past two decades of system growth, a transition to a new owner would maintain existing benefits and provide opportunities for further growth, resulting in even greater environmental and community benefits. In addition, a sale could improve Austin Energy’s ability to provide clean, affordable, reliable energy to customers by paying off debt and freeing up capital dollars for grid enhancements.”

The memo does not mention the fact that the city may be required to go to voters to seek approval for the sale of part of the electric utility. According to the City Charter, Council does not have the power to “sell, convey, or lease all or any substantial part of the facilities of any municipally owned public utility, provided that the Council may lease all or a substantial part of such facilities to any public agency of the state of Texas if the qualified voters of the city authorize such lease” in an election. The question of whether the city needs to hold an election may well hinge on how many Council members think the facilities are a “substantial part” of Austin Energy’s facilities.

Former Council Member Kathie Tovo, who is running for mayor, believes the chilling system is indeed a substantial part of the utility. She expressed concern about the possibility that Austin Energy might sell a part of the utility that is making money.

“I think the ratepayers of this city should protest mightily,” she said. The system “is an asset and we absolutely have the right to say whether it should be part of Austin Energy.”

Two other mayoral candidates, Doug Greco and Carmen Llanes Pulido, expressed concern about the possibility of selling the district cooling system.

“Austin Energy should not sell the District Cooling System,” Greco told the Monitor. “It’s one of the city’s most effective climate protection programs, and keeping it publicly owned assures it is held to our community’s high environmental and labor standards.”

Llanes Pulido said, “I want to know why it’s being considered now. … I understand there is a need for other investments but we need to have an above-board conversation” about why the city would consider selling the chilling system.

“I think this is the kind of thing that needs to go to the voters,” she said. “This is a very valuable asset.” She stressed the need for a public discussion “before we sell something we can never get back.”

On Thursday afternoon, the union representing city, county and state employees, AFSCME Local 1624, put out a statement opposing the sale of the district cooling system, calling it “a blatant attempt at privatization.” The union urged Council to reject the proposal on next week’s agenda to contract with J.P. Morgan.

“Why sell a profitable, efficient and environmentally friendly system just to line the pockets of J.P. Morgan?” AFSCME Local 1624 President Pedro Villalobos said. “Privatizing the service and its assets is a short-sighted, misguided decision that fails our community and ignores the public’s best interests. Let’s invest in our local infrastructure, not Wall Street.”

He concluded that “Austin Energy’s skilled workforce is ready and capable of maintaining and improving the district cooling system.”

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