Deregulation of Austin Energy: The Right Choice?

Austin Energy has long been the only service provider for almost 1 million residents that live with in its 437 square mile service area. Debate has surfaced in the recent years on whether or not to provide Austin residents with an alternative provider opening up competition in the markets with the goal of keeping rates affordable and the cost of living in Austin as low as possible.

Senate Bill 940, which was recently passed in congress, relates to regulation of the public practice of geoscience. The bill requires that any electric utility provider that has 3 million square feet of state-owned office space with in its service area to initiate customer choice. The bill comes about a year before a proposed rate increase of 10 – 12 percent by Austin Energy in 2012.

Many proponents of the bill argue that deregulation in the Austin market will create an open market where utility providers will compete for business thus driving rates lower. Those opposed to the bill such as Mayor Lee Leffingwell argue that the situation is “more like the state isolating and, in some respects, provoking a municipally owned electric company.” General Manager of Austin Energy Larry Weis believes that the difference between a publicly owned utility (Austin Energy) and a deregulated utility is how fuel prices affect rates. Weis states that if gas prices rise, the only way for a deregulated utility to pass those costs onto consumers is through a direct transfer in simultaneous rate hikes. A public owned utility sees the benefit of spreading those costs to consumers over time.

There has been long debate over the rates Austin Energy has charged its consumers dating back to the mid 1980’s when corporations such as AMD, Motorolla, and IBM appealed the rates they were being charged. They argued that Austin Energy was charging a rate far beyond what was required to meet their revenue requirement. The debate sparked a bill that required Austin Energy’s rate subject to review for 10 years.

Since 1994, Austin utility rates have seen a 27.9 percent increase due to an increase in fuel costs. 

Alternative sources of energy will provide Austin rate payers with lower rates for years to come. City council has set a goal for Austin Energy that by year 2020, the city will have 800 mega watts of energy-efficient programs and that 35% of electric generation will come from alternative sources. Deregulated markets in theory are attractive in that they create competition but as fossil fuels become scarce and prices continue to rise, alternative sources are the safest bet. I think that the state and Austin Energy are on the right path in creating and implementing programs to produce cost effective alternative energy sources. Intuitive resources and money should be spent in developing these alternative options because whether or not our utilities are publicly owned or municipally owned, rate increases are unavoidable.

Will this debate or it’s outcome have an effect on the affordability of Austin Real Estate or the Austin real estate market?

For more information on this ongoing debate or for assistance with your Austin home search or Austin real estate needs, contact The Carvajal Group today at (512) 419-7770.

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