Accountability at Austin Energy? Historic documents reveal potential for independent board

AUSTIN (KXAN) -- Jessica Parker vividly remembers the week she spent without power in her Austin apartment during the winter storm in 2021.

"At one point, I had to give up on the refrigerator," she said. "I opened it, and it was warmer in the refrigerator than it was inside the apartment."

Across town, a woman named Julie logged onto Nextdoor, looking for where to buy food and clean water. She moved to Austin from Chicago the year prior and had not "stocked up" on supplies.

"I wasn't ready for Armageddon because an inch of snow, to me, is like nothing," Julie said. She didn't expect the city to shut down.

Through a thread on the site, Julie, Jessica and a group of other Austinites connected and started asking questions: why had their power had gone out? Who was responsible? Who is in charge of overseeing the utility?

When a different storm in February 2023 left nearly a third of Austin Energy's customers without power, their group began to dig deeper into the utility's history, and discovered city leaders had considered other styles of governance in the past, but never implemented them.

"That's when we got like hundreds of pages of documentation, stemming back to the 90s, of suggestions by different energy professionals," Julie explained, "that all made the suggestion that an independent board of trustees would be warranted for the city."

Austin Energy oversight

Historically and currently, the elected members of the Austin City Council oversee the budget, rate and policy decisions for Austin Energy. The city manager selects the general manager of Austin Energy, who then hires the utility's executive team, but citizens can communicate their concerns about the utility directly to their elected city leadership.

Some other municipally-owned utilities operate differently, reporting to an independent board of directors focused solely on the utility's operations. A KXAN analysis showed the majority of the 10 largest municipally-owned utilities in the country report to appointed or elected boards of governance.

According to city documents and media coverage dating back decades, Austin's leadership considered creating this kind of independent board several different times.

Over the years, council proposed a few studies on alternative governance, and an advisory group to the city's utility decisions and operations called the Electric Utility Commission (EUC) also "conducted extensive public hearings on this topic." It even made recommendations in favor of the change to an independent board in 1996 and 2002.

According to the transcript of one of those hearings in 1996, city leaders hoped to make the utility more competitive in the newly de-regulated Texas electric market and "free from political considerations."

Mayor Kirk Watson sat on a panel of people considering the change at the time, before his first term as mayor.

"I've always been of the opinion that while the city council has done a good job and continues to do a good job -- and has built-in protections," Watson explained, "having an independent or professional board might help us make decisions as we go forward and actually take some of the politics out of it."

Ultimately the city stayed the course, with the utility reporting to council, but the idea of an independent board was revived again, a decade later.

This time, discussions about a base rate increase for Austin Energy customers prompted questions about representation at the utility -- primarily from customers living outside the city limits. According to an EUC document from 2012, those residents "raised concerns that they have no effective representation on the body making final rate decisions as they cannot vote for Austin City Council members."

"I don't think it would continue to be revived if it wasn't a good enough idea, or at least direct us to something that will work better for Austin."

Jessica Parker, Austin resident

At the time, another governance study was conducted by Bob Kahn, utility expert and consultant. Kahn worked at Austin Energy previously, as deputy general manager, general counsel and vice president. Earlier this year, he returned to the utility after being appointed general manager.

The study reviewed other public power utilities in Texas and contained statements from several former Austin Energy general managers, who all believed the utility should be governed by a board, citing "frustration in dealing with the City bureaucracy" and the belief a board would be more "nimble and focused."

The study also featured the perspective of Jesús Garza, who served as city manager during the public forums on the topic in the 90s. Garza has now also returned to city leadership as interim city manager.

According to Kahn's study, "Mr. Garza was asked why the issue of governance was never considered by the City Council after the Public Forums were concluded. He indicated, that as he recalled, he believed at the time the issue needed more study. However, given the existing environment the City Council operates in today, he believes the Council should give serious consideration to creating a board. He also believes it would be fair to have a person from outside the city limits on the board so that their voice could be heard. He believes a board would strengthen the utility."

We reached out to Garza's office for comment. A city spokesperson said, "There has been no discussion about different governance for Austin Energy as of late."

However, in light of the recent storms, outages and rate increases affecting Austin Energy customers' bills, Julie and Jessica's group would like to hear these types of discussions happen again.

"I don't think it would continue to be revived if it wasn't a good enough idea, or at least direct us to something that will work better for Austin," Jessica said.

Watson told KXAN, "I don't think that's the kind of thing that's going to happen, but it's one that we want to continue to discuss as we grow."

Open government

The city manager in 2012, disagreed with the idea of an independent board, saying it would "contradict what Austin values most... transparent, open, collaborative government."

In a memo penned to the mayor and council, Marc Ott explained why he believed the current system was working well.

He acknowledged that a separate board might be more streamlined and efficient, without "policies that slow the work down." However, Ott went on to write, "Austin is all about process, communication, collaboration, and transparency. Yes, this can be messy sometimes, but ultimately the resulting 'open government' is worth it."

In 2013, protesters gathered outside city hall to oppose the idea of an "unelected board." KXAN archive footage shows former Austin City Council member and current Travis County Commissioner Brigid Shea telling the crowd, "Don't create an independent, unelected, un-accountable board to solve the problem. It doesn't fix it."

Kaiba White, a climate policy specialist with Public Citizen, said she also opposed the move to an independent board at the time -- and still has concerns about the idea.

In an interview with KXAN, she said she believed the interests of large industrial and commercial customers would be heard and considered no matter the governance structure, but worried about how an appointed board would represent the voice of the typical, residential customer.

"It would be exacerbated if the average person -- residents as a whole -- don't have the opportunity to hold leadership accountable at the ballot box," White explained. "It's important that we don't 'throw the baby out with the bathwater,' in terms of something needs to change, maybe."

White emphasized that she believes more time and energy should be spent overseeing utility decisions, given that Austin Energy typically accounts for a large portion of the city's operating budget. Austin Energy makes up 28% of the $5.5 billion budget passed by council for the next fiscal year.

"There is an argument to be made that, certainly, extra attention is warranted on a utility that gets to a certain size," White said.

After the discussions in 2012, she was pleased to see the creation of a special council committee, the Austin Energy Oversight Committee, carving out time specifically for overseeing utility decisions.

However, a decade later, she said she worries the committee does not meet often enough and is not always "used to dig into issues that are concerns for the community."

'No perfect system'

Watson said he believes there is no perfect system.

"Either way -- if you have a well-operated, well-done, well-run professional/independent board, or you don't have that and you have a council who serves -- you are going to have things that I'll be able to point to in both instances and say, 'Well, that's better than that' or 'That was a mistake,'" Watson said.

In his interview with KXAN, Watson emphasized the "enormous amount of time" and energy council members have spent learning the business of running the utility, particularly its current chair, council member Leslie Pool.

However, he told KXAN he would look into the concerns about the frequency of the committee's meetings and new ways to reach out for community input.

"We can always do better," he said.

He went on to say the goal has always been to "run [Austin Energy] in the best way you can for the shareholders, and the shareholders in this case are the people of Austin."

KXAN's Avery Travis will have more from her interview with the mayor on KXAN News at 10 p.m.