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Lower Utility Rates for Suburban Customers Don’t Make Sense for Austin

Dec. 3, 2012  

Lower Utility Rates for Suburban Customers Don’t Make Sense for Austin

Public Citizen Report Debunks Claims That Austin Suburbanites Are Being Treated Unfairly

AUSTIN – The Austin City Council should not allow discounted rates for utility customers living outside the city limits because such an arrangement would be unfair and no precedent exists for such action, Public Citizen said today. The organization released a report showing that none of the top largest 100 cities in Texas charges different amounts for residents on the other side of the city border.

The Austin City Council soon will debate whether to change how city-owned Austin Energy is governed and whether to offer discounts for electric utility customers who live outside the city. According to the report, titled Public Profit for the Public Good A Survey of Municipal Utility Rate and Profit Policies for Texas Cities  such an action would be unprecedented.

The report examined the results of a survey conducted by Public Citizen of the 100 most populous cities in Texas to see whether residents who live outside those municipalities pay for utilities at a lower rate than those who live within city limits. The report shows no such arrangement exists in any large city through the state.
“There is no major city in Texas whose utility gives rate breaks for customers living outside the city limits,” said Paul Robbins, author of the study. “In fact, more than two-thirds of those cities charge out-of-town customers more for utility services than they do their in-town customers. As far as we can determine, Austin’s suburbs are demanding something not done anywhere else in the state.” 

Among the findings in the report:

• At least 71 of these cities own a utility that offers service to out-of-city customers; 
• Only five municipal utilities pay cities that they serve a franchise fee for the privilege of operating there. Austin is among them; and
• No municipal utility serves out-of-town customers at cost unless their in-city customers are also served at cost.

Proponents of a tiered system for utility rates include individuals and representatives of suburban city governments served by Austin Energy. They contend that suburban residents do not equally benefit from the money that is transferred from utility production into Austin’s general fund.

But that doesn’t take into account the whole picture, Public Citizen said.
“Out-of-town ratepayers benefit a lot from the roads, parks, events and other services paid for by the general fund transfer,” said Tom “Smitty” Smith, director of Public Citizen’s Texas office. “Many out-of-towners work in Austin, a disproportionate share of the utility’s efficiency and solar rebates go to out-of-towners, and the four-lane highway to Westlake serves mostly those who live outside the city limits. Everyone enjoys the benefits of a strong general fund, so everyone should have to contribute to it.

“If these critics are so upset at paying a utility profit to Austin, they also should object to the profit they are paying to private utilities for natural gas, cable, phone service and solid waste collection.” Smith said.

Austin has a large amount of tax-exempt property because it is the seat of state government and home to a main branch of the University of Texas. The city likely loses tens of millions of dollars in property tax revenue annually, while still providing city services for this land and property.

 The historical motivation for providing services through a municipal utility was the high costs and poor service of the major private electric utility operating at the end of the 19th century.  City leaders thought a municipal utility would bring lower rates and allow Austin to better control its own destiny.