Energy in the News: Throwing money at problems is not helping Austin’s poor

Robbins: Throwing money at problems is not helping Austin’s poor

By Paul Robbins – Special to the American-Statesman, Monday, June 8, 2015

Austin has one of the highest, if not the highest, costs of living in Texas. The situation is so bad that, according to an analysis of Census data, many poor people are leaving the city, moving to surrounding areas because they cannot make ends meet. One would think that utility programs put in place by the city of Austin to assist low-income people are essential to helping these residents survive. When poorly planned, however, the programs waste scarce resources, providing reasons for fiscal conservatives to be cynical about their effectiveness.

Last fall, I investigated inefficiencies in a utility bill assistance program run by the city, the Customer Assistance Program, known as CAP. I discovered that CAP, which gives rate relief to low-income customers, was giving money to wealthy people as well as poor ones.

Over 1,100 customers in homes worth more than $300,000 were receiving CAP funds. While some of these were understandable, such as small homes in gentrified neighborhoods, many others were unmistakably wealthy. One 8,100-square-foot Lake Austin mansion worth about $4 million had its own indoor movie theater. Another CAP recipient owned 44 properties collectively worth $10.7 million.

This is one of several examples where Austin has thrown money at aproblem without thinking it through. Unfortunately, the list goes on.

CAP gives a 10 percent electric rate discount no matter how much a customer uses. While many people receiving assistance are frugal, some consume much more than average. In these cases, CAP is subsidizing waste. Assistance from the city should be going for basic needs, not to pay for luxury.

Another bad example is the city’s free weatherization effort to help poor people save energy. The federal government had a number of stimulus programs to get the country out of the 2008 recession. One of these gave about 2,000 Austin homes free weatherization and appliances, including central air conditioners.

While this may have stimulated the economy, it did not do much to lower bills. A survey of these homes showed so little energy reduction that the average payback on electricity savings would be over 59 years. You could literally give money away as rate relief and do better than this. The saddest part is there is a serious effort by some low-income advocates to expand this failure.

Yet another bad example is the utility’s debt expense. Austin Energyis losing $21 million a year from unpaid bills, much higher than two years ago. In late 2013, the Austin City Council was urged by some low-income advocates to come up with a lenient cutoff policy. The idea was, “Give customers extended payment arrangements, and you will get more of the city’s money back.”

It did not work. Nineteen months later, advocates are asking for still more time. Meanwhile, most people on these extended payment arrangements are getting further behind on their bills, some to the point where they will never dig out because their debt is so high.

The failures in these programs, taken as a pattern, do not inspire confidence.

The poor pay for these mistakes as well as the rest of us. Directly, they pay for failed conservation programs that save almost no energy. Many low- and moderate-income customers also pay for CAP, even when it goes to the wrong people. Poor people that are current on their bills pay for the bad debt of people who are not. In 2014, the lost revenue amounted to $48 for the average Austin residential ratepayer, accelerating the need for a new rate increase.

The poor also pay indirectly. If 10 percent of CAP is lost because of a flawed enrollment system or discounts for high consumption, that is $1.4 million a year wasted. Money spent on failed weatherization programs that save almost no energy is diverted from energy-saving programs that are effective.

If the city wants to help the poor effectively, it needs to stop throwing money at problems. Low-income assistance programs will never have enough money. The funds that are available need to be spent strategically and carefully.

Robbins has been a consumer advocate since 1977.

Energy in the News: Utility discounts may be going to people who don’t need them

Utility discounts may be going to people who don’t need them

By Sophia Beausoleil, KXAN, Updated: December 1, 2014, 9:22 pm

AUSTIN (KXAN) — Keeping the lights on can be pricey, and that’s why Austin Energy created the Customer Assistance Program to help reduce utility rates for low-income consumers. But the discounts may not be going to the people who need them.

“I was particularly astounded when I started seeing $1 million homes and $4 million homes on the list and I knew the system needed to be corrected,” said Paul Robbins who has been a consumer advocate and environmental activist in Austin for 37 years.

Robbins said he had heard there were problems with the new automatic enrollment system and decided to check it out for himself. He put in a public information request for the participants in the Customer Assistance Program, reviewed their real estate assets and determined more than 1,100 customers in homes valued more than $300,000 were receiving utility discounts.

Energy in the News: Why Austin utility bill discounts aren’t just going to the poor

Why Austin utility bill discounts aren’t just going to the poor

By Lilly Rockwell – Austin American-Statesman, Posted: 12:01 a.m. Monday, Dec. 1, 2014

As a luxury home builder, Majd Hinedi lives in pretty nice digs himself. His 6,315-square-foot West Lake Hills home is valued at $1.2 million and sits in a cul-de-sac. According to online real estate database Zillow, it has five bedrooms, a pool and a guest house.

But…He is getting a discounted rate on his water, wastewater and drainage fees by being part of Austin Energy’s “Customer Assistance Program,” which is designed to give reduced rates and fees to low-income customers.

An analysis of water and drainage customers on the Customer Assistance Program by activist and consumer advocate Paul Robbins, who obtained the information through an open records request, shows that more than 1,100 people in this program — about 6 percent of the recipients — have homes valued at more than $300,000.

Water in the News: Austin needs to take measure to control water rates

Robbins: Austin needs to take measure to control water rates

BY PAUL ROBBINS – SPECIAL TO THE AMERICAN-STATESMAN, Posted: 12:00 a.m. Saturday, April 12, 2014

Austin’s cost of living is soaring, and one reason is its water costs. Water rates are falling into a dangerous pattern. It’s called a “death spiral.” Costs go up, inducing market pressure to drive consumption down, eliminating revenue needed to pay fixed costs. So rates go up again, causing consumers to cut back further, and the spiral gets steeper.

At the same time, the Central Texas region is afflicted with record drought, so consumption is heavily discouraged. Water rates will go higher to make up for even more lost revenue.

Austin’s water utility boasts that its conservation efforts have lowered consumption 17 percent per person between 2006 and 2013. This seems impressive until you consider water rates went up 70 percent in the same time period. In fact, between 2000 and 2014, water rates went up 123 percent and wastewater rates went up 130 percent. Inflation only rose 36 percent.

And brace yourselves. It has been announced that by 2019, water rates will need to be increased another 31 percent and wastewater rates another 15 percent. This is despite cutbacks planned for next year’s budget and recent hook-up fee increases for new buildings of almost 200 percent.

The planned increases may not stop here. Due to the drought, the utility is shopping for new water supplies. To give you an idea of the relative cost, groundwater sold by one potential supplier to an Austin suburb is 30 times the price Austinites pay for Colorado River water.

Why are costs so high?

  • The biggest reason is capital investment and debt, much of it coming from growth. About 52 percent of your water/wastewater bill is related to capital improvements. An example of this is the half-billion-dollar Water Treatment Plant No. 4, which began construction in 2010. Judging from the utility’s recent forecast, Austin will not need its capacity for 17 years. Because it is a wasted asset, it will literally cost more to turn on the plant than to leave off.
  • There were poor decisions regarding asset management. The “profit” from the land sale of the former Green Water Treatment Plant site was put back into enhancements for the site’s redevelopment instead of lowering water costs. Other property, such as the retired Govalle plant on Lady Bird Lake, sits almost unused.
  • The water utility is one of the largest energy users in Austin, consuming enough electricity to power 17,000 homes. Yet it has no energy conservation plan and is buying wind power at 39 percent more than it cost the electric utility to purchase.
  • The utility’s profit, the transfer to the General Fund, has more than doubled since 2000, while water consumption is roughly the same.

Until the debt works its way out of water rates over time, Austin may not be able to do much to lower them. But through fiscal discipline and real conservation efforts, it can mitigate future increases.

There are a host of small cost-saving measures that can add up. These include: reducing General Fund transfers; postponing the operation of the new treatment plant until it is needed; buying and conserving electricity at an affordable cost; selling unneeded assets and using the profits to buy down debt; using leak-resistant polyethylene pipe; using “smart” utility meters to reduce labor costs and water loss.

There are several strategies that need to be implemented instead of purchasing new supplies. One of the most basic is to fully implement the water conservation plan approved by the City Council in 2007. This would be greatly enhanced if the conservation program was moved out of the debt-strapped utility, which has a conflict of interest saving water.

In addition, Austin has a reclaimed water system that is barely used, as well as access to Barton Springs flows into the Colorado River that might be routed to a treatment plant.

Austin would be foolish to ignore the affordability of its water any longer. Wall Street has a word for cities that have reached the height of fiscal hubris: Detroit.

Robbins is an environmental activist, consumer advocate, and author of “Hard to Swallow,” a report on Austin’s high water costs.