More on Public Power

Marius provides a quality response to my defense of public power in Austin.  I respond in the comments.  Here is the substance of my response:

1. Transfers. Sure, we can include the transfers to the state, though in Marius’ original piece that wasn’t the focus. In that case the Texas public would get more revenue from a private utility, though Austinites might not proportionately benefit from that. Since there is no free lunch, that likely means higher rates for Austin on top of the marketing and profits requirements (which Marius did not address) to provide more revenue for schools and public safety outside Austin. If Austinites were interested in doing that, public AE could just raise rates and give money to the state. This state-subsidizing public AE would still not have marketing and profit needs, so it would still be a cheaper KwH relative to a private one.

2. Rates. It seems we agree that public AE has lower rates and these are tied to the economics of public provision.  Marius points out that there is progressive cross-subsidization, but to me this is a feature not a bug. Marius argues that AE’s provision of cheap power is not green. I agree, though the implication is that AE should raise rates and invest the surplus in green initiatives. This is would be comparatively better than the private utility raising rates to cover marketing, profits, and state revenues.

3. Operations. The 13% “overstaffing” is something to look at, but again, not a compelling case for privatization. That’s 40 FTEs. Assume those FTEs are on average $70k employees. That’s $2.8 million in annual costs. But given that public power gave us $48 million in savings to the public (calculation is in my original blog post on public power) because of its different cost structure, this “fat” does not seem like a good reason to privatize. Moreover, if those positions are doing things like conservation or customer service, then maybe they are not really fat and actually value. The asset-turnover data is interesting but 13 years old; a commenter pointed out that there had been significant operational improvements in AE in the last decade due to outside experts coming in to shape up the utility. Newer data could settle this one either way.

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