THE EARLY HISTORY OF AUSTIN’S CLEAN ENERGY MOVEMENT

The City of Austin has invested in energy efficiency to displace new power generation since 1982.  It has programs to help all Residential, Commercial, and Industrial ratepayers save electricity.  Not only do these programs help make bills more affordable and prevent pollution from power plants, but they also bolster the financial health of Austin Energy by preventing the need for expensive peak power.

Between 1982 and 2016, the programs have saved about 1,200 Megawatts of power (about 31% less than what would have been used if the efficiency programs had not existed).  By the end of 2015, they prevented about 1.1 million tons of carbon dioxide emissions annually.¹

Austin’s efficiency programs are likely the main reason why Austin’s Residential electric consumption and bills are relatively low compared to other utilities in ERCOT, the independent electric system operator for most of Texas.  According to annual statistics kept by the U.S. Energy Information Administration in 2015, residential consumers served by Austin Energy used an average of 10,775 kwh a year,  25% below the ERCOT average.²  Of the top 10 utilities in terms of electricity (kilowatt hour) sales, Austin ranked as the lowest.  Only 1% of ERCOT’s 8.9 million Residential customers had lower average annual consumption.

 

This low consumption has large economic savings.  Austin does not have the lowest Residential rates in ERCOT.  However, of these same top 10 utilities, Austin ranked as the lowest in annual bills.  Again, only 1% of ERCOT’s Residential customers had lower annual bills than Austin.

Austin’s comprehensive approach includes rebate and incentives for efficiency and solar PV retrofits, building codes that mandate efficiency in new buildings, and a progressive rate structure that charges higher rates for higher levels of consumption.  Throughout the decades, these policies and programs have repeatedly won national awards.

The collective efforts of the past few decades owe much to the advocacy of Austin’s environmental community, and the talented City staff who operated the programs.  These efforts were also enabled by City ownership of the utility.

However, efficiency programs were also launched by a reaction from the region’s voters, due both to the rising costs and environmental effects of conventional fuel.  Events and personalities that set history in motion went back 20 years before the first home in Austin was ever weatherized through a City-funded program.

The Chain Reactions of History

Natural Gas Shortages – Ironically, one of the most instrumental people to inspire Austin’s renowned energy-efficiency programs was a colorful and somewhat ruthless oil and gas magnate named Oscar Wyatt.  Though he had a noble side to him – a rags-to-riches tycoon, who at various times in his life acted as a selfless patriot – during the 1970s, he became one of the most reviled businessmen in Texas.

Wyatt was raised in poverty by a single mother.  As a teenager he became a crop duster to make money, which served as preparation for his transition to a (decorated and twice-wounded) fighter pilot in W.W.II.  Surviving the war, he earned a degree in mechanical engineering and bootstrapped an oil supply business into a large pipeline and brokering network for natural gas.  In the early 1960s, his LoVaca Gathering Company cornered the market for much of Central and South Texas by signing long-term contracts for cheap fuel.  His clients included Austin’s electric utility, San Antonio’s larger public electric and gas utilities, and the Lower Colorado River Authority (LCRA).

Between 1929 and 1979, Austin’s electric generation relied on natural gas as its main fuel source.  In 1962, Austin signed a 20-year contract with LoVaca Gathering Company for low-cost natural gas at the rate of 20¢ per MCF (thousand cubic feet).  (This is the equivalent of $1.60/MCF in 2016 dollars.  The average cost of gas used for electrical generation in Texas between 2006-2015 was $5.49/MCF in 2016 dollars.)³

Unfortunately for all concerned, Wyatt did not retain all the long-term supply contracts he needed to honor his agreements.  This came to a reckoning during the harsh winter of 1972/73, when it snowed in Austin 3 times.  A gas shortage occurred throughout LoVaca’s service area.  Among other things, the shortage delayed the opening of the University of Texas at Austin for 2 weeks, and rate shock began to infect the city.

The average monthly bill for Austin’s residential electricity went up 36% between 1973 and 1974.⁴  It went up 66% between 1973 and 1975, while per customer consumption decreased 18%.  Almost all of this was caused by increased fuel costs, which went up 404% between 1973 and 1975.

Austin now had to buy replacement gas at more expensive prices.  And when gas could not be had at any price, the utility had to switch its gas power plants to back-up fuel oil, which was even more expensive.  At one point, in April of 1973, Austin’s utility came within hours of rolling brownouts that would have been needed just to divert enough power to supply the City hospital. A rushed delivery of fuel oil arrived just a few hours before this would have occurred.

As harsh as this period was for Austin, it paled compared to what happened in Crystal City, a small poor city in South Texas that could not afford to pay for gas it was contractually promised at lower cost.⁵  On September 23, 1977, after Crystal City had accrued a considerable debt for unpaid fuel increases, LoVaca cut the town’s entire supply off.  A 2015 survey showed that almost four decades later, natural gas service to the majority of the city had never been restored, and 94% of its homes relied on electricity or propane for their heating.⁶

A massive lawsuit was filed against LoVaca, which was litigated for several years.  In 1979, the company avoided bankruptcy through a settlement.⁷  LoVaca would be spun-off from Wyatt’s other holdings to a company called Valero that was totally unassociated with him.  Wyatt’s larger company would explore for more gas and sell it to Valero at a discount, which would be distributed to the former customers for a number of years.  In addition, a trust consisting of 13% of Valero’s stock would be awarded, and sold over a 7-year period to lower bills.

There was a joke at the time of the settlement that went “Valer is Spanish for ‘value.’  I don’t know what the zero behind it stands for.”  While the settlement was not worthless, it did not account for most of the lost money.  In Austin, the annual discount was calculated to be 2.5 to 3% on the average bill for an 8-year period.⁸  Meanwhile, Wyatt successfully expanded into oil refining and trading and became wealthier.

Many observers believe that even if LoVaca had honored its promises, it would have just pushed off inevitable gas cost increases until the 1980s when the contracts expired.  However, the gas shortage occurred in sync with the first world Energy Crisis, and this magnified the effect on Austin.

The Arab Oil Embargo – In 1973, oil used per kwh of electricity was generally 2.8 times the price of Austin’s original (20¢/MCF) natural gas contract.  By 1974, electricity generated from oil had risen to 7.4 times Austin’s original gas contract price.

The trigger for the increase became an oil embargo against the U.S. for its support of Israel in its October 1973 war with Syria and Egypt.  In solidarity with these two Middle-Eastern foes of Israel, most Arab oil-exporting nations simultaneously began withholding small percentages of oil from the world market while embargoing all exports to the U.S. and other Israeli allies.  Intended as economic pressure, the embargo was short-lived, as the U.S. urged the warring parties to negotiate.  However, media coverage became an incessant feeding frenzy.

Though the embargo against the U.S. only lasted about 5 months, this event changed the world. Major economic damage was sustained because oil went up 119% in price and stayed at that level (or higher) for many years.⁹  Nationally, the price shock contributed to an economic recession.

In Austin, it amplified the anxiety over electric bills.   City leaders wanted to diversify their power sources to be less dependent on gas and (back-up) fuel oil.

New Power Plants – In reaction to skyrocketing gas and oil costs, the Austin City Council moved to dramatically diversify fuel sources for electricity.  In that era, this meant coal and nuclear plants.

In 1973, after a Council-appointed committee of citizens studied the issues, and considerable Council deliberations, it was recommended that the utility become partners with the LCRA in a coal plant (which was later sited in Fayette County), and with Houston Lighting & Power and 2 other partners in a nuclear plant (South Texas Nuclear Project).  A second gas unit at Decker Lake was also suggested.

At that point in Austin’s history, it was common to hold elections to ask voters to approve debt associated with electric and water utility improvements.  This requirement is still in the City’s Charter, though it is routinely ignored.

Though it is doubtful that a coal plant would be approved by Austin’s electorate today in light of the public’s concerns about global warming, in that era, the proposal was not highly controversial.  Since nuclear power worried environmentalists more, some of them actually recommended coal as a preferred alternative.

Austin’s participation in the nuclear plant had been narrowly defeated in a bond election just a year before.  Council tried to persuade the public to pass nuclear bonds again, but this time the proposal was reinforced by the painful experiences of natural gas shortages and uncontrollable utility costs that occurred throughout most of 1973.  In addition, there was the ominous threat of gasoline shortages, which had been all-but-guaranteed in front-page news coverage of the Oil Embargo.

In the weeks before the 1973 election, held November 17, the memories of price shocks (and the threats of more) were used as a club against the nuclear plant’s opponents.  And it was not just City officials campaigning for the new power plants.  President Nixon went on-air November 7 in a specially televised speech to outline short-term measures to deal with the Energy Crisis (which he suggested might cause rationing if they proved insufficient), and a long-term “Project Energy Independence” to create more conventional energy sources.¹⁰  Adding to the momentum was a City-funded bond ”education” campaign, and a political advertising campaign.¹¹

The coal and gas plants passed overwhelmingly, by a 77%-23% margin; however, the nuclear plant barely squeaked through at 51%.¹²

The coal and gas plants were built on time, on budget, and with relatively little controversy.  While the Fayette coal plant has been criticized in recent years, it has operated cost-effectively throughout most of its life (if you ignore the environmental price of carbon emissions, air pollution, and strip mining).  The nuclear plant, however, created overwhelming consternation for the next two decades.

Nuclear Power and Efficiency Programs – The South Texas Nuclear Project, twin reactors totaling 2,725 Megawatts near Matagorda Bay, acquired the sarcastic nickname “the Nuke.”  This power plant, without exaggeration, became one of the most divisive issues in Austin’s history.

While most environmentalists have always been wary of nuclear power because of the waste issue and the possibility of devastating accidents, many Austin voters were more alarmed about the broken promises surrounding its cost.  Austin’s original share of 16% of the billion-dollar project should have cost the ratepayers $161 million in 1973, and this included a contingency that could hedge cost overruns.

However, the engineer and builder, Brown & Root, received the commission without a competitive bid, and made the original estimate without completing most of the engineering work.  Overruns overwhelmed the budget.

In some ways, the overruns were similar to the LoVaca debacle.  Since the City signed a “hell or high water” contract, it was obligated to pay 16% of the Nuke’s cost no matter how much the price rose…and the price did rise.  Ultimately, it skyrocketed from $1 billion in 1973 to $2 billion in 1978 to $2.7 billion in 1979 to $5.7 billion in 1981. At least 3 high-profile lawsuits or court cases were filed over the Nuke between 1983 and 1994.

Austin’s Nuke was hardly the only atomic power plant in the U.S. to experience controversy.  In response to the Energy Crisis, some 223 nuclear reactor units were proposed or being built around the country.¹³  Many were also experiencing huge overruns because of inexperienced architects and engineers, “backfits” for increased safety equipment that were not in original cost estimates, and in many cases, repair of shoddy craftmanship.

The U.S. public was experiencing something similar to Austin: rate shock from high gas and oil prices, and more rate shock from nuclear plants that were supposed to be the solution to rate shock.  This, plus environmental concerns from a certain percentage of the public, created an anti-nuclear movement that in some ways resembled the Anti-Vietnam War protests of only a few years before.  “No Nukes!” became a rallying cry to a lot of young adults of that generation (and the title of a rock album of musician superstars).

However, Austin had an attribute that magnified citizen participation: the citizens partially controlled their municipal electric utility’s future by electing the “Board of Directors,” the City Council.  The electorate, for many decades, also approved revenue bonds for capital improvements.

Austin voted on the nuclear issue 7 times between 1972 and 1983.  As the cost rose dramatically in the late 1970s, the project lost credibility with the electorate.

Energy conservation had been openly discussed since the LoVaca contract had been broken in 1973.  Indeed, electric use per capita went down noticeably by 1975, though some (if not most) of this was likely from cutbacks in response to high prices and not energy-efficiency retrofits.  Conservation was often viewed as a short-term option and not a strategy that could displace new power plants.

At some point in the late 1970s, anti-nuclear opponents began to openly question how much energy could be saved if the money spent on the Nuke and its overruns were invested in energy efficiency efforts instead.  Solar water heating and passive solar design were also highlighted as options.  In addition to displacing the need for conventional power, advocates pointed to the local jobs that would be created, keeping money recirculating in the Austin economy.

The “Conservation Power Plant” idea became quite popular with the electorate.  In 1981, several City Council candidates ran on the issue of selling Austin’s share of the Nuke and investing the money in displacing the need for a new power plant.

Institutionalizing efficiency to defer new power plants was opposed by the management at Austin’s electric utility.  They believed it was not economic, and that the Austin population was growing and needed much more generation.  So the issue was set up as an Efficiency vs. Nuke contest.

The Efficiency argument was won by a persistent effort by anti-nuclear activists sustained, largely by volunteers, over several years.  There were major events and watershed moments, but the strategies and tactics were basically of two varieties: conventional and often grassroots education and outreach, and public episodes that had “shock value.”

Conventional education and outreach included:

• thousands of “No Nukes/Go Solar” bumper stickers;

• debates and public speaking events;

• door-to-door canvassing;

• demonstration projects (a solar water heater installation in a poor neighborhood; a solar water heater brought to City Council made entirely from recycled materials);¹⁴

• huge free “Sun Day” concerts and energy exhibits reaching thousands of people;

• incessant testimony at government public hearings;

• advertising in election campaigns, where the Efficiency vs. Nuclear argument became a dominant issue for a decade.

Shock value was more typified by massive turn-outs at emotional public hearings and colorful demonstrations.

• At a public hearing on the Nuke on December 12, 1978 with 700 people in attendance, an “energy dragon,” (in a Chinese dragon costume) spoke to City Council.  He ate money and defecated nuclear waste.  He made the front page of the Austin American-Statesman.¹⁵

• a press conference calling for the resignation of the City Manager and the Manager of the electric utility because of their mishandling of the nuclear plant;

• a huge rally organized in a muddy field outside the South Texas Nuclear Project’s perimeter.  Hundreds of people traveled from Austin and other cities to show a presence against the Nuke.

 

 

Eventually the Austin electorate was so disappointed with the nuclear project that they elected a Council majority in 1981 that would lead this new direction.

This tale of history hardly ends happily ever after. Austinites did vote to sell the City’s share of the Nuke in 1981, but Austin was a minority partner stuck in a bad contract.  The other partners would not buy its share; they needed Austin’s construction money too badly. The two nuclear units at South Texas were completed, one of them, 8 years late, in 1988, and the second, 7 years late, in 1989.

Though several lawsuits against the project were filed in which Austin was a plaintiff, only one of them yielded any noticeable damages for Austin, and even this money was a small percent of the total cost.   

But energy efficiency programs had a brighter outcome, in part because Austin could autonomously control their management. Since 1982, the City has collectively spent several hundred million dollars on efficiency programs.  The long-standing efforts have won numerous national awards and garnered international acknowledgement.    

Endnotes

U.S. Energy Information Administration, Dept. of Energy, is hereafter referred to as EIA.

1 Austin Energy total savings from energy efficiency programs from 1982 through 2015 multiplied by 1 pound of CO2 per annual kwh saved.  Savings from various annual reports.

2 Analysis of ERCOT consumption and bills from EIA, “Electric power sales, revenue, and energy efficiency, Form EIA-861, detailed data files,” Final 2015 data, October 6, 2016.  Online at https://www.eia.gov/electricity/data/eia861/

3 Fuel cost from EIA, Texas Natural Gas Price Sold to Electric Power Consumers, Data, 2006-2015.  Adjusted for inflation. Online at https://www.eia.gov/dnav/ng/hist/n3045tx3a.htm

4 Historical billing and consumption data provided by Austin Energy.

5 “Utility Cuts Off Natural Gas Supply for a City in Texas,“ New York Times, September 23, 1977.

6  U.S. Census Factfinder, Selected Housing Characteristics, Crystal City, TX, Data, 2011-2015 American Community Survey 5-Year Estimates.

7 Watterson, Thomas, “A court case produces a prosperous gas company,” The Christian Science Monitor, September 30, 1980.

8 Minutes of the Austin City Council, March 6, 1980, pp. 12-13.

9 EIA, “Petroleum and other liquids overview, 1949–2011,” Data, Annual Energy Review, Total Energy, Table 5.1a, September 27, 1012.  Online at https://www.eia.gov/totalenergy/data/annual/showtext.php?t=ptb0501a

10 “Congress Gets Energy Plan,” Austin American-Statesman, November 9, 1973, p. 1.

11 “City Explaining Nuclear Power,” Austin American-Statesman, November 6, 1973, p. 6.

12 City of Austin, Election History, Web site.  Online at http://www.ci.austin.tx.us/election/search.cfm

13  Parker, Larry and Mark Holt, Nuclear Power: Outlook for New U.S. Reactors, Washington, DC: Congressional Research Service, Order Code RL33442, Updated March 9, 2007, p. 3.

14 Smith, Michael B., “Homemade Solar Water Heater Constructed With Junk,” Austin American-Statesman, July 9, 1979.

15 Hight, Bruce, “No-Nuke forces vocal at hearing,” Austin American-Statesman, December 13, 1978, p. 1.