Nuke investment will require vote
But Austin Energy could get permission today to borrow for other expansions without a referendum

By Kate Alexander
AMERICAN-STATESMAN STAFF
Thursday, January 10, 2008

Austin Energy will no longer need voter approval to borrow money to expand or build power plants, except in the case of nuclear power, if the City Council approves a financial policy change today.

The utility is seeking more flexibility in how it pays for capacity expansions but will draw the line at nuclear generators. The water utility has a similar long-standing policy.

The subject might soon come into play because Austin Energy plans to begin gathering public input this spring on how the utility should provide for the community's future power needs.

NRG Texas LLC, the owner of the South Texas Project, has proposed expanding the Matagorda County nuclear plant in which Austin owns a 16 percent share. Austin has until March 4 to say whether it will participate.

Austin Energy spokesman Ed Clark said the nuclear proposal is being evaluated with the help of a consultant. Also under review is whether the utility has sufficient information to make a decision, he said.

The City Council would decide on participating in the expansion.

The policy change before the council today would allow Austin Energy to use short-term debt, which does not require voter approval, to finance major capital projects, except new nuclear generation units. But voter approval would not be required if money had to be borrowed to build a plant powered by coal, natural gas or any other fuel.

Under the current practice, short-term debt is allowed only for Austin Energy's routine capital needs. Major projects are paid for with cash or by revenue bonds approved by voters.

The last revenue bond election for electricity infrastructure was in 1992.

Council Member Betty Dunkerley said short-term debt is the cheapest form of borrowing available to the city.

"But we also have said that we would not do any nuclear expansion or new nuclear stuff without a vote of the people so that is why we excluded it from the policy," Dunkerley wrote in an e-mail.

Elaine Hart, Austin Energy's chief financial officer, said the change would give the utility more flexibility to do electricity generation projects because debt can be issued quickly and incrementally.

"It opens up the door for some of the renewable projects we would like to do," Hart said, such as a planned concentrated solar project in West Texas.

Despite the policy change, the council could still take any bond issue to the voters, Hart said.

Austin voters should certainly have a vote on any investment in nuclear power, said Karen Hadden, executive director of the Sustainable Energy and Economic Development Coalition, a statewide environmental group.

But voters should also be able to weigh in on coal projects, Hadden said.

"Those are projects that citizens in Austin care about and want to have a voice regarding," Hadden said.

A coal gasification plant, which emits less pollution than a traditional coal plant, could be on the horizon for Austin Energy.

Last year, the utility bought land in Matagorda County, and a coal gasification plant is said to be a possibility for that site.

South Texas Project

Voters approved the city's participation in the Matagorda County nuclear project in 1973. A series of bruising battles ensued over how to pay for the plant.

Today, Austin owns 16 percent of the plant, and San Antonio's CPS Energy and NRG Texas LLC own the rest.

NRG announced in September that it would apply for a license to expand the South Texas Project. Austin Energy has until March 4 to notify NRG whether it plans to invest in the expansion.

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