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*THE AUSTIN* CHRONICLE Austin politics. Austin entertainment. Austin iconoclasm. For seven years now, the Austin Chronicle has been keeping tabs on the social and political kaleidoscope that is Texas’ capital city. From the South Texas Nuclear Project to Greater Tuna, from the war between the developers and the environmentalists to the battles for arts funding, from Bill Clements to the Butthole Surfers, the Chronicle covers it all. Available free at over 350 locations throughout the central Texas area, or by Louisiana, will save it from its financial noose. Its plight is a result of resuming construction of the River Bend nuclear power plant in Louisiana. The plant is operating, but GSU no longer needs the power and cannot sell it in a surplus market. The El Paso Electric Company, after years of financial struggle and adversity, appears to have survived its ill-advised participation in the Palo Verde Nuclear Project in Arizona. Like Gulf States, after years of delay to complete the plant, it now discovers it does not need the electricity from Palo Verde. Its rates are the highest in the state. Texas-New Mexico Power Company spent 40 years comfortably depending on other electric utilities for its power. Two years ago it decided to end that dependency by generating its own; it contracted to build four new lignite plants in Robertson County over the next four years. As a result, its credit and financial health are now in question. It faces the task of financing new investment that will double its present asset base. The two nuclear plants being built in Texas, South Texas and Comanche Peak, have overburdened the resources of all seven of their private and public owners, not to mention their customers. Even the utility subsidiaries of the Central and South West corporation, which have no nuclear ownership, have watched helplessly while their credit became tainted. Ratings for West Texas Utilities and Southwestern Electric Power were lowered in August solely for being sister utilities to Central Power and Light and Public Service of Oklahoma, which share ownership in nuclear plants. THE ONLY MAJOR UTILITY whose credit has not been affected, Southwestern Public Service of Amarillo, minded its utility business and retained its AA rating. It runs that business so well that it has gained a reputation for its excellent construction management for new generating plants; other utilities now hire it to manage their plant construction. And what about the Big Daddy of utilities, Houston Lighting and Power? HL&P and its three partners, the City of Austin, City Public Service of San Antonio, and Central Power & Light, began the South Texas Nuclear Project in 1972. Six years later, after management of the project had already begun to founder, HL&P’s management created a nonregulated parent, Houston diversify. First, it created Utility Fuels, which transported and sold all of HL&P’s fuel requirements to the utility at excessive profits; then it created Primary Fuels to enter the unregulated oil and gas business. The City of Austin has sued HL&P for mismanaging the South Texas Project during this period of time. In 1985, Houston Industries formed a 5050 partnership to buy from Westinghouse its Group W Cable TV franchises, among which are El Paso, Galveston, and Palestine. The other 50 percent of the partnership, Paragon, is owned by a Time, Inc., subsidiary, American Television and Communications. So far, like Primary Fuels, Paragon has been a consistent money loser for HI. ATC didn’t like the sky-high price Rogers Communication asked for its cable system and refused to participate. That didn’t discourage HI, which controls the credit and cash flow from the nation’s tenth largest electric utility. It paid a record of $1.3 billion for Rogers Cable, including $550 million for the system in San Antonio. People in San Antonio who are suffering from HL&P’s mismanagement of South Texas nuclear plant show a healthy reluctance to let Big Daddy get another hand in their pocket. What will be the effect of this statewide decline of utility health and credit on rates and services? How much will the costs be and who will pay them? It’s easier to guess who will pay than how much they will pay. The most direct and obvious cost, higher interest rates for lowered credit, will be borne 100 percent by ratepayers. Interest rates for BBB bonds are about 0.8 percent higher, compared to A bonds, and 1.5 percent higher than for AA. A prediction can be made that the cost of nuclear decisions, both prudent and imprudent, will be borne 85 to 95 percent by ratepayers; utility stockholders will absorb the rest. Diversification costs will be borne more like 50 percent by stockholders. The ultimate cost to utility ratepayers in Texas is really incalculable. But one thing you can predict: the costs will all eventually be paid and the ratepayers will pay most of it. Our grandchildren will still be paying for it 40 years from now. That payment will not all be direct, in the form of higher utility rates. As gas and electric rates have risen to pay for these mistakes, business customers have been forced to reassess their energy costs and rates. Unlike residential, commercial, and small-business ratepayers, major corporations have alternatives. They can go where energy is cheaper, or they can buy or generate energy themselves. When they do, it leaves Texas with even higher rates, fewer jobs, and lower economic health. The depressing economic effects of higher rates and declining growth are not just theory or speculation. The depressed Beaumont-Port Arthur area already feels the effect of these alternatives at work and South Texas and the Valley will soon begin to feel it. The rest of Texas cannot be far behind. THE TEXAS OBSERVER 15