Newsroom

Balancing Texas’ Energy Future

Tuesday, July 31, 2007

It’s an honor to be here speaking to you today. You all are among Texas’ most vital resources as we plot our course for the success, prosperity, and development we’re all striving for. So I feel particularly privileged to speak to you about one of the most important issues facing our State today: Where Texas is headed, or should be headed, in terms of electricity and power for our future, and how you all are an essential part of helping us get there.Of course, it’s already been an unusually dramatic year for your industry. Right as I took office in January, the Legislature found itself in the midst of a heated high-profile debate. On one side were ominous – albeit vague – messages about the stability of Texas' energy supply. The State's largest utility, TXU, was in the middle of its sprint to permit 11 new coal fired power plants, saying the state was going to run out of power if we didn't build the new plants. At the very same time, environmental groups, city mayors, and many in the legislature asked TXU to put its plans on ice because they – well, we – worried that all of these new plants would harm our air quality, our friends’ and neighbors’ health, and even our planet’s climate. You all probably know how the story played out. A lot of ideas were debated and discussed – sometimes not so nicely – and, in the end, it didn’t amount to much change. A private equity firm came in and offered to scrap eight of the proposed plants; they promised to lower rates; and they promised to turn TXU into a more environmentally responsible company. If you invite me back to speak to you again next year, maybe I can report on how that all turned out. In the meantime, here’s my take on why you should care about the TXU debate, what happened and didn’t happen, and what it all means for the future of Texas.The world is going through two important transitions in the economy. The first is a transition related to the "entity" that will hold economic power in this century, or at least the first part. In the old days, empires held economic health. In the last century, we saw nation states that were super powers as the entity holding economic prosperity. In this century, it will be regions. No longer do you need large masses of land, big populations or even to be a financial center. Because, today, businesses can access labor, markets and capital anywhere in the world any time of day with the push of button and a computer screen.The second transition involves the "asset" that will lead to economic power. In the old days, it was land. Them with the land had the power. That shifted in the last century as part of the industrial revolution. The asset became, well, industrial assets. The whole economic development paradigm was focused on getting the textile plant, or tire factory or glass facility to locate in my community. It immediately created jobs. Maybe not high skill or high paying jobs. But jobs.In this century, it's not land or industrial assets. The key is knowledge. Imagination. Creativity. Or, simply put – people. People who, as I just said, can go anywhere they want to go.You've seen this maybe more than most. Look at the growth in some of your Co-ops. Even twenty-five years ago, if you wanted to work in the Austin economy, you lived pretty near Austin. Now, people can work as part of the Austin economy – the regional economy – but live in a place where they get their energy from Bluebonnet, or Pedernales or Central Texas Electric Coops. So what lessons did we learn in the last session of the legislature that can advise us while we navigate these transitions?The first thing we learned from this session is that “cheap” can really be pretty costly. TXU came forward with a proposal to create a vast amount of what it labeled new, cheap power, but was nevertheless met with considerable opposition from not just the usual suspects but also local officials, numerous business leaders, and even parts of the energy industry itself.The reason, I think, is that it has become apparent to some people around the state – in Houston and Dallas and pretty much anywhere where the air violates federal standards – that there are serious business costs in areas with dirty air. It’s not just the wrath of the federal government – though, don’t get me wrong; it would be catastrophic for any region to lose all of its federal highway money over dirty air.The truth is that people--talented people who make up the workforce – don't want to live in places where their kids can't play t-ball and run to second base without needing one of those nebulizers. And, so, businesses don’t want to locate in areas where employees can’t breathe the air. The creative, innovative, energetic employees that help make your co-operatives and other businesses so successful don’t want to live in places where their kids could develop asthma simply from playing outside. Health costs are higher, sapping more tax money. Kids get sick and don’t learn as much, threatening the economic future of a region or even the state.Now, these costs don’t necessarily show up on the bottom line. But they’re out there, and they’ll become obvious enough, even if it’s our kids who have to pay them.And that’s why so many people who are invested in the future of this state came out so strongly against something they should have loved: cheap power. It’s because the power wasn’t really cheap. And, we're starting to see Texas thinking about some of those costs.The second lesson to take from this session is that, while many of us operate in a deregulated market, that doesn't mean we can abdicate our responsibility to plan for our future.To tell you the truth, I had a pretty tough time with this debate when it got started. There was no shortage of nightmare scenarios that were presented to anyone who raised any questions at all about whether these 19th Century polluters were really such a good thing. Inevitably, the supporters raised so many specters of rolling blackouts and starved air-conditioning units that opponents may as well have been the moon in an eclipse, passing in front of the sun and putting all of Texas in the dark.Sure that's scary, but what's scarier is that the state could let it get that bad in the first place. The fact is that Texas doesn’t have a plan or a policy when it comes to energy. We know that if we keep doing business the way we have been, and if we keep growing the way we have been, we’ll run out of power. We need to make sure we have the tools and the ability to get us to a point where our demand forecasts account for conservation and energy-efficiency, and that they're measured, reliable, and real.We need to make sure we're ensuring ERCOT's independence and protect this essential agency from market manipulation and profit motives. And we need to make sure the transmission capabilities are there to accommodate alternate and clean sources of energy production.We also need to take a more comprehensive look at our energy policy in this state. We either need to create a new entity, or open the lines of communication between existing entities, to provide Co-Ops and private energy producers the framework, the policies, the guidance and the assurances they need to do their jobs, balance the interests, and protect their customers.In fact, I offered an amendment to Chairman Senator Troy Fraser's Senate Bill 484 giving the state’s Electric Utility Restructuring Legislative Oversight Committee authority to take a comprehensive look at our state energy policy. While it hopefully will facilitate communication between energy agencies and prevent companies from scaring Texans into choosing between more power plants and blackouts, the amendment also will force the state to think about conservation, efficiency, and other ways to impact available capacity other than just building more plants.The third lesson of the last year is perhaps the most important: Texas has a 21st Century economy, a 21st Century population, and 21st Century challenges. We must work toward 21st Century solutions, not fall back on 19th Century habits.We can’t meet our needs with any one approach, and I firmly believe we can’t solve our challenges with the tools we have now. Success – for all of us, for Texas – demands a comprehensive approach where everyone works together for the common goal of a secure, reliable energy picture. And success also demands innovation – we must develop new strategies, and improve the ones we have, if we are going to provide not only for ourselves but also for our children.On that point, I’m happy to report that Texas continues to position itself to be the leader in cleaner, 21st Century energy generation that it was in the vital, but admittedly less-clean, 20th Century power sector.We've had great success cultivating a wind industry here, in large part by creating a renewable portfolio standard. Now we can do the same for other forms of energy production. The fact is that Texas already has the entrepreneurs and companies that make up the foundation of those industries. We just need to implement policies to ensure that we'll buy the power and create the incentives that will allow them to compete with traditional forms of energy.Let me say again, clean energy should not be dismissed simply as “expensive” energy. It should be embraced as the future of your industry. You must not wed yourselves to a 19th Century business model that will hurt Texas and, ultimately, leave your customers in the dark. You must not leave the solutions to so-called environmentalists and others who don’t understand your business or your customers. You must be part of the discussion so the state will avoid quick fixes that give one industry the primary responsibility for cleaning up everyone’s air.I believe clean air is good for business. Clean air helps our economy by allowing existing businesses to grow and new businesses to locate here. And it helps our workers by keeping them healthy and attracting them from all over the world.There is no conflict between promoting clean air and business interests. Rather, there is a natural alliance for the long-term health benefits and economic advantages that clean air will bring to Texas. Let me give you just one example: When I was mayor of Austin, this region became the first in the state to enter what’s known as an Early Action Compact with state and federal environmental regulators. In essence, the business community, working with local officials, took voluntary steps to improve air quality in Central Texas. We did this to avoid harsher federal penalties and to craft an innovative solution that works for our people and our economy.And, you know what? It worked. Seven years later, Austin has continued to stay in compliance with the Clean Air Act, and our economy hasn’t suffered – it’s boomed.(It’s a bitter irony, I guess, that one of the biggest threats to our air quality is one of the coal plants that the TCEQ has actually approved.)Look, you all live and work all over the state. You are faced with these difficult issues every day, just doing your jobs. I firmly believe that the state cannot address its real energy crisis without your help.You should demand that your elected officials take this issue seriously. Let them know you expect them to be planning for our future, balancing the needs for new energy production, and the impacts to our environment, our health, and our economy. Let them know that you expect them to promote and support innovation, to create markets that help clean and renewable energy sources become competitive and cost-effective, and to ensure that new jobs and investment dollars come to Texas. Let them know you expect them to help you serve and protect your customers – not just now, but for 50 years – by offering sufficient, affordable power.And let them know that, if they do anything less, they're letting you down. In closing, let me thank you again for inviting me to speak. I hope you’ll allow me to be your partner in our mutual effort to prepare Texas for tomorrow, next month, next year, and the next generation.Thank you, and God bless you.