Austin Considering Sale of District Cooling System

Austin May Sell its District Cooling System

In a move that could have significant implications for the city’s energy landscape, Austin City Manager T.C. Broadnax has indicated that the city is considering selling its district cooling system. A decision on hiring J.P. Morgan Securities LLC for strategic advice on this possible sale is scheduled to be presented to the City Council on July 18.

Comprised of four plants – two located downtown, one in the Domain and the other at Mueller, the district cooling system offers a crucial service that aids in efficient cooling of large buildings.

The Cooling System Explained

Rather than each building having its own air conditioning system, district cooling employs electricity at off-peak times — typically during the nighttime — to chill water. This cold water is then used by buildings for cooling purposes the next day, thereby reducing overall peak energy demand. Named after local environmentalist Paul Robbins, the city’s downtown cooling system has been operational since 2001.

Why Sell?

Despite generating a profit for Austin Energy, the system requires substantial investment to keep up with the city’s growth. As the memo to Council by Broadnax states, “Austin Energy is financially limited in its ability to maintain and improve the core electric system while also growing district cooling to its full potential.”. The proposed sale might improve Austin Energy’s ability to service its customers by investing the proceeds from the sale in grid enhancements and debt repayment.

Security of Electric Service

Broadnax assured in the memo that Austin Energy’s core electric service to over half a million customers wouldn’t be affected by the potential sale. The district cooling system operates independently of the core electric system.

Community Response

Community response to the potential sale has been marked by concern. Paul Robbins, the environmentalist after whom the city’s downtown cooling system is named, pointed to the Austin City Charter which restricts the council’s power to sell substantial components of municipally owned public utilities.

Doug Greco, a city mayor candidate, questioned the move on social media platform X, expressing concern about the possible privatization of a critical energy efficiency and climate protection program.

Going Forward

If approval is obtained from the council to trigger the process, it is expected to take 9-12 months to complete. Even after the attractive offers, the city council would again need to authorize the transaction.

J.P. Morgan’s Role

J.P. Morgan Securities LLC would work as a financial advisor to the city, providing strategic advice and analysis support. If a sale is completed, JP Morgan would charge a percentage fee of the sale proceeds. Any expenses associated with other agreements would be paid out of existing budgets and reimbursed from any potential sale proceeds.

It remains to be seen how this story unfolds—how the City Council responds to the proposal and how the people of Austin react to this potential change in their city’s energy framework.