Austin Energy gets ready to study rate increase

Austin Energy is preparing to kick off a two-year process that officials hope will culminate in a rate increase in 2012 and develop a framework for the “utility of the future.”

 

The city-owned utility is scheduled to provide an overview of the process to City Council during today’s meeting. The utility has already lined up a consulting contract, with a price tag of up to $3 million over four years, to conduct a cost-of-service study and develop a new rate structure. The contract is expected to go before the Council for a vote next week.

 

The Electric Utility Commission has signed off on the contract, which is for four fiscal years in the event of an appeal to the new rates.

 

“This is just the beginning of a very long-term dialogue,” Mark Dreyfus, director of regulatory and government affairs, told the EUC Monday night.

 

Austin Energy, which is facing a $46 million budget shortfall next year, hopes to achieve three things with the study: enhance revenue, rebalance the rates among the various classes of customers, and create the framework for a new business model.

 

With energy efficiency increasing among ratepayers and green initiatives catching on, Austin Energy has to find a new way to make money as customers use less energy.

 

Coming up with a new business model will involve “unbundling” costs, or determining how much it costs Austin Energy to generate energy and how much it costs to deliver that energy. A new rate structure will be based on that information, Dreyfus told In Fact Daily.

 

Under the proposed contract, Austin Energy would hire consultants R.W. Beck, Inc., of Austin, and J Stowe & Co., LLC to share the work of conducting a rate study, developing a new rate structure, gathering extensive public input, and implementing the changes incrementally. They would also help the utility prepare for a rate case appeal before the Public Utility Commission of Texas.

 

Dreyfus said the utility anticipates that ratepayers will appeal the changes. Austin Energy last raised rates in 1994, a process that requires a rate study such as this to justify the increased rates, which would be spread across the various classes of customers.

 

An appeal can be initiated by 5 percent of the customers who live outside the city’s boundaries if they file within 45 days of the new rates being approved and published.

 

The study would be delivered in three phases over the contract period.

 

Phase 1 would begin in November and run through October 2011. It would involve creating a Public Involvement Committee comprised of about a dozen members from across the community, who would meet monthly, with an independent facilitator to guide the meetings. The utility would also hire a residential rate adviser, who would advocate specifically for residents during the discussions, Dreyfus told the EUC.

 

“I’m a little bit worried, to be quite candid, of having the whole thing stacked in favor of large industrial customers because the people are paid to be in the room at that time,” Commissioner Stephen Smaha told Dreyfus.

 

“We’re hopeful that with the process, with the outside facilitator, with the procedural steps we’re going to put in place … that it will be a balanced committee,” Dreyfus said.

 

Phase 2 would run from spring 2011 through the following spring, during which time the consultants would reach out to a broader set of constituencies in the community, including neighborhood groups. The third, and final, phase would involve expanding the process to the general public with town hall meetings between winter 2011 and spring 2012.

 

Formal hearings before the Electric Utility Commission would take place in the spring and summer of 2012, with a Council vote on the rate changes expected that summer.

 

Any approved changes would take effect October 1, 2012.

 

Commissioner Michael Webber expressed concern that the proposed timeline is too long.

 

“I’m a little alarmed that by the time we come up with a solution, all our problems might have changed,” he told Dreyfus.

 

Dreyfus said staff felt the timeline is merited because it has been so long since the utility has changed its rates.