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Austin Energy head says rate hike needed to meet generation goals

Friday, January 28, 2011 by Josh Rosenblatt

Note: This story has been corrected since an earlier version.

 

A rate increase of more than 10 percent is coming for all Austin Energy customers sometime between 2012 and 2013, General Manager Larry Weis told Council yesterday. That increase, he said, is necessary if the city hopes to meet the goals set out in its generation plan.

 

The last time the city saw a utility rate change was 1994. Since then, said Weis, electricity bills for AE customers have increased only 2 percent annually—and that was due to increased fuel costs—a number lower than the Consumer Price Index for electricity in urban areas.

 

However, increased operating costs and outdated rate structures have put Austin Energy in a financial predicament.

 

“We have to design a new base rate; we have to put in place something to ensure our future progress,” Weis said, pointing out that that the upcoming rate hike will be a one-time “resetting (of) the clock.” “We’re not suggesting any kind of future rate increases at this point. We want the initial rate change in 2012-2013 and then after that point in time, we want to monitor ourselves and see how we do going forward.”

 

Austin Energy is walking a bit of a financial tight rope these days, as it tries to accommodate City Council’s demand for more renewable, yet still affordable, energy.

 

Last April, Council approved a generation plan designed to increase the use of renewable energy. Under the terms of that plan, Austin would get 35 percent of its energy supply from renewable power sources like solar and wind by 2020. The plan also calls for that goal to be reached as affordably and predictably as possible.

 

“We’re headed into uncharted territory a little bit for the utility, where we’re going to require a lot of renewable resources,” Weis told In Fact Daily. “Thirty-five percent is our goal, and I think it’s definitely doable. Council just wants to make sure that we are not going to throttle the rates beyond the relative position we are today and make ourselves an expensive utility.”

 

Currently only about 10 percent of the city’s energy resources are renewables. As laid out in the generation plan, that number will rise as the city’s dependence on carbon-emitting fuels dwindles. For example, the city currently uses 1,029 megawatts of coal and nuclear power and 1,544 megawatts of natural gas. According to the plan, in 2020 that nuclear/coal number will be unchanged, while natural gas usage will increase by only 200 megawatts.

 

Compare those numbers to those of renewables like wind and solar. The city currently uses 439 megawatts of wind but only about 4 MW of solar. Another 30 MW of solar is slated to come online with the completion of the Webberville installation. In 2020, the city hopes to generate about 1,000MW from wind and 200 from solar sources.

 

“What the generation plan is saying is that there will be no increase in the city’s use of coal or nuclear,” Weis told In Fact Daily. “That’s the plan for right now.”

 

At least one group hopes that plan changes. NRG Energy Inc., one of the owners of the South Texas Project nuclear plant, has been lobbying Austin Energy to sign an agreement to get more of its power from two new proposed nuclear units on the site.

 

NRG Director of Communications David Knox told In Fact Daily that NRG sent a letter to Austin Energy earlier this week with a number of different purchase power options to consider. “It’s not a proposal, but it’s more of a foundation for a discussion and has a number of options that we can look at,” Knox said. “We’re looking forward to starting that discussion. We haven’t gotten into the substance of the letter with them, but we know that Austin Energy is very interested in having that discussion.”

 

Asked about that letter after his presentation to Council yesterday, Weis told In Fact Daily that he and his colleagues were keeping an open mind but that they had not yet met to discuss any of NRG’s proposals. “We received a letter describing a concept but we haven’t sorted it out yet,” Weis said. “Like all energy resources, we’re going to remain open to evaluating everything. But do we need any more baseload power right now? No.”

 

NRG President of Advanced Technology Initiatives (and former AE General Manager) Juan Garza told In Fact Daily earlier this week that one of the options his company is interested in talking to Austin Energy about is trading part or all of Austin’s share of the Fayette coal-fired power plant for a similar amount of energy from the new nuclear units proposed for the South Texas project. That would help Austin achieve its commitment to providing clean power to its customers, Garza said, pointing out that Austin has a reputation as a green leader to uphold.

 

Weis admitted that the Fayette coal plant is an issue he often hears raised but said it may not be feasible to deal with at the moment. “To get our climate protection done, we would like to eventually do something about Fayette. And that’s a strategy I would like to deal with right now, but we have these more high-priority items to deal with,” he said.

 

“This is our generation plan right now, and I’m sticking to it.”

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