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Austin Energy considering increased customer charges

Monday, April 25, 2011 by Bill McCann

The long and arduous process of updating Austin Energy’s electric rates for the first time in 17 years is gaining traction.


Austin Energy is well into its work of drafting updated rate structures for residential, commercial and business customers. Rate increases are expected, but just how much rates will need to be adjusted for the different customer classes is still to be determined. Staff recommendations are several months away.


Using 2009 as its test year, Austin Energy has come up with a preliminary figure of nearly $1.12 billion for the total revenue required to run the utility—with total revenues from rates for that test year at $999 million. This leaves a revenue gap of about $119 million, or 11.9 percent.


Council members will get a chance to hear about the actual costs of running Austin Energy and the projected budget for 2012 at Tuesday’s work session.


The utility is taking a close look at the best way to recover fixed costs, including the costs of generating and delivering electricity. It is considering reducing the number of customer classes from 24 to 9. For the residential class, the utility is considering increasing significantly the customer charge, which currently is $6 a month on residential bills, to help recover fixed costs, according to rate-review documents.


In addition, it is considering replacing the current two-tier residential rate with a three or five-tier rate, with rates increasingly higher as usage increases. For example, under the three-tier structure, there would be one rate for usage up to 500 kilowatt hours a month, a higher rate for usage between 501 and 2,000 kilowatt hours, and another rate jump when usage exceeds 2,000 kilowatt hours a month. 


The utility in January named a 14-member Public Involvement Committee of individuals representing residential, commercial, industry and community interests, to provide feedback during the rate process. The committee has been meeting monthly at Austin Energy headquarters and is scheduled to meet again on May 4 at 6pm to discuss commercial and industrial rate structures.


Austin Energy staff has prepared a rate review schedule, which is to culminate in a decision by the City Council late in the year. At its April 18 meeting, the advisory Electric Utility Commission recommended approval of a resolution outlining the schedule. The resolution is expected to go to the council for consideration in the next few weeks.


The proposed schedule calls for Austin Energy staff to update the utility commission on issues arising from the rate review at the commission’s regularly scheduled monthly meetings during the spring and summer. Then city staff will roll out a report containing Austin Energy’s rate analysis and recommendations at a special meeting of the utility commission on Sept. 1. The commission will study the rate proposals at four meetings in September and October and will come up with its recommendations. 


The process will allow many opportunities for the public to comment, including through citizens’ communications at the utility commission and through a web site that Austin Energy has established for the rate-review process. The web address is


The proposed schedule calls for the utility commission to deliver its rate recommendations to the Council in October. The schedule also calls for the final Austin Energy recommendations and the utility commission recommendations to be considered by the Council during at least one work session before the Council takes final action in November or December. If approved, new rates would go into effect Jan. 2, 2012.

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