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Advocacy groups plan alternate rate structure for Austin Energy

Tuesday, September 27, 2011 by Bill McCann

In what is likely to focus added attention on Austin Energy’s proposed electric rate increases, representatives of local consumer and other advocacy groups are banding together against the rate structure proposed for residential customers. They argue that the rate structure would be unfair to residential customers, particularly low-end users, and discourage conservation.


But rather than fight the rate proposals simply with rhetoric, participants say they also hope to develop their own rate alternatives and present that information to the advisory Electric Utility Commission before Oct. 17.


“In developing its rate structure, Austin Energy has provided a lot of data, which is enabling us to become well-informed,” said Tom “Smitty” Smith, director of Public Citizen Texas. “We want to take advantage of that opportunity and use the information to develop a package of rate structure alternatives that we can support. We hope to find ways to lower bills, lower pollution, and encourage new jobs through energy efficiency and renewable energy deployment.”


Advocacy-group members representing 10 church, consumer, low-income, environmental, energy efficiency, renewable energy and tenants groups in the Austin area have been meeting together regularly on the rate issue. 


Representatives of several of the groups, including the Texas Legal Services Center, Texas ROSE, Public Citizen Texas, and Sierra Club, have spoken regularly at the Electric Utility Commission on the issue over the past several months. The commission has been holding public meetings on the proposed rate package before making recommendations to the City Council later in the fall. The commission has held two meeting and has scheduled others for Oct. 3 (which will focus on commercial and industrial rates) and on Oct. 17.


The various groups decided to work together after determining that they had many common interests and questions about the impact of the rates, according to Lanetta Cooper, Texas Legal Services Center attorney with extensive experience in public utility and rate issues.


“As we began to understand more and more what was happening with these rates, more and more people with similar interests have become concerned,” Cooper said.


Advocacy group members point to a number of concerns, including:


·      A significant increase in the customer charge on bills and a new electric delivery charge, which they say could hurt low-income people and those who already conserve and use low amounts of electricity;

·      Revenue requirements that Austin Energy says it needs to operate the system – and are used in calculating rates – contain “hidden” costs, such as nearly $10 million to run the city’s economic development program;

·      Questions whether adequate assistance will be available for low-income and fixed-income customers; and

·      Questions about whether the rate proposals may discourage energy-efficiency and renewable energy efforts.


Austin Energy has been working on updating its rate structure for the better part of a year. The new rates would be the first change in basic rates in 17 years. Austin Energy officials estimate that the utility needs $1.136 billion in revenues annually to pay the costs of expanding, operating and maintaining the electric system. They also estimate that revenues would fall more than $131 million short of what is needed under existing rates. The proposed rate increase- which would vary from about 70 percent for low-use residential customers to 11 percent for average-use customers – was designed to bring revenues most of the way there. 


One issue that has drawn criticism from members of the Electric Utility Commission and consumer advocates is the fact that the Austin Energy budget contains millions of dollars of funds to pay for city-sponsored activities not related directly to energy, such as the city’s economic development program. Those have been City Council policy decisions, not the utility’s. Veteran EUC member Shudde Fath last week repeated her oft-stated comment that the Council continues to use Austin Energy as a “cash cow” to pay for non-energy programs.


In developing the rates, utility officials say that they have taken steps in the rate design to have the various ratepayer classes, including residential, commercial and industrial, pay closer to their fair share of what it actually costs the utility to serve them.


Consumer advocates argue, however, that the methodology used by the city to calculate that fair share favors larger power users over residential customers, who already pay significantly more than large commercial and industrial customers for each kilowatt-hour of electricity used. Instead, consumer advocates favor a different methodology, which they say not only has been recommended by Austin Energy’s rate consultants, but is more in line with how the utility operates in the Texas power grid.


Austin Energy officials counter that the cost-of-service methodology used by the utility is not only widely applied and accepted in Texas but rewards customers who use power efficiently.

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