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Consumer advocates criticize proposed electric rate hike

Friday, September 2, 2011 by Bill McCann

As expected, Austin Energy officials got their first barrage of criticism of a proposed electric rate increase last night when a dozen speakers, generally representing residential ratepayers, spoke out at a special meeting of the advisory Electric Utility Commission (EUC). 

 

Most of the speakers voiced concerns about the impact that the proposed rate increase would have on residents, especially lower-income electric ratepayers, who also face increases in water rates and taxes amid a struggling economy.

 

“There is going to be a triple whammy on the citizens of Austin,” said Kathy Stark, executive director of the Austin Tenants’ Council, referring to the potential energy, water and tax increases by the City of Austin.

 

On Monday, Austin Energy released details of its rate proposal, including four rate options for residential customers. The option preferred in the rate analysis would increase residential electric bills about 60 to 70 percent for low-end users, about 24 percent for higher-end users and 11 percent for average users.

 

Meanwhile, small business customers would see rate increases of more than 20 percent, while larger commercial customers would see increases in the 6 percent to 9 percent range. Industrial customers would see increases between 1 percent and 15 percent.

 

Large industrial customers, however, currently have long-term contracts with Austin Energy that mean they would not see any increases for several years. 

 

Austin Energy officials say they need to raise rates – the first increase in base rates in 17 years – to pay for the rising costs of expanding, operating and maintaining the city-owned electric system. They project a need for $1.136 billion in yearly revenues. With current rates they estimate that revenues would fall almost $132 million short of what is needed.

 

Last night’s EUC meeting was the first opportunity for citizens to speak formally on the rate proposal. The commission is scheduled to hear public comment at three more meetings in September and October before making recommendations to the City Council, which will have a final say on the rates.

 

About 25 citizens turned out at last night’s meeting to go along with an almost equal number of Austin Energy employees who attended. About half of the citizens spoke. Several speakers promised to be back to raise more questions and seeks answers at the upcoming commission meetings.

 

Austin Energy General Manager Larry Weis started off the session telling the commission: “Ratemaking is not an easy business and in public power it is particularly unique.” 

 

Weis and several other executives then ran through a summary of Austin Energy’s decision-making process in developing the rate proposals. They were followed by Bob Wittmeyer, a consultant hired by Austin Energy as residential rate advisor.

 

Wittmeyer divided his presentation into what he thought Austin Energy did right and what it did wrong. On the “right” side, he backed the proposal to increase the customer charge from the current $6 a month to $10 to $15 a month and to add an energy delivery charge. He supported the five-tier rate structure where ratepayers pay higher rates the more they use. He also supported the community benefit charge that includes a funding mechanism to help poor people pay their bills. However, he supported charging all customers a flat $1 a month, rather than the utility’s proposal to charge all customers .065 cents for every kilowatt-hour used, to pay for the energy-assistance funding.

 

On the down side, Wittmeyer’s biggest concern was the methodology that Austin Energy chose to calculate how to allocate the utility’s costs to serve the various customer rate classes – residential, commercial and industrial. He advocated a different methodology, which he said was more in line with how the energy market operates in Texas, and would reduce the proposed residential rate increases by 20 percent.

 

Following Wittmeyer’s presentation, members of the public got a three-minute shot to make their case to the commission. Speakers focused on several issues, including the cost-of-service methodology and the proposed increase in the customer charge on residential bills.

 

Consumer advocate Paul Robbins said the $15 customer charge under consideration would be “unprecedented” among publicly owned utilities in Texas.

 

“No large municipal utility in the state approaches this customer fee,” Robbins said. Other public utilities in the state have a customer charge in the $5 to $9 range, according to a chart he provided.

 

Craig Nazor, a member of the Conservation Committee of the Austin Sierra Club, said the proposed rates disproportionately affect low-end users and do not go far enough to encourage energy conservation among higher-end users.

 

Tom “Smitty” Smith, director of the Public Citizen Texas office, said he was concerned that a proposed energy efficiency charge to be included on bills would send the wrong signal to customers.

 

“If energy efficiency is reducing (the utility’s) costs, why is it a charge as opposed to a deduction?” Smith asked.

 

The lone industry speaker of the night was Andy MacFarlane, business development manager at Data Foundry, and a frequent critic of Austin Energy in the past. While MacFarlane raised some issues, he was generally conciliatory and praised Austin Energy for using the cost-of-service methodology supported by the larger power users.

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