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EUC backs most of proposed Austin Energy rate package

Monday, October 24, 2011 by Bill McCann

During more than six hours of discussion, dissension and compromise at two meetings last week, the advisory Electric Utility Commission (EUC) approved a long list of recommendations that largely concurred with Austin Energy’s proposed electric rate package.

 

But the process was not easy, nor was it pretty, especially the debate over some of the more controversial parts of the package. The complex package, packed with financial and technical details, required 27 separate votes by the seven-member, City Council-appointed EUC at meetings on Monday and Thursday. The EUC is under orders by the Council to make recommendations to the Council by the end of October. Those recommendations are expected to include both majority and minority opinions.

 

The current rate package calls for a systemwide rate increase of about 11 percent, but percentage increases in customer bills would vary greatly depending on the customer class and the amount of power used.  

 

Some of the numbers could change, however. Austin Energy officials said Thursday they will review the information they have heard from the public, as well as the EUC recommendations, and come up with a final proposed rate package, which they plan to send to the City Council by mid-December. Public attention on the issue then will focus on City Hall.   

 

The EUC, concerned in part that it could be making recommendations on issues that might change in the intervening weeks, requested that Austin Energy officials brief the EUC on the final package before it goes to the Council.  In any event, it now appears that it will be well into next year before the Council takes final action on electric rates.

 

During the EUC’s rate deliberations, two commissioners, Shudde Fath and Barbara Day, concerned about the potential impact of the new rates on small power users in particular, raised numerous questions. Day was especially critical and at one point warned: “We are going to see huge spikes for small users in the 40 to 50 percent range. We have to look at the very real impact that this is going to have on people.”

 

In the end, however, the EUC agreed – although not always unanimously – with the gist of the utility’s proposed rate overhaul. This included “unbundling,” or breaking down into line items on the bill, the various costs to serve customers; aligning rates by customer class to minimize subsidies among classes; setting a five-tiered energy charge where the cost per kilowatt-hour increases as usage increases; substantially reducing and simplifying the number of rate classes; and adding a “community benefit” charge on bills to recover costs of funding a customer assistance program, street lighting and energy-efficiency programs.

 

The EUC did recommend some specific changes during its deliberations, including cutting more than $20 million from Austin Energy’s proposed revenue requirement – the amount of money the utility says it needs to operate annually – and the basis for the rate increase (See In Fact Daily, Oct. 19, 2011). Representative of consumer groups and industry have argued that the reductions should be more on the order of $50 million. And Day, at one point, suggested as much as $100 million in adjustments to the revenue requirement, prompting a sharp reaction from Austin Energy officials.

 

Roughly $10 million of the EUC’s proposed total reduction would be from eliminating the utility’s funding for city economic development and climate-protection personnel (EGRSO). The EUC has opposed the utility’s funding of the city’s economic development program for years. But the City Council, which made that decision in the first place, has not budged, and is not expected to do so this time around, EUC members concede.  

 

EUC members and others believe the utility’s funding of non-energy programs is a potential target if the rate case ends up at the Public Utility Commission of Texas.  (While city residents cannot appeal to the state commission, those customers living outside the city limits can appeal.)  

 

The EUC also recommended reducing the monthly customer charge on utility bills from the $15 proposed by the utility, to $12. The current customer charge is $6 a month, but the utility has argued that $6 is less than one-third of the actual cost of providing customer service, meters, a call center, billing and other related costs. Representatives of consumer and other groups have argued in response that more than doubling the current customer charge, combined with a proposed new $10 energy delivery charge on all bills, would be onerous to people who do not use much electricity and to those who can least afford it.

 

The EUC supported dramatically reducing the number of customer classes, but recommended adding back a class for public schools to give them some rate relief, especially in light of recent budget cuts. The EUC recommendation included providing relief to school campuses with multiple meters and, therefore multiple accounts, because they have a number of buildings.

 

The cost of multiple meters was one of the issues raised by Nichole Conley-Abram, chief financial officer at the Austin Independent School District when she addressed the EUC at the onset of Thursday’s meeting. She was one of several local school district officials to raise concerns about the impacts of electric rate increases on their school systems on top of state budget cuts.

 

The EUC also supported Austin Energy’s idea to fundamentally change the way the utility pays for low-income customer assistance by incorporating a funding mechanism into the rates. But the EUC did not exactly go along with how the utility proposed to fund the program. 

 

Austin Energy recommended charging all customers .065 cents per kilowatt hour of electricity used for pay for the customer assistance program. (For a typical resident using 1,000 kilowatt-hours a month, for example, the fee would add 65 cents to the bill.) The utility’s residential rate advisor, Bob Wittmeyer, recommended charging .065 cents per kilowatt-hour for all commercial and industrial customers, and a flat $1 a month for all residential customers – in line with an Austin Energy survey showing most people would be willing to pay $1 a month for help the poor with their bills.

 

The EUC decided to take Wittmeyer’s recommendation, but carried it a step further by recommending that all residential customers using more than 2,500 kilowatt-hours a month pay $3, instead of $1. The overall effect would be to more than triple the $3.1 million that the utility currently earmarks for the program annually.

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