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Austin Energy officials make case to Council on electric rate increase

Thursday, December 15, 2011 by Bill McCann

Austin Energy officials made their formal case for an electric rate increase to the City Council on Wednesday, prompting wide-ranging questions from members seeking to understand the complex rate package and its potential impact on customers.


The package presented to the Council was very similar to the proposal rolled out by the utility initially last summer and run through the advisory Electric Utility Commission hearing and review process.


Council questions focused on everything from the impact of rate increases on schools and places of worship, to a utility program to help low-income people pay their bills, to the best methodology for allocating costs to the various customer rate classes. It was apparent from some of the comments and questions by Council members that they were already beginning to get bombarded with questions and complaints about the rate proposals from various constituents.


Austin Energy General Manager Larry Weis led off the four-hour Council work session saying that the rate increase not only is needed to improve the financial health of the utility, but to provide additional incentives for the utility’s solar and energy efficiency programs. Weis told Council members that cost containment is a major focus of the utility.  


“The effort to control costs and minimize future increases will be the top priority of mine after we get these new rates in place,” Weis said. 


The utility recently went through “a thorough and sometimes challenging process in soliciting public input,”  Weis pointed out, referring to meetings this past year of a Public Involvement Committee and the Electric Utility Commission.


“There are many different opinions and most are slanted towards savings for one type of customer at the expense of another, even inside rate classes,” he said.


Weis presented a proposed rate package closely matching the initial rate proposal that was the basis of several hearings by the Electric Utility Commission last summer and fall. The earlier version sought a total increase in revenues of $131 million a year for the utility, while the latest version seeks $126 million.


Yesterday’s revised package calls for an overall 12.5 percent rate increase (compared to 13 percent for the earlier version). It would be the first increase in the utility’s base rates since 1994. Under the latest proposal, residential customers would see bills increase by $10 to $20 a month – about an average 20 percent increase, according to utility figures. The earlier version was a 22 percent increase.  


Those percentages could vary significantly, however, depending on the amount of usage. For example, scenarios provided by the utility show  that a small apartment dweller with electric heat could see an increase of 40 percent in bills, while a person with an average-sized home with gas heat would see a 14 percent increase.


The new rate proposal calls for a doubling of the current fixed customer charge on residential bills from $6 a month to $12. Initially, Austin Energy staff had recommended $15, but followed a recommendation from the Electric Utility Commission to drop the fee to $12 in the final package.  An earlier proposed electric delivery charge of $10 a month remains.


Austin Energy also took a recommendation by the EUC and the utility’s residential rate advisor to increase funding assistance for low-income customers by charging all residential customers $1 a month and commercial customers 65 cents per 1,000 kilowatt-hours used to pay for the program. The new charges would increase annual funding for the program from the current $3.1 million to $7.2 million. Austin Energy then would use $1 million of the funds collected to pay for free energy improvements targeted to low-income customers with the highest usage. The $1 million figure in effect would double Austin Energy’s current annual funding for low-income home weatherization.


Acknowledging that they had received a number of emails and letters from school and church representatives, Council Members Sheryl Cole and Kathie Tovo focused initial questioning on the impact of the proposed rate increases to schools and houses of worship.  (Schools could see increases anywhere from 10 percent for a portable, to 23 percent for a medium-sized school, and 19 percent for a large school, according to utility documents. Worship facilities could see a jump of 8 percent for a large church, to 28 percent for a medium-sized church, and107 percent for a small church, the documents show.)   


Weis and other Austin Energy officials responded that the rate package includes a 10 percent discount for public schools, recognizing the difficulty many public schools have had with meeting budgets due to state funding cuts. The cost of that 10 percent savings is being allocated to the rest of the commercial sector, since someone has to make up the difference.


Utility officials indicated that some worship facilities and schools may be able to take advantage of new time-of-use rates that will be available to all commercial customers. These rates are lower for energy that is used outside of peak demand hours. Time-of-use rates also will be offered to residential customers on a pilot basis, they said.


Saying it is important financially for the utility to have new rates in effect before summer, Weis proposed that the council hold a public hearing on Jan. 12 and take action on Jan. 26, with new rates taking effect in April. An item is on the Council agenda today to set the Jan. 12 hearing. But Mayor Lee Leffingwell questioned whether the Jan. 12 hearing might be too soon, given the holidays and the complexity of the subject. The Council is to take up that issue today.

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