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Council members discuss possibility of interim Austin Energy rate hike

Wednesday, February 8, 2012 by Michael Kanin

Support is building at City Hall for an interim surcharge that would effectively delay many of the elements of Austin Energy‘s proposed rate hike. Should the idea find enough votes, the Council could apply an across-the-board percentage increase to rate-payers’ bills, then return to deal with a more permanent solution at a later date.


Though there seems to be majority support for an interim surcharge at the moment, officials with Austin Energy were not prepared to address the idea quite yet at Tuesday’s work session. The utility’s General Manager Larry Weis told In Fact Daily that his team had yet to fully explore the issue. “I really don’t have any comment,” he said. “We really haven’t analyzed that at all.”


Council Member Kathie Tovo broached the subject at the work session. “If we wanted to do an interim measure, and cap it at four percent, three percent, while we’re sorting through some of these weightier issues and really evaluating elements of the rate proposal – is that doable under the guidelines?” she asked.


Austin Energy’s director of regulatory and governmental affairs, Mark Dreyfus, previewed Weis’ thoughts. “I think that’s an issue that we’d have to discuss with legal counsel,” he said. “I don’t think we’ve really assessed that internally.”


Tovo pushed the matter. “Would it be an option then for this Council to say, ‘Look, we need more time. We’re in agreement that you need some kind of immediate additional revenue. We’ll authorize you to go forward and collect an additional 3 percent from all customers across the classes and continue to sort out the other elements of the rate proposal?” she asked.


The answer was the same. “We haven’t had any planning or dialogue or any direction working with the City Manager on any of that,” said Weis. “So I don’t really know how to respond.”


Council Members had hoped to question Weis about the utility’s current cost allocation formula – how the utility spreads its rates across its customer classes – one that some argue gives an advantage to area industry. However, as time ran short at the work session, they found themselves able to only dip into the issue.


It was brought up by Morrison. “It’s my desire that we as a Council and the broader community maybe have the opportunity to delve into (cost allocation), and obviously three minutes is not enough,” she said.


Morrison wondered if the Council should bring the issue to the Audit and Finance Committee  to go over the finer points. Weis suggested that that would be possible.


Council members have expressed varying degrees of concern over new rate structure proposals from the utility. That prompted action last week by Austin Energy to reconfigure its original proposal. (See In Fact Daily, Feb. 3, 2012).


Among other concessions, utility staff attempted to soften the blow of what stands to be a dramatic hike in rates by phasing in the new structure over two years. They also offered a new 6.1 percent discount to rate-payers who live outside the corporate limits – a nod to a perception that Austin Energy rate-payers who don’t live in the city don’t want to pay for the revenue transfer that Austin Energy sends to the city’s general fund each year.


It remains unclear whether these adjustments might keep the city from having to defend its rate changes before the Public Utility Commission. There is concern that Austin Energy customers who live outside of the city may pursue a rate case even if they are afforded the 6.1 percent discount.


The interim fee would provide Austin Energy with some level of revenue adjustment, while also allowing Council members to put off a decision about the rates until after the May election. There has been no firm decision about the percentage figure for the interim increase.


Council Member Bill Spelman has pitched his own set of rate suggestions. They included a reduction in the fixed rate proposed by the utility and a reduction in the overall rate to cover only Austin Energy’s projected loss for a given year. (See In Fact Daily whispers, Jan. 30, 2012). At last check, Spelman was not in support of an interim fee.


Austin Energy officials say the utility could start losing roughly $2 million a week this year if it doesn’t adjust its rates. (See In Fact Daily, Dec. 21, 2011.)


The Council could take action on rates at its March 1 meeting.

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