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Mayor Pro Tem conducts energy rate forum for religious organizations

Friday, February 17, 2012 by Michael Kanin

Under pressure from church groups to make major changes to a pending Austin Energy rate increase, Austin Mayor Pro Tem Sheryl Cole hosted a forum for religious organizations on Thursday afternoon. There, officials from Austin Energy told members of the worship community that they would offer one major change to their rate calculations.


“What we’ve done is take the weekend demand completely off of the rate,” said Austin Energy’s Vice President of Finance and Corporate Services Ann Little. “That really is probably the best alternative for the worship group.” Demand charges are calculated using peak demand, the maximum amount of electricity required by a customer during the month.


Austin Energy’s revised proposal move comes out of a set of rate design modifications suggested by Council Member Bill Spelman. According to figures provided by the utility, such a change could save a sample church that currently pays $11,000 a year about $1,000 annually over the highest previously proposed demand charge.


However, some of those in attendance expressed distrust of Austin Energy’s calculations. Former Seattle City Light superintendent Robert Murray, who signed on to work with the Interfaith Environmental Network on the issue, called for more information. “We need data,” he said. “The staff at Austin Energy knows that we need data for the houses of worship.”


Murray complained that there is no automated online tool for religious organizations to use to calculate their future bills. “The reason you can’t have a calculator online for houses of worship is that the data doesn’t exist,” he said.


All of the Council members put in an appearance at the event with the exception of Spelman, who had a speaking engagement. Most took a chance to address the gathering. Cole, who acted as a facilitator for the meeting, gave Council Members Laura Morrison and Kathie Tovo a chance to run down their proposed interim 3.5 percent rate increase. Morrison said that she’d like to see the action accompanied by a plan that would detail the questions that the council wants to answer with the extra year of time they’d earn by moving forward with an interim hike.


Council Member Mike Martinez said Thursday he was generally in agreement with the Morrison/Tovo proposal.


I think the 3.5 percent increase is a starting point,” Martinez said, adding that he would be “willing to discuss if that is the right percentage increase…What we are trying to do is create stability (for the utility) in the short term…I just think we need to have more of a conversation about it.” He said he wanted to see data based on 2011 as a test case year, concluding the he was “not comfortable with accepting Austin Energy’s proposal.”


When Austin Energy made its proposal, 2009 was the last year for which audited revenue and expenditure data was available. Last year was the hottest year on record, so Austin Energy revenues soared.


With Martinez joining Tovo and Morrison, the Austin Chronicle has suggested that Mayor Lee Leffingwell might sign on to the plan. But he told In Fact Daily on Wednesday he is far from making a decision about the rates.


The Morrison/Tovo plan comes in addition to Spelman’s and two versions of the rate structure already proposed by Austin Energy. Unlike Morrison and Tovo’s idea, Spelman’s plan leaves intact some form of a fixed rate increase, a measure that is said to be key for the utility.


At the hearing, Cole gave Spelman aide Barksdale English a chance to stand in for the Council member. English said that Spelman was “thrilled” that the utility had decided to eliminate the weekend charges. He added that Spelman was equally excited that the same benefit would be extended to some small businesses.


Although Council could vote on the rate hike after a public hearing on the matter on March 1, that seems unlikely.


Cole has promised more discussions like the one she hosted on Wednesday afternoon and Council is scheduled to have a work session next Wednesday to talk about rates and to hear what the City Auditor has to say about Austin Energy’s revenue requirements.


Weis has pointed out that the national economic downturn has had a big impact on the utility. Until 2009, power sales growth and increasing revenues were more than adequate to offset Austin Energy’s rising system expenses, according to a report from Navigant Consulting.


Then the economic slowdown and lower natural gas prices resulted in a decrease in off-system sales revenues, decreased interest earnings on fund balances, and overall reduced growth rate for power sales. In 2009 and 2010, the utility dipped into its operating fund balance to make up for the deficiency in revenues, something the consultant said was not sustainable in the long term – and thus the need for a rate increase. 


The original Austin Energy plan, proposed by General Manager Larry Weis on Dec. 14, called for an increase of about $126 million in revenues needed to operate the utility annually. That translated to a systemwide rate increase of about 12 percent, with residential customers projected to see an average increase of about 20 percent.


The most recent Austin Energy proposal does the following:


·       Instead of seeking a $126 million increase in revenues right away, as proposed in December, the utility would seek an increase of $88 million now and a $38 million increase starting in October 2014.


·       This two-step increase would result in the utility imposing an 8.7 percent systemwide average rate increase this year and a 3.8 percent increase in October 2014, rather than a 12.5 percent increase now. The phase-in would be carried out by deferring money needed to replenish the utility’s reserve funds until 2015.  The effect on residential customers would be an average increase of about 13 percent in the first phase, rather than 20 percent immediately, as initially proposed.


·       The new plan would cap the annual transfer from the utility to the city’s General Fund at the current level of $105 million. Those transfers are used to help pay for such things as parks operations, police and fire, and help keep property taxes significantly lower than they otherwise would be.


·        The new plan would give a 6.1 percent discount on the monthly bills of residential ratepayers living outside the city to account for about two-thirds of what those customers pay to the city as their share of the General Fund transfers. Some of these suburban ratepayers have threatened to take their case to the Texas Public Utility Commission. It seems likely that they will carry through on that threat regardless of whether the utility gives them a discount.


·       The $12 customer charge and a new $10 electric delivery charge in the December proposal would remain in the modified proposal, making the new minimum monthly bill $22. But the first 200 kilowatt-hours used would be included in the customer charge each month, reducing the impact of the fixed charges on customers using small amounts of power, according to the utility. The current customer charge, and minimum monthly bill, is $6. The proposed doubling of the customer charge and the new electric delivery charge have been major sticking points with consumer groups, especially those concerned about low-income ratepayers.


·       Under the modified plan, the utility would drop the demand charge and electric delivery charge for small worship facilities and small businesses with less than 10 kilowatts of peak demand. This would help soften the rate increase for those customers.

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