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Council gets closer to finalizing details of electric rate hike

Wednesday, May 30, 2012 by Michael Kanin

Austin Energy’s new rate structure will likely have a five-tier pricing scheme and no discount for ratepayers who live outside city limits, at least based on two separate unanimous votes taken Tuesday during a special Council work session. Though their actions were preliminary, council members are expected to vote the same way when the utility’s new rates come up for a final vote on June 7.


Tuesday’s determinations were part of the last in an extended series of work sessions designed to help council members arrive at the complicated set of policy decisions that dictate how the utility’s rates will be adjusted. Council members have already moved to set a $10 fixed monthly fee, a $1.50 monthly bill charge to help finance the utility’s assistance program for low-income residents and to follow a two-step approach to the rate increase. That means a lower hike this year, followed by a second increase in two years.


Collectively, council members’ various policy decisions have more or less cemented an annual revenue increase of $71 million for the utility in the first phase of rate adjustments. That’s roughly $55 million less than Austin Energy asked for in a March pitch to council.


Concern lingers that the increase will not be enough to keep bond rating agencies from downgrading the utility’s bonds or enough to fully replenish the utility’s cash reserves – a policy decision that could come back to haunt the Council if Austin Energy faces major emergency repairs or a sudden need for emergency energy purchases.


It has been apparent from the beginning of the year that out-of-city ratepayers would challenge any increase at the state’s Public Utility Commission (PUC).


Still, a note of relief seemed to linger in Council Chambers as council members wound down what has been a grueling process. Though no action on Austin Energy’s rates has yet been posted on the agenda for the June 7 Council meeting, all signs point to some sort of vote on the matter then.


At Tuesday’s work session, Austin Energy proposed a moderately graded five-tiered residential rate structure designed to encourage conservation. According to utility calculations, the new approach would bring an average increase of roughly 10 percent to the bulk of its residential customers. That would amount to $5 on an average $59 per month bill.


Some of the biggest residential customers – defined by the utility as ratepayers who use 2,501 to 3,000 kilowatt hours per month – could see a 21 percent increase. That would represent an increase of $59 on an average monthly bill of $332.


According to the utility’s Vice President of Finance Ann Little, council members could add 15 percent to those figures to roughly calculate summer bills for the majority of ratepayers. That percentage would be higher for heavier residential customers.


Austin Mayor Lee Leffingwell expressed worry about the possible impacts of tiered rates. However, on Tuesday, he voted with the rest of his colleagues for the five-tiered moderate approach recommended by Austin Energy.


Still, Leffingwell seemed to harbor concerns about the realities associated with the five-tiered approach to conservation incentives. “If you’ve got the means to improve the energy efficiency of your home, for example … you may be in a much better position to conserve energy than some one who does not have that ability,” he said. “So it’s not strictly a matter of making the decision to do it, there’s also having the means to do it.”


Council members also voted to deny non-Austin ratepayers a discount that would have been designed to help keep the utility out of a rate challenge by that group. Council Member Mike Martinez was blunt. “Do you see any way to avoid an appeal to the PUC by an outside entity?” he asked.


Utility General Manager Larry Weis was just as frank in his response. “Based on the knowledge that I have, no,” he replied.


That established, it took little time for Martinez and his colleagues to dispatch with the idea of a discount for their out-of-city ratepayers. It came on a motion from Council Member Kathie Tovo.


In making the case for her motion, Tovo detailed a set of facts aimed to illustrate the reliance of even out-of-city ratepayers on the funds transferred directly out of Austin Energy’s revenues and into the City of Austin’s general fund, a potential sticking point for any rate case. “In looking at the data that Austin Energy provided us…we see that our customer assistance program serves people outside of our city limits – 7.7 percent of total participants are living outside of the city of Austin,” Tovo offered. “More interestingly, I thought given some of the comments we heard…for the air conditioner rebate program, 24 percent of the total participants are out of (city limits).”


Tovo also pointed to figures provided by the Capital Area Council of Governments, or CapCOG, that indicate 57 percent of Austin Energy’s out-of-town ratepayers commute to work in the city.

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