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Spelman, Cole, and Riley pitch yet another Austin Energy rate design

Tuesday, May 15, 2012 by Michael Kanin

Fresh off decisive election victories, Council Member Bill Spelman and Mayor Pro Tem Sheryl Cole joined Council Member Chris Riley at a City Hall press conference where the trio announced their solution for the lingering question of what to do about Austin Energy’s rates.


If approved as is, the deal would include a two-phase revenue increase for the utility that could bring in an additional $106 million annually for the utility. Only a $71 million portion of that hike – the amount that represents the first phase – would be guaranteed to Austin Energy under the plan.


All told, Spelman said that residents would see around an 8 percent increase in their rates with the new proposal.


There is a broad base of support for the Spelman, Cole, and Riley approach. It includes the backing of Trey Salinas’ industry group CCARE, members of the religious community, and the chair of the city’s Electric Utility Commission Phillip Schmandt. The Austin Independent School District is also on board.


Still, concerns about the plan remain for some Council members and members of the community. On Friday, Executive Director of Texas ROSE Carol Biedrzycki sent out a preemptive media release.  “Consumer advocates who have represented the interests of residential ratepayers, low-income consumers, and environmental protection were dismayed by…the proposal,” Biedrzycki wrote.


On Monday, Biedrzycki wondered if this past weekend’s Council elections had something to do with the new proposal. “Originally we agreed to delay the vote on the rate case proposal so that there would be time to carefully look at the recommendations of the residential advocate and compare those with Austin Energy’s,” she said. “That has not happened. There are inconsistencies between those recommendations and Austin Energy’s recommendations and I don’t think it’s fair to residential customers that this particular step in the process is being skipped.”


At the news conference, Spelman was frank. “This is a terrible time for a rate increase. The recovery has been slow and halting, wages have not kept up with inflation, many people are still looking for work and not finding it,” he said. “I wish we could wait another year or two before proposing higher electric rates, but we can’t.”


Council members have been engaged in a quick and difficult look at Austin Energy in light of a series of presentations from the utility that suggest it would be detrimental to increase its revenues by any less than $71 million a year. The presentations are part of an ever-evolving set of workshops designed to guide Council members’ decisions about a pending rate increase that would mark the first such bill adjustment in nearly two decades.


With their plan Spelman, Cole, and Riley aim to drop the proposed fixed fee portion of the rate hike from a total of $22 – as suggested by Austin Energy – to $11.50. That would include a base $10 customer charge and $1.50 to help facilitate the utility’s low-income assistance program. It would also set-up a five-tier rate structure that would place the top 10 percent of users in the upper tier and the bottom 10 percent of users in the lower tier.


Spelman, Cole, and Riley have also found a way to make the region’s houses of worship comfortable with their plan. In short, the Council members would move all synagogues, churches, mosques, and other such facilities to its commercial class of service. Spelman, Cole, and Riley would also cap the total charge for houses of worship at 12.5 cents per kilowatt hour. The Council members further intend to pursue a detailed time of use study for those facilities.


How Austin Energy charges its religious customers had been a frustrating sticking point for all involved. That community’s agreement with a proposal that reaches the minimum revenue hike defended by the utility represents a milestone in negotiations.  


In addition, Spelman, Cole, and Riley would increase the reach of Austin Energy’s Customer Assistance Program from 10,000 to 25,000 area residents over a two-to-three year period, offer schools a 10 percent discount on their respective total bills – in exchange, the Austin Independent School District has agreed to make comprehensive energy-saving repairs – and re-work the formula for Austin Energy’s contribution to the city’s general fund based on a suggestion from Council Member Laura Morrison that would use only non-fuel revenue to calculate the transfer itself.


Additionally, the proposal would remove Austin Energy from its role as the sole funder of the city’s Economic Growth and Redevelopment Services Office. It also mandates what the Council members are calling a “budget scrub” that would take a deeper look at Austin Energy’s finances as a precursor to action on the potential second phase of the rate hike. Cole told In Fact Daily that this was a key element of the deal.


“We know that there have been questions about the financial prudence of Austin Energy,” Cole told In Fact Daily. “We just need to take on that endeavor to make sure we’re being cost efficient and (that we) have financial integrity.”


For its part, Austin Energy seemed ready to sign on to the Spelman, Cole, and Riley proposal. Though he was clear to point out that staff serves as an information resource in the matter, Austin Energy spokesperson Ed Clark seemed to believe that the proposal could work. “What they gave us today provides a plan that ensures that we can maintain financial stability,” he told In Fact Daily. “It also challenges us to look from top to bottom to make sure” that the utility is financially efficient.


Riley assured In Fact Daily that the intent of the proposal was not to short-circuit the aims of the work sessions. “We’ve still got a couple of work sessions to go and some more public hearings,” he said. “This is really a matter of helping things crystallize as we approach the final decision so that we have more informed conversations about what exactly is on the table.”


Council Member Kathie Tovo said that she supports some aspects of the Spelman, Cole, Riley plan, but she hadn’t yet been able to fully explore the ideas thanks to open meeting rules. Still, Tovo expressed concern about the proposal. “I fundamentally believe that we can reduce rates further,” she said.


Morrison was also skeptical. “Today’s rate increase proposal places undue burden on our residents and is premature since council (Austin Energy) work sessions have not yet been completed,” she told In Fact Daily via email. “I am disappointed that a proposal was presented circumventing the process which was unanimously endorsed by the Council.”


For Morrison, however, it wasn’t just about the process. “The bottom line is, the proposal doesn’t fix the problems and I cannot support it,” she continued.

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