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Across-the-board percentage rate hike again floated for Austin Energy

Tuesday, June 5, 2012 by Michael Kanin

With the fast-approaching City Council meeting on Thursday – when a rate hike at Austin Energy could be decided – a handful of interested parties are floating last-minute suggestions, including one urging Council members implement a simple rate increase instead of a comprehensive restructuring.


The suggestion that the Council again consider a small, across-the-board rate hike comes from veteran Electric Utility Commission member Shudde Fath, who pitched it in a memo to Mayor Lee Leffingwell and the rest of the City Council on Friday. Public Citizen‘s Tom “Smitty” Smith and consumer advocate Paul Robbins are also shopping a list of ideas, many of which were outlined in an opinion piece penned by Smith that ran in Monday’s edition of the Austin American-Statesman.


It remains unclear how much impact any of these suggestions will have on Thursday’s vote – or whether Council members will take final action on the rates. To pass any new rate structure on all three readings of an ordinance, five Council members need to vote for the changes.


In her memo, Fath offered a host of reasons to simplify the rate increase. These include her belief that a small, across-the-board hike could help Austin Energy avoid a challenge from out-of-city ratepayers at the state’s Public Utility Commission. Under Fath’s plan, residential ratepayers would still pay the highest pure cents-per-kilowatt-hour rate among rate classes but this increase would be lower than the one in the plan currently under consideration. She also argued that the utility’s plagued billing system would be unable to handle anything other than a simple flat hike.


“If the troubled new billing system can successfully implement anything, it seems that a simple across-the-board increase could take effect on August 1,” Fath wrote.


Programming issues have delayed the fully successful implementation of the city’s new utility billing system, which is managed by Austin Energy. However, utility spokesperson Ed Clark was not concerned about sending out bills under a new rate design. “We have a pretty high confidence level that we can implement the new rate structure in an orderly fashion once the Council has approved it,” he told In Fact Daily.


Still, Council Member Laura Morrison was worried. “I share Commissioner Fath’s concerns about the implementation of the major structural changes in our electric rates, especially with the challenges we’ve seen in the new billing system,” she said via email. “We need to have a clear plan for monitoring the efforts to get the new rates in place, as well as a clear testing and decision making process as to when they are ready to go.”


Council Member Mike Martinez said that Fath “makes very good points. She uses her lone example of herself and a billing problem she had, which is very real, and if we’re having customers with similar examples, these are things we have to find out,” he said.


The utility has given itself a 90-day window after the implementation of the rate structure to sort out any billing kinks that may result from the new rates.


In his op-ed piece, Smith calls on Council members to adjust the rate structure to include three items: “The Austin City Council has made some improvements (to the rate structure), but the plan now being debated still gives the biggest commercial and industrial users big breaks and unfairly burdens those who use the least energy,” he wrote. “Our three solutions are…[a]djust the (price) tiers to more fairly allocate the rate increase to really encourage conservation, [a]ssure adequate funding for low-income programs, and fund them based on the amount of energy consumed and not on a monthly fee, (and) [d]evelop a new governing process for the utility. The City Council should create a process to allow for annual review and adjustment of variable costs. It should establish a new process for the next rate case that would include hearings before an independent hearing examiner on the complex technical and financial aspects of setting rates.”


Council Members Bill Spelman and Chris Riley along with Mayor Pro Tem Sheryl Cole will offer an item on Thursday’s agenda to direct City Manager Marc Ott and Austin Energy General Manager Larry Weis to explore alternative governing solutions. A citizen’s group signed off on the idea of creating a governing board not unlike the one employed by San Antonio’s CPS Energy as part of a 1996 discussion (see In Fact Daily, June 4, 2012).

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