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PUC staff chastises city on rate design, transfer from Austin Energy

Thursday, February 14, 2013 by Michael Kanin

Public Utility Commission staff released written testimony today that calls for a $31.6 million reduction in the $105 million transfer Austin Energy sends to the City of Austin’s general fund. If ultimately forced on the city, that would represent a significant loss in revenue.


Indeed, if the city had to make up that loss, that $30 million figure would represent a 3.62-cent property tax increase.


Commission staff testimony also calls for a nearly $46 million reduction in the overall revenue requirement presented by Austin Energy as part of its ongoing rate case.


The commission staff also proposed the elimination of the utility’s funding for the city’s Economic Growth and Redevelopment Services Office (EGRSO) – a long-controversial subject – as well as funding for the city’s office of small and minority business resources. They also suggested that the city is overcharging Austin Energy by more than $3 million in shared city costs, such as Human Resources.


Ruth Stark, the commissions’ Director of Financial Review, was blunt in her assessment of the first two items. “The first two listed above…are not reasonable and necessary for the provision of electric service,” she wrote.


The PUC staff also recommended that the utility disallow discounts for houses of worship and Independent School Districts – unless, in the case of the latter, ISDs are not allowed to participate in the utility’s Green Choice program. Further, commission staff questioned the utility’s approach to ratemaking, including the five-tier structure at the center of the new residential rate design.


As part of the ongoing case, commission staff recommendations should be considered fact-finding in nature. Austin Energy can still dispute any findings in front of the state hearings officer that will hear the case in early March.


As any one within listening distance will remember, Austin City Council members approved a complicated rate increase for Austin Energy ratepayers this summer. It was fueled by a proposal pitched by Council Members Bill Spelman and Chris Riley along with Mayor Pro Tem Sheryl Cole. It settled on a five-tier rate structure that would more closely associate energy consumption with ratepayer bills. (See In Fact Daily, June 8, 2012.)


Commission rate analyst Brian Murphy rejected that structure. “Austin Energy’s Council-approved residential rates conflict with nearly all the traditionally primary rate design objectives,” he wrote.


Murphy went further. He criticized the design of the rates, suggesting that it was skewed unfairly in the direction of conservation – and thus cost ratepayers inordinately more than they otherwise might be charged. “Specifically with respect for the residential class, Austin Energy has overemphasized the conservation aspect of the consumer rationing objective of rate design,” he wrote. “Consequently, Austin Energy has inadequately emphasized the fairness objective.” 


Commission testimony comes on the heels of an even more scathing discussion filed by the Office of Public Utility Counsel. Those documents suggest that no additional utility revenue was required and offered the commission a figure that deducted $20 million more than was approved by Council members in new rates this summer. (See In Fact Daily, Feb. 12, 2013.)


Austin Energy will formally respond to all interveners in the case next Friday. Spokesperson Ed Clark again declined comment today based on the ongoing nature of the case.

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