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Watchdog says electric rates too low for customers outside Austin

Thursday, May 30, 2013 by Michael Kanin

Consumer advocate and longtime Austin Energy watchdog Paul Robbins is shopping a set of calculations that he says illustrates a dramatically unbalanced subsidy to utility ratepayers that live outside of the City of Austin. In addition to making a stop with the figures at the city’s Electric Utility Commission, Robbins shared his math with In Fact Daily.


According to Robbins, revenues received by the utility from residential customers who live outside of the city will drop by 5.6 percent as a result of the 2013 rate case settlement agreement.  That agreement was between the city and parties that challenged the first rate increase for the utility in nearly 20 years. For West Lake Hills alone, Robbins says that revenue will drop by 6.7 percent. He tops that figure with the three percent franchise fee number that he says the city pays to eight non-Austin municipal customers.


The franchise fee – and an interpretation of how it is applied – is at the center of Robbins’ argument.


Though he admits that his interpretation of the numbers is a “lay reading,” Robbins tells In Fact Daily that the utility should revise the franchise fees “for as many cities as possible.” Robbins puts the gross profit off of energy sales for those regions at 8.3 percent. By his calculations, he says, “people living outside the city are getting electricity below cost.”


“This rate reduction to ratepayers outside the city violates about every principle of progressive urban planning since about 1950,” Robbins wrote in an email. “It serves as an incentive to encourage people to move outside of Austin. The franchise fee is adding insult to injury. I mean, they already get a rate break offered nowhere else in Texas. Isn’t the franchise fee on top of this double dipping?”


Austin Energy Spokesman Ed Clark says that it is not. He notes that “all franchise fees paid by Austin Energy were paid from general revenue,” a fact that means that all ratepayers – including ones that live outside the city – contribute to that payment. In addition, Clark notes that those fees cover the sort of right of way access that “just about every utility in America” pays for.


Though Clark wouldn’t say it, two other sources told In Fact Daily that franchise fees can also help offset the sting of a rate increase, and earn some political goodwill when it comes time for smaller municipalities to pick sides in a rate case. That strategy appeared to pay off this time around, as none of the extra-Austin municipalities joined the plaintiff side when some non-city ratepayers challenged the recent rate increase at the state’s Public Utility Commission.


In his email, Robbins makes a handful of other suggestions. These include a call to “revise agreements (that the utility can change)…from one based on payments from Austin Energy’s profit to one based on a franchise fee on top of gross revenues.”


Clark says that this would be impossible. He notes that such a revision would have the utility place the franchise fee as a line item – something that the Public Utility Commission would not allow.


Robbins’ statements come as the city continues to wrestle with major utility issues well after the settlement of its rate case. Most recently, that has translated into an entrenched debate over how Austin Energy should be governed.

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