Friday, April 4, 2014 by Elizabeth Pagano

Some Austin Energy commercial customers get surprise in their bill

A newly instituted and complex rate structure has led to headaches for Austin Energy executives as well as a number of the utility’s commercial customers.


At Thursday’s Council Committee on Austin Energy,AE General Manager Larry Weis and Chief Financial Officer Ann Little explained that due to a recent oversight, about 400 commercial customers had been underbilled by a total of $715,000, Once the mistake was discovered, the average impact to those businesses’  was about $826 on their next bill.


Council Member Kathie Tovo said the mistake hit many of the businesses hard.


“For a small business, that can really be a challenge to pay in addition to their regular monthly bill,” said Tovo.


Weis explained that recently a group of customers who had never had demand charges in the past recently qualified for that type of charge. A demand charge is a fee a customer pays on the highest level of electric demand during a billing month. The demand charge is based on the maximum flow of power used at any one time by the customer.


“There were some situations where the bills weren’t quite correct and we’ve had to go though and audit those, and we’ve had to work with the customers one-on-one to make sure they understand what is happening,” said Weis.


Weis told the committee that the problem was discovered through audits though, he said, “we also made the assumption that was probably going to happen as well. Because we didn’t have the demand readings on all of those customers prior to setting the meters and having that kind of rate design.”


Little added to that explanation, saying, “Our rates are really very complex, especially some of the commercial rates, and the system just wasn’t able to change their demand when the summer months began in 2013.”


“We’re doing a manual correction now, and we are having the programming completed,” said Little.


Little explained that rates only change during peak summer months, and if demand increases then, ratepayers are moved to a different class that pays a higher rate.


“It’s fairly complex programming to automatically do that and that’s the piece that did not work in 2013. But we are having it fixed and it will be corrected manually now and electronically in 2014,” said Little.


Tovo noted that the problem was compounded by the fact that the new charges arrived long after the use happened, leading to unanticipated bills seven months after the charges were incurred. She said that those customers had rightly questioned whether they couldn’t have gotten notice earlier in order to budget for the extra expense. She asked for assurance that customers would be billed correctly this summer.


Weis offered a qualified “yes,” saying that no matter how good the system, there were always problems that can arise, particularly with commercial accounts.


“We would like for our bills to be 100 percent correct, but they never will be. In this industry, there’s always some bills that will be incorrect,” said Little. “We’re about 99 percent accurate on our bills.”


Weis said that they would continue working with customers to help understand the demand charges, as well as giving them the tools to help reduce their demand.


“Now that we’ve rolled through a summer, we will be able to address it and we will be able to fix it automatically,” said Weis. “We knew that starting a rate package for a whole new group of customers – it takes a whole season to flesh out all the characteristics of a customer… As time goes on, the important part for customers is that we have accurate data, and we have a good understanding of how it works.”


“We have work to do,” said Weis. “But, yeah, some customers have gotten surprised that they have a demand charge that they never used to have.”


The committee also heard the utility’s quarterly report Thursday morning.


Little reported that in Fiscal Year 2013, Austin Energy’s net income was $67 million, which was a $97 million improvement over last year. Fiscal Year 2012 saw a $30 million net loss for the utility.


Little attributed most of the improvement to the rate increase.

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Key Players & Topics In This Article

Austin Energy: As a municipally-owned electric utility, Austin Energy is a rarity in the largely deregulated State of Texas. It's annual budget clocks in at over $1 billion. The utility's annual direct transfer of a Council-determined percentage of its revenues offers the city a notable revenue stream.

Austin Energy Utility Oversight Committee: The Austin City Council committee on Austin Energy was created in May 2013 to provide oversight of the city's electric utility. It's creation was marked by political maneuvering that ultimately resulted in a committee comprised of every member of the Austin City Council.

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