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Local small-business alliance proposes energy policy change

Thursday, July 16, 2015 by Tyler Whitson

Small-business owners often wrestle with financial uncertainty, and some have complained that Austin Energy policies contribute to that challenge. Rebecca Melançon, executive director of the Austin Independent Business Alliance, wrote a letter to City Council and Austin Energy management Monday proposing changes that she believes will improve the situation.

Melançon’s primary request is that the city increase the demand threshold for a certain class of small commercial Austin Energy customers – which includes many small businesses – from 10 to 20 kilowatts. She would also like to see the utility shorten the amount of time – from a year to three months – that such a customer must remain in its new class after surpassing the demand threshold.

Between June and September of any given year, if a customer within the small commercial class uses electricity in excess of the threshold, Austin Energy’s billing system bumps that customer into a higher class. This reclassification triggers demand charges that are added to the customer’s bills for the following year.

Council set the current 10-kilowatt threshold during the 2012 rate proceedings, dropping it from the previous 20 kilowatts.

“The class of 10-20kW users consisted of 7,733 businesses who used only 2.16 percent of the total system kWh,” Melançon wrote in her proposal. “They are our small shops and businesses who can ill afford to absorb these costs. And they are diverse enough that their collective impact on overall system electric usage is minimal.”

Mark Dreyfus, vice president of regulatory affairs and corporate communications at Austin Energy, put these numbers into perspective in a meeting of the Austin Energy Utility Oversight Committee on June 25. A large house in Austin, he explained, has a peak monthly usage of about 5 kilowatts.

Melançon asserted that, since the threshold is based on the average amount of electricity a customer uses during a 15-minute period between June and September, an isolated event could trigger additional costs long-term for a small business.

Dreyfus commented on Melançon’s proposal in an interview with the Austin Monitor on Wednesday. “Changing the rates for these small commercial customers who perceive they’re faced with higher charges would be rewarding the customers whose usage is inefficient and penalizing the customers whose use is efficient,” he said.

“We would not recommend making any changes at this time,” Dreyfus continued. “These are factual and policy issues that need to be addressed in a fully participative, transparent public process, as we’re about to kick off.”

Dreyfus was referring to the Austin Energy cost-of-service study for which the city is currently gearing up. The extensive process, which will involve an independent consumer advocate, consists of assessing the costs involved with running the utility and setting a new rate structure that applies to all customer classes for implementation in the fall of next year.

In an interview with the Monitor on Wednesday, Melançon said she would prefer that Council take action ahead of the cost-of-service study.

Melançon also asserted that more than 70 percent of small businesses lease their spaces and argued that these businesses have fewer opportunities to make major energy efficiency improvements because of structural or financial barriers.

“You’re looking at businesses that can’t afford to invest in a property that they don’t own,” Melançon said. “From my perspective and the businesses I’ve talked to, the problem is when you have something that you think is an incentive that’s driving people to take an action, (but) it’s an action they can’t take, it’s not an incentive – it’s a punishment.”

Dreyfus responded to this concern. “We agree that some customers in this small commercial customer class are difficult to get at for energy efficiency services, but we have programs that are still designed for customers like this – for example, lighting programs,” he said.

“We encourage these customers to come in and meet with our energy efficiency folks to learn about those programs and also to share their concerns so that we can work with them to target energy efficiency programs to them,” Dreyfus continued.

This is not the first time this issue has been raised. After business owners expressed concerns about the demand charge threshold, Council passed a resolution last year calling for an independent study on the impacts of the 2012 decrease. Consultant NewGen Strategies and Solutions released the report for that study in March.

“To the extent possible, AE should maintain current pricing signals as they reflect cost of service results and customer reactions to these signals generally appear to be meeting the utility’s rate design objectives. However, AE should consider options to minimize ‘rate shock’ for low load factor and poor power factor customers,” NewGen recommended.

According to Dreyfus, load factor refers to how much power a customer uses compared to how much power they have the potential to use, while power factor refers to the efficiency with which a customer uses energy.

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