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Some AE customers propose rate case settlement

Thursday, July 21, 2016 by Jo Clifton

Austin Energy’s two largest customers, Samsung and NXP, have teamed up with advocates for residential and low-income consumers, the Greater Austin Chamber of Commerce and the city’s two largest hospital networks to propose a settlement of the utility’s currently pending rate case.

They have proposed a $55.9 million base rate reduction, with approximately 43 percent of that reduction going to one class of customers of which the only members are Samsung and NXP.

During the recent public process before the hearings examiner, who was hired by the city to make recommendations, Austin Energy proposed a $24.5 million rate reduction that the utility believes “strikes an appropriate balance among competing objectives of ensuring long-term financial stability of the city-owned utility, achieving the (City) Council’s goals for affordability and efficient use of energy and charging each customer class the cost of providing them electric service,” according to a statement released by the utility last night.

The hearings examiner proposed a reduction of $64 million, agreeing with Austin Energy that most of the rate reductions should go to medium and large commercial customers, which are paying rates most out of line with the cost of service. Those customers are in a different rate class from the largest customers, Samsung and NXP, who have their own rate.

Although the proposal from the largest customers and their cohorts does not include a number of other advocates and companies that intervened in the rate case, it is likely to carry significant weight with City Council members, several of whom are up for re-election in November.

According to the settlement proposal, Samsung and NXP are asking for a reduction of $15.1 million from their current rates but when you add the other reductions to that, the would see a reduction of $24 million in their electric bills.

“The remaining $31.9 million base revenue reduction shall be distributed among the other customer classes in a matter most beneficial to a global settlement, provided that no customer class receives less of a rate decrease than originally proposed” by the utility in January, the proposal states.

The settlement proposal offers significant incentives to advocates for low-income customers, particularly those in Austin Energy’s controversial Customer Assistance Program. The proposal would prevent the utility from making changes to the program’s eligibility procedures “without the opportunity for stakeholder input,” including those same advocates.

Paul Robbins, a consumer advocate who has argued at length against allowing customers who live in houses valued at more than $250,000 to pay lower rates simply because they are eligible, was outraged when the Austin Monitor informed him of the proposed changes. Robbins said he was present with advocates for low-income customers and could not understand what more they could say that they have not already said about the program. He also said he offered to do research on the CAP program, but the utility would not let him, citing privacy concerns.

Under the settlement proposal, those eligible for the CAP program “will not be charged a late fee penalty charge” when they fail to pay their bills on time. In setting tariffs for either the CAP customers or other residential customers, Austin Energy would not be able to consider the revenues they lose because of this provision.

It is not clear how much this proposal would cost Austin Energy or ratepayers in general.

Kaiba White, who is an advocate on environmental issues at Public Citizen, had several objections to the changes proposed by Austin Energy. For example, she said the utility had proposed to increase rates for those who use the least electricity while lowering the rates for those who use the most.

The settlement proposal would address some of those concerns, she said. For example, the $7 million proposed reduction in residential rates would be applied first to AE’s proposed increase in the lowest-use tier, with remaining funds to be used to reduce the proposed rates in equal percentages for all the residential tiers.

The tiered rates help customers to understand what causes high bills, and changes can result in customer confusion, she said.

Public Citizen objects to the utility’s proposed elimination of the summer and winter rates that it has long used to encourage conservation, with summer charges being naturally higher. Austin Energy is also proposing to change the pass-through charge twice a year rather than once a year, and White said her group would object to that.

Environmental advocates are also concerned because there is no specific reference in the settlement proposal to setting aside funds for decommissioning the Fayette coal-powered plant. In fact, the proposal does not indicate where funds will come from to lower customers’ bills, either.

Austin Energy objects to the settlement proposal, much of which it had already rejected previously. In a prepared statement, the utility said, “The hearings examiner approach taken by Austin Energy has been an exemplary, unique path that has allowed all interested customers to make their best case for expenditures and revenues. The Austin City Council has before it a well-developed 299 page report on the facts and law that should apply to Austin Energy’s rates.” The utility’s statement said it is comfortable with moving forward with the “fair and transparent process already laid out for the resolution of the rate review.”

Photo by Billy Hathorn transferred from en.wikipedia to Commons by Teratornis using CommonsHelper., CC BY-SA 3.0.

This story was updated to clarify that Samsung and NXP are asking for a reduction of $15.1 million from their current rates but, when you add the other reductions to that, the reduction in the bills for the two companies is $24 million. A complete list of Austin Monitor donors can be found here.

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