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Thursday, May 14, 2020 by Jessi Devenyns
Austin Energy expects only small revenue reduction from Covid-19 bill relief
Although Austin Energy expects to provide both residential and commercial customers with $35 million in bill relief between now and Sept. 30, the utility does not expect the rate reduction to greatly affect its balance sheet.
Austin Energy’s Chief Financial Officer Mark Dombroski told the Electric Utility Commission at its May 11 meeting that lowering electric rates for customers using more than 1,000 kilowatt hours per month will result in $4 million of “foregone revenue.”
The other $31 million in customer savings will not come at a loss for the electric utility.
This reduction is made possible due to the regulatory funds that the electric utility had overcollected from Austin Energy customers and was planning to return in the form of reduced rates in the upcoming fiscal year. Regulatory funds are electricity managing and maintenance costs that Austin Energy collects for the state energy grid ERCOT and are passed through to utility customers. These costs are estimated, and over- and under-payments are recalibrated into customer energy bills the following year. Last year, this overcollection totaled $25 million. As a result, regulatory electric charges will be reduced by 32 percent for residential and commercial customers, which translates to about a 4 percent reduction in a customer’s total bill.
“We were already over-recovered and we were anticipating reducing that in 2021,” Dombroski told commissioners. By returning those funds five months ahead of schedule, “it provides more assistance to our customers up front.”
The remaining $6 million in savings returned to Austinites will come to Customer Assistance Program customers, mostly low-income families who participate in state, federal or local assistance programs and whose rates are correspondingly lowered by the utility. Other beneficiaries will include those who participate in the Plus 1 fund for customers having temporary difficulty paying utility bills.
Dombroski said that because the CAP program was overfunded, Austin Energy is able to transfer $5 million to the Plus 1 fund. In conjunction with this transfer from CAP, the utility will increase the CAP discount from 10 percent to 15 percent, or about $1 million in additional funding. This additional aid “may have an impact on our final CAP balance,” noted Dombroski.
These financial aid measures will remain in place until Sept. 30, at which point Dombroski said they will be revisited as part of Austin Energy’s Fiscal Year 2021 budget process with changes implemented Nov. 1, 2020. Further review of rate structures will occur during the next rate review process with new rates expected to go into effect in early 2022.
The utility’s current rates are structured in five tiers; the top two tiers charge customers substantially more in order for the utility to provide lower rates to consumers in the first three tiers. As a result of this structure, Dombroski explained that the utility makes the majority of its revenue during the warmer months in the third and fourth quarters of the year when more customers are billed in the upper usage tiers.
Even though Austin has not yet hit the warmest months of the year, sales of electricity were up 3.2 percent in the second quarter with the energy utility bringing on an additional 12,647 customers, or a 2.6 percent increase in service connections.
However, in the second quarter, which ended March 31, the utility had a $65 million deficit rather than a projected $53 million deficit, due to higher than anticipated operating expenses.
Dombroski told commissioners that the effects from Austin’s Stay Home, Work Safe order were not accounted for in second quarter financials as the change kicked in only two weeks before the end of the quarter. However, he said in the upcoming months, “We anticipate slightly higher residential consumption.” Austin Energy will continue to monitor the effects of Covid-19 on its customers.
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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.
Electric Utility Commission: The advisory body charged with oversight of Austin Energy, the City of Austin's municipally-owned electric utility.