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Austin Energy seeks to bridge revenue gap through changes to service costs

Thursday, April 7, 2022 by Kali Bramble

Austin Energy customers can anticipate changes to their bills in the near future, as the utility gears up to revise its base rate charges by 2023.

Russell Maenius, vice president of finance, and Tammy Cooper, vice president of communications, spoke to City Council’s Austin Energy Utility Oversight Committee on Tuesday to propose a timeline for the update, planning to return to Council with final recommendations by late November.

“It’s no secret that revenues are down and costs are up,” Maenius said. “This is due to the changing landscape for electric utilities overall, as well as specific challenges unique to Austin.”

In the seven years since Austin Energy last took stock of its customer base, the number of users has increased by 18 percent. “That means over that seven-year period, we have added 80,000 customers and invested nearly $2 billion in infrastructure,” Maenius said.

City staff reported that the base rate for energy services has changed only twice since 1994, with the last increase dating back nearly 10 years ago in 2013. While the utility has generally remained financially stable, the last two years have seen operation costs steadily outpacing revenue, resulting in a $90 million net loss.

Though Austin Energy currently has a credit rating of AA, continuing gaps between revenue and expenditures could impact its future score and impair its ability to secure bond funding.

While these losses are due in part to rising wages and equipment costs, staff also reported that new approaches to efficiency and conservation have had an impact. Average residential summer consumption has decreased by 22 percent since 2009, with an increasing number of users failing to meet criteria for the tier 4 and 5 consumption designations.

“There is a new paradigm of energy efficiency,” Maenius said. “Instead of 1149 kWh (kilowatt-hours), the median usage is now 900 kWh, with about half using less and half using more. Our current rate structure doesn’t accommodate this new paradigm.”

Previously, larger consumers of energy in tiers 4 and 5 paid a premium that helped to finance operations. With more falling into lower tiers of consumption, this source of revenue has evaporated.

While the move to reevaluate the cost of services is driven by decreasing revenue, Austin Energy staff said they will continue advocating for equity and conservation. Measures like the customer assistance and energy efficiency programs will not be affected.

To encourage an equitable process, Austin Energy plans to engage in several months of outreach to the public and will appoint both an impartial hearing examiner and independent consumer advocate to guide its recommendation to Council. Over the spring, the utility will conduct a number of in-person and virtual meetings. Learn more about those meetings here.

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