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Council to debate controversial rate increase for Austin Energy customers this fall

Friday, September 2, 2022 by Kali Bramble

With stakeholders awaiting the conclusion of the hearing review process, City Council’s Austin Energy Utility Oversight Committee heard updates Tuesday from the electric utility on what to expect as the 2022 base rate review case approaches the homestretch.

Following a lengthy series of hearings last month, the city-appointed independent hearing examiner is slated to issue its concluding argument next Friday, Sept. 9. From there, the onus will rest on the Electric Utility Commission and City Council members, who will carry the conversation into a final public hearing and vote on Nov. 17.

The 7.5-month process, which began in April with Austin Energy’s proposal to raise base rates by an average 7.6 percent, has prompted lively debate among the participating interest groups. To date, Austin Energy staff and stakeholders like Texas Industrial Energy Consumers, Sierra Club, NXP Semiconductors, the Solar and Storage Coalition, activist Paul Robbins, and an independent consumer advocate have issued thousands of pages of reports and arguments disputing the proposal from every imaginable angle.

Following criticism that the rate increase was unreasonably steep, Austin Energy decreased its initial proposal to raise $48.2 million in additional revenue by 25 percent (read: $35.7 million) to soften the blow. Still, the most controversial proposal remains, including a 150 percent increase in a flat monthly service charge from $10 to $25 and the restructuring from a five- to a three-tiered system that relaxes premium charges for the highest percentile of residential energy users. Experts from the consumer advocate and environmentalist camps argue that such policies could cause rate shock among low-income and lowest-using customers, as well as undo incentives to conserve energy and invest in home efficiency.

Citing factors like city growth and changing consumption patterns, Austin Energy says it has faced an increasing gap between revenues and the cost to provide service. Just last week, credit agency S&P Global downgraded the utility’s rating from AA to AA minus, mirroring a parallel downgrade issued by Fitch Ratings in June. While the rating is still investment-grade, Austin Energy says it will need increased revenues to course-correct for its long-term financial health.

While the base rate review process is designed to hold Austin Energy accountable to its stakeholders, Robbins says the utility’s freedom to withhold information on “competitive matters” has hampered engagement. Robbins says his requests for pertinent data and correspondence between Austin Energy and credit agencies have been repeatedly deferred to the attorney general for a weekslong review process, challenging his ability to formulate a counterargument.

“In 2011, Austin Energy relented somewhat from its draconian secrecy through stakeholder meetings with activists, such as myself,” Robbins said. “We devised a set of rules we could better live with that was passed by City Council, but Austin Energy has let the resolution expire, has not brought it back for an update, and has broken promises it has made in the past. A new competitive matters policy is required … a transparent utility is one difference between a trusted institution and a rogue agency.”

With utilities across the Electric Reliability Council of Texas actively under review, Mayor Steve Adler wondered whether a hit in financial credit following catastrophic Winter Storm Uri outages might be something needing statewide attention.

“If the cost to operate our system is going up in part simply because of our participation in ERCOT … then that’s probably something we want to point out to our state legislative delegation,” Adler said.

As if the rate case weren’t enough, Austin Energy will also be reviewing its pass-through charges this month, with plans for a public hearing on Sept. 29. Charges outside of the base rate, including the power supply adjustment, community benefits charges and regulatory charges, will all be on the table for an update. 

Those interested in following the rate review case can stay up to date via Austin Energy’s dedicated web page. In the meantime, take a deep dive through the city’s archive on the subject for the nuts and bolts.

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