Impartial examiner report backs up Austin Energy base rate proposal, but critics aren’t giving up

As the November deadline to update utility rates approaches, the pressure is on for Austin Energy and its stakeholders to make their final arguments before city policymakers.

Following the release of the impartial hearing examiner’s report earlier this month, participants in the base rate review process stopped by the Electric Utility Commission to break down its conclusions. While the hearing examiner largely sided with Austin Energy’s controversial $35.7 million rate increase proposal, it will ultimately fall upon City Council and its Austin Energy Utility Oversight Committee to settle the case.

“We are disappointed in the impartial hearing examiner’s report,” John Coffman, the city-appointed independent consumer advocate, said. “We think that if followed it would lead to a rate impact that would be pretty dramatic, particularly for those who use less than the average consumer.”

Among Austin Energy’s proposals are a 150 percent increase in its fixed residential charge from $10 to $25 per month, as well as a restructuring of the five-tiered system currently used to incentivize conservation through premiums for high consumption. The publicly owned utility says such changes are needed to stabilize its deteriorating finances, arguing that the present model is too volatile for it to reliably recover costs to provide service.

“Since Austin Energy’s last ratemaking test year, prices measured monthly by the consumer price index for urban consumers, fuels and utilities have increased 16.5 percent while rates have remained unchanged,” Austin Energy attorney Thomas Brocato said. “This year alone, overall inflation has been above 8 percent within the city, and Austin Energy is not immune to these impacts.”

Nevertheless, many observers are disgruntled with Austin Energy’s proposed solution, harboring particular skepticism toward its use of 2020 and 2021 data to ground its cost analysis. The utility’s critics feel such data – which encompasses both Winter Storm Uri and unprecedented unemployment and lockdown measures due to Covid-19 – is too abnormal for use in future projections and they have expressed frustration at the lack of transparency over details pertaining to Austin Energy’s revenue requirement.

While the impartial hearing examiner has largely agreed with the utility’s proposal, the report echoed a number of concerns from stakeholders, particularly around the risk of rate shock for low-income residential customers. 

“The IHE is concerned that vulnerable customers who do not qualify for AE’s current Customer Assistance Program may experience rate shock, rendering the new rate design inconsistent with a known concern of affordability for certain Austin residents,” reads the report. “The IHE does recommend that Austin Energy either revisit its current rate design or consider a targeted assistance program like CAP, perhaps to be phased out over time.”

Still, stakeholders are concerned that an expansion of AE’s Customer Assistance Program, which currently enrolls only 30 percent of eligible residents, would prove an underwhelming solution. Critics also argue that the proposed design would be a move in the wrong direction for the city’s environmental goals, eradicating price signals that encourage investments in conservation and betraying those who have already made the leap.

In response, independent consumer advocates Coffman and Clarence Johnson have developed an alternative rate design that they believe is more equitable to residential consumers while still helping Austin Energy recover costs. The proposal includes an increase in fixed monthly fees from only $10 to $13, and would reduce the existing five-tiered rate system to four tiers, rather than Austin Energy’s proposed three.

Austin Energy will return to the Electric Utility Commission in October, where it is expected to present finalized data on consumer impacts of its proposal in comparison with alternatives. From there, the commission will issue recommendations to be taken up by City Council in November.

For all things base rate review, check out Austin Energy’s website and the city clerk’s archive of relevant documents.

Photo by Angelo DeSantis, CC BY 2.0, via Wikimedia Commons.

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