City Council Torpedoes Austin Energy’s Base Rate Proposal, Reduces Monthly Charges
The Austin City Council unanimously approved a proposal by Austin Energy on August 29 to modify its residential electric rates, after the city-owned utility dropped a problematic plan to increase its base electric charge.
Under the terms of the new agreement, Austin Energy’s 400,000 residential customers would save $62 a year, according to the utility. The deal included $5 million to help reduce residential electric rates.
As part of the vote, the council also signed off on a $42.5 million package of annual cuts that Austin Energy and its major customers agreed to earlier this month, according to a report by the Austin American-Statesman.
The bulk of those cuts, $36.5 million, will go toward reducing electric bills for industrial and commercial customers, who had long complained that they paid some of the highest rates in the state. Major customers, such as data centers and large hospitals, will see their electric rates cut by 24 percent.
The Original ‘Ask’
The utility had presented a proposal on August 8 to the Austin City Council’s Energy Utility Oversight Committee to use a projected $24 million surplus to support changes to the utility’s rate structure that it claimed would slash rates for commercial and industrial (C&I) customers.
The plan also would have increased the base electric rate that all customers pay, in order to trim the higher rates paid by customers who consume more electricity. And it would have eliminated seasonal rate changes that can send bills soaring during the summer, according to a report by the Statesman.
Data from the utility showed that during the summer, low-income ratepayers enrolled in the discount program were more likely to end up in Austin Energy’s more expensive third- and fourth-use tiers than were more affluent customers. However, a review of that data by local activist Paul Robbins found that on average — over 12 months — lower income meant lower energy use, the Statesman said.
The utility’s management said that it “made sense” to raise residential rates, because a study it recently conducted found that residential ratepayers weren’t paying the full cost of providing their service and that business customers were over-paying.
But the proposal was greeted with skepticism by area ratepayers. According to the local news outlet, the fight over rates centers on how much money it takes to run the utility and ensure it remains on stable financial ground, a figure known as the revenue requirement. The additional money the utility earns — its profit — is supposed to be returned to customers in the form of lower rates.
“This is what I consider a[n] historic moment for us in Austin,” said Council Member Sheri Gallo, who chairs the utility’s Energy utility Oversight Committee, in an interview with the local news outlet. “The city now has before it the opportunity to significantly address the issue of affordability in Austin with the setting of our new electric rates.”
“We lowered electric rates for everyone in a way that supports conservation, cleaner air, better business practices and local control of our utility,” said Mayor Steve Adler, speaking in favor of the entire package.
Austin Energy’s major customers, including Samsung Austin Semiconductor and NXP Semiconductors, agreed not to ask the Public Utility Commission to review the rate deal. They also agreed not to ask the state Legislature to intervene in the management of the utility before 2020.
“The original proposal, in our view, strikes a balance on long-term revenue stability, and we would like to make a little more incremental progress there,” Mark Dreyfus, director of Regulatory and Government Affairs at Austin Energy told council members. “But given the parameters that the council discussed … (we believe) this to be the best option to meet those parameters.”
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