Austin Energy Claims Changes to Rate Structure Would Benefit C&I Customers

Austin Energy 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 would slash rates for commercial and industrial (C&I) customers.

The plan also would include an overall restructuring of the utility’s residential rates — increasing 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 eliminate seasonal rate changes that can send bills soaring during the summer, according to a report by the local Austin American-Statesman.

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.

However, the proposal has been 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.

Indeed, the city’s independent examiner, Alfred Herrera, estimated that the utility’s “real” surplus might be $75 million – three times what the utility projects.

In his review of the utility’s proposal, Herrera said that he found that Austin Energy is earning $12 million in profits from its transmission grid that should be returned to ratepayers – however, the utility argues that the money should be used to expand the system.

In addition, the Austin American-Statesman reported that Herrera believes the utility is seeking $6 million more than necessary to cover uncollected bills it will rack up during the average year – and has set aside too much money for the eventual decommissioning of several power plants.

Austin Energy has disputed the findings, offering a number of scenarios that demonstrated how the rate changes would affect customers over the course of a year – among them:

• Scenario 1: An apartment dweller who uses less than 500 kilowatt-hours (kWh) per month, totaling 5,000 kWh for the year, would pay $17.16 more per year.
• Scenario 2: The average Austin residential customer who uses 10,740 kWh/year, ranging from a low of 611 kWh in April to a high of 1,283 kWh in September, would pay $2.28 more annually.
• Scenario 3: A medium-size house equipped with a gas heating system and other efficiencies that keep electricity use below 1,500 kWh/month, totaling 13,000 kWh/year, would save $63.12 annually.
• Scenario 4: A large suburban home that averages 2,184 kWh/month, totaling 26,200 kWh/year, would save $157.92 per year. Austin Energy says these users currently overpay, compared with what it costs the utility to serve them.
• Scenario 5: A small medical office, such as a dentist’s office with lights and equipment used at peak times, totaling 27,300 kWh/year would save about $575 annually.
• Scenario 6: A restaurant that uses 78,000 kWh/year, factoring in lights, cooking and air conditioning, would save about $456 annually.

The hearing was the first in a series for council members. A vote on rates is expected later this month.