February 2, 2012

Austin Energy Modifies Rate Proposal

Austin Energy today presented modifications to its rate proposal to address issues raised by the Austin City Council, members of the public and advocacy groups.

The utility, which has experienced large deficits in two of the last three years and projects a $77 million deficit this year, is seeking the first increase and restructuring of its base electric rates in more than 17 years.

In its presentation to City Council, Austin Energy outlined modifications aimed at softening the impact of the rate increase while providing core revenues needed to operate the utility.

Proposed modifications include the following:

• Implement an 8.7% increase this year and a 3.8% increase in 2015 – to provide the overall 12.5% increase needed. This two-step approach would be achieved by deferring until 2015 revenues needed to fully rebuild reserves;
• Cap the General Fund Transfer at the current $105 million;
• Reduce the General Fund Transfer factor for residential bills outside the City from the current 9.1% to 3%. The $6 million reduction in GFT revenue would be absorbed by the utility and would not change the rates of City of Austin residential customers;
• The $12 fixed monthly Customer Charge will include 200 kilowatt-hours (kWh) of energy use for residential customers:
• To reduce the impact on customers using small amounts of power which includes a number of low and fixed income customers
• Further encourage energy efficiency and conservation;
• Remove the Demand Charge and Electric Delivery Charge for small worship facilities and small businesses with less than 10 kilowatts (KW) of peak demand;
• Make time-of-use rates available to all worship facilities to provide lower rates for those whose power use peaks on the weekend rather than during weekdays;

“These proposed modifications seek to provide a transition that will assist all customers, provide fairness between customer groups while ensuring the financial health of the utility,” said General Manager Larry Weis. “Also during this period we will work with the City Manager to perform an assessment of our reserve fund levels, capital improvements program, fees charged for connects, disconnects and power line extensions fees.”

A concern heard during public discussions from advocates for low income customers is that additional funding is needed to assist the growing number of disadvantaged customers. Austin Energy has proposed more than doubling from $3.1 million to $7.2 million, funding that provides utility bill discounts to low income customers. The funding would be provided through a recommended $1 per month charge on residential bills and 65 cents per megawatt-hour (MWH) for commercial customers. The level of funding assistance is one of the decisions to be made by Council. The design of the assistance program will be completed once a final decision has been reached regarding the level of funding.

Austin Energy’s rate proposal modifications will be discussed by Council during a work session this Tuesday, February 7 at City Hall. The Council has also set a second public hearing on the Austin Energy rate proposal to be held during its Council meeting Thursday, February 9 at City Hall.