City Council Approves New Austin Energy Base Rates
December 9, 2022
Customers Will See the New Rates Reflected in Their March 2023 Bills
Today, Austin City Council approved new base electric rates beginning in 2023 that will help Austin Energy close a significant base revenue deficit, moves ratepayers closer to the cost of serving them, and stabilizes the utility’s financial position as it seeks to balance conservation efforts with a rapidly changing service area.
Customers’ electricity usage is billed in kilowatt-hours (kWh). With a $13 monthly customer charge, a typical residential user living inside the City of Austin that uses 860 kWh per month will see an increase of $8.87 to their electric bill beginning in March 2023. This represents a 5% percent overall base rate increase, though actual bill impacts will vary depending on customer class and usage.
“We know any rate increase affects our customers, who are dealing with rising costs just like our utility,” said Jackie Sargent, Austin Energy’s general manager. “With the new base rates, residential customers will continue to see some of the lowest bills in the state while paying closer to the cost of service. I appreciate City Council recognizing the need to protect customers from rate shock while improving the utility’s financial position to continue to meet our community’s needs and priorities in the long term. We believe this balanced approach will help our customers and our utility’s long-term financial health.”
Austin Energy hasn’t raised base rates in more than 10 years and reduced base rates by $42.5 million in 2016.
2023 Base Rate Changes
Key base rate changes include:
- A 3-step increase in the customer charge of $13/$14/$15 over the next three years to better recover fixed costs. The customer charge reflects the costs for billing, metering, and other account management costs. The current residential customer charge is $10 per month.
- Increase the utility’s revenue requirements by $29.5 million.
- Updating a residential base rate structure to reflect customers’ current energy usage. Austin Energy uses a tiered rate structure, with increasing rates based on energy consumption. Austin Energy will reduce the number of inside City of Austin residential tiers from five to four, bringing residential customers closer to their cost of service and establishing more equitable rates. The revised rates for customers living inside the City of Austin for the first year under a $13 customer charge are:
- Tier 1 (0-300 kWh) — 4.100 cents per kWh
- Tier 2 (301-900 kWh) — 5.100 cents per kWh
- Tier 3 (901-2,000 kWh) — 7.307 cents per kWh
- Tier 4 (>2,000 kWh) — 10.564 cents per kWh
- Continuing separate tiered rates for residential customers outside the City of Austin.
Business customers will also see an increase in their customer charge. More specific base rate changes for business customers will depend on their business customer class (small business, large industrial customer, etc.).
2022 Base Rate Review and Process
Austin Energy is required to regularly review the utility’s costs and revenues so that customer charges accurately recover costs and reflect the community’s priorities. Base rates cover the costs of owning and operating the electric system, such as financial obligations and utility operation and maintenance expenses.
Key base rate review drivers include:
- Higher operation and maintenance costs
- Continued customer growth, which requires infrastructure additions and improvements
- Lagging energy sales, compared to customer growth
- Grid reliability
The base rate review process included an open and transparent review of Austin Energy’s base rate proposal by an experienced Impartial Hearing Examiner. The Impartial Hearing Examiner listened to all issues and positions from participants and made a recommendation on Austin Energy’s base rate proposal to Austin City Council.
The Austin City Council set new rates for Austin Energy after considering Austin Energy’s final proposal for stakeholder positions, and the Impartial Hearing Examiner’s recommendation. Base rate changes will take effect in 2023.
Help Available for Eligible Customers
As part of its approval of Austin Energy’s base rate changes, City Council also established annual targets for Austin Energy to increase participation in the Customer Assistance Programs (CAP). CAP offers programs to help residential customers who face temporary and long-term financial difficulties, as well as serious medical problems. Eligible customers can apply for CAP. CAP customers do not pay the monthly customer charge and receive a 10% bill discount.