2016 Rate Review

Assessing the Cost of Providing Electricity to Our Customers

The cost of service study and review of retail rates concluded with the Austin City Council’s unanimous approval of new retail rates. Council approved a Joint Agreement between 22 parties on August 29, 2016. The agreement set new base rates for Austin Energy. Changes went into effect January 1, 2017. 

Read the final summary

The Process

City Council’s decision closed a year-long, open and transparent public review process that was more extensive and transparent than any process currently used by a municipal electric utility in Texas, included an Impartial Hearing Examiner to conduct an independent review of Austin Energy’s rate recommendation and an Independent Consumer Advocate to represent the issues of residential and small business customers. Austin Energy staff fielded more than 1,100 questions from the public and made available thousands of pages of documents. There were about 26 interveners in the Impartial Hearing Examiner process who had the opportunity to participate in more than 30 hours of live testimony.

Thank you for your interest and participation in this process. It is this kind of public dialogue and discussion that makes community-owned power such a beneficial asset to the customers it serves.

Key Points from the Approved Joint Agreement

Originally, Austin Energy proposed to reduce base rates by about $24 million. The joint agreement lowered base rates by $42.5 million. Base rates recover the fixed costs of the utility. A Power Supply Agreement recovers the cost of buying energy (kilowatt-hours) for resale to customers.

Residential

$5 million of that reduction went to the Residential Class. In this agreement, year-round residential base rates on January 1, 2017 are:

  • Tier 1 — $0.02801
  • Tier 2 — $0.05832
  • Tier 3 — $0.07814
  • Tier 4 — $0.09314
  • Tier 5 — $0.10814

Commercial

Austin Energy’s commercial classes saw $37.5 million of the reduction — about 88% of the total base rate reduction. The breakdown looked like this:

  • $1M reduction to Secondary < 10 kW (small offices, daycares, school portables, billboards)
  • $15.7M to Secondary 10-300 kW (small office buildings, retail, restaurants, small hotels)
  • $5.3M to Secondary > 300 kW (large office buildings, grocery stores, schools, hospitals)
  • $4.5M to Primary < 3,000 kW (office parks, water treatment plants, manufacturing)
  • $5.3M to Primary 3,000-20,000 kW (large manufacturing, data centers)
  • $5.5M to Primary > 20,000 kW (large industrial manufacturing)
  • No change to Transmission voltage level 1 (industrial)
  • No increase to Transmission voltage level 2 (large industrial)

Low Load Factor Floor

The Joint Agreement included a demand adjustment for customers with load factors below 20%, which effectively decreased the cents/kWh charged to those customers. This benefitted about 3,700 small- and medium-sized commercial customers.

Houses of Worship

Transition of the Houses of Worship discount will continue for four more years with the following rate cap adjustments:

  • FY 2018 — 13.75 cents
  • FY 2019 — 14.25 cents
  • FY 2020 — 14.75 cents

The cap concludes at the end of FY 2020. Austin Energy also will continue to measure demand charges based on weekday use and will prepare a study examining non-coincident peak use for commercial customers.

Seasonality

Seasonality was removed from base rates and applied to the Power Supply Adjustment.

Energy Efficiency Commitment

The agreement required Austin Energy to dedicate an additional $2 million in energy efficiency benefits and free high bill audits to residential and small commercial customers without increase to the FY 2017 Energy Efficiency Services tariff.

Fayette Power Project

In agreement with Public Citizen/Sierra Club, Austin Energy agreed to meet with stakeholders in the upcoming update of the Resource Plan to discuss goals for the Fayette Power Project. The utility also will develop a roadmap with possible paths for ending the use of coal and starting retirement of Austin Energy’s share of FPP. Any definitive action taken on FPP-related objectives remains subject to the Council’s affordability requirements. Austin Energy provides an update on the roadmap by the end of January 2017, with June 2017 targeted as the Council presentation of options.

Agreement Support

By signing the agreement, the parties agreed to not seek, fund or support an appeal of this rate review before any oversight body including the Public Utility Commission of Texas as well the Texas Legislature until the next rate review or December. 31, 2020.

Agreeing Parties

The agreeing parties included:

  • Austin Energy
  • Independent Consumer Advocate
  • Applied Materials
  • Austin Apartment Association
  • Austin Association of Facility & Maintenance Engineers
  • Austin Energy Low Income Customers
  • Austin Regional Manufacturers Association
  • Bethany United Methodist Church
  • Building Owners & Managers Association of Austin
  • Coalition for Clean Affordable Reliable Energy
  • Crown Castle
  • Cypress Semiconductor
  • Homeowners United for Rate Fairness
  • Goodwill
  • Greater Austin Chamber of Commerce
  • James Rourke
  • NXP Semiconductors
  • Public Citizen/Sierra Club
  • Samsung Austin Semiconductor
  • Seton Healthcare
  • St. David’s HealthCare
Last Updated: 11/1/17

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