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    Softening blow of another rate hike


    November 28, 2022 - Austin American-Statesman

     

      At a hearing earlier this month, Council Member Kathie Tovo also floated the idea of a smaller, short-term increase in rates. She noted the utility and the consumer groups still have vastly different views about how much revenue is needed, and questions remain over Austin Energy crafting its rate proposal based on revenues and expenses from 2021 — an odd choice for a model year, given the winter freeze and pandemic-era closures.

      The second jab of a one-two punch is about to hit Austin Energy customers, and you can bet the City Council is looking for ways to soften the blow.

      Just over a month ago, the council took a painful vote to raise the fuel and regulatory charges that are tacked onto every Austin Energy bill, adding $15 a month to the typical resident's tab (and considerably more for commercial customers).

      Now the council is approaching a vote to revamp the utility's base rates — a proposal that, at least on paper, would add an additional $14 a month to the typical resident's electric bill.

      I say "at least on paper," because it's hard to imagine the City Council will adopt Austin Energy's proposed rate hike in the next week or two without tweaking it, perhaps substantially.

      What might that look like?

      First, let me recap what's on the table for residential customers. Austin Energy proposes raising the monthly service fee from $10 to $25, a jaw-dropper designed to bring a larger stream of dependable revenue to the utility regardless of how much electricity customers use.

      The utility also wants to change the rates that customers pay based on their electricity use. Currently, Austin Energy has five tiers that charge progressively higher rates for energy use, a price structure that was designed to encourage conservation. The utility proposes moving to three tiers that reduce the rates for all but those using the least amount of electricity.

      That's right. Under this proposal, a frugal customer using half as much electricity as the typical resident would see their bill go up about $20 a month. An extravagant customer, burning through three times the amount of electricity as the typical user, would see their bill drop $57 a month.

      Austin Energy, which pulled $90 million out of reserves over the past two years to help cover its operating costs, says the shift is necessary to bring rates in line with what it truly costs to deliver electricity to people's homes. That's cold comfort to Austinites facing rising utility bills on top of the rising costs of housing, food and other necessities.

      So what could the council do?

      Go for a smaller increase in the flat monthly fee. Let's say the council kept the tiered rates it currently has for electricity use, and simply increased the monthly base fee by $2 (instead of the $15 hike Austin Energy seeks). The Electric Utility Commission, an advisory panel that suggested that idea, says that minor bump would generate $11.4 million annually, making up nearly a third of the revenue Austin Energy says it needs to raise.

      Roll out the increased fees gradually. Council Member Leslie Pool, who chairs the council's Austin Energy oversight committee, asked during a Nov. 15 discussion whether the increase in the monthly fee could be spread over three years.

      "I'm interested in any approaches that would lessen the rate shock that may be experienced for utility customers," Pool said. "I think we all are in agreement about that."

      Reduce the scale of the rate hike. A tremendous amount of work has been done on this front by consumer advocates, environmentalists and commercial customers who have a shared interest in keeping electricity as affordable as possible. Earlier this month, this coalition issued a proposal to raise the monthly fee by $2 and shift the electricity use tiers more gradually, resulting in a $12 million annual increase in revenue.

      That's a long way from the $35.7 million that Austin Energy says it needs to generate "to ensure the long-term financial health of the utility." But the utility's critics argue that revenue goal is overblown, that the utility overestimated some costs and overlooked some sources of revenue. They note, for instance, that Austin Energy didn't include the revenue it's expecting from the sale of its old Town Lake Center office building (the utility says that's because the sale hasn't happened yet).

      Several council members also support knocking about $4 million off Austin Energy's revenue goal, saying the utility overestimated the amount of money it would need to send to the city's general fund to help support other city services.

      A few million in revenue here, a few million in savings there — it could add up to a smaller rate hike for customers.

      Make a short-term decision. Some consumer advocates have urged no increase, or a minimal one, or a temporary one, so the city can spend more time examining whether a larger rate hike needed.

      At a hearing earlier this month, Council Member Kathie Tovo also floated the idea of a smaller, short-term increase in rates. She noted the utility and the consumer groups still have vastly different views about how much revenue is needed, and questions remain over Austin Energy crafting its rate proposal based on revenues and expenses from 2021 — an odd choice for a model year, given the winter freeze and pandemic-era closures.

      "It might make sense to not think about this as a rate for five years," Tovo said, "but to do something less drastic in terms of a rate increase and come back and revisit in a couple years."

      Council members expect Austin Energy to bring some options to their discussion on Tuesday. They could take a vote as early as Thursday.

      The council faces a difficult task: ensuring the utility has the money it needs to, quite literally, keep the lights on, while also ensuring affordable prices for residents who keep getting squeezed.

      And because it affects an essential service and the pocketbooks of everyone in town, this will be one of the most important things the City Council does this year.

      Grumet is the Statesman's Metro columnist. Her column, ATX in Context, contains her opinions. Share yours via email at bgrumet@statesman.com or via Twitter at @bgrumet. Find her previous work at statesman.com/news/columns.

      ATX in Context

      Bridget Grumet

      Austin American-Statesman

      USA TODAY NETWORK

      At a hearing earlier this month, Council Member Kathie Tovo also floated the idea of a smaller, short-term increase in rates. She noted the utility and the consumer groups still have vastly different views about how much revenue is needed, and questions remain over Austin Energy crafting its rate proposal based on revenues and expenses from 2021 — an odd choice for a model year, given the winter freeze and pandemic-era closures.

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