New report urges Austin Energy to ‘revisit’ rate increase proposal, warns of affordability problems

AUSTIN (KXAN) — As Austinites power through the final weeks of the summer temperatures, there’s a heated battle taking place over Austin Energy’s proposal to increase and restructure the way it bills customers.

After months of back-and-forth over the proposal, an Impartial Hearing Examiner released its final recommendations on Friday — marking the latest update in the case over rates.

In April, Austin Energy announced it needed to cover a growing gap between revenues and the cost of providing service. The utility proposed several ways to restructure its base rate, including raising the fixed monthly charges for customers from $10 to $25, before they ever hit the light switch. The proposal goes on to suggest folding the current 5-tier rate structure, based on customers’ power usage, down into only three tiers.

Meanwhile, some consumer advocates think the utility is taking the wrong approach.

The utility estimated an overall base rate increase of 7.6%, but an independent consumer advocate tested that amount more than doubles for the residential class, at 17.6%. That advocate also said the increase would be further “magnified” for certain customers, especially the ones who use the least amount of power.

Environmental organization Sierra Club, which is another party in the rate case, worried that flattening the tiered structure would slash people’s incentive to save energy and affect conservation efforts in the city.

Another piece of the Austin Energy proposal changes the way customers with solar panels are credited for any energy they generate, in order to more fairly and accurately compensate them, the utility said. But KXAN talked to an energy consultant who said the change treats solar customers less like a resource and more like a commodity.

So far, thousands of pages of arguments have been filed in the ongoing case over the rate proposal, but the Impartial Hearing Examiner reviewed all of it before releasing its final recommendations.

  • Read the full recommendations here

According to the filing, the Examiner recommends the City Council approve several pieces of Austin Energy’s proposal — such as the Value of Solar methodology and the revenue requirement — but the Examiner urged the utility and other participants in the case to “revisit” the rate design itself.

The Examiner agreed with the concerns about potential rate shock and said the “proposed increases may exacerbate a known affordability problem in Austin.”

Austin Energy has argued that its proposed rate design will actually mitigate seasonal rate shock, by stabilizing electric charges from “non-summer to summer.” The Examiner agreed, but noted that the seasonal rate shock is “less of a concern” than the overall rate shock potentially caused for some customers by the proposal.

The Examiner agreed that residential customers who fall in the lowest-use categories will be impacted most.

It’s a concern consumer advocate and longtime Austin resident Bill Oakley has been writing about on his blog, Austin Affordability, since the proposal was released. As a former member of the city’s Electric Utility Commission, he’s been following these kinds of rate cases for nearly 40 years.

  • Read other testimony filed in the case here

“This new one is the most challenging, and the most interesting yet,” he said.

Oakey said Austin Energy’s proposal indicates the utility’s need to re-evaluate its larger business model. As more Austinites work to conserve power and prioritize efficiency, he believes the utility should anticipate selling less power and, instead of raising rates, pull back on its infrastructure and costs. He calls it “growing backwards.”

“The bottom line is that we need to be able to get from point A to point B, and just think about what point B might be 10 years from now, 15 years from now. We might have 15 to 20% of the population, both business and residential, using solar panels and storage batteries,” he said.

He and others who tested in the rate case, emphasize that one of the biggest concerns of the proposal is the impact on conservation efforts. Austin Energy has responded in testimony that its proposed rate design “predominantly focuses on conservation.”

It states, “One hundred percent of the demand costs are designed to be recovered in energy rates. The energy rates are proposed in three tiers of inclining blocks of consumption, which amplifies the conservation price signals.”

The Impartial Hearing Examiner also recommended Austin Energy expand programs such as the Customer Assistance Program (CAP), which assists customers who may be vulnerable to rate shock from increased rates.

The Examiner ultimately stated the design to adopt “depends heavily on City Council’s policy preferences.”

The recommendations will be forwarded to the Electric Utility Commission and City Council, ahead of further votes on the proposal in the fall.

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