Coal Plant Closures Could Raise Electricity Rates In Austin. Or Maybe Not.

Nov 30, 2017

The announcement that three coal power plants in Texas plan to close next year is likely good news for the environment, but bad news for the people who worked at the plants. As for what it means for your electric bill if you live in Austin, that’s complicated.

That was basically the message Austin Energy, the city’s publicly owned electric utility, delivered this month to a city oversight committee.

After the closures were announced, said Austin Energy’s Erika Bierschbach, wholesale electricity contracts in Texas for next August shot up by 20 percent. That means if Austin wanted to buy electricity ahead of time for next summer it suddenly had to pay much more. 

“Prices rise because of uncertainty. Less available electricity when it’s needed most in the summertime adds to that uncertainty,” Bierschbach said.

But, those higher prices might not actually be bad for Austin ratepayers. That’s because Austin Energy doesn’t just buy electricity, it also sells it. Higher prices might be good for the utility and, by extension, the ratepayers, if Austin is skillful and lucky in buying low and selling high.

“Our team is very good at what we do,” Bierschbach assured the committee.

If that doesn’t calm ratepayer anxiety, here’s another wrinkle: Even if Austin Energy wanted to pass higher electricity costs to consumers, it might not be able to.

The easiest way to pass the cost on is by increasing a fee on your bill called the "power supply adjustment fee."

“Essentially that fee is covering the difference between what [Austin Energy] is selling energy for on the market and what they're buying energy for,” said Kaiba White, an energy policy and outreach specialist with Public Citizen, which has fought to close coal plants and encourage more renewable power.

White said if the utility wanted to increase the supply adjustment fee it would have to get approval from Austin City Council, and if it did, it couldn’t increase the fee by very much.

“It would still be restricted by the 2 percent [increase] per year affordability goal that Austin Energy is working under,” she said.

White said she doesn’t believe the plant closures will lead to major or long-lasting hikes in costs to consumers and that more electricity is already coming online to replace what will be lost when the plants close.

In her presentation, Austin Energy’s Bierschbach said more electricity will come from renewables. In a follow-up email, Austin Energy told KUT that 20 percent price hike it presented to the committee was temporary; the utility doesn’t expect electricity prices to be as high as that next year.