Austin
1:08 pm
Mon January 16, 2012

Five (or Six) Reasons Lee Leffingwell Opposes Austin Energy's Rate Increase

You can add one more voice to the chorus opposing Austin Energy’s proposed rate increases: Mayor Lee Leffingwell, who announced this weekend that he does not support the current proposal from the utility.

As seen in the uniformly negative public reaction to Austin Energy’s proposal at City Council’s last meeting, the rate increase – potentially the first in 17 years – has struck a nerve.

The utility’s most controversial recommendations are a bump in fixed costs. Austin Energy currently charges a monthly customer fee of $6; they propose doubling that fee to $12 “to recover about two-thirds of the approximately $20 cost to serve each customer for billing,” they write. Additionally, they propose creating a $10 monthly “electric delivery charge;” the utility estimates they spend approximately $14 per customer “for the construction, maintenance, equipment, and operation of the electric system.” But critics have charged the $22 in flat fees penalize lower-income users, and users of less electricity, disproportionately. As previously reported, a 300 kWh monthly average bill (a usage rate on the lower end of the scale) would rise from approximately $27 to $43. The effect of the higher rates on schools and churches, in relation to the fees assessed on large businesses and industrial users, also received much attention at last week’s council meeting.

With a $75 million deficit looming this fiscal year, many are in agreement Austin Energy needs to reassess their rates. Leffingwell writes that he shares that concern, but cites five reasons he doesn’t support the rate changes as drafted:

  • Uncertainty on Austin Energy’s financial requirements: “I believe we need clarity on Austin Energy’s future revenue requirements,” Leffingwell writes. “Until the Council has full confidence that the revenue requirements are based on sound analysis and projections, it will be impossible to debate any rate increase.”
  • Residential rate hikes are out of proportion to corporate increases: “In the past, Austin Energy’s largest corporate customers have helped subsidize residential ratepayers,” he writes. “We shouldn’t now put our financial house in order disproportionately on the backs of homeowners and renters.  While I’m open to some formula change, I believe we need to protect our long-held covenant that big users should help support small ones.”
  • Schools, churches, and low-income users may be hurt: “We have an obligation to consider their needs specifically as we weigh a rate increase, and to do everything we can to minimize our impact on them.”
  • He’s “not yet convinced that the current proposal does enough to promote energy efficiency, conservation and the use of renewable energy.”
  • The proposal doesn’t “give consideration to the concerns of ratepayers who live outside the Austin city limits,” a complaint previously raised by State Representative Paul Workman, which he reiterated to the council in person at last week’s hearing.

Politically, there may be a sixth, unstated reason: With the rate proposal dramatically unpopular, and a city election on the horizon, the timing couldn’t be worse for incumbent council members. As the Austin American-Statesman notes, “delaying the rate increase until after the election could defuse a potentially explosive campaign issue.” And with, as the Austin Chronicle writes, only six citizens registered in support of the increases out of some 130 speakers at Thursday's public hearing, the discontent with Austin Energy's proposals is plain to see.

The next hearing on the proposed rate increase is tentatively scheduled for Feb. 2.