Austin
1:35 pm
Mon January 30, 2012

How is City Council Responding to Austin Energy’s Proposed Rate Hikes?

The Austin City Council will hold another public hearing on Austin Energy’s proposed rate increases this Thursday. If it’s anything like the last hearing, expect dozens and dozens of citizens to speak in protest of the proposal.

But with opinion divided on how best to proceed, and the policy debate arguably mutating into a political issue as campaign season begins, it’s uncertain exactly when the increases will be settled. And as council members are inching toward a solution, so far it’s been on separate paths.

Mayor Lee Leffingwell was the first to prominently, publicly address electricity rate hikes outside of council chambers. In a blog post, he gave five reasons he opposed the increase as drafted. He also offered some suggestions on how to improve the proposal. He suggested phasing in the increases -- including a base amount of power in the controversial based changes the utility’s proposed (which would increase from $6 to $22) -- and applauding “time-of-use’ billing that would charge more during peak system times.

Council member Bill Spelman went further late last week, releasing a thorough “starting point” for discussion of rate increases. One of Spelman’s most notable proposals is to reduce the $22 in base fees to $15, and have that amount include 250 kilowatt hours of electricity. He also wants to waive those base fees for low income customers.

Spelman also wades into the subject of Austin Energy’s revenue requirements – the leading cost driver of the proposed rate hike, and an increasingly contentious issue as the debate has drawn on. Here, he writes:

I am not satisfied with the research and analysis that support AE’s revenue requirement of an additional $126 million each year.  While the utility needs a significant structural fix to its business model, the revenue requirement has too many assumptions and lacks plain, understandable comparisons to our industry peers for me to feel comfortable passing on such a large increase to our customers.  I suggest that AE go back to work on the revenue requirement, paying particular attention to our financial policies, our reserve funds, and our project capital improvement program to more thoroughly substantiate the need for additional funds.  In the meantime, the utility will need to propose a smaller revenue increase that covers our projected losses for the year.  Once AE finishes its additional studies, we all should expect another rate increase that will help AE fix its structural imbalances and replenish the most critical of its reserve funds.

Taking another tack, Mayor Pro Tem Sheryl Cole held a forum this weekend to discuss the rate increases. The Austin Chronicle describes the tenor of the talk below:

While there was much general bluster about all bills being too high, an uneven consensus conceded that after 17 years with no bump in rates, some increase is inevitable. The question remains whose oxen are going to get gored, and Cole and others insisted that whatever comes out of the discussion, the city will do its best to reduce the impact on low-income citizens, churches, and schools. It's still very unclear how that will happen -- but it's also clear that the Council, while scheduled to address the matter in the next couple of meetings, is nowhere near a vote yet on an actual rate schedule.

Will the council be any closer after this Thursday? That’s a question we’ll hopefully have an answer for at the end of their meeting.