Council Approves New Austin Energy Rates; Advocates Disappointed

At Council’s last meeting of the year yesterday (Dec. 8) – and for Mayor Steve Adler and three council members, their last meeting ever – Austin Energy finally secured approval of its new customer rate structure.

The proposal will allow AE to bring in another $29.5 million in revenue a year (down from the $35.7 million requested), and will raise the fixed customer charge, or “base rate,” from its current $10 per month to $13 per month in 2023, $14 per month in 2024, and $15 per month in 2025. This charge is paid by ratepayers regardless of how much electricity they use; the current five-tier rate structure that incentivizes conservation (the more power you use, the more expensive each kilowatt-hour becomes) will be flattened to four tiers.

The average household inside the city limits will see an increase of roughly $9 per month to its electric bill beginning in March 2023, on top of the $15 increase approved in October to the Power Supply Adjustment charge (driven by the rising cost of natural gas used to generate power). Council approved the plan on a 7-4 vote, with Mayor Pro Tem Alison Alter, Council Member Vanessa Fuentes, and last-meeting-ever CMs Kathie Tovo and Ann Kitchen voting against.

The ratepayer-owned utility spent nine months in deliberation with interveners in the case – including NXP Semiconductors, Sierra Club, Public Citizen, and residential ratepayers. They argued that AE’s original ask for a $25-per-month base rate and only three rate tiers would hurt low-income customers and destabilize the delicate balance the utility has struck over the last 20 years between promoting sustainability and still turning a profit selling electricity (which is then use to subsidize the city’s General Fund). In the end, AE got much of what it asked for, except for the (greatly reduced) hike to the customer charge.

Adler and last-meeting-ever CM Pio Renteria encouraged constituents that will struggle to pay an extra $110 a year (that’s like an extra 13th electric bill) to explore AE’s Customer Assistance Program, which gives low-income customers a 10% bill discount on electricity used and waives the customer charge entirely. The program is funded internally by AE to cover about four times as many people as are currently enrolled; Renteria and CM Natasha Harper-Madison, who both represent lower-income districts, said this expansion of CAP offsets the rate increase enough for them to support the changes.

Fuentes, however, remarked before the vote that the proposal “has been confirmed as rate shock to some of our most vulnerable customers. Knowing how challenging it is to live in our ever increasingly more unaffordable Austin, with rents on the rise, with inflation, with grocery prices going up … that is why I don't think this proposal is the best possible solution. I want to make it clear that there were different options.”

Tovo agreed, expressing concern about the graduated increase of the customer charge: “In my years on the dais I've tried to never shy away from hard votes … but I simply cannot get there with this. I saw a pathway to mitigate this impact on families and can't be satisfied with where we are today.” Alter voted against because “tonight we are voting on a proposal that was unveiled this evening … I don't have full assurances that it will fully fix our utility’s challenges.”

Interveners in the case on behalf of low-income ratepayers are largely unhappy with the result after their months of advocacy. Public Citizen’s Kaiba White said in a statement that “While the approved rate plan is an improvement from what Austin Energy initially proposed, it still is inequitable and de-prioritizes energy conservation, which is key to reducing our impact on climate change.” The statement pointed out that the proposal also shifts costs to residential and away from commercial customers.

Sierra Club’s Shane Johnson added that the customer charge of $15 by 2025, on top of the $15 increase to the Power Supply Adjustment, "will harm low-income households in Austin. Unfortunately, this was not the best outcome for ratepayers.” Interveners have agreed with AE on a list of next steps, including further expansion of CAP, a line-loss study to see where power is leaking, the calculation of the Value of Solar (what customers who install solar would earn for putting power on the grid), and developing a standard offer program for community solar installations.

“We know any rate increase affects our customers, who are dealing with rising costs just like our utility,” said Jackie Sargent, AE’s general manager, in a statement. “With the new base rates, residential customers will continue to see some of the lowest bills in the state while paying closer to the cost of service.” The statement also notes that AE hasn’t raised base rates in more than 10 years and reduced them in 2016. The current change will help recoup upwards of $90 million in losses over the past two years, due to high natural gas prices, increasing interest rates, and AE’s own success at promoting conservation.