Council Uses Its (Public) Power to Soften Austin Energy Rate Hike

A benefit of buying electricity from a publicly owned utility like Austin Energy is that you can vote for the people who have to sign off on rate increases before AE executives can implement them. But public power providers face the same increasingly expensive challenges getting electricity to customers that private companies do, ones that – eventually – need to be paid for by someone.

Austin Energy ratepayers will soon be those someones, following a 7-4 vote by Council to increase the pass-through charge imposed on AE customers for the cost of generation, known as the Power Supply Adjustment. (Remember that this is different from the base rate adjustment Council will consider in six weeks.) The PSA portion of AE customer bills will increase $15 per month, as the utility seeks to recoup $104 million in emergency operations costs incurred in the chaotic 2022 fiscal year, in the aftermath of the prior year's grid failures.

The PSA is intended to pass through to customers the prorated cost of the natural gas or coal used to generate their power; right now at AE, the fossil fuel share of the energy mix is mostly natural gas, which has hit record prices around the globe. That and this year's unusually hot summer, which appears to have just ended, led to unexpected costs for AE, as did the Winter Storm Uri-prompted bankruptcy of Brazos Electric; the cooperative serving Waco owed $27 million to AE.

Proving the point of public power, Council opted for a phased three-year increase rather than an immediate $20-per-month hike, but they didn't really have a choice on whether or not to increase the PSA, since AE has already spent the $104 million. "Your publicly owned utility has already expended these dollars to provide you with electricity," Council Member Kathie Tovo said before the vote. "So it is a regrettable yes vote today." That clear-eyed view on the rate increase among the Council majority did free up four CMs (Vanessa Fuen­tes, Macken­zie Kel­ly, Natasha Harper-Madison, and Paige Ellis, the latter two of whom are seeking reelection Nov. 8) to vote against the increase, which some of their constituents may appreciate. Fuentes said that at a recent town hall in her District 2, city fee increases generally were a major concern for "families in South­east Austin who are living paycheck to paycheck and who are dealing with rising rent and inflation … I will not be supporting today's proposal." AE's increased PSA will go into effect Nov. 1; Council will deliberate and vote on the base rate increase at the end of November.

On the housing front, Council spent some time arguing over an item from Mayor Steve Adler that asks staff to find ways to offset costs imposed on housing developers by critical environmental regulations, like those included in the city's Water Forward plan. Adler's resolution does not contemplate changing those regulations, but asks staff to propose to Council bonuses or other tools that could help offset their costs, and thus help create more housing.

Still, CMs Tovo and Ann Kitchen and Mayor Pro Tem Alison Alter were sufficiently concerned to persuade Adler to postpone his item until Oct. 27 (a formal motion to postpone failed). Alter said she hoped to get greater clarity from Adler's office on which regulations in particular city staff would be tasked with reviewing and on a clearer timeline for when the review would be completed.

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* Editor's note Thursday, Oct. 20, 3:41pm: This story has been updated. A previous version incorrectly stated that three Council members voted against the rate increase. It was four. We regret the error.