Huge Fuel Charge Increase to Jolt Customers in January!

In a stunning, pre-Christmas surprise late this afternoon, Austin Energy delivered some bad news to the Mayor and City Council.  They are planning to raise the monthly fuel charge on residential electric bills by $5.10 per month for the average user of 1,000 kWh.  This is in addition to and completely separate from the base rate increase battle that is playing out at the same time.  The consumer and citizen groups involved in that rate case are just now beginning to absorb the shock of the fuel charge increase.  Right now there are far more questions than answers.

Here is Austin Energy's explanation for the increase:

Austin Energy customers will see an increase in the Fuel Charge on their utility bills for 2012. The Fuel Charge is the dollar-for-dollar recovery of the cost of fuel used by AE power plants, purchased power costs, as well as costs related to state grid operations.

The Fuel Charge will increase from the current 3.10 cents to 3.61 cents per kilowatt-hour (kWh) of electric use effective with January electric bills. An average residential bill (1,000 kWh) will increase by $5.10. Customers who subscribe to the Austin Energy green power program (GreenChoice®) are not affected because they pay a green power rate that replaces the Fuel Charge on their electric bill.

The Fuel Charge increase for 2012 is due to additional fuel and purchase power needs this past summer during record heat and customer demand. In addition, an unplanned, multi-day outage at the Fayette Power Project in early August required the purchase of replacement power during peak demand periods with very high wholesale prices. South Texas Project Unit 2 has also experienced an unplanned outage that began in late November and is expected to last into early 2012.

This Fuel Charge increase is unrelated to the Austin Energy rate proposal. However, most of the January Fuel Charge increase was included as a placeholder in the overall rate proposal cost totals.

Last January the fuel charge was reduced by 15%. The new fuel charge is lower than the fuel charge required in three of the last four years.

American-Statesman Guest Editorial

Austin Energy's revised billing scheme wouldn't serve city's poorest customers

Bill Oakey, local contributor

Published: 6:54 p.m. Tuesday, Dec. 13, 2011

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If you are a fan of airline baggage fees and bank service charges, then you will love what Austin Energy has in store for you! How about a fixed monthly charge of $25.00, before you even flip the first light switch? If that sounds hard to swallow, hang onto your hats. That is only the beginning of a flawed set of changes rooted in this new rate proposal.

For decades, our mayors and City Councils and Austin Energy have prided themselves on rate policies that encourage energy conservation. The structure has been progressive — the less you use, the less you pay. This not only rewards conservation but also provides a safety net for low-income residents, senior citizens and students who can least afford to pay. Thanks to our rate design, even residents of larger homes are able to offset high summer bills with lower ones in the spring and fall.

Austin Energy's new proposal is upside-down and backward. Several citizens' groups, including Public Citizen, Texas ROSE, the Austin Tenants Council, Gray Panthers and the Sierra Club are working to oppose this rate plan. The current $6 customer charge would jump to $15, and a new $10 "delivery charge" would be added to each residential bill. A customer using only 300 kWh of electricity would see a smaller energy charge but would get a 60 percent bottom line increase of $16 per month. A more typical customer using 1,000 kWh would see an average bill increase of just less than $10 per month. The new fixed charges would push Austin Energy from near the bottom in that category to among the highest in the state.

Other elements of the rate proposal are also flawed. The utility industry uses different models to calculate the "cost of service." These models divide up the cost of running Austin Energy among the customer classes. Our current cost of service model, in use since 1994, would be replaced with one that is heavily skewed in favor of large industrial ratepayers. This would leave residential and small business customers responsible for paying for the bulk of the rate increase. Utility bills are a hardship for many customers, but not for the largest Austin companies that use the most electricity. Many of them already have special discount rate contracts that don't expire until 2015.

Finally, there is just cause to question Austin Energy's revenue requirement for the $100 million rate increase. Some citizen groups believe they could trim at least $50 million from that figure. Austin Energy wants to collect more than twice the amount needed to cover annual debt payments. Also included is an unfair plan to allocate $10 million annually for the city's economic development programs exclusively to residential ratepayers.

This rate proposal defies many utility industry standards. The high fixed charges, the flawed cost of service model and the excessive amount of the increase could fail if challenged before the Texas Public Utility Commission. Austin Energy's residential customers living outside the Austin city limits have the legal right to petition the PUC for a review of this rate case. That is exactly what happened in 1985, when a settlement resulted in lowering the amount of that increase and some other changes. Is this déjà vu all over again?

Austin Energy will present its final proposal to City Council on Dec. 14. Public hearings are scheduled to begin in January. We encourage you to attend those meetings and visit our blog and Facebook page, "Affordable Energy for Austin." As Austin citizens, we are very fortunate to be the owners of Austin Energy. We should make our voices heard and turn this upside down and backwards rate proposal right side up and forward.

Oakey is a consumer advocate and former member of the Austin Electric Utility Commission.

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Fact Checking on the "Cost of Service" Arguments

In this electric rate case, you will hear a lot about "cost of service."  Are the big high tech companies paying more for electricity than what it costs to serve them, while residential homeowners are paying less than their fair share?  Or is it the other way around?  Austin Energy's proposed rate increase makes the assumption that residential ratepayers have been paying much less than their true cost for a good many years.  But is there something wrong with that picture?

You bet there is!  Not surprisingly, there is more than one utility industry model for calculating cost of service.  Without going into too much inside jargon, we can tell you that Austin Energy has recommended the AED model, which favors the large industrial ratepayers.  The consumer advocates and community organizations that we represent support the BIP model.  It is also very important to note that since the last rate case in 1994, Austin Energy has been using a cost of service model that is very similar to BIP.  Their sudden switch to a different model that is punitive to residential and small business ratepayers is a major part of our opposition to this unfair rate increase.

Cost of service models assign the costs of energy generation power plants to each category of customers.  The AED model lumps all the power plants together, including the expensive coal and nuclear plants.  It then measures those costs on the single hottest day of the year - the system peak.  The truth is that Austin Energy meets residential demand during peak summer hours using the much less expensive natural gas power plants.

Merle Moden, former chair of the City Electric Utility Commission, said this about the AED model, which favors industrial ratepayers, "The single-most important shortcoming of the Industrial Model is its failure to match the demands for electricity throughout the year among the various classes with the required actual costs of generation to meet those demands."  The bottom line in this rate case is that using the AED model would unfairly allocate $25.4 million in costs to the residential class, compared to the BIP model.  (Source: Austin Energy Rate Recommendation, page 85).

The BIP model measures the appropriate generation usage throughout the year for each type of customer, and does so both accurately and fairly.  You do not have to just take our word for it. The Electric Reliability Council of Texas (ERCOT) uses the BIP model for its pricing of electricity that is bought and sold through the statewide power grid.

And yet, Austin Energy has been promoting the notion that residential ratepayers have gone for years without paying their true cost of service.  Check out these two news articles that propel this myth:

http://www.statesman.com/news/on-way-out-water-electric-rate-deals-for-1809361.html?viewAsSinglePage=true

http://www.statesman.com/news/local/should-austins-homes-bear-brunt-of-electric-rate-1850128.html?printArticle=y

Voice Your Concerns to the City Council!

We've made it easy for you to contact your elected City Council Members.  Remember that Austin Energy is not a private company.  We are blessed to be the owners!  Here are the names, phone numbers, and email addresses of all 7 Council Members.  Just click an email address to start your message:


Mayor Lee Leffingwell (512) 974-2250, Lee.Leffingwell@ci.austin.tx.us

Mayor Pro Tem Sheryl Cole (512) 974-2266, Sheryl.Cole@ci.austin.tx.us

Council Member Mike Martinez (512) 974-2264, Mike.Martinez@ci.austin.tx.us 

Council Member Laura Morrison (512) 974-2258, Laura.Morrison@ci.austin.tx.us 

Council Member Kathie Tovo (512) 974-2255, Kathie.Tovo@ci.austin.tx.us

Council Member Bill Spelman (512) 974-2256, Bill.Spelman@ci.austin.tx.us

Council Member Chris Riley (512) 974-2260, Chris.Riley@ci.austin.tx.us

Welcome to Affordable Energy for Austin

Economic times are bad.  Austin Energy is hitting us with 17 years of increases all at one time.  The staff proposal includes fixed monthly charges of $25 for residential ratepayers, before they use a single watt of power.  In addition, the revenue requirement is overstated and some of its elements defy industry standards.  The rate design puts an unfair burden on residential and small business ratepayers.  Community groups are banding together to demand that Austin Energy go back to the drawing table and reduce the increase by at least 50 percent.

The following groups and individuals are working together to oppose the AE rate proposal:

Public Citizen

Texas ROSE
Austin Tenants Council
Texas Legal Services Center
Sierra Club
Bill Oakey, Consumer Advocate
Paul Robbins, Energy Activist

“Why all of a sudden do they need a 25% residential rate increase?” asks Katherine Stark, executive director of the Austin Tenants Council. Industrial customers get zero rate increase. “Families and small businesses are being asked to pay the biggest increases.”

Austin Energy’s new rate proposal discourages conservation and does not support the clean energy future we anticipate in the Austin Energy Resource, Generation, and Climate Protection Plan. We believe that the rate proposal is upside down and backwards…

¡spɹɐʍʞɔɐq puɐ uʍop ǝpısdn

There is still time to fix this. AE should come back with a totally new proposal that significantly reduces bills for families and small businesses. We are not sure AE needs a rate increase, but if they do we want it to be fair and simple.

The biggest bill increases will hit families and small businesses with:

• An overall increase of 25 percent for residential customers
• Monthly fixed charges of $25 or more.
• A Revenue Requirement for the utility that is much too high
• A cost-of-service allocation model that favors large industrial customers at the expense of residential and small business customers