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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