By Bill Oakey – July 25, 2014
When Austin gets embroiled in a formal Austin Energy rate case, it brings on tons of media attention and large crowds of customers at public meetings. The rate hearings can last for several months. What you may not realize though is that about 35% of your electric bill comes from the fuel charge. The bureaucratic name for it on your bill is the “power supply adjustment charge.”
Well, that charge is set to go up in a few months by 4.4%, which is on top of the 4.6% increase that we got last year. So, we’re talking about a 9% increase over a two-year period. Like so many City regulations and policies these days, the Austin Energy fuel charge needs a good thorough public review and much better transparency. It’s like one of those Facebook relationship status deals, where somebody says “It’s complicated.”
Supposedly, the fuel charges are passed through to the customer at no more than what it costs the utility. But when we hear that natural gas prices have fallen like a rock over the last several years, why would Austin Energy be jacking up the cost? And why would the increases compound themselves instead of leveling off? This is where I think Austin Energy has a lot of explaining to do.
Part of the problem is a contracting procedure called “hedging.” The utility can purchase fuel contracts at the current rate and lock them in for long periods, hedging their bets that price will go up instead of down. Apparently Austin Energy bet the wrong way and lost awhile back. And then there’s a situation during periods of high demand, like our unusually cold winter, where they have to purchase fuel at very high prices from the statewide grid.
Here Are the Questions That the City Council Needs to Ask Austin Energy:
1. What exactly are the specific factors that add up to a two-year cumulative fuel increase of 9%?
2. What options does Austin Energy have to bring down the cost of fuel in their planning processes? Do they have a fuel cost management strategy, and is it plugged into a forecast with goals and targets? If not, let’s insist that they get that done.
3. What is the complete, detailed breakdown of the various categories of costs that get dumped into the “power supply adjustment charge?” I have spoken with members of the Electric Utility Commission, and they have not been given the keys to this cryptic puzzle? It’s time to crack it open and shine a light on it!
4. Where can Austin Energy cut their budget to help offset these high costs, at a time when Austinites are getting taxed, charged, and fee’d out of their socks? Most of us don’t make the six-figure salaries that the Austin Energy executives make.
Today, I am sending this blog posting to all seven members of the Austin City Council. And I have one other recommendation for them to consider. They did something right when they appointed a Joint Committee on the Water Utility’s Financial Plan. They met with the staff and identified a total of $29.5 million in budget cuts between now and next year. (See it here in Recommendation #5).
What I will ask for is a similar committee to meet with Austin Energy and give their budget a good little haircut. It’s time for the City to come down to earth and recognize that most of us are having to cut out things that we would like to have but can’t afford. They need to learn to do the same thing, especially since it is our money that they are spending!