By Bill Oakey – October 6, 2022

For the past several months, Austin Energy has been paying extremely high fuel costs and ERCOT regulatory charges from its own funds. They have not been collecting pass-through payments from customers to recover those costs. This has left them with a whopping $796 million in unrecovered cash. The utility now has only enough cash on hand to last 120 days.

Last week at a City Council work session, Austin Energy offered a few options to resolve their impending cash shortage. In normal times, they would do an annual adjustment to the monthly pass-through charges on customer bills. But a 71% spike in power supply costs and a 24% jump in regulatory charges threaten to put residents and businesses in a bind, possibly starting on November 1st. But, the City is now scrambling to try to find an alternate solution.

Here Is An Idea for the City to Consider

Certain other Texas utilities took out long term loans to cover high fuel charges associated with last year’s winter storm. San Antonio’s public utility did that. Their customers will be paying a small monthly charge for 25 years, to cover a large fuel cost debt. Austin Energy should explore a similar option to resolve their unrecovered costs. Even though interest rates are high right now, the utility could probably refinance the loan at a later date. They could try to estimate how long the higher than normal costs might continue, and borrow enough money to get through that abnormal period.

Unleashing the sky-high Power Supply Adjustment and Regulatory Charge all at once would hinder ratepayers in ways that other cities have already seen firsthand. Check out this news article and this one.

Borrowing the money is a better option. Perhaps there actually is a rabbit hiding in a hat somewhere down at City Hall. And it’s just waiting to be pulled out.