By Bill Oakey – November 9, 2022
Good Morning City Council,
This year, I learned that I survived cancer for the third time. I plan to dedicate the rest of my life to celebrating my family and good friends. And to doing my very best to help the community. As someone who has followed Austin electric rate cases for 39 years, I have a broad, historical perspective. I served on the City Electric Utility Commission, alongside Shudde Fath, from 1985 to 1990. This year, I have undertaken the most extensive, highly detailed research of any public issue in my lifetime.
The stakes are very high for both Austin Energy and the City of Austin. Please take your time and do this right. Here is a brief summary and my recommendations:
You have multiple options to choose from, to completely wipe out the base rate increase. Now that the increased Power Supply Adjustment and Regulatory Charges will cause rate shock, it is essential for you to examine every detail of the revenue and cost-saving options available.
Please do not make the mistake of using a base rate increase to compensate for reduced energy sales. The City’s published, Climate Equity Plan requires reduced energy usage and reduced sales. Our nationally recognized rate design, pioneered by Shudde Fath in 1981, has achieved the results that it was intended to achieve. We must continue to encourage conservation and customer adoption of solar and other related technologies.
Within the next several years, Austin will see declining energy sales on a rapidly accelerating curve. This will be driven by market forces that are beyond the control of either the City or Austin Energy. Solar and battery manufacturers have been advertising heavily this year, to residential, commercial and industrial customers. That train has already left the station. There is no turning back.
This means that Austin Energy will need to transition into a modern utility business model, that will accommodate energy conservation and customer-based power generation. Please review the major 2019 report, issued by the National Conference of State Legislatures. It is linked on my blog, AustinAffordability.com. This report presents several new, successfully used utility business strategies.
Consult with every single participant in the rate case. Consider each revenue and cost-saving option, presented in their filing briefs.
Do not take the “easy way out,” by approving a compromise rate increase. The rate case participants and the Electric Utility Commission are operating under traditional rules and practices. They are viewing this case primarily through a traditional lens.
But these are not normal times. Austin Energy is at a critical crossroads. You can lead them on a road to the past, which will actually make their financial position worsen progressively over time. Or, you can lead them in a prudent, positive direction, toward the inevitable future. That future will see Austin Energy, and every other major utility in the country get smaller. Austin’s new customer growth will not be enough to stem the tide of the changes that are coming.
Elon Musk is building a whole factory to develop both current and evolving battery technologies. Cutting edge companies in Austin are now offering smartphone apps that will control the energy usage in every room of a home. AISD is planning major conservation upgrades and solar panels for a large number of schools. The future energy landscape will look very different from the traditional one that is baked into Austin Energy’s current plans.
You have the option to ignore all of these considerations. You can choose to kick the can down the road. A quick and easy compromise would achieve that result. But, I implore you to study the complex issues surrounding this case. I have put it into a national perspective on my blog. There are a multitude of linked references to credible sources.
I do not take any of these recommendations lightly. I am aware of Austin Energy’s recent bond rating downgrades. But a parade of base rate increases over the next few years, would only drive customers further and faster away from buying most of their power from Austin Energy.
This is a difficult and challenging dilemma. My final thought is that you and Austin Energy should seek outside expertise to evaluate and understand the new, innovative utility business models that are already operating in some European countries and parts of the U.S.
Please note the devastating new Federal report on climate change. The Washington Post this week opened a story with these disturbing statements:
”Climate change is unleashing “far-reaching and worsening” calamities in every region of the United States, and the economic and human toll will only increase unless humans move faster to slow the planet’s warming, according to a sprawling new federal report released Monday.”
“The things Americans value most are at risk,” the National Climate Assessment authors, who represent a broad range of federal agencies, write in the draft report. “Many of the harmful impacts that people across the country are already experiencing will worsen as warming increases, and new risks will emerge.”
The message is clear. Austin Energy must set a firm goal of selling less carbon-generated electricity. They cannot expect to cover those sales losses by raising base rates and curtailing solar customer benefits. Please work with Austin Energy to develop near term, midterm and long term plans to transition into a climate-friendly and financially sustainable future. Thank you for considering these recommendations. And thanks for the good work that you have done to improve the City’s preparedness for potential ERCOT grid disruptions.