Author Archives: Bill Oakey

About Bill Oakey

I am retired from the State of Texas as an accountant. I am now an artist in Austin, doing photographic art. I'm also a lifelong music fan and a computer geek.

Can Austin Energy Learn To Grow Backwards?

By Bill Oakey – August 17, 2022

Austin Energy and every other major electric utility in America should rethink what their primary mission is. Achieving that mission will require a new model that is contrary to every other business model out there. Here are just a few of the required elements of that upside down, but critically important model:

1. The primary goal is to provide a product that everyone needs. The utility must deliver it with guaranteed reliability.

2. The next most important goal is to convince the customers to stop buying as much electricity from the utility. This will be true until fossil fuels are eliminated from the system. This goal is important, because the survival of our planet depends on it.

3. The number of utility employees who spend 40 hours per week trying to make that second goal happen will probably grow. They will offer rebates to customers, and provide services to help them become more energy efficient, and less dependent on the utility.

4. The number of employees who spend 40 hours per week doing other operating functions will gradually shrink.

5. From the first year that a utility started operating, the number of full time employees has always continued to grow. Now, they will have to learn to grow backwards. Some of the workers will see their career paths change, as they transition to other jobs elsewhere.

6. If a utility is located in a rapidly growing city, the challenge will be much greater. The cost of providing electricity to new customers is expensive. The need to sell less of it every year will complicate the utility’s financial stability.

7. The country is moving away from fossil fuels in electric power generation. That process needs to accelerate, if we hope to combat climate change. Utilities need to establish clear strategies and achievable timeframes, for ending their usage of fossil fuel power plants.

8. Today, some percentage of fossil fuel power generation is still needed, to ensure electric service reliability. Especially during extreme weather events. But, eventually, clean energy and battery storage will replace fossil fuels. Utilities need to aggressively pursue clear pathways to get to that point, as quickly as possible.

9. For the foreseeable future, electric utilities will send generated and stored clean energy across power lines to their customers. So, their businesses will not fade away anytime soon. But, in that environment, they will be competing against themselves. Because private businesses will provide those same technologies to a growing number of customers. It is anybody’s guess as to what sort of balance will evolve between those competing interests.

10. Setting the rates that customers pay for diminishing quantities of electricity will become one of the biggest challenges. The rate design should not discourage conservation. It should not incentivize, either directly or indirectly, the increased sales of electricity generated from fossil fuels.

Can Austin Energy Meet These Challenges?

Earlier this year, they moved into a modern, $150 million headquarters in the Mueller neighborhood. The $30 million proceeds from the sale of their old building on Barton Springs Road was not included in the calculations during the electric rate hearings. The City Council has the opportunity to utilize at least part of those funds to mitigate the proposed rate increase.

Within the walls of that elaborate new building, Austin Energy needs to reassess their future plans. They won’t be outgrowing this new building, like they did with the Town Lake Center. Instead, they will eventually be able to share space with other tenants. Someday, perhaps, it could even become a museum. Future tourists could visit it to learn what it was like, back in the days when electric utilities were run by centralized authorities.

But, in the next few months, Austin Energy and the City Council have some tough decisions to make. Moving backwards in business thinking is not the established norm. Try to imagine how you would react if an old fashioned door to door salesman rang your doorbell. The person looked at you with an engaging smile. And these words came out of their mouth…

“Hello. I’m here representing a local business. You are one of our best long time customers. Today, I have a special offer. I’m here to help you stop buying so much of our product. It is costing you too much money. With our new program, you’ll be able to buy much less of our product. In fact, we will pay you a bonus each month, if you can make more of our product on your own than what you need.”

That is not the way that normal businesses operate. And yet, electric utilities will have to find a way to survive financially in that upside down, backwards kind of environment. Big changes are coming pretty fast. It would be futile to fight the transition by raising rates too much, and cutting back the solar buyback credits.

A very small rate increase may become necessary in the short term. It might even be worthwhile to consider variable rates that fluctuate, according to weather extremes. Or, perhaps summer windfall revenues could be held in reserve, to be used during future periods when milder weather drives down electricity sales.

The Ball Is In the City Council’s Court

One thing appears certain. Austin Energy is on the wrong road right now. The City Council must protect an asset that transfers $125 million annually to the City’s General Fund. In the coming years, that amount will probably gradually shrink.

I implore the City Council to think of 2022 as the most important turning point in Austin Energy’s history. They should take advantage of the wealth of expertise that lies within the rate hearing’s filing briefs from all sides. The City Council should do more than just read the materials. They should engage with the diverse group of participants, Austin Energy and the public. Business as usual would be the easiest way out. But, Austin deserves so much better.

Austin Energy’s New $150 Million Headquarters

Musical Accompaniment and Other References:

1. “Walk Out Backwards” – Bill Anderson
2. “Wrong Road Again” – Crystal Gayle
3. “The Times They Are A-Changin’” – The Byrds
4. “The Curious Case of Benjamin Button”  – Movie
5. “The Incredible Shrinking Man” – Movie

Austin Energy’s Charts – A Sobering Reality Comes Home

By Bill Oakey – August 16, 2022

It’s funny how things can come full circle. Sometimes you embark on a journey that winds in confusing directions. Then you find yourself back at the beginning. Something deadpan simple slaps you in the face. And you go, “Oh my gosh, it was right there all along! How did I miss it?”

Flashback to April 5th, Earlier This Year

Austin Energy presented its Base Rate Review to the Utility Oversight Committee. This is the Mayor and the entire City Council. Tap or click each picture to enlarge it. Then hit the Back arrow in your browser, to return to this page.

Justification for a Base Rate Increase

On the first chart, you will notice that revenues exceeded costs in every year, except 2020 and 2021. The chart is intended to show a trend – that Austin Energy is losing money in the current timeframe.

But, put down your mask if you are holding one. Remember what started in 2020 – the pandemic. Businesses were closed that year. People stayed home. All those offices, stores, restaurants, theaters and hotels used a lot less electricity. Then came 2021. The pandemic lingered, although people started going out later that year. But don’t forget the big winter storm. Industrial customers were ordered to power down before the storm. They were not allowed to come fully back up, until days after the storm. Electricity was cut off for most of the City during the storm. Then, we had a milder than normal summer. So, there is no extreme trend that extends into this year and next year. No reasonable assumption that steep future revenue declines will persist.

The Chart That Nails the Big Challenge

It amplifies the message from their Vice President of Finance, “Our rate design is not as efficient as our customers.” Think what that means. It’s a clear signal that their business model has not kept pace with their own conservation goals. A whole division of Austin Energy assists homeowners and businesses with weatherization and transition to solar panels. Within 10 or 15 years, solar panels and storage batteries will proliferate exponentially. How does the utility plan to meet that inevitable challenge? Especially now that the President has signed the historic climate change and energy bill?

Many other U.S. utilities are following the same two-pronged approach – raise base rates, and reduce solar buyback credits to customers. But that will only backfire. It’s hilarious to watch a cat try to chase its tail. Chasing revenue declines with rate increases is just as futile, but without the humor. Customers will adopt solar faster than ever, and the next rate increase will guarantee the same reaction. Here is the chart:

One more note on this chart before moving on. New customers do add to infrastructure costs. But consumer advocates recommend that Austin Energy adopt the more comprehensive capital recovery fees for developers, that Austin Water uses. The City should streamline and reduce developer permitting fees, to offset this change.

Higher Rates for Small Users, and Lower Rates for the Biggest Users

This final chart shows the unfairness and climate change unworthiness of Austin Energy’s rate proposal. Raising rates for struggling apartment renters, especially during record inflation and sky-high summer bills seems unfair. Summers will probably trend hotter in the future. Giving favorable rates to folks in large, expensive homes makes little sense. These rate design changes would discourage conservation at both ends of the usage spectrum.

What this chart proves is that our current rate design has worked exactly as intended. It has driven down the usage of electricity, and pushed Austin closer to carbon-free electric generation. It’s time for the City Council to work with Austin Energy and other experts to seek solutions. We need a new business model that is financially viable, and maintains our admirable progress on climate change goals. Here is the chart:

Read This Poem, and Use the Email Links to Contact the City Council

I’m not accusing them of evil duplicity
It’s true they’re not selling as much electricity
But somewhere deep down into their soul
They should have realized, hey that’s our goal

Climate change affects every part of the nation
And we’re trying to fight it with energy conservation
Take pity on us when we try to conserve
A rate increase is not what we deserve!

This happened a while back with Austin Water
We’re stuck like chickens on their way to slaughter
But this time we’re all going to unite
And stand up for what we know is right!

Thank goodness we own our municipal utility
Or this could end with nothing but futility
Our elected leaders down at City Hall
Have the power to fix this, for once and for all

We’re been through a summer that’s hotter than hell
So they can bid the rate increase a fond farewell
Just like I suggested back in late July
Those windfall revenues will help them get by

One More Good Laugh – Cat Chasing Its Tail

Use These One-Click Links to Email Every City Council Member:

Ask them to do 3 things – Keep our current, successful rate design. Improve our Value of Solar buyback program, instead of weakening it. Accept my recommendation to use the windfall revenues from the historic summer heatwave to cancel the rate increase.

Mayor Steve Adler steve.adler@austintexas.gov
1. District 1 – Natasha Harper-Madison natasha.madison@austintexas.gov
2. District 2 – Vanessa Fuentes vanessa.fuentes@austintexas.gov
3. District 3 – Sabino “Pio” Renteria sabino.renteria@austintexas.gov
4, District 4 – Jose “Chito” Vela chito.vela@astintexas.gov
5. District 5 – Ann Kitchen ann.kitchen@austintexas.gov
6. District 6 – Mackenzie Kelly mackenzie.kelly@austintexas.gov
7. District 7 – Leslie Pool leslie.pool@austintexas.gov
8. District 8 – Paige Ellis paige.ellis@austintexas.gov
9. District 9 – Kathie Tovo kathie.tovo@austintexas.gov
10. District 10 – Mayor Pro Tem Alison Alter alison.alter@austintexas.gov

San Antonio Vindicates Plan to Halt Austin Energy’s Rate Increase

By Bill Oakey, August 14, 2022

On July 22nd on the KXAN-TV News, I made a public call for the City to ditch Austin Energy’s rate increase. At that time, my idea faced long odds of succeeding. But as a retired accountant and former member of Austin’s citizen Electric Utility Commission, I vowed to stay in the battle until we can raise the flag of victory.

News From San Antonio Sparks an Exciting Ray of Hope!

Late last week, financial officials in San Antonio announced a huge, $75 million budget surplus, thanks to windfall revenues from soaring summer electric bills. Just as I figured, Austin now has a wonderful opportunity to quell the anxieties of our ratepayers. In San Antonio, one option being considered is to offer one-time refunds, in the form of credits to customers’ October bills. Here in Austin, we should be able to call off or postpone the entire rate increase.

The City’s Independent Consumer Advocate Personally Agrees

While clarifying this as a personal opinion, rather than an official statement from his team’s rate filing brief, Clarence Johnson gave me permission to share this quote from an email to me: “I agree with your position that the rate increase could be postponed until post test year actual data becomes available.  My reasoning is simply this: ICA’s review indicated that the proposed rate increase should have been $6 M, which is much smaller than the (Austin Energy’s) original request or rebuttal request.”

It’s All About the Rate Design, With Winners and Losers

Above all else, we must oppose Austin Energy’s radical rate design change. What I did not know until recently is that the out-of-city ratepayers would walk away with the big grand prize. The vast majority of those customers live in large to very large, expensive homes. The current rate design keeps those customers paying into the highest rate tiers on the five-tier scale. This provides a conservation incentive. On average, outside city customers use 86% more electricity than inside city customers. (See pg. 43). Under Austin Energy’s new plan, those people would see generous discounts on their bills. (See pp. 42-44). All while struggling Austin apartment renters and low to moderate income folks would bear the brunt of the rate increase. So much for affordability and narrowing the economic divide!

Past history shows us another, somewhat political motive for gifting the non-city ratepayers with lower bills. Even though they enjoy Austin’s amenities, these folks don’t pay City taxes. And whenever they object to our electric rates, they appeal them to the Texas Public Utility Commission, or even to the Legislature. Austin Energy’s new rate design might just keep them quiet and happy. What a sad situation!

Austin Energy Versus “Too Much Customer Efficiency”

The new rate plan would create a seismic shift in Austin Energy’s pricing structure. Raising the monthly residential customer charge from $10.00 to $25.00 would reset annual base revenues unrelated to electricity sales to over $140 million. ($25.00 X 467,291 customers X 12 months). This shift would be a short-sighted, self-defeating approach – to address sales declines that are due to solar panels and other efficiency options that homeowners and businesses are adopting at a rapidly accelerating pace.

The utility’s future plans call for enlarging that shift, in addition to reducing solar buyback credits. (See “Looming Penalties for Solar Users” here). That’s a pretty bleak picture. Especially in light of the big climate and energy bill that the President will sign this week. And AISD’s upcoming bond election, that would provide solar rooftops and other energy efficiency upgrades for the schools.

My previous blog piece and radio interview address the climate change / electric utility dilemma that also threatens other cities and states across the country.

Let’s Call the Whole Thing Off

Here are four major factors that support postponing or canceling Austin’s rate increase:

1. The Independent Consumer Advocate (ICA) in the rate case reviewed Austin Energy’s books, and found two accounting errors, totaling $12.5 million. Austin Energy accepted those reductions, bringing the revenue deficiency down, from $48.2 million to $35.7 million. (See pp. 1-2).

2. The ICA cites several instances where Austin Energy used future cost assumptions. Some of those do not meet the requirement for being known and measurable. And using future costs, combined with past test year revenues violates the matching rule in standard rate-making procedures. After adjusting out those costs and the accounting errors, the  ICA concluded that the revenue deficiency should be only $6.5 million. (See pp. 5-8).

3. The City should raise more utility revenue by increasing the Contributions in Aid of Construction (CIAC) fees, charged to developers for connecting new customers. It should be revised to the same standards used for Austin Water’s capital recovery fees. (See pg. 9).

4. The City Council should follow San Antonio’s example. A comparison of budgeted to actual base rate revenues from October 2021 through this summer will reveal a large surplus. That, in combination with the other factors shown above, should send the rate increase to the scrap heap. (Oops…to the recycle bin)!

See my full list of 10 recommendations for the Austin City Council at the bottom of my previous blog piece.

I would encourage the City to bring in outside experts and consult with all the participants in the rate case. Austin Energy needs a fresh new start, with full transparency and lots of public engagement. We, the people are its owners. Our elected City Council is the board of directors. Let’s remake this valuable asset into a utility that always honors equity and fairness. And one that is innovative and forward-looking, with respect to the changing customer-efficiency landscape.

Heartfelt thanks to my good friends and the Independent Consumer Advocate, who traveled the long and winding road to their final filing briefs in the rate case!

Musical Accompaniment for This Blog Piece:

1. “Let’s Call the Whole Thing Off” – Harry Connick Jr., from “When Harry Met Sally”
2. “Sad Situation” – Tracy Nelson & Mother Earth
3. “San Antonio Rose” – Asleep at the Wheel
4. “Home In San Antone” – Willie Nelson
5. “Across The Alley From The Alamo” – Bob Wills
6. “I’ll Be Your San Antone Rose” – Dottsy
7. “The Long And Winding Road” – The Beatles

Austin Energy’s Rate Case Debacle – A Stunning Management Failure

By Bill Oakey – August 8, 2022

Update: Listen to my Rag Radio interview from Friday, August 12th, in the permanent archives.

Austin’s Values Turned Upside Down

A fiction writer couldn’t make this stuff up. Austin Energy wants to raise rates because you and I and our neighbors have become too energy efficient. Their plan would multiply the fixed monthly customer charge by 2 1/2 times, from $10.00 to $25.00. Why? Because “the current rate design is not as efficient as the customers, causing the revenue to be unable to keep up with costs.” That’s what Austin Energy’s vice-president of finance, Rusty Maenius, told the Community Impact newspaper last month.

And it gets worse. The new rate design would overturn the conservation-centered policy that Austin’s environmental icon, Shudde Fath pioneered and the City adopted in 1981. (See Page 6). This system is called inclining block rates. We currently pay less when we conserve and use less electricity. The big users in larger homes pay more. The new plan, with the $25 customer charge and fewer rate tiers, socks it to the small users and reduces bills for big users in fancy houses. Why? Because the utility’s current rate structure is “not as efficient as the customers”…Wow! Are you kidding me??

Oh my, how things can change! My dear friend, Shudde Fath was my mentor, when we served together on the City Electric Utility Commission in the 1980’s. I conserved and saved money, thanks to her rate design. In 2016, our City honored Shudde on her 100th birthday. Here is a photo of…uh…Austin Energy…presenting her with a birthday plaque. You can click the link and see this on Austin Energy’s Twitter feed.

A Parade of Rate Increases

Now, back to June, two months ago. A bond downgrade report from the Fitch bond rating service says, “Austin Energy expects additional base rate increases will be necessary, to improve the utility’s operating cash flows, etc. on a sustained basis.” But, as my recent blog postings here and here point out, multiple rate increases won’t guarantee revenue stability. They will simply push customers to rush toward efficiency measures that will reduce electricity sales even faster than before.

Fun and Games In the Current Rate Case

In rate cases, Austin Energy uses a “test year” to illustrate their revenue deficiency, and justify a rate increase. This time, that test year just happens to be 2021, during the COVID pandemic. Many offices across the city were still closed, while people worked from home. New COVID variants kept people from going out as often. Just imagine all of those office buildings, theaters, restaurants, hotels, bars, shopping centers, etc. that didn’t use a lot of electricity. In addition, there was less electricity usage before, during and after Winter Storm Uri.

Whether that wildly abnormal year’s revenues and costs were adequately adjusted to reflect normal conditions was a big issue in numerous legal briefs flying back and forth. (See Page 3). Austin Energy’s notorious, hard-nosed lack of transparency was on full display. But get this – In the years immediately before the 2021 test year, their revenues were positive (for crying out loud)!

You can learn more by slogging through the appendices in the utility’s rate filing package. But you might find it less agonizing to have your own appendix taken out, while being fully awake during the surgery (!)

Looming Penalties for Solar Users

Here comes another Holy Cow Moment! This quote comes from one of those cringe-worthy rate package appendices. “Some staff expressed concern over Austin Energy’s Value of Solar (VOS) pricing scheme, stating the current VOS structure is unsustainable, if commercial customers continue to adopt on-site solar and reduce their peak demand charges.” (Appendix 2.1.1, Page 408). (Gulp)! 

Residential solar credits are threatened as well. Kaiba White, with Public Citizen, published an opinion piece against the rate proposal in the Austin Chronicle. Here is his statement. “While the new Value of Solar tariff would be a slight increase in the first year, it would change – potentially by a lot – each year. The new tariff also doesn’t accurately reflect the benefits that rooftop solar provides to the utility and our community. A volatile Value of Solar rate, or one that undervalues local solar energy, could put the brakes on adoption of solar at homes and businesses.” (Ouch)!

The Big Climate and Energy Bill in Congress

The U.S. Senate passed the sweeping climate and energy efficiency bill on Sunday. The House will pass it later this week. We would all love to celebrate! It is projected to save eligible families $1,800 per year on their electric bills. The whole purpose is to cause utilities to generate and sell less electricity. But, Austin Energy is clearly not prepared for that. They desperately need a new direction and a new business model.

Instead, their incompetent planning, tone-deaf excuses and heartless approach to rate design would stick us with sky-high bills next year. Especially during the summer. We simply can’t let that happen!

Let’s Ask the City Council to Take a Stand!

This isn’t the same responsive City staff that we worked with when I served on the Electric Utility Commission back in the 1980’s. If raising base rates and reducing solar credits is the only solution Austin Energy has to offer, then we the people need to vigorously protest to our Mayor and City Council. After the rate hearing is completed, they should:

1. Carefully study the recommendations from all sides.

2. Demand answers to all the information requests from the parties, that Austin Energy refused to comply with. Discuss them in executive session, if necessary.

3. Raise developer fees for new utility customers. The CIAC, Contributions In Aid of Construction (See pg. 9), should be modeled after the much better policy used by Austin Water. That is a proper way to increase revenues.

4. Enshrine Shudde Fath’s legacy by making her signature achievement on rate design permanent. Adopt its framework and general parameters into the City Code.

5. Establish senior discounts for all of the monthly customer charges on our utility bills. Make a bold statement, for once and for all, that our longterm resident still matter, and that we still belong, in the affordability-challenged “New Austin.”

6. Reject Austin Energy’s plan to modify the Value of Solar credits for rooftop solar customers. Conduct a study and adopt best practices for Value of Solar, as outlined here. (See pp. 20-28). Do not exempt any high load factor customers from the Community Benefit Charge or Energy Efficiency Charge. (See pp. 29-36).

7. Approve the BIP cost allocation model (See pp. 22-26) recommended by the Consumer Advocate in the rate case. Ask every participant to submit their best ideas, to make Austin Energy more cost-effective and more accountable. Ask the City Manager to adopt those suggestions.

8. Put the electric rate increase on hold. Let the summer heat windfall revenues buy some time. Time for the City Council and the public to engage in open discussions – about how Austin’s biggest asset, our publicly-owned electric utility, can best meet the realities of a new, carbon-reduced energy future.

9. Develop near, mid, and long term planning scenarios with Austin Energy. Compare our current “Rate Increases Chasing Declining Revenues” business model with better alternatives. Examine modern utility systems in Europe and elsewhere. Prepare comparison charts and graphs, extending from now into the future. Bring in a variety of experts. Create an innovative plan. Consider hosting a national conference right here. Let Austin lead the way on this!

10. In your planning, make sure that Austin never has to cut back on home and business solar buyback credits. Please think about what might happen in the future. What if most of the customers get to solar, before Austin Energy finds a sustainable plan? Help them now!

Please share this blog link with your friends, neighbors, email lists, social media and civic organization membership, etc. And ask each person to share it widely, as well.

Use These One-Click Links to Email Every City Council Member:

Mayor Steve Adler steve.adler@austintexas.gov
1. District 1 – Natasha Harper-Madison natasha.madison@austintexas.gov
2. District 2 – Vanessa Fuentes vanessa.fuentes@austintexas.gov
3. District 3 – Sabino “Pio” Renteria sabino.renteria@austintexas.gov
4, District 4 – Jose “Chito” Vela chito.vela@astintexas.gov
5. District 5 – Ann Kitchen ann.kitchen@austintexas.gov
6. District 6 – Mackenzie Kelly mackenzie.kelly@austintexas.gov
7. District 7 – Leslie Pool leslie.pool@austintexas.gov
8. District 8 – Paige Ellis paige.ellis@austintexas.gov
9. District 9 – Kathie Tovo kathie.tovo@austintexas.gov
10. District 10 – Mayor Pro Tem Alison Alter alison.alter@austintexas.gov

Opposing Forces Up The Ante On Climate Change / Electric Utility Dilemma

By Bill Oakey, August 3, 2022

I have written about the big conundrum facing Austin Energy and other utilities. As their own employees help homeowners and businesses become more energy efficient, the utilities find themselves wanting to raise rates, because they’re not selling enough electricity. Austin Energy has forecast the potential need for more than one rate increase. And as I’m writing this, a dear friend is preparing for contractors to install solar panels on her roof. A 10 kilowatt battery to store excess energy comes with her package.

It’s easy to see how rate increases to shore up lost utility revenues will backfire. The contractor that is helping my friend will boost their advertising, as will the others in that business. Utilities will find that chasing revenue deficits with successive rate increases could send them into a death spiral. Climate change is the trigger here. It drives summer electric bills to historic high levels. That pushes businesses and residents to go solar, and employ every other efficiency measure they can find.

This daunting dilemma looks to get worse, because of a series of circumstances that have yet to be widely recognized. That’s why I’m making a push to alert the news media and the Austin City Council, as well as Congressman Lloyd Doggett.

Big Changes May Come to the Texas Power Grid

I was jolted awake this morning by a shocking article in the Texas Tribune. Come to find out, there is plenty of West Texas wind energy available. But ERCOT, the Texas grid management agency, has ordered a lot of the wind turbines to be shut down this summer. Why? Because there aren’t enough transmission lines to deliver the cheap wind power to big cities like Dallas, Houston and Austin. The Texas Public Utility Commission is working on a solution (we hope)! Two recent grid assessment reports cited in the Tribune article highlight the many shortcomings in the grid system. Three entities will collide over what response follows those reports – public interest groups, special interest groups and politicians. The problems can be fixed, if the solutions aren’t nixed. The future of your bill rests on political will.

There is reason for hope. From the Tribune article comes two profound statements. “This month, the PUblic Utility Commission formed a task force to develop a pilot program next year that would create a pathway for solar panels and batteries on small-scale systems, like homes and businesses, to add that energy to the grid. The program would make solar and batteries more accessible and affordable for customers, and it would pay customers to share their stored energy to the grid as well.”

And this comment from John Hensley, with the American Clean Power Association. “Storage is the real game-changer because it can really help to mediate and control a lot of the intermittency issues that a lot of folks worry about when they think about wind and solar technology. So being able to capture a lot of that solar that comes right around noon to [1 p.m.] and move it to those evening periods when demand is at its highest, or even move strong wind resources from overnight to the early morning or afternoon hours.”

How Can the Utilities Stay In Business, As Efficiency Drains Revenues?

That’s the big challenge that demands to be addressed. I submit that, above all, it should be discussed and resolved out in the open. Our local leaders, our Congressmen and women, and the public should all be granted a seat at the table. If we stay in the background and hope for the best, nothing good may come of it. With or without Congressional passage of the current climate bill, future legislation will probably happen. Utilities may need to completely rethink their business models. Austin would be an ideal place to host a major conference on resolving the dilemma.

One thing is certain. All utilities will be generating and selling a lot less energy in the years to come. That’s a good thing for progress on climate change. But utilities must not be allowed to charge unreasonable rates, and cut back credits for end users who generate and store their own energy. For now, Austinites are staring down a terribly flawed rate increase proposal. That calls for a poem:

The folks at Austin Energy are way out of touch
They simply don’t care about us very much
In a fancy new building that cost $150 million
They wrestle with a budget of a couple gazillion

Amongst them is a band of renegade abusers
Who want to raise rates for the smallest users
While the Austin economy sees poverty expansion
They would lower the rates for a big, sprawling mansion

Pardon me if I be so bold
But their rate increase should be put on hold
From the month of May to the end of September
They’ll make more money than anyone can remember

The City needs time to assess the situation
And we’re in a recession with high inflation
My idea might be met with a blanket rejection
But there’s an upcoming City Council election

We need transparency, reason and fairness
And a whole lot more public awareness
This is a time for all hands on deck
We and our neighbors should protest like heck!

Musical Accompaniment for This Blog Piece:

  1. “Blowing in the Wind” – Peter, Paul & Mary
  2. “Wind Beneath My Wings” – Bette Midler
  3. “Candle in the Wind” – Elton John
  4. “Catch the Wind” – Donovan
  5. “Summer Wind” – Frank Sinatra

The Big Electric Utility And Climate Change Dilemma – And How To Solve It

By Bill Oakey, August 1, 2022

Electric Utilities Can’t Make a Profit

It’s simple economics. If homes and businesses get too energy efficient, the utilities can’t sell enough electricity. And yet, most offer home weatherization programs, and credits for rooftop solar panels. These utilities have whole divisions that do nothing but promote energy conservation, and they directly help customers achieve energy efficiency.

But now, many utilities find themselves facing a potential death spiral. Here in Austin, rapid growth requires expanding the utility services. City regulations do not require enough developer fees to cover all the costs associated with adding new customers. In addition, homes and businesses have become more energy efficient. As a result, Austin Energy has been losing money. They are not selling enough electricity throughout the year. Their solution is a hefty base rate increase. Austin Energy’s revenue bonds were downgraded to AA- in June. They told the Fitch bond rating service that additional rate increases, beyond this one, may be necessary.

The Utility Death Spiral Is Easily Explained

Austin Energy faces a daunting dilemma that they share with other utilities across the country. Rate increases as an ongoing business strategy will almost certainly backfire. They will push builders, homeowners and businesses to implement energy efficiency solutions at an accelerating pace. Businesses that sell solar panels have already stepped up their advertising. It’s easy to see that a whole series of rate increases, each followed by similar market responses, would drive the utility into a death spiral.

Within the next ten years, Austin residents and businesses will have a significantly lower demand for purchased power than they have today. We will always need electric utilities. As connected customers, we are assured of reliable service, assuming that the power grid holds up. But, future declines in electricity sales are inevitable. So, it is imperative for Austin Energy to find a new direction, and change their business model. Their very survival depends on it. If they don’t get it right, the City will face an additional, ominous revenue shortfall. Austin Energy’s transfer to the General Fund will have to be reduced.

If Utilities Try to Wage a Battle Against Technology, They Will Lose. And the Country’s Climate Change Efforts Will Suffer

I recently wrote a blog piece about an incredibly exciting climate change opportunity. CNN did a major study on the potential benefits of large-scale rooftop solar installations at big-box retail stores. Read that piece to get all the details.

But, the big dilemma comes back to bite us again. What if every Walmart, Home Depot, Lowes, big warehouse and distribution center across the country put solar panels on their rooftops? What if Austin put one on their massively expanding convention center? Austin Energy and the other utilities would sell a lot less electricity. And yet, we’d be addressing climate change. Severe drought, intense hurricanes, wildfires, epic flooding and West Coast water shortages might finally begin to subside. Further mitigation will become possible, once battery storage technology gets more efficient and affordable.

Some Utilities Are Pushing Back Against Solar Panel Credits

The seriousness of the utility profit / climate change dilemma is laid out in a disturbing article from NBC News, published in May. Utilities in some states are reducing their solar energy buyback rates. Austin Energy’s solar buyback program could be weakened, as part of their new rate proposal. The Sierra Club and Public Citizen are intervening in the case, to protect solar-use customers. In Mississippi and other places, utilities are telling their State regulators that maximum buyback benefits are no longer economically viable for them. The most stunning example is California, where drought and wildfires are prevalent. A battle over huge reductions in solar buyback rates has been raging there since January. Governor Gavin Newsom should step in and defend solar credits.

Utilities Need to Embrace Declining Electricity Sales

The pushback by utilities against technologies that help their customers is a major threat to national climate change efforts. The outdated utility business models are as dangerous to the environment and the planet as fossil fuels and carbon emissions. To put it quite simply, gradually selling less electricity over time must become one of the utilities’ primary goals. How to make that happen, while keeping the utilities in stable financial condition is the challenge.

Maybe the U.S. Congress Can Help

Congress is poised to pass a historic climate change bill this week. Funding will be available for energy efficiency programs and infrastructure improvements on a large scale. I have requested an appointment with Congressman Lloyd Doggett, during the August recess. One of the topics I would like to discuss is the daunting dilemma that is described here. Maybe Congress could    facilitate a series of discussions among climate scientists, utility company executives, State regulators and business strategy experts. They could task them with studying the dilemma and finding ways to resolve it. Our utilities need to counteract the death spiral, before it’s too late.

A First Step Toward the Solution

We only need to look at the frightening condition of the Colorado River to “get it” about climate change. A recent Washington Post report highlights the West Coast lakes that are drying up. The Austin City Council should stop Austin Energy’s rate increase proposal dead in in its tracks. And they should insist on maximum solar panel credits. The revenue windfall from the historic summer heatwave will buy some valuable time. With innovative planning and a fresh new approach, our city could shine a light on the rest of the nation. We should turn the daunting dilemma into an exciting opportunity for positive change.

A note about the author of this blog: I am a longtime affordability activist, with nearly 40 years of experience observing and participating in electronic utility rate cases.

Austin Energy’s Rate Increase Tied To Not Selling Enough Electricity

By Bill Oakey – July 28, 2022

That headline should jolt anyone out of bed, if they are not awake already. Yes, you read it right! This is a deja vu from a few years ago. We were urged to conserve water. Then Austin Water told us they were raising its rates, because they weren’t selling enough water.

The shocking news from Austin Energy seems outrageous on its face. But the philosophy behind it is chilling and disturbing. Here’s the explanation from Austin Energy’s vice president of finance: “Customers have become more efficient in their energy usage, but the current rate design is not as efficient as the customers, causing the revenue to be unable to keep up with costs. This means the old rate structure was built in a way that assumed the top energy users would to an extent subsidize the lower energy users. However, over the last 20 years, customers have become more efficient in using energy. This has eliminated a large portion of the higher-end energy users, causing Austin Energy to lose revenue.” 

Wow! Let’s think about that statement. He is literally suggesting that wealthy people who have moved into Austin neighborhoods, into big fancy homes, have made those homes more energy efficient. Therefore, the outdated rate design does not allow these folks to pay more and “subsidize” the low and middle-income folks who pay less for electricity.

Austin Energy’s shameless solution is to stick the smaller users with the highest portion of the rate increase. It would guarantee that by raising the fixed monthly customer charge by $15.00. On top of that, they want to decrease the number of rate tiers, and flatten their impact. This will lower the costs for the biggest users.

Here’s Why That Philosophy Falls Apart

1. It would exacerbate the income inequality that underlies Austin’s affordability crisis.

2. Instead of solving Austin Energy’s revenue problem, it would make it worse. Residents and small business owners at all income levels would make energy efficiency a high priority. They would use this link and this link on Austin Energy’s own website!  Yes, Austin Energy is offering us rebates and incentives to conserve. Then, with the other hand, they want higher base rates every month because they’re not selling enough electricity!

3. And get this, folks…The future outlook is even worse. On June 28, the Fitch bond rating service downgraded Austin Energy’s revenue bonds to AA-. Here is a statement from the first page of their report. “The planned rate increase is projected to contribute an additional $48 million in base rate revenues. AE expects additional base rate increases will be necessary to improve the utility’s operating cash flows and leverage profile on a sustained basis.”

Yup, that’s Austin Energy’s brilliant management plan. Watch the customer base shrink, as more homes and businesses install solar panels, energy storage batteries, etc. Have they not been adjusting their operational plans to coincide with the evolving market? It looks like they’re desperately trying to keep the ship afloat, by piling rate increases onto the masses of people who can’t afford to join the solar club.

I Have a Much Better Solution

1. Use the list of single-click links in my previous blog posting to email every City Council member and the Mayor. Ask them to cancel the proposed rate increase. The record daily highs and record high overnight lows this summer are producing historically high electric bills. This will easily shore up Austin Energy’s revenues.

2. The City Council owes it to the citizens to hold a series of public engagement sessions to evaluate the best path forward for Austin Energy. As for the ongoing formal rate hearing process – Nip it, Snip it, STRIP it! A new City Council will be sworn in next January. Why suffer through the agony of the other kind of swearing, that would accompany a raucous and contentious electric rate battle this fall? Citizens and small businesses are already being crushed by high summer bills.

3. Ausin Energy is the most important asset that our city owns. It provides us with electricity. But it is also a vital revenue source for the City’s general fund. Their financial dilemma needs to be carefully evaluated by our new Mayor and City Council. And most importantly, you and I and our friends and neighbors deserve a seat at the table!

Call To Action – Let’s STRIP Austin’s Electric Rate Increase Proposal!

By Bill Oakey – July 25, 2022

On Friday July 22nd, KXAN-TV News aired a story about our oppressively high summer electric bills. The historic triple-digit heat has led to these burdensome bills, that are straining family budgets at a time of record high inflation. But, as I pointed out in the news segment, Austin Energy has a nasty surprise for us, lurking around the corner. They want to pile on a new base rate increase!

In the news interview, I explained that Austin Energy will be sweeping up the highest peak season profits in their history, from May through September. This will pour tens of millions of extra dollars into their coffers, well above their current year’s budget. The City Council will have every reason to nip the rate increase in the bud, as well they should.

But my jaw dropped to the floor, as I listened to Austin Energy’s response to that suggestion on KXAN. Here are their misleading and faulty arguments:

1. We don’t make any profits. The extra revenue is returned to the City.

2. We will earn extra revenue, but we also have additional expenses, with “the high cost of energy.”

The full costs of fuel and ERCOT power purchases are passed through to us, the customers. That charge appears on the Power Supply Adjustment line on our electric bills. The summer demand surge will undoubtedly push the charge higher. The fixed monthly amount is modified each year in November.

It’s true that Austin Energy’s revenue transfers to the general fund are not the same as a private business profit. But, here we’re talking about a revenue surplus – a windfall. In a recession or a time of high inflation, the revenue surplus can be used to keep customer rates stable. (Hint for the City Council)!

Imagine this historic seasonal windfall, with a new base rate increase stacked on top of it! That would generate even more tens of millions of extra revenue – every year. There are suspicions that the City wants to dodge the Legislative property tax cap with higher general fund transfers.

Here’s The Rub – Get Ready for a Snub!

The rate increase proposal would shift some base rate costs away from big businesses, onto residential ratepayers. And it would upend the residential rate tiers, pushing higher costs onto low and middle-income folks. We simply can’t let that happen! It’s a slap in the face in a city with extreme income inequality and an affordability crisis, plus high inflation.

It’s Time For a Call to Action!

S-T-R-I-P: Stop The Rate Increase Proposal

Nip It, Skip It, STRIP It!

My plan is to meet with neighborhood groups and civic organizations across the City, to explain what’s going on here. This is my fifth decade of affordability activism. I served on the City Electric Utility Commission from 1985-1990. This time around, we may have a victory in the palm of our hands. There are four City Council seats and the Mayor’s race on the ballot in November. Even if the current City Council adopts the lopsidedly unfair rate proposal, the new Council could scale it back or STRIP it completely. It’s up to you and me and our friends and neighbors, to elect a consumer-friendly Mayor and City Council. We can do it! Any future rate increase must not penalize small users, and it must protect residential and small business ratepayers!

Here’s What You Can Do to Help

1. Contact every City Council member and the Mayor. Ask them to STRIP (Ooooh!…They can do some of it behind closed doors, subject to the open meetings law limitations).

2. Ask the City Council to put senior discounts on the fixed customer charges for every category on our utility bills. It’s high time for the City to help our longtime residents.

3. Alert your friends, family, neighbors and co-workers. Send them the link to this blog piece.

4. Subscribe to this blog to stay up to date on our path to victory. A convenient STRIP Guide will soon be made available. It will tell it like it is in plain, simple language. The veil of special interest subterfuge will be peeled away and clearly exposed. We will wrestle our publicity-owned utility away from the special interests, and give it back to the people!

Use These One-Click Links to Send Emails to the City Council:

Mayor Steve Adler steve.adler@austintexas.gov
1. District 1 – Natasha Harper-Madison natasha.madison@austintexas.gov
2. District 2 – Vanessa Fuentes vanessa.fuentes@austintexas.gov
3. District 3 – Sabino “Pio” Renteria sabino.renteria@austintexas.gov
4, District 4 – Jose “Chio” Vela jose.vela@austintexas.gov
5. District 5 – Ann Kitchen ann.kitchen@austintexas.gov
6. District 6 – Mackenzie Kelly mackenzie.kelly@austintexas.gov
7. District 7 – Leslie Pool leslie.pool@austintexas.gov
8. District 8 – Paige Ellis paige.ellis@austintexas.gov
9. District 9 – Kathie Tovo kathie.tovo@austintexas.gov
10. District 10 – Mayor Pro Tem Alison Alter alison.alter@austintexas.gov

Musical Accompaniment for This Blog Posting:

1. “Let’s Call The Whole Thing Off” – Harry Connick Jr., from “When Harry Met Sally”
2. “The Stripper” – David Rose, 1962 #1 song
3. “Behind Closed Doors” – Charlie Rich
4. “The Streak” – Ray Stevens
5. “Heat Wave” – Martha & the Vandellas
6. “Windfall” – Rick Nelson
7. “77 Sunset Strip” – Don Ralke
8. “Tell It Like It Is” – Aaron Neville
9. “The High Cost Of Living” – Wood’s Tea Company
10. “When The Lights Go On Again” – Mary Duff

Two More Electric Bill Shocks Are Coming!

By Bill Oakey, July 21, 2022

If you have seen your latest electric bill, you know that the historic heatwave has pushed it way up. That’s bad enough – with rents skyrocketing, along with gasoline, grocery bills and property taxes. But strap yourself in…The second and third episodes of this ugly electric bill drama are right around the corner. At least we may have a chance to slow down or significantly curtail Episode 3. But that will require a call to action, with a united citizen backlash. (I’ll be on the front lines for that!)

Episode 2 – The Power Supply Adjustment Charge

The sky high bills that we are seeing this summer are simply based on our usage – the number of kilowatt hours that we consumed in order to beat back the heat. Most of us were propelled into the third tier of the base rate structure. Anything above 1,000 kilowatt hours is billed at a higher rate. It doesn’t take much to jingle the cash register to $25, $50 or $100 above the normal charges that we are used to seeing.

So, you might wonder, how could it get any worse? Well, there’s the little matter of power generation costs – Austin Energy’s fuel costs, plus their energy sales and purchases through the ERCOT power grid. Those net costs are passed through to the customers, but there’s a hitch. The Power Supply Adjustment is a fixed monthly charge. Austin Energy and the City Council only recalculate it once a year. So, this summer it’s relatively small. That’s because we had a mild summer last year, before the latest calculation was made. The adjustment charge will be reviewed next month, as part of the City’s annual budget discussions.

That’s when the next shockwaves will probably come to light. Many Texas utilities adjust their fuel charges and ERCOT net costs on a monthly basis. Statewide news reports are filled with grim accounts of skyrocketing electric bills. They cite the huge spike in national gas costs for power plants. That’s because of the war in Ukraine and the worldwide heatwave. Texas is one of the highest U.S. gas producers. We are exporting lots of it to Europe.

That’s where supply and demand kicks in. It falls to ERCOT to regulate the daily sales and purchases of electricity across the state. Because of the Big Special Interests who created this system, and lobbied the Legislature to keep it, we’re screwed! During peak demand periods, the price per megawatt hour for ERCOT transactions can skyrocket. The normal rate of $40 to $50 per megawatt hour can legally spike up to $5,000 per megawatt hour. It shouldn’t hit that cap unless the grid goes into a weather emergency, like it did during the 2021 winter storm. But it has already swung to well over $1,000 per megawatt hour at times, during this heatwave.

For now, we are at arm’s length from Episode 2 of electric bill shock. I have asked the City Council to give us some sort of estimate of how bad it might be. Austin Energy actually made a $100 million profit during the winter storm. They produced more electricity than they were allowed to use. So, they sold it through the grid and netted a profit. But without any usage restrictions yet this summer, we are probably on the hook for high power purchase costs.

Episode 3 – A Ludicrous and Outlandish Rate Increase Proposal

As mentioned in my last blog posting, Austin Energy wants to jack up the fixed monthly customer charge from $10.00 to $25.00. That extra $15 per month would generate a stunning annual windfall of $84 million. Suspicions abound that a great portion of that would be transferred to the City’s general fund. They could be planning to circumvent the Legislature’s 3.5% revenue cap on property tax increases.

In addition, the rate proposal calls for increasing the charges for small users of electricity. This is a shameful act from Austin Energy. Austin’s “inverted block” rate structure was never based on “cost of service.” It was proudly established over 40 years ago, pioneered by Austin consumer and environmental icon, Shudde Fath. Sticking low-income residents with such a penalty during a city affordability crisis should be unthinkable. Let’s just hope that the City Council agrees. In the meantime, we’ll have to wait out a formal rate hearing process, peppered with reams of paper full of lawyerly crosstalk and legal jumbo-jumbo.

By the way, we may not even need a rate increase. Austin Energy will be earning historic profits from a record hot season from May through September. I’ve asked the City Council to request an updated estimate on that.

A Blast From the Past

This is my fifth decade as a consumer activist in Austin electric rate battles. In the early 1980’s, I defeated a 20% electric rate increase, by getting it cut in half. Late one night, I discovered a “magic sentence” in the City Budget. It stated that the 20% rate increase was based in part on the passage of lignite bonds in a City election. Well, the budget was adopted before the election, and the lignite bonds failed. City staff forgot to mention that detail to the City Council when they passed the rate increase.

Get Ready For A Big Shock – Watch Out For Your Next Electric Bill!

By Bill Oakey – July 18, 2022

We all know that electricity can shock you, if you touch a live wire. But within days, hundreds of thousands of Austinites will be shocked out of their socks, by looking at their electric bills. Make sure you are sitting down before you look.

The basic rates have not changed – yet.  But the historic summer heat wave is causing big shockwaves for three important reasons:

1. The war in Ukraine has caused a severe shortage in Europe of the natural gas used for electric power plants. Texas has been exporting lots of gas to European countries. This has caused our own gas prices to skyrocket. And, even worse gas shortages in Europe may be coming soon.

2. Texas has fallen behind in building new power plants to keep up with climate change and population growth. This article explains the grim consequences.

3. Austin Energy is required to sell electricity at the fluctuating market rate determined by ERCOT. Our ERCOT power grid uses a demand-based pricing structure that allows energy producers and wholesalers to charge wildly inflated prices. No other grid anywhere else in the country uses this terribly flawed system. During last year’s winter storm, the legalized price-gouging caused several Texas utilities to take on massive debts. This summer, the exorbitant rates are not as high as that winter. But at close to $1,500 per megawatt hour, they are staggeringly higher than the normal rate of $40 to $50 per megawatt hour.

Why does Texas use such a crazy, unfair system that can cripple the finances of Texas businesses and families? The simple answer is political cronyism. The Good Old Boys in the oil and gas industry laughed all the way to the bank after the big winter storm. Other fat cats got fatter by making lucrative investments in Texas energy futures on Wall Street. All while many Texans, some who died, sat huddled under blankets, freezing in the dark during that storm.

Did the Legislature “fix” the grid during their last session? Well, they applied a few bandaids. On the financial side, they lowered the power grid price cap from $9,000 to $5,000 per megawatt hour. So, now the outrageous price limit is only 100 times the normal rate. Whoopie!

Here’s a Look at ERCOT’s Recent and Current Pricing:

1. Houston provides a good example.

2. A good overview of ERCOT policies and pricing.

3. Check out the ERCOT dashboard to see the current daily prices for wholesale electricity.

4. Keep in mind that Austin Energy buys electricity and also sells electricity through ERCOT. So, the final impact on ratepayers is the net gain or loss from those transactions each month.

5. Check out this link to compare ERCOT pricing with other U.S. power grids.

We just have to hope that ERCOT doesn’t reach an emergency status this summer, like it did during the winter storm. If that happens, the exorbitant price-gouging will reach stratospheric proportions, and could even last longer than the few days of the winter storm.

Are You Ready for a New Austin Energy Base Rate Increase?

Put down your high-priced bag of groceries, grab a beer and try to swallow this news. Austin Energy is just now wrapping up formal hearings on an outlandish rate increase proposal! The details call for a separate blog posting. But here are a couple of highlights:

1. They want to raise the fixed monthly customer charge from $10.00 to $25.00  As an accountant, I couldn’t resist doing some math. That’s $15.00 per month more for every residential customer in their service area. How much new revenue would that bring Austin Energy in one year? Here’s the calculation:

$15.00 X 467,291 customers X 12 = $84,112,380

And that’s based on customers in Fiscal Year 2021, which ends on August 31. What does Austin Energy plan to do with that huge windfall? The extra $84 million paid in customer charges, before a single light switch is flipped on?

What?? Did I hear somebody say that the City might transfer it to the General Fund? To try to get around the Legislature’s 3.5% revenue cap on increased property taxes? The City Council should strap themselves in, and get ready for an angry backlash. Whatever Austin Energy has up its sleeve needs to be delved into and explained with full transparency. Perhaps they were told to tack on those extra charges. Or, maybe they just woke up from a weird dream and proposed this on their own.

Whatever the case, there are consumer activists lurking in the shadows. We are coming out now, and looking over their shoulders, with calculators and spreadsheets in hand. Finally, here’s just one simple little question for Austin Energy and the City Council:

How Much Extra Profit Will the Utility Make During This Historic Summer Heat Wave?

The number of triple digit daily highs and higher than normal overnight lows has broken all records. And we still have almost two and a half months to go until the end of September. So, Austin Energy will record record profits for the 5 months covering May through September. I am asking the City Council to request that revenue estimate as soon as possible. The need for a hefty rate increase at this time should wither considerably. Just like our grass, trees, flowers and plants. It’s time for a major City Hall reckoning on this entire situation!