Category Archives: General Affordability Updates

Hey City Council, Please Answer One Big Question

By Bill Oakey – November 22, 2022

We’re into the final stretch of the Austin Energy rate case. All of the official legal parties have made their recommendations. The Electric Utility Commission could not agree on everything, so they made a partial recommendation. But guess what…Everybody so far has overlooked the one big question that still begs to be answered…

What Happened to the Huge, Un-Budgeted Surplus From the Summer Heatwave???

If you just sit back and think about it for a moment, the request for a rate increase just doesn’t add up. In fact, it makes no sense at all. And yet, whole groups of people have completely overlooked the obvious – Why do we need an electric rate increase, when Austin Energy made more money from mid-May through mid-September, than in any other summer season in all of Austin’s history? And that goes back to 1839, when the City of Austin was founded.

I have raised that issue before on this blog. How it has managed to escape more attention is strange and mystifying. One could ask a few more obvious questions:

1. Why is Austin Energy the only electric utility in Central Texas asking for a rate increase?

2. The revenue windfall from the historic heatwave was not predicted, and was not part of Austin Energy’s budget. Their budget was approved by the City Council in August 2021. So, why was the utility allowed to spend a historic surplus, without asking the City Council for amendments to their budget?

3. Since the rate increase under discussion is an increase in the base rates, shouldn’t the public be told how much un-budgeted base revenue came in from the summer heatwave? It is quite reasonable to assume that it runs into the tens of millions of dollars. And, it could easily have a material impact on the $35.7 million revenue request for the rate increase.

4. If Austin Energy has already spent that money, without City Council budgetary approval, then what did they spend it on?

5. Does the City Council have a formal process for City department to make budget amendment requests? If so, how often is that process overlooked and not enforced?

A Disturbing History Lesson About Austin Energy and the Ratepayers’ Money

I have followed Austin electric rate cases for 39 years, since 1983. I served on the City Electric Utility Commission from 1985 through 1990. During that time, I researched and unraveled some fascinating financial scenarios. But none compares with the twisted tale that you are about to  read. I am not smart enough to make this up. The whole thing is true, and I still have the newspaper archives that tell part of the crazy adventure.

Let’s travel back in time to the late 1980’s, when the Electric Utility Commission met at the Electric Building Auditorium on West Avenue. Before it was rebranded as Austin Energy, it was simply called the Electric Utility Department. At the Commission meetings back in those days, we had more than a few dramatic rate battles.

Shudde Fath was a founding member of the Commission, and she was my mentor. It was Shudde who pioneered Austin’s conservation-based rate design. It was first implemented in 1981, and it served as a highly respected national model. This year, unfortunately, it is being threatened by Austin Energy’s radical new rate design recommendation. Ironically, the formal rate case hearings this year were held in the honorary Shudde Fath Conference Room.

So, back to the history lesson…One night at a Commission meeting, we were presented with a report that focused on a legal dispute over a coal contract for one of our power plants. The report explained that this contract allowed Austin to purchase coal on the spot market, if the market price dipped below the contract price. So, our utility exercised that option, and started purchasing the cheaper coal.

The coal contractor sued the City, claiming that we did not have the right to purchase the cheaper, spot market coal. So, the Electric Dept. presented our Commission with a report, detailing how the electric rates were impacted by the price of coal and the legal dispute. Our utility decided to continue collecting the full contract price for the coal. We were told that the difference between the contract price and the cheaper spot market price was being deposited into an escrow account. Thus, if the coal contractor won the legal case, we could pay off their claim from escrow funds. But, if Austin won the lawsuit, we would be able to keep the extra money.

Shudde Fath and I kept copies of the financial reports that were included in our meeting packets. I carefully observed the growing amounts of the clearly labeled, “Escrow Ending Balance.” By the time the lawsuit was finally settled, the escrow balance had climbed to $43 million. During this same time period, President Ronald Reagan, John Poindexter and Oliver North were accused of violating an act of Congress, by diverting large sums of money to the Nicaraguan Contras. I happened to notice that the total amount involved was less than the $43 million in our Electric Utility coal contract escrow account.

Finally, at one of our evening Commission meetings, it was announced that Austin had won the legal case with the coal contractor. Therefore, we would be able to keep the $43 million that was in the escrow account. So, I made a motion that this money should be credited back to the ratepayers on their electric bills.

Suddenly, I noticed what looked like a huddle in the middle of a football field. The top executives of the Electric Utility Dept. scrambled to prevent us from taking a vote on my motion. One of the financial officials took a seat in front of our Commissioners. He asked us to please postpone the motion until our next monthly meeting. He said they needed more time to consider the administrative impact of distributing the $43 million.

We agreed to the delay. Very soon after that, the issue landed in the lap of the City Council. City Finance Director, Virginia Rutledge stood before the Council. She performed the most artful and creative dog and pony show that I have ever beheld. I used to have it all preserved on a VHS tape, but it eventually gave way to more important music concert. The gist of her presentation was that distributing the $43 million back to the ratepayers would cause “too much of a cash flow problem,” and she recommended against doing it at that time.

Then, the entire issue blew up in the news media. Everyone began asking, “What really happened to that $43 million. Why couldn’t the Electric Department simply withdraw it from the escrow account, and credit it back to the ratepayers?” If I had known then what I found out later, that would have been one heck of a news story!

Instead, Mayor Frank Cooksey came forward with an ideal solution. He recommended that the City hire not one, but two outside auditing firms, to review the financial records of the Electric Utility Dept. This, we were told, would get to the bottom of the mystery surrounding that big chunk of money.

So, Shudde Fath and I decided to make an appointment with one of the auditing firms, Coopers and Lybrand. We took our latest copy of the financial report, that showed the escrow ending  balance of $43 million. We wanted to ensure that the auditors looked into what happened to that money, and whether it was available to be credited back to the ratepayers. They told us that they would need to check with the City first. It would be up to whichever manager had been assigned to oversee their audit.

Well, about three weeks went by, and Shudde and I never heard back from the auditors. So, I called them to check on our request. They said they were not allowed to include our request, because the manager overseeing the audit determined that it was outside the scope of the audit. Then, I asked who that manager was. It turned out to be the City Finance Director, Virginia Rutledge. That gave me a queasy feeling. Could it be that the fox was guarding the henhouse?

The next thing we heard was that both auditing firms had completed their work. The results would be aired on the 6:00 PM local TV news. Lo and behold, both auditing firms gave the Electric Utility Dept. a clean bill of health. They each concluded that “The $43 million was properly posted to the deferred fuel revenue column in the financial statements. That is in full compliance with Generally Accepted Accounting Principles.” Very well, indeed. It was a spectacularly perfect whitewash. The auditors were never asked to investigate what happened to the money, or how much of it had been spent.

The news medial dropped the story at that point. Nothing we said could convince them that the real issue had not been resolved. So, we all went about our lives and moved on. The issue was the farthest thing from my mind about three years later, when I walked out of a West Austin restaurant after lunch. The current Mayor, Lee Cooke, walked up to me with a friendly smile. “Hi there, Mr. Oakey, how are you doing?” “Just fine, Mayor,” I responded. “Hey, I have a question for you. Did you ever find out what happened to that $43 million?”

The Mayor didn’t even hesitate. I was totally unprepared for what he said that day. “Well, Mr. Oakey, I think you can be pretty sure that the money found its way over to cover the deficit at Brackenridge Hospital.”

Those of us who took on volunteer positions at various times over the years, all have our favorite stories to tell. This one never made it into the news. It was all water under the bridge, as the old saying goes. But at least I can say that I graduated from the School of Hard Knocks. Sometimes, I unleash my emotions on this blog. But my motto when dealing with public officials is, “Walk softly and carry a big memory stick.” Try to let the facts speak for themselves. That doesn’t always work. Sometimes, what seems like the most blatantly obvious questions never get asked, and never get answered.

Like…Hey guys…What happened to that unprecedented windfall revenue surplus from the record summer heatwave? It was never budgeted and never approved for spending by the City Council. So, how much was it anyway, and where did it get spent?

Perhaps someday, a future Mayor will whisper the answers to somebody. Then, at least one other fortunate soul will know the full and complete truth.

Musical Accompaniment for This Blog Piece

  1. “The Fox” – Elton John
  2. “Foxy Lady” – Jimi Hendrix
  3. “Fox On the Run” – Tom T. Hall
  4. “Such An Easy Question” – Elvis Presley
Advertisement

A Simple Austin Energy Rate Case Timeline And Proposal

By Bill Oakey – November 16, 2022, Revised November 21, 2022

Forget all of the confusing excuses and convoluted explanations surrounding this long, frustrating ordeal. Share this timeline that makes it simple, and ties all the loose ends together.

August 2021 – The City Council approved Austin Energy’s annual budget, which began October 1st.

April 2022 – Austin Energy made a presentation to the City Council, requesting a $47 million base rate increase. The reason given was declining electricity sales. But, Austin Energy’s charts show revenues exceeding costs from 2014 through 2019. No evidence of declining energy sales is provided, except for 2020 and 2021. A 100-year pandemic and a highly unusual winter storm caused the lower sales in those years. Not mentioned in the presentation is an August 2020 memo from Austin Energy to the City Council. At that time, they forecast a $19 million revenue surplus for 2021. So, it is crystal clear that the lower energy sales caused by the pandemic and the winter storm were abnormal. There is no evidence of an ongoing trend. The rate case was flawed from the very beginning.

May Through September 2022 – Rate case participants offered a broad range of revenue and cost-saving opportunities to reduce or eliminate the rate increase. Austin Energy agreed to correct two accounting errors, reducing the rate request to $35.7 million. (See pp. 1,2)

Late Spring Through Early Fall 2022 – Austin ratepayers filled up Austin Energy’s coffers, by paying for the biggest, baddest and longest triple-digit heatwave, since the city was founded in 1839. This huge increase in revenue was not predicted, and not budgeted. Austin Energy spent tens of millions, without budgetary approval from the City Council. They never publicly disclosed the base revenue surplus amount. San Antonio’s municipal utility announced a $75 million budget surplus, and gave $50 million of it back to the ratepayers.

October 2022 – The City Council was blindsided by Austin Energy’s eleventh-hour announcement of a 71% increase in the monthly Power Supply Adjustment and 24% increase in the Regulatory Charge. The City Council voted to spread the rate shock over 3 years. Austin Energy estimates that these increases will cost the “average customer” only  $15 per month this year. But folks living in 3 bedroom houses will pay much more, especially during the hot summer months.

Early November 2022 – Rate case participants presented a compromise rate proposal to the City Council, even though their rate filings offered enough options to completely wipe out the rate increase.

Here is my proposal:

This Proposal Is Simple, Fair and Financially Prudent

1. The public deserves to be told the amount of the un-budgeted base revenue surplus from the summer heatwave, and how it  was spent.

2. The City Council may decide that a small base rate increase is needed to cover the pandemic and storm-related losses from 2020 and 2021. If so, it should be done as a temporary adjustment to the base rate charges in the current rate tariff. The City Council can determine how long to keep the temporary rate increase in effect.

3. No changes to the rate design, customer charge or Value of Solar benefits should be included in the temporary rate adjustment.

4. The City Council should regularly monitor Austin Energy’s financial position. They should conduct a financial review, towards the end of the adjustment period. If the utility’s financial position has stabilized, the City Council should suspend the temporary base rate increase.

5. Austin Energy, with City Council oversight, should develop new short term, midterm and long term plans. These plans should guide the utility toward the inevitable future of rapidly accelerating customer adoption of solar and other energy-saving technologies. They should examine and implement some of the emerging business strategies outlined in the 2019 report, commissioned by the National Conference of State Legislatures.

Early December 2022 – The City Council faces critical choices. They should protect our existing     conservation-based rate design, and honor their commitment to the City’s adopted Climate Equity Plan. A higher customer charge would threaten affordability for customers across several income levels.

The City should postpone the rate decision until the new Mayor and City Council take office in January. They should comb the rate filing briefs, consult with the participants and citizen experts. They should adopt the various measures to wipe out the rate increase. If any rate increase is deemed necessary, a temporary adjustment is the most reasonable approach.

New Year’s Eve 2022 – This is a time for Auld Lang Syne and fun celebrations. It would help to know that our City leaders are committed to that word that is so often casually supported, but so seldom backed up with concrete action – affordability.

Musical Accompaniment

”Auld Lang Syne In Austin”

A Better Compromise For The Austin Energy Rate Case – Make It Temporary

By Bill Oakey – November 15, 2022

On Monday, I met with Mayor Adler’s Senior Policy Advisor. The rate case is coming down to the wire. The City Council has planned a final vote for early next month. Any change in the rates would ring in the new year, on January 1st.

Mayor Adler took the lead, and did an excellent job in tackling the doubled-barreled rate shock of increased fuel and regulatory charges. Those new charges hit our monthly bills at the stroke of midnight on Halloween night. Mayor Adler’s efforts led to the City Council’s decision to increase those charges gradually over three years. The first round may seem somewhat small over the winter months. But, if we have another triple-digit heatwave next summer, folks living in three bedroom homes will definitely feel the rate shock.

Why Does Austin Energy Want a Base Rate Increase?

As this blog has pointed out, Austin Energy says they want it because “our rate design is not as efficient as our customers.” In other words, there are too darned many energy efficient small living units. Those customers aren’t buying enough electricity. Well, there are many problems with that reasoning. Zapping those customers with a $25 monthly customer charge would send the wrong signal on conservation. If you have to pay more, you might as well use more and get your money’s worth. And the biggest users would see their electric bills decrease. So, their motivation to conserve flies right out the window. Austin Energy’s rate plan runs in direct conflict with the City’s adopted Climate Equity Plan.

My Proposal Offers a Fair and Financially Prudent Solution

I recommend that the City Council keep the current rate design and customer charge in place. If they review all the input from the rate case participants, and still conclude that a compromise base rate increase is necessary, then approve it – but make it temporary.

A standard rate increase would have to stay in place for a few years, until the next routine rate review comes around. Austin Energy’s rate request was determined by using 2021 as their “test year.” They soldi less electricity than they needed to cover their expenses in both 2020 and 2021. Well, we all know that we had a 100-year pandemic that affected both of those years. And in 2021, we had a historic winter storm and a milder than normal summer, on top of the pandemic.

The charts that Austin Energy presented to the City Council, clearly show revenues exceeding expenditures in every year leading up to 2020. So, their own data fails to show any proven trend of not seeing enough electricity. The need for an ongoing rate increase was built upon on a false foundation. If any rate increase is needed, it should only cover the losses caused by the unusual circumstances in 2020 and 2021. Most importantly, the record-setting summer heatwave this year certainly doesn’t portray a dire decline in electricity sales.

Austin Energy’s Big Credibility Problem

When Austin Energy filed the rate request last April, no one had predicted the upcoming heatwave. It was not included in last year’s budget, that ended on September 30th. There is no doubt that the utility sold more electricity than in any summer throughout their history. San Antonio’s ratepayers received bill credits from part of their $75 million surplus. So, what did Austin Energy do with all that money from their windfall budget surplus? Until they satisfactorily answer that question, the public has every reason to question their credibility.

Is a Temporary Rate Increase Needed? If So, Then How Much?

The rate case participants have each submitted a treasure trove of expert testimony, chock full of data-driven analyses and thoughtful conclusions. It’s as if the City has been handed a stack of expensive consultant reports, each of which represents many months of tedious, detailed work. In my opinion, the experts have identified more than enough revenue and cost-saving options to wipe out any rate increase. But the City Council may disagree.

It so, they should consider a six-month temporary amendment to the existing rate tariff. The only thing that should change is the base charges for each customer class. The solar benefits should not be changed until more study and citizen input takes place.

Review Austin Energy’s Financial Position After Several Months

The City Council could monitor Austin Energy’s financial position. By late next spring, they should know whether another triple-digit heatwave is coming. So, what happens with rates next fiscal year should start with a spring financial review. During that review period, the City Council could decide whether to leave the amended rate tariff in place, or whether they can revert back to the base rates that we are paying now.

This approach is certainly not a common practice, and Austin Energy would be less than thrilled with the idea. But we are in a time of record inflation, sky-high rents and crazy-high property taxes. We have a large number of folks at various income levels, struggling to make ends meet. And seniors living on fixed incomes. Many small businesses are still trying to recover from the pandemic. One double-dose of rate shock is bad enough. We certainly cannot afford any other type of rate increase, for any longer than it is absolutely necessary.

Also, the six month review period would give Austin Energy, with oversight from the City Council, time to explore and evaluate new utility business models. It is true that solar panels and new, evolving technologies will lead to rapidly rising utility losses from customer adoption of these technologies, in the not too distant future. Energy-efficient building renovations and new construction, combined with energy-saving appliances will add to this trend.

Austin Energy’s existing plans rely on an outdated business model. That model calls for continuous base rate increases, to counter the conservation-driven revenue losses. The City should call upon national experts, to help guide them toward a sustainable and financially viable plan, for the inevitable future that is coming.

Remarks To The Austin City Council – Just Say No To Austin Energy Rate Increase

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:

Summary

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.

Recommendations

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.

Simple Math Explains Mind-Boggling Tax Jolt With AISD’s $2.44 Billion Bonds

By Bill Oakey – October 27, 2022

Being a taxpayer and affordability advocate can be a frustrating pursuit. What if I learn something so shocking that nobody believes it? The answer is this – I refuse to give up! After slicing and dicing numbers throughout a 35-year accounting and auditing career, I know a thing or two about numbers. Check this out, and you can easily understand why I find it so shocking.

Simple Math Question – What Is $2.44 Billion Divided By $350 Million?

Answer: $2,440,000,000 / $350,000,000 = 6.9

That rounds off to 7.

Now, let’s put that number 7 into perspective. Let’s turn that simple math problem into a word problem: How many years would it take, if AISD spread their $2.44 billion into annual bond elections of $350 million each?

The answer is 7 years.

Why did I choose the annual figure of $350 million? Because, during the election that voters are deciding right now, the City of Austin has a $350 million bond on the ballot for affordable housing. That is the highest amount we have ever had at one time for affordable housing. The taxpayer impact might not be too shocking, just for that amount alone.

But, what if we had a $350 million dollar bond election every year, for 7 years in a row? Would that make you a little bit uncomfortable, as a taxpayer? Well, get this folks – AISD is asking for 7 times that $350 million – right now…all at once…this year!

And, we are being told that the taxpayer impact is nothing to worry about – just a one-penny increase in the debt service portion of their tax rate.

But, let’s keep something else in mind here. AISD has a smaller tax base than the City of Austin. That means that there are fewer taxpayers to share the burden. Haven’t we heard a few people say that we are in an “affordability crisis?” That tiny one-penny tax impact that AISD advertises may be true in the first year or two, as a small, initial amount of bonds are sold, But, you can’t finance $2.44 billion throughout the life of all the bonds, without raising taxes much higher within a few short years.

Now, let’s put this whole thing into perspective. ACC has a $770 million bond issue on the ballot. How many $350 million chunks are being put to the voters all at once, stacked on top of each other…this year…right now…in the current election?

1. City of Austin – 1 $350 million chunk

2. ACC: $770 million – over 2 $350 million chunks

3. AISD: $2.44 billion – 7 $350 million chunks

Total = $3.5 billion – 10  $350 million chunks

What Can We Do If This Message Is Ignored, And All of the Bonds Pass?

I have a good solution in mind. Public officials and other influential folks could conceivably work with AIISD to evaluate the taxpayer impact, going forward. Maybe they could spread out the issuance of these bonds over a longer period of time. I would suggest that they reach an agreement on a specific timetable for issuing the bonds, to spread out and soften the taxpayer impact. They could review several different scenarios, and decide on a feasible and sensible approach, that does not severely impact affordability for homeowners, renters and businesses.

$3.5 billion is the highest amount by far, for any bond election in Central Texas history. And it is about to flash right by, with hardly a whisper from anybody. I could not resist speaking out about this. Numbers don’t lie. But, they have been known to stare people in the face, and jolt them awake. That happens to me all the time. Right now, it means that I need a nice, hot cup of coffee. Have a nice day, and don’t forget to pay your utility bill…

AISD Bonds Will Cost Over 7 Times What Voters Have Been Told!

By Bill Oakey – October 24, 2022

The big $2.44 billion AISD bond proposition on the ballot will cost taxpayers many times more than the one penny per $100 valuation that they have publicized. They skirted around the law with a crazy loophole. State law requires them to publicize the tax impact on a $100,000 home. So, technically, that is what they did. The estimated tax rate impact would be one cent, if you take the $100,000 home value and subtract the $40,000 homestead exemption. That leaves just $60,000 as the valuation to apply the tax rate to.

Well, that’s misleading, because the median home taxable valuation in Austin is over $500,000. And the $40,000 homestead exemption applies to the whole taxable value. So, $500,000 minus $40,000 leaves $460,000 to apply the tax rate increase to! $460,000 is over 7 times higher than $60,000. So, the tax impact on the owner of an average home is at least 7 times higher than what the voters have been told!

Voters just need to keep this in mind. The greater Austin area has never had a $2.44 billion bond issue in its entire history. We have had many smaller bond issues that have raised taxes more than one penny per $100 evaluation. So, how is it possible that this one could be so different? How could the taxpayer impact be so small?

The Answer Is Simple – It Can’t!

This information was provided to me over the weekend, by former Travis County Tax Assessor-Collector, Bill Aleshire. AISD officials have some explaining to do. They need to be called onto the public carpet and held accountable. The full cost to the taxpayers is required under the spirit of the law. Taxpayer advocates have already met with lawmakers, including Senator Paul Bettencourt, to ensure that the gaping loophole is tightly sewn up, during the next Legislative session in January. 

Using such a loophole to deceive voters is shameful, and reflects poorly on AISD’s Board of Trustees – or should I say, Board of Mistrustees? Check it out. Go to the AISD website. Under the heading, “2022 Bond,” Click on “Voter Information Documents.” 

On the first page, in Item number 7, AISD states that the estimated tax increase on a $100,000 home is only $6.00. But they subtracted the $40,000 homestead exemption. That means that they are only using $60,000 to do the tax increase calculation.

For an accurate and honest message to the voters, AISD should have show us what the estimated new tax would be on a median-value home, at over $500,000. The tax amount will probably be higher in the first couple of years, because of the steep rise in interest rates. And AISD did not publish what the tax impact would be in later years, as more bonds are gradually sold.

Austin Community College (ACC) has a $770 million bond on the ballot. Their taxpayer impact is estimated at $5.00 on a $500,000 home for the first five years, and $25 per year for each year thereafter. You can easily see that AISD’s estimate for $2.44 billion in bonds is wildly understated. Here is the link for ACC.

The Total Amount of Bonds On the Ballot Adds Up to $3.56 Billion!

AISD’s $2,440,000,000 + ACC’s $770,000,000 + Aistin’s $350,000,000 = $3.56 Billion

Any way you slice it, this is an extraordinary, historic event for the Austin area. And yet, it has flashed before our eyes with barely anyone noticing. And early voting started Monday. Any of you who are over 65 or disabled won’t be hit as hard. But everyone else should buckle up, and prepare for some severe property tax shock, along with a triple dose of electric rate shock, which starts at one minute past midnight on Halloween night…

The saddest part of all this is that AISD really needs the school upgrades and repairs that the bonds would fund. Voters will need to make some difficult choices. AISD should help them by immediately clarifying the misleading information, with clear, simple, full and complete facts. And do that as soon as possible.

What Happens In School When Somebody Misbehaves?

Several AISD officials should be summoned to the nearest principal’s office. A designated teacher should smack each one of them with a ruler…See photos below:

 

American-Statesman Calls For Fuel Adjustment Reform

By Bill Oakey, October 10, 2022

Over the weekend, the Statesman’s metro columnist, Bridget Grumet absolutely nailed the issue of Austin Energy’s surprise rate shock announcement. This blog has recommended a periodic adjustment of the fixed fuel charges on our bills. The Statesman column endorses that concept. But a future reform may not help us anytime soon.

The big question is, what can the City Council do to soften the extreme rate shock that will accompany the proposed 71% surge in the Power Supply Adjustment and the 24% increase in the Regulatory Charge? I have two ideas that may make a big difference.:

1. The City Council should consider a 25 year loan to finance the fuel cost increase. This would be similar to what San Antonio CPS did after last year’s winter storm. Their customers will pay it back monthly, with a small fee of just over a dollar per month. A loan would at least recover Austin Energy from the big financial hole that they dug themselves into, by not asking to change the Power Supply Adjustment early in the summer.

2. The City should contact Congressman Lloyd Doggett, to explore options for Federal assistance. The Inflation Reduction Act may have some provisions for helping cities and states pay for shoring up electrical grids. Any other potential Federal grants should also be explored. The City should also ask State officials about potential assistance from the State.

Here is the Statesman column on this topic:

Austin American-Statesman, October 9, 2022

Grumet: Austin Energy shouldn’t wait a year to catch up on fuel costs

This year Austin Energy faced soaring natural gas prices and a surge in the cost of buying electricity from the state's power grid.

One way or another, we’re going to pick up the tab.

The only question is how much of a wallop this will pack on our monthly Austin Energy bills — and whether the city-owned utility will take common-sense steps to avoid hitting customers with such wild spikes in the future.

“To have such an extreme change happen so quickly, that has got to be something we can better control,” Mayor Steve Adler told me Friday.

  • A few weeks ago, Austin Energy proposed significantly raising the fuel charges and regulatory fees on our utility bills, amounting to about a $20 increase on the typical resident’s monthly bill.

More: City Council raises concerns over planned Austin Energy rate, fee hikes

It was a startling announcement, considering the City Council normally tweaks these fees once a year with little fanfare. Last year’s adjustment to the fuel charges and regulatory fees knocked a whopping 4 cents off the average resident’s monthly bill.

This year is different. Natural gas has been at its highest prices since 2008. Buying electricity has also grown more expensive, as the state has taken steps to shore up the power grid to try to prevent a repeat of the disaster we experienced in the 2021 winter freeze. These rising costs are unavoidable expenses for Austin Energy — which means they must, in some way, get passed on to us as customers.

“In May, things just seemed to explode here in ERCOT,” Austin Energy Chief Financial Officer Mark Dombroski told me, referring to the congestion on the state power grid. “We had a really hot summer; we had all the supply problems and a huge demand. I’m not sure anyone really saw … all those things coming together back when we set the (fuel charges for customers) in November of ❜21.”

OK. But here’s the maddening part. Costs have been surging for months. Utility executives could see that back in May and June. Yet it wasn’t until September that they proposed raising fees on customers to recoup those costs. By then Austin Energy needed to dig itself out of a deep financial hole — meaning a steeper price hike for all of us.

The problem is that Austin Energy adjusts its fuel charges for customers only once a year, providing an annual reckoning to catch up on whatever happened with the utility’s own fuel expenses over the past 12 months.

More: Grumet: Austin Energy proposal would raise your bill — even more if you conserve. Why?

The goal behind this policy was to keep customers’ bills stable. But in a way, this practice has the opposite effect: Waiting months to revise fees, allowing the deficits to pile up, means customers face an even bigger spike by the time the annual recalculation occurs.

Consider this analogy: Say you’re used to spending $100 a week for your groceries. But then prices jump around a bit, and some weeks it costs $2 more to get what you need. Or $5 more. Or $7 more.

Would you rather pay as you go, handing those extra bucks to the cashier as you check out? Or would you put those extra weekly charges on your credit card, where they add up to a couple of hundred bucks by the end of the year, and only then do you come up with a plan to pay off that debt over the next 12 months?

Option B is what Austin Energy is doing right now with our once-a-year fuel adjustments.

It doesn’t have to be this way. Our neighbors in San Antonio have a city-owned utility that adjusts the fuel charge on customers’ billsevery month to keep up with market conditions. Yes, that means bills fluctuate a bit from month to month. But that spares customers the kind of annual jolt facing Austinites now.

I asked Dombroski whether Austin Energy would consider adjusting the fuel charges more often. He said he’s open to the idea, but doing so would require the City Council to update its ordinances on how fuel charges are set.

Adler told me he wants to hear a couple of things when Austin Energy officials meet with the council this week.

For starters, the mayor has asked the utility to offer a different proposal instead of the roughly $20-a-month fee hike for residential customers that was designed to recoup costs within one year.

Adler said he wants to see a more gradual adjustment in fees “over a three-year period of time, in a way that doesn’t hurt our bond rating, but that provides some softening of this extreme change.”

And then the mayor wants the utility to address the question: “How do we know this isn’t going to happen again?” That will require a plan that’s more proactive than simply waiting once a year to adjust fees.

We can’t stay on a path where this kind of sticker shock happens. For one thing, the hit to residential customers under Austin Energy’s current proposal might be greater than $20 some months. Austin Affordability blogger Bill Oakey recalculated his bill for July — a sweltering month when he kept the thermostat at 80 degrees in his 1,400-square-foot home — and the proposed charges would have added $34 to that bill, for example.

Meanwhile, as my colleague Bob Sechler reported, Austin Energy’s current proposal to raise fuel charges and other fees could cost small restaurants around $455 a month extra, while department stores and small hotels could see monthly bills increase by about $1,800. Large industrial consumers could face millions of dollars in rising costs over the span of a year.

And these fees are all separate from the proposed overhaul of Austin Energy’s base rates that I’ve been writing about recently. Those proposed changes, which are also likely to drive up bills for many residents, are slated to come before the council in November.

So how could Austin Energy prevent another year of runaway fuel charges? Adjusting the fees monthly would be one approach. Or the utility could recommend adjustments only when market prices have moved beyond a certain threshold. Or perhaps the utility needs to keep more robust cash reserves on hand to better absorb fluctuating expenses, Adler said.

It’s hard to predict what will happen with fuel prices and the power grid in the coming year. And really, that’s the point. Austin Energy doesn’t have a crystal ball, either. It needs a better mechanism to ensure customers don’t get clobbered by a massive price correction that arrives only once a year.

Grumet is the Statesman’s Metro columnist. Her column, ATX in Context, contains her opinions. Share yours via email at bgrumet@statesman.com or via Twitter at @bgrumet. Find her previous work at statesman.com/news/columns.

 

A Possible Solution For Cash-Strapped Austin Energy

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.

Austin Energy’s Huge Financial Misstep – The Fallout Is Just Beginning

By Bill Oakey – October 5, 2022

Just days ago, Austin Energy dropped a big bombshell on the City Council.  All summer long, the utility has been paying out big bucks to cover sky-high high fuel costs. These were caused by the worldwide spike in the cost of natural gas, combined with the artificially high capped prices for gas that the Texas Legislature set for gas sold through the ERCOT grid market. In addition, our utility has been paying for their share of higher charges to help fortify the power grid.

Austin Energy Has Racked Up $796 Million In Unrecovered Costs

Most utilities throughout Texas have already been passing those higher costs on to their customers, through monthly charges on their electric bills. But Austin Energy dug themselves into a big financial hole. They relied on their usual practice of only adjusting the fuel and regulatory customer charges once per year. Our moment of reckoning will come at one minute past midnight on Halloween night – unless the City can pull a rabbit out of a hat.

Heads Are Rolling at City Hall

The proposed 71% increase in the monthly Power Supply Adjustment Charge and its companion 24% hike in the Regulatory Charge have heads rolling and emotions reeling at City Hall. The City Council was asked to vote on it, with no public input and only a few days’ notice. The new target date for action is next Thursday. As this blog pointed out, the electric bill impact, when projected onto summer bills, will be higher than the base rate increase that has been under City review since April. And, I predicted the fuel-related rate shock back on July 21st.

Now, the City Council is scrambling to try to find an alternate solution. Austin Energy brought this problem on themselves. There is no law that says they have to wait each year until November to reset those pass-through charges. But that’s where we are right now. According to the American-Statesman, the utility has enough cash on hand to last just 120 days, which is 30 days less than usual. The implications are wide-ranging, and quite intriguing on a number of levels.

At last week’s City Council work session, Austin Energy floated the option of phasing in the higher pass-through charges over a longer period of time. But the utility said it does not have the cash to cover that option. They would “need assistance from the City.” Of course, we know that the City gets its money from the taxpayers – you and me. And the little matter of that other base rate increase still has to be sorted out.

I have repeatedly called for the City Council to utilize the numerous revenue opportunities identified by the rate case participants to wipe out that base rate increase. I have recommended a10-step plan for the City Council to change the timing of adjusting pass-through charges, eliminating the base rate increase, and moving Austin Energy toward a modern, conservation-based business model.

Austin Businesses Are Up In Arms Over The New Price Hikes

If you think you and your neighbors might have trouble paying these higher bills, just take a look at some of the numbers quoted by the business community. These only count the new pass-through charges, without the potential base rate increase. The American-Statesman has reported that convenience stores and small restaurants would pay about $455 more per month, or $5,500 more per year. Department stores and small hotels would pay $1,800 more per month, or $22,000 more per year. Large industrial users, like semiconductor manufacturers, could see increased costs into the millions of dollars. All of the business organizations have called for a delay in the fee increases, and some sort of phased-in approach. But Aladdin’s lamp would probably be needed to conjure up the money for that.

What Will Become of the Windfall Summer Heatwave Revenues?

One of my biggest fears is that those will be very quietly swept under the rug. Few people besides me are even talking about that subject. Those whom I have asked to raise the issue to Austin Energy have been given vague answers, accompanied by fuzzy math. I’ve heard statements like, “It costs a lot to generate all that extra energy.” Well, yes, but when every customer in the system generates record volumes of sales, the base revenue that rolls in from historic triple-digit temperatures would have to be extraordinary. So, again I ask, what will become of that huge un-budgeted surplus? See this blog piece and this one for more details.

It is tempting to take an educated guess. Austin Energy is cash-strapped right now, because of the $796 million hole from not collecting the pass-through fuel and regulatory charges. The summer base revenue surplus might well be used to help plug that hole. Then sometime next year, after the customers pay back all the pass-through charges, the summer base revenue surplus will bubble back up to the surface. Then, it could sit comfortably in the budget – without anyone in the community remembering that it existed. I just can’t help wondering if that’s the plan…

       

A Nostalgic Tribute To A Very Special Person

By Bill Oakey, October 4, 2022

Once upon a very long time ago, Time Magazine listed Austin as one of the most affordable cities in the country. I can attest to that, since my rent for a one-room efficiency in a house at 1904 Nueces was $120 per month, with all utilities paid. I moved into that place in 1971.

The burgeoning live music scene kept me out most nights, and the price of admission was next to nothing. A six pack of beer cost $1.50. I had been collecting records since the age of 5, so going to the live music shows, and meeting some of the performers was very exciting. I was never one to sit on the sidelines.

My favorite singer in the mid-seventies was Loretta Lynn. The news broke this morning that she has passed away, at the age of 90. Getting to meet her in person is one of my fondest Austin memories. It started in a very unexpected way. In the spring of 1976, I bought a copy of her autobiography, Coal Miner’s Daughter. In the middle of the book, I read about three sisters in a town called Wild Horse, Colorado. They started Loretta’s fan club. Then they built it into the International Fan Club Organization.

On a crazy whim, I picked up the phone and called Directory Assistance. They put me through to     the sisters’ home, and we chatted for a good while. They invited me to come to Nashville for the annual Fan Fair event. I just needed to buy a $35 ticket, fly out there, and the sisters would introduce me to Loretta Lynn. It was all kinds of fun! After I got back home, arrangements were made for me to interview Loretta for a cover story in Country Song Roundup magazine. (Click to enlarge photos).

I was terribly nervous on the evening of the interview. She was doing a show and dance at the Silver Dollar dance hall. I was told to come outside to her bus, during the intermission. Well, I pushed open a side door and quickly set off the fire alarm! The club manager came over and took care of that. At Loretta’s bus, her road manager gave me a warning. He said I could talk to her about anything, except for one topic that was strictly off-limits.

Loretta had set up and performed at a charity fundraiser, for the children who lived in Butcher Holler, Kentucky where she grew up. The proceeds would go into an education fund, that would give the kids a chance to improve their lives and get good jobs after graduation. But a group of parents filed a lawsuit. They wanted to claim the money for themselves. That story was strictly forbidden from any news coverage.

In 1977, the very next year, a set of lucky circumstances put me on a chartered jet, with the stars of a big country music festival, at a town outside London. I chatted with Loretta on the plane and visited her backstage.

The next time I saw Loretta was at her house in Hurricane Mills, Tennessee. She allowed me to take pictures of several rooms for a magazine article. I can tell you that the homemade peach cobbler in her backyard was the best I ever tasted!

Back home in Austin, I was only a few years away from the launch of a new TV series called  “Austin City Limits.” Those were unforgettable times. Marty Robbins could not remember one of my favorite songs of his from the early 60’s. I’m a pretty bold guy, but when he asked if I could sing a few lines to jog his memory, I politely declined.

Loretta Lynn was an amazing person. She put up with an abusive husband, letting the drama play out in a series of number one hits. She broke ground with controversial songs about birth control, and whatever else she felt needed to be said. In person, she was as down to earth as you can get. My favorite of her Austin shows took place where I first met her, at the Silver Dollar. The crowd had moved close to the stage, when somebody requested a song. She hollered out, “Well I know I’ll forget some of the words to that one. But, what the heck. I’ll get rid of the plans for the rest of the show. You all can pick the songs. Let’s just enjoy our time together and have some fun.” And indeed we did!

Check out this special article about Austin in the 1970’s.

Musical Tribute to Loretta Lynn:

1. “Coal Miner’s Daughter”
2. “I’m A Hanky Tonk Girl” – Her very first record, on the Canadian Zero label

3. “Don’t Come Home A-Drinkin’ (With Lovin’ On Your Mind)”
4. “One’s On The Way”
5. “They Don’t Make ‘Em Like Me Daddy”
6. “Somebody Somewhere”
7. “The Pill”
8. “I Wanna Be Free”
9. “You’re Lookin’ At Country”
10. “Keep On The Sunny Side” – From her last album, “Still Woman Enough,” released in 2021