Category Archives: General Affordability Updates

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.

 

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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

Austin Energy Rate Shock With Actual Bill Example – Not a Pretty Picture!

By Bill Oakey, October 4, 2022

The City Council Never Saw This Coming

You may have heard about the new skyrocketing fuel charges and regulatory charges coming soon to your electric bills. These unwelcome shocks could begin as soon as the stroke of midnight on Halloween night. The City Council has little choice but to approve the recommendation from Austin Energy. But, they are not at all happy about the short notice given to them. The news hard to swallow – a 71% increase in the monthly Power Supply Adjustment Charge, and a 24% increase in the Regulatory Charge. This is in addition to the controversial base rate increase plan that is still undergoing City review.

Readers of this blog will recall that I predicted the fuel charge rate shock, back on July 21st. But Austin Energy did not send their memo to the City Council until September 21st. Mayor Steve Adler said this to City Manager, Spencer Cronk at last Tuesday’s Council work session, “There has to be a different and better way for us to deal with this situation.” Mayor Pro Tem Alison Alter complained that the details are too complex to explain to the folks in her district. So, the City Council voted to delay voting on the new charges for two weeks.

Get Ready for a Double-Whammy Wallop!

The war in Ukraine touched off a worldwide surge in the cost of natural gas. Many Texas utilities adjust their fuel charges every month. So, their customers saw the higher fuel prices throughout the summer. Austin Energy only changes the Power Supply Adjustment charge once per year, starting in November.

In addition to the war-related gas prices, the ERCOT power grid was pushed to its limits over the summer. Austin Energy must purchase some of its gas-generated power at the exorbitant ERCOT bid prices. The special-interest backed Texas Legislature gave a sweet gift to the oil and gas industry, with far and away the highest price caps for gas in the entire country. The last legislative session saw those price caps lowered from outlandishly outrageous to simply unconscionably exorbitant. The Legislature also agreed to shore up the grid, but we will be the ones paying for that, with higher regulatory charges on our bills.

The Bill Impact Will Be Worse Than $20 For Many of Us – And Worse Than the Proposed Base Rate Increase!

Austin Energy has publicized an impact to the average customer, using only 860 kWh, of $20 per month. Let’s suppose that we have another triple-digit heat spell next July. Below are the calculations that you can use to see the difference in your own July bills. I challenge every City Council member and their staff to do these calculations on their July bills. Here’s what it looks like on my bill for the period ending July 11th. My living unit in a triplex has 1,439 square feet, and I kept my thermostat at or slightly above 80. I used 1,478 kWh of electricity.

New Power Supply Adjustment 1,478 kWh X .04917 = $72.67
Current Power Supply Adjustment 1,478 kWh X .02877 = $42.52
Difference = $30.15

New Regulatory Charge 1,478 kWh X .01495 = $22.10
Current Regulatory Charge 1,478 kWh X .01206 = $17.82
Difference = $4.28

Total Difference From Both $30.15 + $4.28 = $34.43

If your place is at or above 1,400 square feet, and you kept your thermostat below 80 in July, then you should run the numbers to see your bill impact. It won’t be pretty.

We Need Senior Discounts for All Utility Customer Charges

On May 22, this blog issued a proposal for broad-based senior discounts, across several City departments. There is now a new urgency to adopt discounts on each of the customer charges on our utility bills. I recommend 50% senior discounts on the electric, water, wastewater and solid waste services customer charges. Those should be put in place as soon as possible, even if it requires complex reviews or proceedings.

Austin’s longterm residents are being squeezed to the max by inflation, high rents and property taxes, and high utility bills. We seldom get the attention from City Hall that is bestowed upon developers and recruitment efforts for new residents moving to luxury high rises. We’re the ones who established Austin’s reputation and high quality of life.

The City Council Should Consider These Actions and Reforms

1. I challenge every City Council Member and their staff to run the above calculations on their own July bills.

2. Move Austin Energy to a monthly or bi-monthly change in the Power Supply Adjustment and Regulatory Charges, to minimize rate shock. Consider a two or three month rolling average.

3. Require Austin Energy to report their net cash position to the Austin Energy Utility Oversight Committee on a quarterly basis. This will keep the City Council in the loop on unexpected shortfalls or surpluses.

4. Put the proposed base rate increase on hold. Conduct a series of meetings with rate case participants and community experts, to identify revenue options and other strategies to wipe out the increase.

5. Get to the bottom of the big mystery surrounding Austin Energy’s huge windfall revenue surplus, from the summer heatwave. It has to be the highest seasonal surplus in their history, given the long series of record-breaking triple-digit temperatures. Insist that Austin Energy produce fiscal year-to-date budgeted vs. actual base rate revenues. Austin Energy asked for a bass rate increase of $48 million in April. The summer surplus started in mid-May. They could not have budgeted for the unforeseen record-breaking summer bills, So, how much is the surplus, and where is that money now? The public deserves to know the full story.

6. Pass a City Council resolution that clarifies Austin’s policy goals on conservation, adoption of customer-based solar and other conservation-related technologies, and climate change mitigation. Include mandates for Austin Energy not to adopt policies, rate designs or customer charges that discourage conservation. or hinder progress on climate change mitigation.

7. Take on the challenge of helping Austin Energy find and implement a modern, innovative business model. They need to recognize that selling less electricity is a positive outcome, and should be a core element of their mission. They should not attempt to discourage conservation. Nor should they try to counter its impact with new fees and a parade of base rate increases. The market for customer-based solar, battery storage and other technologies is expanding by the day.

8. Review the entire scope of Austin Energy’s well-documented resistance to public transparency. Determine precisely which, if any, of Austin Energy’s operational and contractual records should be considered “proprietary,” and thus hidden from public scrutiny. Adopt a firm, enforceable policy, describing a complete, detailed list of any such items. Require by written policy the full public disclosure of all other types of records, requested by anyone, now and in the future. Austin Energy is owned by the citizens of Austin.

Review all of the information requests that were either rejected outright or not answered to the satisfaction of the current rate case participants. Hold City Council executive sessions with Austin Energy, to compel full responses to any of those information requests identified as “proprietary.” As Austin Energy’s Board of Directors, the City Council should have full authority to see and review all records, including any deemed “proprietary.” Compel Austin Energy to release the non-proprietary information to all the rate case participants, and to the City Council.

9. Austin Energy, their stakeholders and the City Council should review the best established European business models. And they should meet with the leadership of the National Conference of State Legislatures (NCSL). They have published a report on conservation-based business models.

10. Establish 50% senior discounts for each of the monthly customer charges on our utility bills –  electric, water, wastewater and solid waste.

New Utility Business Models Endorsed By National Legislative Organization

By Bill Oakey, September 20, 2022, Revised September 21, 2022

I will cut right to the chase. Austin Energy’s rate review and hearings that began this spring should never have happened. This week, the various parties that filed their legal briefs will sit down for their first post-hearing meeting, to try to reach a negotiated settlement. In their squeaking chairs, they’ll be splitting hairs over revenue requirements, cost of service and which customer class is “subsiding” which other. All of this begs one fundamental question.  Should Austin Energy even be asking to raise rates, because “their rate design is not as efficient as their customers?”

The answer is no. In my 39 years of following Austin electric rate cases, I have never seen anything as convoluted, challenging and fascinating as this one. As this adventure winds down to a close, our City Council must grapple with several indisputable facts:

1. Not selling as much electricity is a positive outcome, and should become a stated goal in our quest to halt carbon-based power generation, and meet our City’s climate change goals.

2. Long before now, Austin Energy should have been compelled to tell the City Council and their customers how much of a budget surplus they have acquired from the biggest summer revenue windfall in their history. Just 76 miles from here, San Antonio has decided to give their utility’s customers refund credits for $42.5 million of their $75 million revenue surplus. Why are we facing a deadline in a rate case, without knowing whether Austin Energy will even need to cover the perceived shortfall that prompted the rate review? We could actually double the amount of our surplus, with Federal matching funds, under guidelines in the new Federal climate and energy legislation. Then we could use revenues identified in the rate hearings to wipe out the need for a rate increase.

3. Austin Energy’s own data, presented early in the rate review, shows that revenues exceeded expenditures every year, up until fiscal year 2020. The 100 year pandemic and the extraordinary 2021 winter storm made both of those years anomalies. Yet, Austin Energy’s charts paint those years as proof of a new trend of declining electricity sales. Compounding that fallacy is their August 2020 memo to the City Council, which projected a $19 million revenue surplus for 2021. In addition, 2021 brought a milder than normal summer. So there is no “known and measurable” evidence that there is a new trend of declining revenues going forward.

4. Raising base rates and manipulating rate designs in ways that discourage conservation is a completely backwards approach. It would boost utility revenues, to the detriment of climate change mitigation. Penalizing solar customers with unpredictable buyback rates would only make matters worse. All of these high costs would drive more affluent residents and businesses toward alternatives, at an accelerating pace over time. A Community Benefits Charge will eventually rise to unsustainable levels, as customer adoption of solar gradually climbs to 10%, 15%, 20% etc. of the city’s population. Utilities without a viable plan will be left with declining revenues, as their customers require less of their power.

The Root of the Problem Is a Broken Business Model

Ask yourself these basic questions. If you owned a business – any business – would you hire people to go out in the community, and offer your customers incentives to use less of your product? Would you put links on your website, offering rebates to customers who install things that get them out of your business altogether, part of the time? And finally, would you offer to pay them a special rate, if they give back any unused portion of your product? And you agree to put that unused product on the market, so that your competitors can sell it.

If you did those things, how long do you think you could stay in business? Well, suppose that your community grows very fast every year. Perhaps you can add enough new customers to keep the business going. But what happens when those things that customers install to get out of your business become so affordable and so attractive, that they explode in the marketplace?

Suppose that your business is regulated by your state or your city. You could tell your regulator that you are losing money, because you’re not selling enough of your product. Ask them for permission to raise your base prices, and increase the add-on fees. Even though the demand for that product is falling. And, because you did such a great job helping customers get less of your business, that demand is projected to keep falling, at an accelerating rate. Would your price increases keep you afloat, or would they just drive away your customers faster than ever?

Welcome to the electric utility business! You just acquired a hornet’s nest of a messy dilemma. And, the Federal government just passed landmark legislation to help thousands of families use less electricity. Climate change goals are so critical that you need to aggressively support selling less electricity from carbon-based power plants. Now you need to look for a way out of the dilemma. You need to start planning to move in a new direction – as expeditiously as possible.

New utility business models are being developed and implemented, both here and very successfully in Europe. Utilities should consider the new practices outlined in a 2019 report by the National Conference of State Legislatures. It is worth noting that nobody from Texas appears to have leadership roles in this organization – yet.

The NCSL Report Lays It All On the Line

This report begins with an all-too-familiar theme that has been hiding in plain sight for too long. Here are a few excepts from the Overview:

Overview

”Energy efficiency is an appealing option for state policymakers looking to lower energy costs, reduce air pollution and promote local economic growth. Utilities also recognize the benefits that energy efficiency can provide for ratepayers—such as lower utility bills, increased system reliability, reduced greenhouse gas emissions and increased customer satisfaction. When implemented on a large scale, energy efficiency measures may take the place of new power plants and transmission and distribution projects, reducing utility expenditures and risk while lowering costs.”

”Although energy efficiency can be a substitute for new power plants and power lines, it can lower utility earnings under traditional utility business models.”

“The current energy landscape is rapidly changing, with increased demand for clean energy, growing amounts of customer-sited energy generation and new distributed energy resource technologies. While efficiency is seen as a resource that lowers energy demand and increases productivity, the traditional utility business model creates substantial financial disincentives for utilities looking to develop these programs. As a result, many states are exploring and establishing policies that motivate cost-effective efficiency investments.”

Here is another excerpt that leads into the heart of the report:

“At least 44 states and Washington, D.C. have established utility revenue incentives for energy efficiency through decoupling mechanisms, lost-revenue adjustment mechanisms (LRAMs) and performance incentives. The next three tabs explore these approaches in detail and include state policy maps and summary tables.”

The Handwriting Is On the Wall

Utilities, including Austin Energy, need short term, midterm and long term strategies. Technology marches on. American ingenuity will inspire entrepreneurs in the marketplace to deliver what utility customers want. That train has already left the station. It’s better to hop onboard than to be left behind – wondering why people don’t like the idea of higher electric rates. After a brutal summer heatwave, in a period of record inflation and a housing affordability crisis.

I rest my case!

Musical Accompaniment for This Blog Piece:

1. “Wrong Road Again” – Crystal Gayle
2. “Why Don’t They Understand?” – George Hamilton IV
3. “The Times They Are A-Changing’ ” – Bob Dylan
4. “I Can See Clearly Now” – Johnny Nash
5. “The Writing On the Wall” – Adam Wade
6. “Down By the Station” – The Four Preps

Benefits For Utility Solar Customers Threatened, As Climate Change Dramatically Worsens

By Bill Oakey, September 13, 2022, Revised September 15, 2022

We are now witnessing the worst wildfires, heatwaves, drought, severe flooding and strongest hurricanes than ever before, worldwide. But electric utilities are stifling progress, with outdated business models, and plans that would slow the transition to customer-based solar. This blog piece is dedicated to everyone out there who cares passionately about meeting climate change goals.

Do Non-Solar Customers “Subsidize” Solar Customers?

No! No! No! No! No!!!

That is a dangerous question to even ask. If we travel down that road, we will seriously jeopardize our chances of saving the planet. Ratepayers who can’t afford solar are eligible for a host of other energy-efficiency programs. Major utilities from Austin to California have fallen into the “subsidy” trap. Their conventional thinking is couched in terms of dollars. How do the dollars flow up, down and around the customers – between customer classes, and within customer classes? Austin Energy has a Value of Solar buyback program, that could be weakened in the current rate case. “Value,” when placed next to “solar” deserves a much broader perspective than just the dollar impact on energy sales. Subsidization should be taken out of the equation.

In the 1950’s, when Elvis Presley first started swiveling his hips, it made good sense for utilities to think of rate setting strictly in terms of dollars. Ratemaking, like sausage-making could be reduced to a simple, defined recipe. Jimmy Dean found that out, when he left the music business to become a sausage king. But today, we cannot afford conventional thinking about the value of solar. Not if we care about mitigating climate change! 

How Do “Subsidies” Creep Into Austin Energy’s Solar Planning?

It’s not a pretty picture. Prior to our current rate case, Austin Energy hired a firm, NextGen Strategies and Solutions, to evaluate their current Value of Solar payment structure, and recommend potential improvements. Here is a quote from that report, following their statement that there are two options available:

“To be clear, either approach if conducted in a transparent and well‐informed manner may be acceptable and appropriate for Austin Energy. However, to the extent the amount paid to customers through VOS credits exceeds the direct economic savings to Austin Energy, the VOS credit will result in non‐PV customers subsidizing PV customers. Further, to the extent a subsidy exists, as PV penetration increases, so shall the subsidy. At some point the subsidy may reach a magnitude that is not acceptable to policymakers. In recognition of this situation, it may be helpful for Austin Energy to consider the following policy questions:

1. Should non‐PV customers subsidize PV customers and, if so, by how much and for how long?
2. Can Austin Energy achieve its distributed renewable energy goals with a VOS credit that is solely based on embedded cost avoidance/savings?
3. How should achieving Austin Energy’s distributed renewable energy goals be balanced with
minimizing PV customer subsidies?”

Subsidy, Subsidize, Ad Nauseam…

There are subsidies throughout our economic system. Austinites who pay property taxes subsidize big corporations, who get tens of millions in tax abatements – for the privilege of creating high tech jobs. This has touched off waves of income inequality, massive gentrification and an affordability crisis. Where is the “Strategies Inc.” report to address that problem?

In Austin, big downtown skyscrapers are often assessed at well below market value, for property taxing purposes. The City filed a lawsuit, to put commercial taxpayers on an equal footing with homeowners. The lawsuit went nowhere. Movie theaters subsidize the multi-billion-dollar Hollywood film industry. Theaters survive by charging outlandish prices for popcorn and candy. Subsidies are everywhere.

Austin Energy hasn’t explicitly stated that substantial fee increases to reduce the subsidy effect are factored into their future solar planning. But it’s on their radar. And, their proposed rate plan calls for evaluating the Value of Solar calculation every year. If customers begin to see a weakening of the credits, they may not want to wait long enough for a solar investment to break even. Solar contractors try to help new customers figure out their break even timeframe.

The Perils of the Community Benefits Charge

Austin Energy wants to move the service charge for energy efficiency programs, including solar, to the “Community Benefits Charge.” We can see a complex web of cross-subsidization with that. But there’s a much bigger problem. I like to think in terms of getting from Point A to Point B. At Point B, perhaps 15% of Austin homes and businesses will have solar panels and battery storage. Then add modern home generators, to get through power outages. We could call 20% saturation Point C, and so on. That would push the customer benefits charge to unsustainable levels. Austin Energy could not hope to recover all their lost electricity sales through fixed monthly customer charges and reduced solar benefits. Or a parade of base rate increases. I’ll say it again – Old business models won’t work forever. Utilities will need to adapt, and learn to “grow backwards.” Centralized electric utilities will gradually shrink.

The Net Energy Metering “Reform Movement”

Climate change mitigation is being threatened nationwide by so-called “net metering reforms.” Reducing solar benefits and adding new fees for solar customers is the opposite of reform. Sadly, utilities now find themselves ill-prepared to absorb the cost impact of the historic climate and energy bill, passed by Congress. Solar United Neighbors recently published this dire warning about fixed monthly customer charges, and new fees for solar customers:

”Utilities are attempting to restructure electricity bills so that more of each bill is made up of these charges. These fees directly affect how much of your bill you can reduce through solar generation, efficiency upgrades, and conservation. They discourage efficiency and limit homeowners’ ability to save money by producing a portion of their own power through solar. Some utilities propose to more than double the fixed charges for ratepayers.”

This looms over the surfers at California beaches and throughout that state. Check out this alarming message from a California pro-solar organization:

“Previously, the California Public Utilities Commission released its proposed decision on December 13th, 2021. The proposal contains provisions that (among other things) reduce compensation for solar energy sent to the grid, add new monthly fees to the electricity bills of future solar owners, and reduce the amount of time people on Net Energy Metering (NEM) 1.0 and NEM 2.0 can receive bill credits under those programs.”

Wow! This is California, where climate change has unleashed the worst wildfires, chronic severe drought and a devastating summer heatwave. Fortunately, their Public Utilities Commission has since voted to put that proposal on ice for one year. The plan would slash solar benefits by as much as 80%. Perceived “unfair subsidies” are one of the driving forces behind it. Understandably, climate change activists are all riled up. And, hey, think about this. It’s not totally about the subsidies. Utilities will sell more carbon-generated electricity, and make more money when they reduce solar benefits. (Duh)!

It’s not just residential solar customers who could see their benefits cut here. In Austin Energy’s final rate case filing brief, I discovered this startling sentence:

“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.” (See Appendix E. Sec. 2.1.1., Pg. 408).

Holy cow!

A Stalled Proposal and a Hopeful Parting Note

The rate case explains why one of my proposals hit a brick wall. I wanted Austin to lead the nation in a push to put solar panels on big-box retail stores. The idea came from a wonderful study as reported by CNN. It outlines the huge carbon reduction gains that we would see if all big-box retailers and shopping malls nationwide built solar rooftops. City Council Member, Ann Kitchen told me in two meetings this spring that she would seek a response from Austin Energy about my proposal. I’ve heard nothing about it since. So, now the challenge is to stop Austin Energy and other utilities from reducing solar benefits.

Let’s support the environmentalists’ call for a comprehensive study of best practices, to craft a new Value of Solar policy. It needs to put climate change front and center. Let’s try to steer Austin Energy in a positive direction, away from the nostalgic 50’s and 60’s, and into a climate-conscious future. My next blog piece may inspire some hope. New utility business models are being developed. I will explore them with two fascinating published reports.

Check out these related blog pieces:

1. Electric Utilities and Power Grids Are At a Critical Crossroads
2. Can Austin Energy Learn to Grow Backwards?
3. KXAN’s Outstanding Web Article On Austin Energy’s Solar Shortcomings

Musical Accompaniment for This Blog Piece:

1. ”Surfin’ U.S.A.” – The Beach Boys
2. ”California Dreaming” – The Mamas and the Papas. (Original album photo, before the toilet was covered up. The grammatically incorrect apostrophes were not removed)
3. “California Sun” – The Rivieras
4. “San Francisco (Be Sure To Wear Flowers In Your Hair)” – Scott McKenzie
5. ”All Shook Up” – Elvis Presley
6. ”Big Bad John” – Jimmy Dean, 1961 #1 hit, original uncensored version, with “hell” at the end
7. ”Big Bad John” – Jimmy Dean, clean version

San Antonio Could Double Their Windfall Utility Revenues – Let’s Do That Here!

By Bill Oakey, September 12, 2022

San Antonio City Council member, Mario Bravo, has set an example that we should follow here in Austin. He is proposing to use part of their $75 windfall from high summer electric bills for a variety of wonderful programs that will protect the utility and help consumers. His plan is much better than giving ratepayers a one-time rebate of $22 to $29. Here’s the kicker in Council Member Bravo’s proposal. It would allow San Antonio to apply for Federal matching funds, to DOUBLE the amount of the revenues!

Let’s Double Down On This Opportunity!

This is a game-changer that changes my recommendation for Austin. I have asked each of the pro-consumer participants in Austin Energy’s rate case to make a list of the revenue options they have identified in their filing briefs. Let’s use those revenues to wipe out the rate increase. Then, let’s follow Council Member Bravo’s example. But first, we need Austin Energy to release their fiscal year to date Budgeted vs. Actual revenues. Bravo for Mr. Bravo!

The Texas Longhorns almost beat Alabama on Saturday. Let’s give them and the rest of the City a big win in the rate case. It is 4th down, and we’re just inches from the goal line. We can score a full consumer victory. And then get the extra dollars to sweeten the deal! Here is the San Antonio news story:

Let’s invest CPS revenue in real solutions to high energy bills

 
 
 

Due to an extremely hot summer, CPS Energy’s contributing revenue came in at $75 million over the city’s 2022 budget, and the city proposed returning some of that money to customers as a discount on their October bills. While a bill rebate after a summer of high bills sounds good at first, taking a closer look at where the money goes, we see how it could cost residents a chance at real solutions and savings.

In the city’s proposed rebate plan, the average residential bill would get a $29 rebate, and many would get even less. Half of my District 1 residents would get less than $22. Commercial customers would account for nearly half of the $42.5 million returned to customers, and residents and businesses outside of San Antonio would also get a significant amount.

This is a bad deal for San Antonio residents, and it’s why I’m proposing we invest some of this extra revenue to help protect residents from future high energy bills and prepare for more extreme weather.

As a city-owned utility, CPS Energy is owned by San Antonio residents. As owners, we now get a return on your investment every year with up to 14% of all CPS Energy revenue going into your city’s annual budget to help pay for your sidewalks, libraries, police and firefighters, parks, and more.  

What about CPS Energy customers who aren’t San Antonio residents and therefore aren’t owners of CPS Energy? Under the current proposal, $12 million would go to residents and businesses outside of San Antonio.  

There is also a huge corporate welfare component to this rebate proposal. Commercial customers will receive almost $20 million, with one corporation alone receiving close to $1 million.

I didn’t run for office so that I could transfer wealth from our city to corporations and residents outside of San Antonio. Fortunately, some council members have developed an alternative proposal which includes the following:

  1. Create safe community spaces for extreme weather events and emergencies: Install backup power in public buildings for when the electric grid goes down. These buildings will serve as public cooling centers during heat waves and heating centers during freezing weather, as well as distribution sites for emergency supplies.
  2. Protect low-income residents against future high energy bills: Weatherize and install energy efficiency upgrades to help reduce energy waste. The Department of Energy has found that weatherizing a home saves $372 per year on average. This will also reduce the peak electricity load on our utility, which then saves all CPS Energy customers on future bills.
  3. Reduce urban heat and flooding: Plant trees in the hottest parts of our city to provide shade and cool our city down by up to 9° F on hot days.  Also, plant trees that can absorb up to 4,000 gallons of water per year near drainage basins where we have flooding problems. 
  4. Add funds to a program to help prevent our most vulnerable CPS Energy customers from having their electricity cut off. This applies to low-income customers who are senior citizens, disabled, have small children in their homes, or require critical-care equipment. 

The timing for this proposal is just right to achieve more for every dollar we invest. The federal government just passed the $700 billion Inflation Reduction Act, which includes $1.5 billion for tree planting and $1.9 billion to reduce urban heat island hot spots. Passing our proposal allows us to demonstrate that San Antonio is serious about doing this work and allows us to apply matching funds for the federal grants, allowing us to double or triple our investments.

The only reason we have this additional city revenue is because this summer heat wave has been brutal. We can expect to see summers like this and possibly even hotter going forward. Corporate welfare and rebates to people outside of San Antonio are a bad idea and do nothing to help address our future extreme weather and electricity grid challenges. Let’s invest these revenues, which could be doubled or tripled through federal grants, to protect our community against future extreme weather and associated high energy bills.

Update:

San Antonio has decided to allocate $42.5 million of the surplus for customer rebates. The rebates will be optional, as explained in this article.

KXAN’s Outstanding Web Article On Austin Energy’s Solar Shortcomings

By Bill Oakey, September 11, 2022

You can’t get through a day in Austin now without seeing or hearing commercials about solar, home generators, etc. The boom is on. But Austin Energy’s rate proposal lacks the vision to carry us into the much-needed transition away from traditional carbon-emitting, centralized power plants.

Kudos to KXAN’s Avery Travis, who is spearheading a series of in-depth reports on a complicated issue. It’s time for a pause – to form a consensus among concerned citizens, local experts, the City Council and the good folks at Austin Energy who keep the lights on. No City recognizes the value of innovation better than Austin, Texas. We must make it happen!

Read the Austin solar article below. Then do yourself a favor, and bring a group of friends to the early show at the Elephant Room on Tuesdays, at 315 Congress Ave. You are about to meet Sarah Sharp…

INVESTIGATIONS

How will Austin Energy’s proposed rate changes impact solar customers? Consumer advocates concerned

Posted:

AUSTIN (KXAN) — Local musician Sarah Sharp sings every week at a downtown jazz club, but she still remembers her first gigs in Austin: working at Fresh Plus Grocery in Hyde Park and Z’Tejas on West Sixth Street more than 20 years ago.

Local musician Sarah Sharp said she thinks investing in solar panels will stabilize her utility costs, "if all goes as planned."
Local musician Sarah Sharp said she thinks investing in solar panels will stabilize her utility costs, “if all goes as planned.” (KXAN Photo/Chris Nelson)

“My half of the rent was $415 a month,” she laughed. “I’ve tried to have a really positive attitude and roll with it and accept that change is just the fact of life, but it’s getting a little bit out of hand. It’s getting harder and harder to keep a positive attitude on the rapid growth and the cost and the things that we are losing — like our music venues and our beloved restaurants.”

Over the last few years, certain changes have made her feel like she is in “survival mode,” in more ways than one. She said described being worried about climate change, losing faith in the state’s power grid after last year’s winter storm and feeling alarmed about what seems like an ever-climbing utility bill. In search of some stability, she began researching the costs and benefits of solar panels for her home. She decided to install some and believes, if everything goes as planned, she will be able to “lock-in” her electric costs — even if others’ rates go up.

“It’s kind of primal,” she said. “To be able to have a predictable, steady payment and wanting to do what I can for the earth… and wanting to have some help in the situations where we can’t count on our own grid.”

But now, some changes Austin Energy has proposed for the solar program have Sharp worried about whether her panels will give her the consistency she was looking for.

Looking forward, or backward

On a sunny day, people with solar panels on their roofs are generating energy not just for their own houses or businesses, but enough for some to go back into the electric system that powers other homes and businesses. During darker hours, though, these homes may use some power from Austin Energy.

So, solar customers’ bills will reflect charges for any power usage and credit back for the energy they generated. That amount is calculated by the utility’s Value of Solar rate.

As a part of its ongoing retail rate review process, Austin Energy wants to adjust the way the Value of Solar gets calculated.

The utility announced earlier this year it would be seeking to increase the base rate for electric service from $10 to $25 per month for customers, as well as trying to restructure the tiered system they use to charge customers based on how much energy they conserve. Austin Energy said these changes — along with the Value of Solar proposal — are necessary to cover the increasing cost of providing service.

Tim Harvey, Customer Renewable Solutions Manager for the utility, said the three specific changes proposed for the solar calculation will make it “more accurate.”

First, Austin Energy wants to change the way it calculates what are called “avoided costs.” Basically, this is the price the utility would have paid to produce the same power itself or purchase it from another source, but instead, it is received by solar customers’ power generation.

Currently, Austin Energy’s avoided cost methodology is forward-looking, using forecasts and projections to “try to grab those values from the future and bring them into present day,” Harvey said. The proposal aims to look at market data from the previous year to calculate the avoided costs. Harvey said the proposed method would rely on measurable data instead of predictions.

“Both ways, both methodologies, have value and can be correct,” he said. “It could be more accurate to look in the backwards, the rearview mirror on it, so to speak, because we can measure what happened in the past. We can’t really do that for the future.

Energy consultant Karl Rábago, however, compares the new methodology to someone clocking a runner’s average time for a 26-mile marathon by only looking at one mile.

Rábago served as Austin Energy’s Vice President for Distributed Energy Services back in 2006 and helped create the original Value of Solar tariff. He believes the forward-looking approach they designed treats customers more like a long-term investment for the utility, rather than a wholesale energy generator.

“What’s the price based on the fact that they’re installing a 25-year resource? Today’s Austin Energy is treating them like a commodity, like they’re just in a spot market — where if they happen to make electricity this year, they might not make electricity next year. They’re giving them only the short-term price,” he said.

To put it another way, he said, “If Austin Energy wanted to build or contract for a solar farm, they wouldn’t pay for it one year at a time, they would put it on the books as a long-term asset with 25 or more years of usable service.”

The Sierra Club, Public Citizen and Solar United Neighbors filed testimony claiming that the new formula ignores other resources provided by local solar customers, including avoided air pollution, benefits to the local economy and avoided distribution capacity costs. According to the document, they call the changes “unjust, unreasonable, and discriminatory” towards solar customers.

Austin Energy disagrees. Harvey said they ran an analysis using the proposed methodology and came out with a higher Value of Solar, at $.0991/kWh — compared to the analysis they ran using the other, future-looking methodology which came out to $.095/kWh. For context, the current value is $.097/kWh.

He said they would assess any market changes on a yearly basis, but wouldn’t necessarily change the rate every year.

“If it goes down, then we can talk about doing a rolling average and what that looks like,” he said.

Still, the possibility of variability concerns several consumer advocates, including Bill Oakey. He has worked on several utility rate cases over the years and has been following affordability issues in Austin since the 1980s. He sat on the Electric Utility Commission for several years and now writes a blog called Austin Affordability.com.

While he didn’t file testimony in this case, he believes the changes will make it more difficult for solar customers to plan ahead, which could discourage people from investing and committing to solar.

“The problem is that the rate is going to be variable, and so there is no guarantee of what it’s going to be,” Oakey told KXAN.

He said he’s concerned about anything that might hinder interest and accessibility for solar projects.

“The bottom line is that we need to be able to get from point A to point B, and just think about what point B might be 10 years from now, 15 years from now. We might have 15 to 20% of the population, both business and residential, using solar panels and storage batteries. If that were to happen, Austin Energy would need to learn to grow backwards,” Oakey explained.

He is critical of the reason behind Austin Energy’s larger proposed rate increase, urging the utility to eye a business plan that anticipates selling less power — as more customers conserve and trend toward energy-efficient patterns.

Harvey, however, insists the utility is not “defunding solar.”

“We’re not trying to cost-signal people to stop adopting solar. You know, quite the opposite. It’s the values going up, we’re intending to just pass through the benefits to the customers who are producing energy. But there can and probably will come a day where solar-hosting capacity is an issue that we’ll have to address. We’ll look to other utilities to find out what best practices are because there are other utilities that are further along the adoption curve than we are today.

Other changes

According to the utility, another key piece of its proposal is to shift the recovery method for solar energy transactions with customers.

Currently, the Value of Solar expenses are recovered through the Power Supply Adjustment (PSA) charge. It has proposed recovering something called Societal Benefits through a different charge — the Customer Benefit Charge (CBC). The move would increase the CBC while decreasing the PSA, and Harvey said this “increases transparency” for customers.

“So, we’re breaking out the environmental values, we’re calling them societal benefits now,” he said. “By breaking those out, we’re able to show the public, you know how we come to that calculation.”

Harvey acknowledged some concerns about this shuffle, for example, the fact that certain commercial customers do not pay the CBC charge.

Testimony filed by Sierra Club, Public Citizen and Solar United Neighbors states, “the utility effectively creates an uneconomic subsidy in which customer [solar] generators are required to subsidize other non-solar customers (especially large users of electricity) and the utility. Whenever customer-generators are forced to subsidize other customers, they will be less likely to invest in solar generation, frustrating policy and economic goals for the community.”

Rábago voiced a different concern about this switch. He argues that by recovering the Societal Benefits through the CBC, the utility could “starve” other energy efficiency programs that are funded by the CBC.

“They are making those non-utility resources fight for themselves for an ever-decreasing slice of pie,” he said.

He is particularly alarmed by the third change proposed by Austin Energy, which involves adding a new, third value to the Value of Solar calculation, called the Policy Driven Incentive (PDI). This incentive would ultimately be provided to solar customers “for a fixed term and at a fixed amount” based on the customers’ power production and other factors — but would adjust annually — according to a written statement by utility officials.

Solar panels on an Austin rooftop (KXAN Photo/ Chris Nelson)
Solar panels on an Austin rooftop (KXAN Photo/ Chris Nelson)

Harvey explained it as “a proposal” to meet with the community and interested parties “to help inform our incentive solutions, so that we can meet policy-driven goals.

Those goals include having 200 megawatts of solar from Austin Energy customers — about twice as much as exists today, according to Harvey.

“We want to get there in the most effective and easy way possible for customers, and also the most cost-efficient way,” he said.

Rábago, however, argues that the need for an incentive is an indicator that the Value of Solar itself may not be compensating customers fairly. He told KXAN that was his intention, when he helped craft the original tariff.

“That having a price set on value would create the holy grail: a self-sustaining market. A market where installers could figure out what things were worth; they could make the sales proposition to customers; the customers would feel they were getting a reasonable payback — that their investment in the community, as well as of course themselves, was going to be respected for a long time.”

Sharp said, whatever the methodology, she hopes the utility chooses to prioritize customers’ goals.

“We’re just trying to do our part. Quit making it so darn hard. It’s ridiculous,” she said.

What’s next

On Friday, an Independent Heading Examiner released its recommendations for the rate review.

These recommendations will be sent to the Electric Utility Commission and, eventually, City Council for review before further votes this fall.

Musical Accompaniment By Sarah Sharp:

1. “Your Girlfriend Hates Me”
2. “You Were Always On My Mind”
3. “Morning”
4. “Songwriters Across Texas Podcast”

Hearing Examiner Recommends Compromise Rate Increase

By Bill Oakey – September 9, 2022

The announcement should come as no surprise. Austin Energy’s windfall revenues from the historic summer heatwave are considered “post test year data” in the parlance of traditional utility ratemaking procedures. But that doesn’t stop the City Council from adopting my proposal to scrap the rate increase. They should stuff some of the mountains of rate case filing documents into the recycle bin. But, as mentioned in this blog, there is plenty of material in those papers to guide the Council toward permanent, progressive and meaningful reforms.

Here is a summary statement by the IHE, Impartial Hearing Examiner. (See Page 7).

Summary

”The IHE recommends approval of a substantial portion of AE’s revenue requirement, cost allocation methods, and VoS. Besides rate design, these are the basic elements that facilitate AE’s duty to remain financially stable. AE presented well-reasoned arguments based on ratemaking principles, City and Financial policies, and its status as a non-profit MOU. Where the IHE departs from AE’s Base Rate Package is rate design. Although certain participants challenge whether AE is correct on its cost concerns, AE is focused on assigning cost recovery to those customers who create the costs and moving from declining energy sales to better recover demand costs.”

“The IHE agrees with certain participants, particularly the ICA, who express concern over potential rate shock. AE’s proposal to increase the customer charge from $10 to $25 may not result in rate shock for certain AE customers. However, the IHE is concerned that, for those customers who are vulnerable to rate shock and yet ineligible for CAP (as it is currently designed), AE’s proposed increases may exacerbate a known affordability problem in Austin. As a result, the IHE recommends that AE’s proposed rate design and targeted customer assistance programs like CAP be revisited by AE and the participants.”

What’s the Bottom Line?

In my view, the IHE did a very thorough analysis. Wading through it is cumbersome, however, because his conclusions for each piece of the rate package are scattered throughout the document. There is no convenient breakdown listed in a single place.  The best part is the recommendation that Austin Energy’s controversial rate design should be revisited. But most of his conclusions ultimately just rubber-stamped Austin Energy’s. Their rate recommendations are hampered by antiquated methodologies, an outdated business model, and the urgent need to combat climate change.

Even without those concerns, Austin Energy’s own documents defeat the logic of a rate increase. A revealing 2020 memo that they sent to the City Council, combined with a set of their own charts paint a clear picture – There is no compelling trend that points to declining revenues.

Stay tuned, as the long, tedious but invigorating process winds down to a full consumer victory!