Tag Archives: Austin City Council

The City Council Has Been Snookered – But It’s Not Too Late To Fix It!

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By Bill Oakey – November 30, 2022

I am not surprised by what happed yesterday with the City Council and Austin Energy. After all, a good sales pitch can be hard to resist. The odds are pretty good that snake oil, if it were cleverly packaged in souvenir bottles with an antique logo, might sell pretty well. Heck, you could probably sell them in a gift shop on Congress Avenue.

But, when it comes to something serious, like our electric bills, we should all pay careful attention to what’s inside the package that we are being sold. Otherwise, we could easily be sold down the river.

So, How Can We Un-Snooker the City Council?

The answer is pretty simple. Just let the numbers do the talking. I like to talk, but I would be willing to sit still without uttering a single word, if we could just get the right set of numbers. So, let me try this, and let’s see how it goes…

Dear Friends On the Austin City Council,

Most of you know me pretty well. I don’t have a reputation for making up things that are not true. I try to ensure that my research produces accurate information. If I make an honest mistake, I will accept responsibility for it, and correct it promptly. You probably know that I have successfully challenged Austin electric rates in the past. I was appointed to the Electric Utility Commission, after getting the City Council to cut a 20% rate increase in half, in April 1984. In between music events and art shows, I have been following electric rate cases for 39 years. So, I know more than just a little bit about them.

Here is my simple challenge for you in the current rate case. Stop listening to me, and all of the other competing voices. Ask for a few sets of numbers, and then let those numbers do the talking. Please do that, and I promise that this whole confusing matter will be put to rest.

These Are the Numbers That You Need to Ask For

For each proposed rate increase scenario, ask Austin Energy to provide residential customer bill examples for the following consumption amounts and timeframes:

1. 860 kWh (the average customer amount) in a typical winter month

2. 1000 kWh in a typical winter month

3. 1500 kWh in a typical winter month

4. 2000 kWh in a typical winter month

5. The same four examples in a typical July

6. The same four examples, using  July, 2022 data

 7. Try to get some estimated bill impacts for typical small business ratepayers. Those folks are still trying to recover from pandemic-related financial losses. They need your compassion, and the best possible diligence that you can provide.

Of course, every individual customer has different conditions in their home that will affect their energy usage. But any examples are better than no examples at all. You folks on the City Council could offer your own electric bills, or the bills of people on your  staffs. The point of this exercise is to demystify the actual impact of whatever rate increase that you consider. Will a triple-dose of rate shock give most of us a $30 monthly bill increase, or will it be significantly higher for a 3 bedroom home, especially in another summer heatwave?

Please ask for those sets of numbers, and take a good, hard look at them. Don’t pass a highly controversial rate increase, without knowing up front how it will impact the community. Thank you for your time and consideration.

On a Lighter Note, Here’s the Lowdown On Snookering

Here’s the official definition by Merriam-Webster. Click to enlarge the images.

The transitive verb describes what has befallen our City Council.

And a lesson can be learned from the noun definition.

Don’t be snookered on your Christmas gift purchase of professional snooker balls. You can get them for less than the full retail price of $452.03.

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Austin Energy’s Triple Rate Shock – Look At The Forest And Not The Trees!

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By Bill Oakey – November 29, 2022

My view of this rate case is simple and straightforward – It’s a matter of many people involved not seeing the forest for the trees! I look at it like this:

1. Austin Energy asked for a base rate increase back in April.

2. They asked to increase the monthly customer charge by 2 1/2 times, to $25.00. No other major utility in the State has done that! Shouldn’t that raise a huge red flag? Why are people saying that we should “compromise” with a $12.00 customer charge? $10.00 is standard throughout the State.

3. Austin Energy wants to upend our conservation-based rate design, that dates back to 1981. Why would we want to do that? Reducing the incentive to conserve would jeopardize the City’s adopted Climate Equity Plan. A “compromise,” to reduce the rate tiers from 5 to 4 might only reduce our conservation incentives by 20% or so. But why cut back on conservation at all?

4. Austin Energy said they need a base rate increase because of declining energy sales. But their own charts, presented to the City Council at the very beginning, don’t back up that claim. The only years where costs exceeded revenues were 2020 and 2021. Well, duh, we had a 100-year pandemic and a highly unusual winter storm. Of course less energy was sold, but only in those two years.

5. Now, here’s the clincher. In 2022, this year, Austin Energy sold more electricity from mid-May through mid-September, than in any other summer season in their entire history. And, they are still insisting that they need a rate increase? What’s up with that?? Well, apparently, they spent that huge summer surplus, without a required budget amendment being approved by the City Council. The public deserves to know the base revenue amount of that surplus, and how those un-budgeted funds were spent.

6. Austin Energy sprang a last-minute surprise on the City Council in late October. We got a double dose of rate shock for fuel and regulatory charges on Halloween at midnight.

7. One final important note – The so-called $15 increase in the “average” customer’s bill for the fuel and regulatory charges is mythical. It is only that low if you use 860 kWh per month. Try going that low in a 3-bedroom house in the sweltering July heat. So, obviously, if the City Council approves a third round of rate shock, be careful with the “average user” cost estimate. It might be as lowball as another $15.00. Well, for starters, even $30.00 more per month is tough to swallow during an affordability crisis. So, just imagine the actual, much higher costs for a 3-bedroom homeowner, in every neighborhood across the City!

This Is Not Rocket Science…

It just requires you to stand back and look at that big forest in front of you. Don’t get bogged down in all of those confusing trees. No other Central Texas electric utility is asking for radical, controversial changes to their rate structure. And they are not asking for a base rate increase. They are getting along just fine, with the historic summer heatwave providing a nice revenue cushion.

What Austin Energy does badly need is a big reality check. Austin’  hard-working residents and small business owners deserve much better transparency and accountability. Because, after all, we are the folks who own Austin Energy!

Musical Accompaniment for This Blog Piece:

1. “A Walk In the Black Forest” – Horst Jankowski
2. “A Walk In the Black Forest” – Rare vocal version by the Modernaires
3. “Tall Tall Trees” – Alan Jackson, Excellent George Jones cover version
4. “Tall Oak Tree” – Dorsey Burnette, Stereo version
5. “I Fell In Love Again Last Night” – The Forester Sisters

Austin Energy Spent Summer Surplus Without City Council Approval

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By Bill Oakey – November 28, 2022

For the past several months, consumer advocates have tried to break through Austin Energy’s transparency barrier, for details on the huge revenue surplus that the utility earned from the historic summer heatwave. The critical question is how much un-budgeted base revenue did they reel in, from mid-May through mid-September? The public still has never been told. And yet, Austin Energy wants the City Council to approve a conservation-busting, highly controversial base rate increase, as soon as this week. We simply can’t let that happen! Our hard-working families and small business owners deserve a better solution.

Where Was the Required Budget Amendment?

Austin City policy requires departments to seek City Council approval, by way of a budget amendment, if they want to significantly raise or lower their annual budget. Austin Energy has routinely complied, as recently as late September. But there is no visible record of any budget amendment request to spend the surplus summer base revenue. We are talking about tens of millions of dollars, from the biggest and longest triple-digit heatwave in Austin history. It is conceivably possible that the utility did request a budget amendment. But, if so, it was done at a low-profile meeting, and it left no online tracks.

A Google search for “Austin Energy”  “budget amendment” shows only these two recent results:

1. Sept. 29, 2022 – Budget amendment to increase monthly electric charges related to fuel and ERCOT expenses. This was the double-dose of rate shock that hit at midnight on Halloween.

2. April 9, 2020 – Budget amendment to authorize $15 million in COVID relief.

Back on July 22nd, I suggested on the 6:00 PM KXAN-TV News, that the summer surplus should wipe out the need for a rate increase. It is time for City officials to finally explain why San Antonio’s public utility gave nearly $50 million back to their ratepayers from their summer surplus, while Austin Energy kept the money and asked for a rate increase. No other Central Texas utility has asked for a rate increase. And the vast majority of large Texas utilities maintain a standard $10 monthly customer charge. Austin citizens, who literally own Austin Energy, deserve much better transparency, and the more prudent financial management, in the face of record inflation and our affordability crisis.

Hey City Council, Please Answer One Big Question

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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

A Simple Austin Energy Rate Case Timeline And Proposal

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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

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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.

American-Statesman Calls For Fuel Adjustment Reform

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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

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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

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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…

       

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

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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