Tag Archives: Austin Electric Bills

Two More Electric Bill Shocks Are Coming!

By Bill Oakey, July 21, 2022

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

Episode 2 – The Power Supply Adjustment Charge

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

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

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

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

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

Episode 3 – A Ludicrous and Outlandish Rate Increase Proposal

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

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

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

A Blast From the Past

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

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

By Bill Oakey – July 18, 2022

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

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

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

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

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

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

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

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

1. Houston provides a good example.

2. A good overview of ERCOT policies and pricing.

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

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

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

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

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

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

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

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

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

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

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

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

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