Tag Archives: Austin Electric Rate Case

Hey City Council, Please Answer One Big Question

By Bill Oakey – November 22, 2022

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Musical Accompaniment for This Blog Piece

  1. “The Fox” – Elton John
  2. “Foxy Lady” – Jimi Hendrix
  3. “Fox On the Run” – Tom T. Hall
  4. “Such An Easy Question” – Elvis Presley
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A Simple Austin Energy Rate Case Timeline And Proposal

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

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

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

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

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

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

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

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

Here is my proposal:

This Proposal Is Simple, Fair and Financially Prudent

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

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

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

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

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

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

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

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

Musical Accompaniment

”Auld Lang Syne In Austin”

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

By Bill Oakey – November 15, 2022

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

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

Why Does Austin Energy Want a Base Rate Increase?

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

My Proposal Offers a Fair and Financially Prudent Solution

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

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

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

Austin Energy’s Big Credibility Problem

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

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

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

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

Review Austin Energy’s Financial Position After Several Months

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

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

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

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

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!

Why Haven’t We Been Told Whether Austin Energy Has A Windfall Revenue Surplus?

By Bill Oakey – September 8, 2022

On August 14th, this blog asked the City to evaluate whether the historic summer heatwave will raise enough of a budget surplus to nullify the need for an Austin Energy rate increase. That was over 3 weeks ago. There has been no response from City Hall, or from the Utility. I first raised this question in a July 22nd KXAN News broadcast. Since then, we have learned several new factors that make that case stronger than ever.

City Officials Should Answer These Important Questions?

1. What is the revenue status now in Austin Energy’s current budget?

As pointed out in my August 14th blog post, San Antonio’s City-owned utility announced a $75 million budget surplus. Their City Council has held work sessions on how best to utilize those funds. Just yesterday, San Antonio City Manager, Erik Walsh, discussed the options in an on-air interview with KSAT-TV. A rebate to customers is being considered.

2. Where, and at what time will the Hearings Examiner deliver his recommendation on the rate increase?

His report is due tomorrow. But where and when is that supposed to take place? Austin Energy published a procedural timeline, but it does not address that question. When I asked one of the prominent participants in the rate case, I was told that they have not been given that information. This is a perplexing and frustrating lack of transparency!

3. What impact will a budget revenue surplus have on the rate 

Let’s hope that the City Council will ask Austin Energy immediately for a current estimate of their fiscal year to date “budget vs. actual” revenue status. They should have been able to conduct the same type of revenue and spending option evaluation that San Antonio has been doing for the past month. If not, somebody should tell us why not.

We already know that accounting errors identified by the Independent Consumer Advocate have been accepted by Austin Energy. This caused them to lower their rate case revenue requirement from $48.2 million to $35.7 million. (See pp. 1-2). At this point, the current budget status should be an essential part of reviewing the Hearing Examiner’s recommendation.

4. Does Austin Energy have the opportunity to improve its bond ratings, based on new revenue estimates, along with the diligent and excellent recommendations by all of the rate case participants? The picture is much better now than it was at the beginning of the summer. The best outcome would avoid the need for ongoing rate increases.

This blog has raised a whole host of other questions. And, there are more to come. Stay tuned. I remain optimistic that the Austin community can come together, and ultimately end up in a better place. If we get onto the right path, we can be a leader in the country’s quest to obtain affordable clean energy, while setting achievable goals to combat climate change.

A Fun Thing to Think About

What about the other Central Texas utilities? A friend asked me about Pedernales Electric Coop. It got me to wondering. Won’t all of these utilities have summer windfall revenues? Bluebonnet and what-all. They don’t hesitate to raise rates when financial woes strike them. But now they are awash with boatloads of unanticipated surpluses. Is it executive bonus time at champagne galas? Or, do their customers deserve a billing credit or a rate decrease? This question should apply from Buda, Kyle and Dripping Springs to Pflugerville, Round Rock, Cedar Park and Georgetown. Maybe even San Marcos and Bastrop.

I don’t have time to look into it. But, maybe somebody should.

Will The Real Cost Of Service Please Stand Up

By Bill Oakey – September 7, 2022

A Trip Back to the Mid-1980’s

In the summer of1985, I took a seat behind a nameplate on the City’s Electric Utility Commission. This was my first meeting as its newest member. City Council Member, George Humphrey had appointed me. This followed a fun adventure that concluded on a happy note the year before. It began in 1983, when I read a newspaper headline that the City had approved a whopping 20% electric rate increase.

During my lunch hour that day, I left the accounting office where I worked, and walked over to City Hall. For the next three weeks or so, I stayed up late in bed, scrutinizing the City Budget by lamplight. How could such a huge rate increase even be possible? One lucky night, I hit the jackpot. It was all right there, in a single “magic sentence.” It said that the 20% rate increase “is based, in part, on the successful passage of the lignite bonds in the November bond election.”

Well, the City Budget was adopted in late September, to take effect on October 1st. Thanks to Max Nofziger’s “Austinites for Clean Energy” activist campaign, the lignite coal bonds failed, by a margin of 61% to 39% (See Prop. 2). I did some other Budget calculations, and came up with a proposal to cut the rate increase by half, down to 10%. The Electric Utility Commission accepted it, and made the recommendation to the City Council. The 10% reduction became official at the City Council meeting on April 12, 1984. (See Page 3, Electric Rate Ordinance).

“Cost of Service” Emerges As a Rate Case Lynchpin

At my first meeting on the Electric Utility Commission, I was introduced to a whole new world of confusing jargon. We met at the old Electric Building Auditorium at 301 West Avenue. At each meeting, we received agenda packets stuffed with papers and documents. It wasn’t long before we found ourselves embroiled in a major rate case. That was my initiation into the mystical and mysterious realm of “cost of service.” A more formal name for it is “cost allocation.”

Don’t get scared off! Don’t quit reading! I will make this simple and painless, even fun…

People Just Love to Play With Words

I quickly learned that phrases used by City Staff should not be taken at face value. One should always ask questions and do research. “Cost of service” is based upon a specific model, and there are many different models. The rate cases in the mid-1980’s featured intense battles between consumer advocates and industrial ratepayers. Cost of service always took center stage..

Here’s the bottom line on the different models. The industrial ratepayers favored an antiquated model, that some say dates back to the jazz age – when you could buy an Edition phonograph, or one made by the Victor Talking Machine Company. That model lumps all the power plants together. Then it assigns the cost allocation to each class of customers.

That model is simplistic, flawed and unfair. Industrial power comes primarily from expensive power generation sources that are used 24/7. Residential power comes primarily from cheaper generators, and used during peak hours of the day. Consumer advocates prefer a modern, sophisticated model, that allocates cost based on numerous factors, including types of power generation, time of year, hours of the day, etc.

Even Gary Hart Didn’t Change Models

We often debated those 1980’s rate cases in a packed City Council chambers. One of those lively public hearings happened during the 1987 primaries for the next year’s Presidential election. Gary Hart was the Democratic front runner, to take on George H.W. Bush. But Hart was in a heap of trouble over a mistress, a model caught nestled in his arms, on a boat named “Monkey Business.”

I argued to the City Council that that the Electric Utility should not switch to the industrial ratepayers’ favorite cost of service model. To attempt a bit of humor, I said “Even Gary Hart didn’t change models.” He at least appeared to remain loyal to his one favorite mistress, Donna Rice.

Fast-Forward to 2022 – It’s Business As Usual

Here we are folks, over 35 years later, and we’re still stuck with business as usual. The Electric Utility Department has rebranded as Austin Energy. The funky, stacked Independent Condos Tower now stands where the Electric Building Auditorium used to be. The iconic “Katz’s Never Kloses” deli, down the street at 6th and Rio Grande, got gentrified into oblivion several years ago. But, the very same electric cost of service models are once again being tossed about in this year’s rate case.

    

The Graphics That Should Steal the Show

With online research, it’s exhilarating to turn over a rock and discover a gold nugget. These images come courtesy of the Regulatory Assistance Project, as presented to the Rate Design Subcommittee of the National Association of Regulatory Utility Commissioners in 2020 (Section 4, Pages 22-23). These were identified as Best Practices. Click each image to enlarge it:

One of the “old ways,” shown in both graphics, is Austin Energy’s current method, the 12CP Model. In their final rate filing brief, the TIEC, Texas Industrial Energy Consumers, endorsed their same, worn-out 1987 model. Here is a statement from their brief, “TIEC’s witness, Jeffry Pollock, recommends the Average & Excess Demand (AED)-4CP allocation method, which has been consistently used for Texas utilities under PUCT jurisdiction for decades (their italics).” (See Page 3 from their brief). But, Texas has also had horrifying child foster care conditions for many years. Both are unacceptable.

The City’s Independent Consumer Advocate has this to say about cost of service, “The BIP methodology represents a more reasonable approach to allocating production demand costs than the 12CP or the A&E-4CP methods. The BIP is a method which more reasonably balances the interests of AE’s customer base by recognizing both reliability and economics. Furthermore, BIP recognizes the prevalence of meeting ERCOT loads…” (See Page 26).

In 2011, Austin Energy held a rate review, which included a Residential Rate Advisor. The Advisor’s report contains extensive justification for adopting the BIP cost of service model. Here is the statement in the Executive Summary: (See Page ES-1):

Cost Allocation Methodology

My Suggestion – Base-Load Intermediate Peaking – (BIP) method be applied, as it is consistent with the Electric Reliability Council of Texas (ERCOT) deregulated market design and use of facilities.

Austin Energy Recommendation – Average and Excess Demand (AED) method applied, as it is commonly, but not uniformly, used in regulated markets.

Impact – The AED method approach leads to 20 percent higher rates for residential and small business customers, and 30 percent lower rates for large businesses.

Wow…!!

A Positive Final Note

Here is an update on an aging model that I mentioned. Donna Rice is doing quite well, and she’s making a positive contribution to society. For many years, she has been working to promote a safer Internet for children. She heads an organization called Enough Is Enough.

Musical Accompaniment for This Blog Piece:

”People Just Love To Play With Words” – Men at Work, From the album, Business As Usual, which was Number One for 15 weeks in 1982 and 1983.

Austin Energy Projected $19 Million Revenue Surplus For 2021

By Bill Oakey, August 29, 2022

On August 27, 2020 Austin Energy sent a memo to the City Council, announcing the results of a routine rate review. This statement appears in the memo, “The cost‐of‐service study indicates that Austin Energy’s current base rates produce an approximately $19 million revenue surplus.” (See Page 2, 3rd paragraph). The surplus could come in fiscal year 2021. But future uncertainties led them to question the surplus. Among those were the impact of the pandemic and the planned 2022 exit from the coal-burning Fayette Power Plant. However, Austin Energy has been unable to reach an agreement with LCRA to relinquish our share of that plant.

Here is the strange irony of the projected $19 million 2021 surplus. Austin Energy presented its current rate review to the City Council this past April. At that time, the utility suddenly decided that their financial picture was much worse. Indeed, there were revenue shortfalls in 2020 and 2021, because of the pandemic and the winter storm. But Austin Energy’s charts in the April presentation describe an alleged trend that does not yet exist.

The chart below shows costs outpacing revenues in 2020 and 2021. They attribute that to falling kWh sales of electricity. And they depict this as a proven trend that will hurt their revenues going forward. That reasoning is clearly faulty. Their own projections indicate the opposite trend, as shown in the same chart. You can see that from 2014 to 2019, there were revenue surpluses. Had it not been for the pandemic and the other anomalies, their projected surpluses would likely have continued into 2021.

We have every reason to believe that Austin Energy is seeing a historic revenue windfall this summer, because of the heatwave. San Antonio has already publicized their $75 million surplus. You can add to that the accounting errors discovered by the City’s Independent Consumer Advocate. And a boatload of other solid recommendations, produced from the hard work and sweat of the other rate case participants. (Thank you Paul Robbins, Lanetta Cooper, Cyrus Reed, Clarence Johnson and many other good folks)!

This blog will soon show even more examples of cost-saving opportunities and needed reforms at Austin Energy, for the City Council to consider. When the Hearings Examiner announces his recommendation early next month, I will repeat a better suggestion to the City Council. Study all of the good ideas from the rate case. Then, gather up all of the papers that recommended a rate increase, and gleefully toss them into the recycle bin.