Tag Archives: Austin Electric Rate Increase

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

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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.

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Electric Utilities and Power Grids Are At a Critical Crossroads

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By Bill Oakey, August 25, 2022

On August 16th, President Biden signed the landmark climate and energy bill. It provides $60 billion for clean energy manufacturing, $9 billion for home energy efficiency rebates, and a decade of tax credits for homeowners who participate. But there is one huge problem. Some U.S. utilities are already losing money because of “too much energy efficiency” for their customers. New Mexico’s utility is fighting a brand new solar program, that was approved by their State Legislature.

Three of California’s utilities have routinely raised rates because of declining sales. (See P. 9, Table 1.8). Thankfully, the state may delay a controversial plan to cut back solar credits by up to 80%, and impose a monthly fee on solar customers. This is framed as an income inequality issue. But it’s misguided, because of their devastating, climate-induced wildfires and extreme drought.

Austin Energy is planning both rate increases and solar credit cutbacks to cover declining revenues. They say that they are not selling enough electricity. And yet, reducing the usage of electricity generated from fossil fuels is critically necessary, in order to save the planet. Just this week, we learned some bad news about the Fayette Coal plant, which Austin Energy co-owns with another utility. It has made #10 on the list of the worst-polluting power plants in the country.

But, the energy generation landscape is changing rapidly. Elon Musk builds a line of Powerwall Batteries, and he hopes to become a tough competitor in the retail electricity market. He has also partnered with a builder in Austin to build homes with solar panels and batteries included.

All utilities should have planned for the upward curve of 5%, 10%, 20%, etc. of customers living in highly efficient offices and dwellings. And they should have planned for the growth of customers expecting to sell excess energy back to the utilities. (Although at some future time, utilities may need less of that unused power).

I recently made a proposal to the Austin City Council, to push for big-box retailers to install rooftop solar panels. This followed a revealing CNN investigative report, that outlines the enormous carbon emission reductions that such a plan would yield. Because of Austin Energy’s “not selling enough electricity” problems, my proposal landed with a dull thud. And yet, a Washington Post special series details the horrifying devastation that awaits the Colorado River reservoirs, that supply Arizona, Nevada and California with water.

The Texas Power Grid Is Fraught With Problems

Here in Texas, we live with the fear that our independent electric power grid will fail, throwing us into life-threatening blackouts. If that were to happen, the special interests who control the politically-run ERCOT grid management agency would reap millions of dollars in profits. The system is set up to reward oil and gas producers during weather emergencies. Utilities that purchase fuel to run some of their power plants are forced to pay exorbitant prices in the ERCOT-controlled market. The alleged rationale for this is to incentivize the utilities to build more power plants, to meet growing demand. And yet, State and Federal  reviews, following 2011 Texas blackouts didn’t lead to either fixing the grid or construction of enough power plants. Texans remain at risk, even as our state continues to grow and prosper.

During the 2021 Texas winter storm, ERCOT used a $9,000 per megawatt hour price cap, that was 250-300 times higher than the normal market rate. It generated $50 billion in electricity sales during the single week of the storm. That’s more than the entire annual budgets of Austin, San Antonio, Dallas and Houston, combined!

The special interests who made huge financial gains multiplied their profits through lucrative Wall Street investments. The then-chairman of the Texas Public Utility Commission was caught on tape, promising to protect those profits. Meanwhile, San Antonio’s municipal utility went heavily into debt. Their customers will be paying back over $400 million through a special fee, for the next 25 years. Several electricity retailers were driven into bankruptcy. So, in order to help “fix the grid,” our legislators responded. They lowered the maximum allowable rate for ERCOT sales from $9,000 per megawatt hour to $5.000 – still highly outrageous.

Summer Heatwaves Pose an Even Bigger Risk

In May of last year, the New York Times ran a story with this headline – “A New, Deadly Risk for Cities in Summer: Power Failures During Heat Waves.”  Consider this stunning paragraph from the article:

“Power failures have increased by more than 60 percent since 2015, even as climate change has made heat waves worse, according to the new research published in the journal Environmental Science & Technology. Using computer models to study three large U.S. cities, the authors estimated that a combined blackout and heat wave would expose at least two-thirds of residents in those cities to heat exhaustion or heat stroke.”

A Major 2016 Report On U.S. Power Grids Deserves Attention

“The Grid: The Fraying Wires Between Americans and Our Energy Future,” by Gretchen Bakke, Ph.D. is highly recommended reading. It’s an eye-opening examination of how the system works, and the various challenges that we face. Consider this paragraph from Page 3 of the introduction. Add 6 years to the 25 year ages quoted below, since 2016 was six years ago:

”More than 70 percent of the grid’s transmission lines and transformers are twenty-five years old; add nine years to that and you have the average age of an American power plant. According to the industry expert Peter Asmus, we rely on twice as many power plants as we actually need because of “the massive inefficiencies built into this system.” As a result, significant power outages are climbing year by year, from 15 in 2001 to 78 in 2007 to 307 in 2011.”

One fascinating takeaway from the report is that our power grids were not designed to efficiently transport modern clean energy, such as wind and solar. Rapidly emerging battery storage holds the promise of filling that gap. Check out this webpage from the investment banking firm, RBC Capital Markets. One of the biggest barriers is surmounting the thorny required regulatory processes.

Don’t Celebrate the New Federal Energy Benefits Too Soon

President Biden’s success on the climate and energy bill brings Texans some hope for ratepayer relief. However, Austin Energy may spoil the party, as we try to celebrate the newly-promised benefits. They have filed for a base rate increase. One local newspaper quoted them as stating, “Our rate design is not as efficient as the customers.” (See 6th paragraph). The new rate design would discourage conservation for both small and big users of electricity. And the utility told the Fitch bond rating service that “additional rate increases will be necessary” to improve cash flows. (“See Analytical Conclusion,” 2nd paragraph).

The current rate proposal also calls for weakening the methodology used to calculate the Value of Solar buyback credits for residential solar customers. Public Citizen has published their objections. (See third paragraph from the bottom). And, buried deep within the Appendices of Austin Energy’s rate filing brief, comes the threat of cutbacks to the Value of Solar credits for businesses. (See Appendix E. Sec. 2.1.1., Pg. 408). It says, “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.” This disturbing signal runs counter to the City’s adopted climate change goals.

After a Summer From Hell, Bid the Rate Increase a Fond Farewell!

A good solution for Austin can be found in my recent blog piece. It makes a reasonable case that the City Council should cancel the rate increase, because Austin Energy will gain windfall summer revenues, their highest in history, thanks to the heatwave. San Antonio CPS is considering using their $75 million In surplus revenues to issue billing credits to customers.

When Two Worlds Collide – What Will Happen?

News reports about power grid problems, heatwaves and utility rate increases have led to one predictable result. American entrepreneurship has stepped up to the plate. This summer, we have seen a wave of sales promotions for solar panels and batteries. Then…BOOM…Congress passed a historic energy bill that promises $1,800 in annual energy savings for eligible families. This news article offers a clear breakdown of the climate bill’s benefits.

But, hanging over all of this like a dark shroud, is that looming question – How will the utilities cope with the big revenue losses that will accompany the promises of customer financial relief and a greener planet? With advancing technology, eventually hundreds, and then thousands of customers might be able to generate more electricity than they need. Or at least, a significant  percentage of what they need. At that point, the size and role of centralized utilities will change forever. Maybe utilities should be allowed to enter some non-traditional markets, not directly related to utilities.

The Future Is Coming Faster Than You Think

I will close with a parting thought for you regular folks, reading this in your living rooms. Picture yourself relaxing in an easy chair, with a cold beer on a blazing hot summer afternoon. You have solar panels on your roof, and a backup storage battery. You flip on the TV and see a special announcement. Your city is going into rolling blackouts within 24 hours.

Well, what if you could reach for your phone? Suppose somebody invented an app, just for this occasion? The app lets you select which rooms in your home to give priority for backup power, when the blackouts come. Are you thinking that this is somebody’s visionary dream for 10 years into the future?

Well, it’s not. There are several options available for you to do it right now. Not everyone will be able to afford these options right away. But check out this sample ad, and this one, along with another one for a phone app. Then, go back to that cold beer that I distracted you from. And don’t forget to pay your electric bill!

Blog Writer’s Note: I am a retired accountant and longtime Austin affordability advocate. As a former member of the City’s Electric Utility Commission, I have been involved with electric rate cases for the past 39 years.

Musical Accompaniment for This Blog Piece:

1. “Blackout” – Aviva
2. “Heat Wave” – Martha & The Vandellas
3. “Windfall” – Rick Nelson
4. “The Battery Song” – Mark Cummings
5. “I Just Want To Celebrate” – Rare Earth
6. “I Don’t Want To Spoil The Party” – The Beatles
7. “Storms Never Last” – Waylon Jennings
8. “Wichita Lineman” – Glen Campbell
9. “When Two Worlds Collide” – Jim Reeves
10. “The Night The Lights Went Out In Georgia” – Vicki Lawrence

Austin Energy’s Charts – A Sobering Reality Comes Home

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By Bill Oakey – August 16, 2022

It’s funny how things can come full circle. Sometimes you embark on a journey that winds in confusing directions. Then you find yourself back at the beginning. Something deadpan simple slaps you in the face. And you go, “Oh my gosh, it was right there all along! How did I miss it?”

Flashback to April 5th, Earlier This Year

Austin Energy presented its Base Rate Review to the Utility Oversight Committee. This is the Mayor and the entire City Council. Tap or click each picture to enlarge it. Then hit the Back arrow in your browser, to return to this page.

Justification for a Base Rate Increase

On the first chart, you will notice that revenues exceeded costs in every year, except 2020 and 2021. The chart is intended to show a trend – that Austin Energy is losing money in the current timeframe.

But, put down your mask if you are holding one. Remember what started in 2020 – the pandemic. Businesses were closed that year. People stayed home. All those offices, stores, restaurants, theaters and hotels used a lot less electricity. Then came 2021. The pandemic lingered, although people started going out later that year. But don’t forget the big winter storm. Industrial customers were ordered to power down before the storm. They were not allowed to come fully back up, until days after the storm. Electricity was cut off for most of the City during the storm. Then, we had a milder than normal summer. So, there is no extreme trend that extends into this year and next year. No reasonable assumption that steep future revenue declines will persist.

The Chart That Nails the Big Challenge

It amplifies the message from their Vice President of Finance, “Our rate design is not as efficient as our customers.” Think what that means. It’s a clear signal that their business model has not kept pace with their own conservation goals. A whole division of Austin Energy assists homeowners and businesses with weatherization and transition to solar panels. Within 10 or 15 years, solar panels and storage batteries will proliferate exponentially. How does the utility plan to meet that inevitable challenge? Especially now that the President has signed the historic climate change and energy bill?

Many other U.S. utilities are following the same two-pronged approach – raise base rates, and reduce solar buyback credits to customers. But that will only backfire. It’s hilarious to watch a cat try to chase its tail. Chasing revenue declines with rate increases is just as futile, but without the humor. Customers will adopt solar faster than ever, and the next rate increase will guarantee the same reaction. Here is the chart:

One more note on this chart before moving on. New customers do add to infrastructure costs. But consumer advocates recommend that Austin Energy adopt the more comprehensive capital recovery fees for developers, that Austin Water uses. The City should streamline and reduce developer permitting fees, to offset this change.

Higher Rates for Small Users, and Lower Rates for the Biggest Users

This final chart shows the unfairness and climate change unworthiness of Austin Energy’s rate proposal. Raising rates for struggling apartment renters, especially during record inflation and sky-high summer bills seems unfair. Summers will probably trend hotter in the future. Giving favorable rates to folks in large, expensive homes makes little sense. These rate design changes would discourage conservation at both ends of the usage spectrum.

What this chart proves is that our current rate design has worked exactly as intended. It has driven down the usage of electricity, and pushed Austin closer to carbon-free electric generation. It’s time for the City Council to work with Austin Energy and other experts to seek solutions. We need a new business model that is financially viable, and maintains our admirable progress on climate change goals. Here is the chart:

Read This Poem, and Use the Email Links to Contact the City Council

I’m not accusing them of evil duplicity
It’s true they’re not selling as much electricity
But somewhere deep down into their soul
They should have realized, hey that’s our goal

Climate change affects every part of the nation
And we’re trying to fight it with energy conservation
Take pity on us when we try to conserve
A rate increase is not what we deserve!

This happened a while back with Austin Water
We’re stuck like chickens on their way to slaughter
But this time we’re all going to unite
And stand up for what we know is right!

Thank goodness we own our municipal utility
Or this could end with nothing but futility
Our elected leaders down at City Hall
Have the power to fix this, for once and for all

We’re been through a summer that’s hotter than hell
So they can bid the rate increase a fond farewell
Just like I suggested back in late July
Those windfall revenues will help them get by

One More Good Laugh – Cat Chasing Its Tail

Use These One-Click Links to Email Every City Council Member:

Ask them to do 3 things – Keep our current, successful rate design. Improve our Value of Solar buyback program, instead of weakening it. Accept my recommendation to use the windfall revenues from the historic summer heatwave to cancel the rate increase.

Mayor Steve Adler steve.adler@austintexas.gov
1. District 1 – Natasha Harper-Madison natasha.madison@austintexas.gov
2. District 2 – Vanessa Fuentes vanessa.fuentes@austintexas.gov
3. District 3 – Sabino “Pio” Renteria sabino.renteria@austintexas.gov
4, District 4 – Jose “Chito” Vela chito.vela@astintexas.gov
5. District 5 – Ann Kitchen ann.kitchen@austintexas.gov
6. District 6 – Mackenzie Kelly mackenzie.kelly@austintexas.gov
7. District 7 – Leslie Pool leslie.pool@austintexas.gov
8. District 8 – Paige Ellis paige.ellis@austintexas.gov
9. District 9 – Kathie Tovo kathie.tovo@austintexas.gov
10. District 10 – Mayor Pro Tem Alison Alter alison.alter@austintexas.gov

San Antonio Vindicates Plan to Halt Austin Energy’s Rate Increase

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By Bill Oakey, August 14, 2022

On July 22nd on the KXAN-TV News, I made a public call for the City to ditch Austin Energy’s rate increase. At that time, my idea faced long odds of succeeding. But as a retired accountant and former member of Austin’s citizen Electric Utility Commission, I vowed to stay in the battle until we can raise the flag of victory.

News From San Antonio Sparks an Exciting Ray of Hope!

Late last week, financial officials in San Antonio announced a huge, $75 million budget surplus, thanks to windfall revenues from soaring summer electric bills. Just as I figured, Austin now has a wonderful opportunity to quell the anxieties of our ratepayers. In San Antonio, one option being considered is to offer one-time refunds, in the form of credits to customers’ October bills. Here in Austin, we should be able to call off or postpone the entire rate increase.

The City’s Independent Consumer Advocate Personally Agrees

While clarifying this as a personal opinion, rather than an official statement from his team’s rate filing brief, Clarence Johnson gave me permission to share this quote from an email to me: “I agree with your position that the rate increase could be postponed until post test year actual data becomes available.  My reasoning is simply this: ICA’s review indicated that the proposed rate increase should have been $6 M, which is much smaller than the (Austin Energy’s) original request or rebuttal request.”

It’s All About the Rate Design, With Winners and Losers

Above all else, we must oppose Austin Energy’s radical rate design change. What I did not know until recently is that the out-of-city ratepayers would walk away with the big grand prize. The vast majority of those customers live in large to very large, expensive homes. The current rate design keeps those customers paying into the highest rate tiers on the five-tier scale. This provides a conservation incentive. On average, outside city customers use 86% more electricity than inside city customers. (See pg. 43). Under Austin Energy’s new plan, those people would see generous discounts on their bills. (See pp. 42-44). All while struggling Austin apartment renters and low to moderate income folks would bear the brunt of the rate increase. So much for affordability and narrowing the economic divide!

Past history shows us another, somewhat political motive for gifting the non-city ratepayers with lower bills. Even though they enjoy Austin’s amenities, these folks don’t pay City taxes. And whenever they object to our electric rates, they appeal them to the Texas Public Utility Commission, or even to the Legislature. Austin Energy’s new rate design might just keep them quiet and happy. What a sad situation!

Austin Energy Versus “Too Much Customer Efficiency”

The new rate plan would create a seismic shift in Austin Energy’s pricing structure. Raising the monthly residential customer charge from $10.00 to $25.00 would reset annual base revenues unrelated to electricity sales to over $140 million. ($25.00 X 467,291 customers X 12 months). This shift would be a short-sighted, self-defeating approach – to address sales declines that are due to solar panels and other efficiency options that homeowners and businesses are adopting at a rapidly accelerating pace.

The utility’s future plans call for enlarging that shift, in addition to reducing solar buyback credits. (See “Looming Penalties for Solar Users” here). That’s a pretty bleak picture. Especially in light of the big climate and energy bill that the President will sign this week. And AISD’s upcoming bond election, that would provide solar rooftops and other energy efficiency upgrades for the schools.

My previous blog piece and radio interview address the climate change / electric utility dilemma that also threatens other cities and states across the country.

Let’s Call the Whole Thing Off

Here are four major factors that support postponing or canceling Austin’s rate increase:

1. The Independent Consumer Advocate (ICA) in the rate case reviewed Austin Energy’s books, and found two accounting errors, totaling $12.5 million. Austin Energy accepted those reductions, bringing the revenue deficiency down, from $48.2 million to $35.7 million. (See pp. 1-2).

2. The ICA cites several instances where Austin Energy used future cost assumptions. Some of those do not meet the requirement for being known and measurable. And using future costs, combined with past test year revenues violates the matching rule in standard rate-making procedures. After adjusting out those costs and the accounting errors, the  ICA concluded that the revenue deficiency should be only $6.5 million. (See pp. 5-8).

3. The City should raise more utility revenue by increasing the Contributions in Aid of Construction (CIAC) fees, charged to developers for connecting new customers. It should be revised to the same standards used for Austin Water’s capital recovery fees. (See pg. 9).

4. The City Council should follow San Antonio’s example. A comparison of budgeted to actual base rate revenues from October 2021 through this summer will reveal a large surplus. That, in combination with the other factors shown above, should send the rate increase to the scrap heap. (Oops…to the recycle bin)!

See my full list of 10 recommendations for the Austin City Council at the bottom of my previous blog piece.

I would encourage the City to bring in outside experts and consult with all the participants in the rate case. Austin Energy needs a fresh new start, with full transparency and lots of public engagement. We, the people are its owners. Our elected City Council is the board of directors. Let’s remake this valuable asset into a utility that always honors equity and fairness. And one that is innovative and forward-looking, with respect to the changing customer-efficiency landscape.

Heartfelt thanks to my good friends and the Independent Consumer Advocate, who traveled the long and winding road to their final filing briefs in the rate case!

Musical Accompaniment for This Blog Piece:

1. “Let’s Call the Whole Thing Off” – Harry Connick Jr., from “When Harry Met Sally”
2. “Sad Situation” – Tracy Nelson & Mother Earth
3. “San Antonio Rose” – Asleep at the Wheel
4. “Home In San Antone” – Willie Nelson
5. “Across The Alley From The Alamo” – Bob Wills
6. “I’ll Be Your San Antone Rose” – Dottsy
7. “The Long And Winding Road” – The Beatles

Austin Energy’s Rate Increase Tied To Not Selling Enough Electricity

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By Bill Oakey – July 28, 2022

That headline should jolt anyone out of bed, if they are not awake already. Yes, you read it right! This is a deja vu from a few years ago. We were urged to conserve water. Then Austin Water told us they were raising its rates, because they weren’t selling enough water.

The shocking news from Austin Energy seems outrageous on its face. But the philosophy behind it is chilling and disturbing. Here’s the explanation from Austin Energy’s vice president of finance: “Customers have become more efficient in their energy usage, but the current rate design is not as efficient as the customers, causing the revenue to be unable to keep up with costs. This means the old rate structure was built in a way that assumed the top energy users would to an extent subsidize the lower energy users. However, over the last 20 years, customers have become more efficient in using energy. This has eliminated a large portion of the higher-end energy users, causing Austin Energy to lose revenue.” 

Wow! Let’s think about that statement. He is literally suggesting that wealthy people who have moved into Austin neighborhoods, into big fancy homes, have made those homes more energy efficient. Therefore, the outdated rate design does not allow these folks to pay more and “subsidize” the low and middle-income folks who pay less for electricity.

Austin Energy’s shameless solution is to stick the smaller users with the highest portion of the rate increase. It would guarantee that by raising the fixed monthly customer charge by $15.00. On top of that, they want to decrease the number of rate tiers, and flatten their impact. This will lower the costs for the biggest users.

Here’s Why That Philosophy Falls Apart

1. It would exacerbate the income inequality that underlies Austin’s affordability crisis.

2. Instead of solving Austin Energy’s revenue problem, it would make it worse. Residents and small business owners at all income levels would make energy efficiency a high priority. They would use this link and this link on Austin Energy’s own website!  Yes, Austin Energy is offering us rebates and incentives to conserve. Then, with the other hand, they want higher base rates every month because they’re not selling enough electricity!

3. And get this, folks…The future outlook is even worse. On June 28, the Fitch bond rating service downgraded Austin Energy’s revenue bonds to AA-. Here is a statement from the first page of their report. “The planned rate increase is projected to contribute an additional $48 million in base rate revenues. AE expects additional base rate increases will be necessary to improve the utility’s operating cash flows and leverage profile on a sustained basis.”

Yup, that’s Austin Energy’s brilliant management plan. Watch the customer base shrink, as more homes and businesses install solar panels, energy storage batteries, etc. Have they not been adjusting their operational plans to coincide with the evolving market? It looks like they’re desperately trying to keep the ship afloat, by piling rate increases onto the masses of people who can’t afford to join the solar club.

I Have a Much Better Solution

1. Use the list of single-click links in my previous blog posting to email every City Council member and the Mayor. Ask them to cancel the proposed rate increase. The record daily highs and record high overnight lows this summer are producing historically high electric bills. This will easily shore up Austin Energy’s revenues.

2. The City Council owes it to the citizens to hold a series of public engagement sessions to evaluate the best path forward for Austin Energy. As for the ongoing formal rate hearing process – Nip it, Snip it, STRIP it! A new City Council will be sworn in next January. Why suffer through the agony of the other kind of swearing, that would accompany a raucous and contentious electric rate battle this fall? Citizens and small businesses are already being crushed by high summer bills.

3. Ausin Energy is the most important asset that our city owns. It provides us with electricity. But it is also a vital revenue source for the City’s general fund. Their financial dilemma needs to be carefully evaluated by our new Mayor and City Council. And most importantly, you and I and our friends and neighbors deserve a seat at the table!

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

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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!