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).
”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ultimately just rubber-stamped Austin Energy’s. Their rate recommendations are hampered by antiquated methodologies, an outdated business model, and the urgent need to combat climate change.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!