06 Feb Electric Rates – Act 2

By Paul Robbins:

This Thursday at 6 PM at City Hall Chambers, the second hearing on Austin's electric rate increase is taking place.  People concerned with fair rates and funding for environmental programs are urged to attend.  City Hall is downtown at the corner of Lavaca and Cesar Chavez.  The garage entrance for free parking (on Council-meeting days) is on the left side of Lavaca.  It is likely that food will be available for those attending (organizers are working on the food option now).

In the face of overwhelming criticism from environmentalists, low-income advocates, and churches, Austin Energy (Austin's municipal utility) has come up with a "compromise" proposal.  Some aspects of this proposal are arguably worse than the original.

1. New Out-of-City Rate – One of the worst parts of the new proposal is the creation of a separate electric rate for people living outside of Austin. Austin's profit from the electric utility goes to the City's General Fund which funds city services such as street building and maintenance, police, fire, and emergency medical services.  Many people living outside the City feel that they should not pay for these services because they do not live here and do not reap the benefits.  Austin Energy feels that by appeasing this sentiment, the out-of-city ratepayers will not petition for deregulation of Austin's municipal utility in the upcoming session of the Legislature.  There are numerous problems with the logic here.

• There is no large municipal utility in Texas that has a separate rate structure for out-of-city ratepayers. 

• The ability to profit from a utility has ample legal precedent in Texas.

• No private utility (gas, cable, phone, investor-owned electric utility) goes without a profit.  In Austin, the profit goes to maintain streets. In a private utility, the profit often goes to maintain pension funds and buy sports cars.

• Many out-of-city ratepayers commute to Austin for work, education, or cultural activities, and use Austin's city services while they are here.

• Perhaps most importantly, the proposal will cause "wealth flight", creating another reason that will drive people to live outside of Austin and promote more urban sprawl.

• Perhaps most ironically, the proposal will not stop deregulation proponents. These people are free-market zealots, and they will not stop their attacks on Austin and other Texas cities based on this appeasement policy.



2. Too Much Money – The new proposal still asks for the same amount of money, though the increase is divided into two phases.  About 2/3 of the increase will occur in 2012. The last third will be in 2014.  This amounts to a 20% overall increase on residential ratepayers, a 10% to 22% increase for small businesses, and new rates for churches that will increase rates for some of them by 50-80%.

The rate increase might be lowered by tremendous amounts by reducing unnecessary funding, reserves, and decommissioning old power plants. Several knowledgeable people have suggested the rate increase is inflated by as much as 50 to 80%.



3. Not Enough Funding for Clean Energy – Supporters for Renewable Energy and Energy Efficiency were out in force at the first hearing, asking for Austin to follow San Antonio's lead and fund more clean energy programs. 

Austin Energy's proposed new rate structure would line-item clean energy funding on the bill, making it vulnerable to criticism from fiscal conservatives who do not care about the environment. Contrast this to another cost for the utility, executive salaries. 

It costs every residential ratepayer at least $1.27 a month to fund the 131 Austin Energy employees that make over $100,000 a year.  Curiously, you don't see the utility proposing to highlight executive salaries on a monthly bill statement.  Why should environmental programs be any different?



4. Attacks on Low Income Ratepayers and Conservation – The altered rate proposal still exacts huge rate increases on low-volume consumers, most of whom are in low income brackets. The customer fee will still be a high $22 whether or not you use a single kilowatt hour.  The new proposal gives 200 kwh "free" with minimum fee.  However, exclusive of the electricity, it means an effective increase from a $6 a month customer charge to $18 a month. This is $144 a year extra for nothing.

Looking at it another way, a household using 300 kwh a month (roughly 15% of customers) will pay 14¢ per kwh.  A McMansion using 4,000 kwh (roughly 4% of customers) a month will pay 13¢ a kwh. In order to encourage conservation, the rates need to be steeply tiered so that the more you use, the more you pay.



5. Class War – Austin Energy refuses to run a rate design model that treats residential ratepayers well.  This model has been run by others, however, and has shown that more of the cost of any proposed rate increase should be borne by large commercial customers. 

The rate process has lacked balance because there is no independent Consumer Advocate that can speak on behalf of residential and small business customers.  This is another example of the lack of fairness in this rate making process.


The Bottom Line – Since there is no official Consumer Advocate to speak on our behalf, consumer activists, environmental activists, and churches have become the de facto Consumer Advocates in opposition to this alarming rate proposal.  Many of us are proposing a small (2%) interim rate increase while the problems described here are reassessed.

We need your help!  Please come to the hearing and support fair rates and clean energy. 

Since we are being ignored by a tone-deaf utility, we need to speak loudly to the Council.

Again, democracy is not a spectator's sport.  Come and be heard.