After more than a year of review and extensive public feedback, Austin Energy (AE) today outlined its proposal for a 12.5% rate increase – its first increase in base electric rates in 17 years. The redesign of rates is needed to provide sufficient revenues, to achieve greater rate equity between customer classes and to better support strategic goals for energy efficiency and on-site energy resources such as rooftop solar.
Rate increase impacts
Currently rates for residential and the smallest businesses are about 25% below the cost to serve those groups. Under the rate proposal, residential customers would see a $10-$20 a month increase on average for electric usage of 1,500 kWh or less. More than 80% of residential customers average 1,500 kWh a month or less. This translates into an overall 20% increase for residential customers.
Commercial and industrial customers will be consolidated into eight customer classes. This is consistent with industry best practices. Small businesses would be transitioned to a demand charge over a three-year period. The charge is currently paid by medium and larger business and is based on the peak demand of the business each month. The proposed rate design represents, on average, a 3% to 20% increase for commercial. The range reflects the fact that about one-third of businesses are already paying very close to the cost to serve them – while two-thirds are paying less than the cost to serve them.
Key changes to residential electric bill
Increase the monthly Customer Charge from $6 to $12 to pay more of the $19.70 fixed cost to serve each customer for billing, meters, call center and other account management.
Establish a monthly $10 Electric Delivery Charge to pay more of the $14.42 fixed cost to serve each customer for the construction, maintenance and operation of the electric system. This new fixed line item charge reduces the charge per kWh of electricity used.
Increase the current 2-tier inclining rate structure to a 5-tier structure. Customers who use less power pay the lowest rates. Those using higher levels pay higher rates to cover the additional generation and infrastructure sizing needed to serve the higher demand. A 5-tier structure encourages energy efficiency and conservation. For example, a customer who averages 1,200 kWh per month at 12 cents per kWh, can lower their rate to 9 cents/kWh by dropping their usage 200 kWh per month through conservation and by making energy-efficiency improvements.
Increase funding to assist low-income customers from $3 million to $7 million. Use $1 million of new funding for free energy efficiency improvements targeted to low-income customers with the highest usage. Collect the $7 million through $1 per month charge for residential and 65 cents per 1,000 kWh charge for commercial customers.
Austin Energy also seeks to present more cost information on the electric bill. This will be achieved both through line items that have appeared in the past – as well as the recovery of various community benefit expenditures through new line item charges. The new items are not new fees. They will simply be collected as line items rather than included in the Energy Charge, which is the base electric rate:
Energy Charge. Charge per kWh of electricity used. It recovers generation costs and costs not recovered through line-item charges.
Fuel Charge. Dollar-for-dollar recovery of fuel costs for AE power plants as well as the net cost of power sales and purchases through ERCOT transactions, if purchases are greater than sales.
Regulatory Charge. Dollar-for-dollar recovery of Austin Energy’s required share of fees for our use of statewide transmission, new state transmission construction costs and support of Electric Reliability Council of Texas (ERCOT) operations.
Customer Assistance Program. To fund assistance for disadvantaged residential customers.
Service Area Street Lighting. To fund maintenance and electricity for street lighting in all communities served by Austin Energy.
Energy Efficiency. To fund energy efficiency, Green Building, solar and electric transportation programs, rebates and incentives.
