Council urged to change “demand charges”

Austin Energy is scheduled to present to City Council today a process for conducting a new cost-of-service study.

Among the many things that Council will be asked to consider in reviewing Austin Energy rates is whether to lower or eliminate what are called “demand charges” for certain small businesses. Such charges are used to recover the cost of transmission and distribution of electricity to non-residential customers.

Back in 2012, when the previous Council adopted the current rate ordinance, Austin Energy began charging commercial customers who were using at least 10 kwh a month a demand charge that had previously only been levied on customers using more than 20 kwh per month. That was quite a shock to many of those customers. Making matters worse was the fact that about 400 businesses had been underbilled and had large extra charges tacked on to their current bills.

Longtime Electric Utility Commissioner Shudde Fath called on Council again this week to lower or eliminate the demand charges paid by business customers who use between 10 and 20 kwh per month.

Fath argued in a letter to the mayor and Council that 7,733 business customers who use between 10 and 20 kwh are being unfairly penalized. “As many, if not most, small businesses occupy rented space, they are mostly limited in their ability to make energy efficiency improvements unless for replacing whatever inefficient motors they use in business,” Fath wrote.

Mark Dreyfus, Austin Energy vice president of regulatory affairs & corporate communications, told the Electric Utility Commission during a briefing in March that eliminating the demand charges for those customers would reward less-efficient customers and penalize the more-efficient business customers. He said it would be a bad idea to change the demand charges now.

Dreyfus told the Austin Monitor this week, “These are policies adopted by the City Council in 2012 following a lengthy cost-of-service and rate setting process. In the next year, Council will have the opportunity to consider these and other policies following a fair and transparent cost-of-service and rate setting process that will invite public participation from all segments of AE’s customers.”