Austin Energy projects $1 residential bill increase

According to current forecasts, the average residential Austin Energy customer will see his or her monthly bill increase this fall by 1 percent, or about $1. However, that number may change once the utility figures in cost data for May through July, when residents are likely to consume a lot of power.

Austin Energy staff gave an updated budget presentation to the Electric Utility Commission on Tuesday, when it met for the first time since switching over to the new 11-member system.

“This will change as we go forward with our proposed budget and get better data,” said Austin Energy Budget Director David Kutach. “We’re hoping it will go down.”

Kutach noted that Austin Energy staff plans to have its final recommendations ready before City Council holds its Aug. 20 public hearing on utility rates. The new rates, which Council must approve with the city budget, will go into effect at the start of the next fiscal year on Oct. 1.

There are two major changes that Austin Energy staff projects for average residential customer bills.

First is a decrease of 8 percent, or $3.15, in the power supply adjustment. Austin Energy uses that charge to recover its fuel and power supply costs. Mark Dombroski, the utility’s chief financial officer, said the decrease is due to a drop in the cost of natural gas.

Second is an increase in the regulatory charge of 51.3 percent, or $4.26. Austin Energy uses that charge to recover the costs, fees and penalties it pays to the state and the Electric Reliability Council of Texas, which manages about 90 percent of the state grid.

These adjustments equal out to a $1.11 increase per bill for a residential customer using 1,000 kilowatt hours of electricity per month. Kutach pointed out that although the average residential customer actually uses about 918 kilowatt hours per month, the utility uses the larger, round number for easier comparison with other utilities.

The surge in the regulatory charge has been due, in part, to the state’s expansion of transmission lines to West Texas. The project – known as the Competitive Renewable Energy Zone build-out – is intended to give electric utility customers in other parts of the state access to West Texas renewable energy sources, such as wind farms.

During last year’s budget deliberations, Council opted to forgo a considerable chunk of Austin Energy’s revenue in order to pay the regulatory charge while aiming to keep this year’s rate increase below the city’s affordability goals. The move ultimately meant that the utility scaled back plans to replenish its relatively low reserve funds for a year. Now it is resuming those plans.

“If the revenue – the cash that we collect – does not meet the expenses that year, it comes out of the funding for our reserves,” explained Dombroski. “The following year, when we readjust those rates, we’ll have an over or an under, and we’ll increase those rates or decrease those rates as needed.”

Council set affordability goals for Austin Energy in 2011 mandating that its rates remain among the bottom 50 percent of Texas utilities and limiting annual rate increases to 2 percent.

Austin Energy depleted its reserves over an 18-year period during which it did not increase its rates, leading up to the 2012 increase. According to a fact sheet the utility released in May, it needs to invest $400 million into its reserve funds, which help it maintain financial stability for its customers.

Austin Energy staff forecasts that the utility will spend about $1.42 billion in the upcoming fiscal year and take in about $1.46 billion, resulting in about $44.1 million in excess funds. The spending includes a $45 million transfer to the utility’s reserve funds.

Kutach noted that the utility is generally in compliance with all of its financial policies, with the exception of its reserve funds policy. “We’re trying to build those back up, but we haven’t made it there just yet,” he said.

Dombroski also commented on the issue. “We’re slowly building those cash reserves up, but this will not make our reserves whole at the end of the year,” he said.

City staff will finalize its budget recommendation for the coming fiscal year and present it to Council on July 30.