Rising Rates at Austin Energy: What Customers Need to Know

A fracked gas power plant and Austin Energy gas container surrounded by blue sky and clouds.

Austin Energy's Sandhill fracked gas power plant. Photo by Al Braden.

By Cyrus Reed

Last week Austin City Council greenlit a significant increase in electricity bills when it approved higher fuel charges as well as other fees. Beginning on Nov. 1, average bills will soar $15 dollars under the proposal adopted on an 8-3 vote. This hike is in addition to a separate effort by Austin Energy to raise base rates by another $15 per month, a proposal that hasn’t yet been approved and one that Sierra Club is actively campaigning against. 

Our members, supporters, and partner organizations still have time to speak out against the second increase. Several opportunities to voice your opposition to the base rate hike (on top of the increased fuel charges) include:

  • Nov. 14: Meeting of the Electric Utility Commission. Austin Energy Headquarters at Mueller, Shudde Fath Conference Room, 4815 Mueller Blvd. Show up in person and sign up to speak.
  • Nov. 15 and Dec. 1: City Council meetings. Sign up to speak here.

So What Are the Rates That Just Went Up?

While the Customer Benefit Charge – which is related to payment assistance and energy efficiency programs – remained static at roughly $2 dollars on the average bill, the fuel charge – known officially as the Power System Adjustment – will go up by approximately $12.50 a month while ERCOT’s Regulatory Charge is rising by another $2.50 on an average residential bill. 

The initial proposal from Austin Energy would have raised bills by about $20 but City Council worked with the utility to spread the fuel and regulatory costs over three years and bring it down to $15 per month. The increases approved by Council last week are “pass-through” fees that are supposed to simply recover the costs in 2023 that the utility spent in 2022. 

Why Are the Pass-Through Fees So Much Higher Now? 

Four basic reasons:

  1. Fossil fuel prices are unstable and volatile. Gas prices were about 288% higher in August of 2022 compared to August of 2020, which impacts Austin Energy because it has to purchase gas for its gas plant at Sand Hill and because high gas prices cause electricity prices to soar within the electric grid since about 45% of Texas’s overall electricity comes from gas. Even though wind and solar are making up more than 30% of the market, our energy market is still dominated by gas, meaning we are subject to fluctuations caused by a variety of factors from Putin’s invasion of Ukraine to the decision to export gas from LNG facilities in the Gulf. 
  2. The extreme weather event that was Winter Storm Uri impacted several utilities, one of which – Brazos Electric Cooperative – declared bankruptcy and is unable to pay money it owes to ERCOT and other market participants. So Austin Energy never got paid tens of millions of dollars it was expecting. 
  3. While our wind and solar resources made money in 2022 – lowering costs for customers – congestion on the system meant that not as many electrons as we expected actually flowed into the system. This lowered our revenues while congestion costs soared, a portion of which Austin Energy had to pay. While the Legislature finally passed legislation designed to allow for more “economic” transmission to be built, the Public Utility Commission has yet to adopt final rules, and ERCOT is waiting for those final rules – frustrating developers, utilities and consumers alike. 
  4. Finally, regulatory charges also went up, largely because ERCOT made the decision to increase the amount of reliability services it is purchasing after Winter Storm Uri. All utilities like Austin Energy are responsible for paying for these services. While we need a more reliable grid, this is another way that the Winter Storm is leading to higher prices for customers.

Any Good News? 

Well, one positive action taken by City Council – and supported by the Sierra Club – was to require Austin Energy to report on their PSA and regulatory costs and revenues each month and to allow the utility to raise or lower the pass-through costs if less than 5%, but require Council approval for any increase or decrease more than 5%. Sierra Club also advocated that the information should also be shared with the Electric Utility Commission – a move the council adopted. The Electric Utility Commission, which I serve on, is a citizen advisory group that gives advice to the City Council. 

Sierra Club also separately advocated that City Council reopen the Austin Energy Resource Plan to consider ways to increase local non-carbon energy generation and energy reduction to help us lower those costs. The EUC will be considering such a resolution next month!

What’s Next? 

In addition to the $15 dollar increase just approved by City Council, next month it is expected to take on Austin Energy’s separate proposal to substantially increase base rates by a similar amount. Sierra Club has – with several allied organizations – been participating in the rate hearing procedure, arguing that Austin Energy does not need such a large increase, which would raise the fixed monthly cost from $10 per month to $25 per month. We are most concerned about this proposal that would raise rates on all residential customers irregardless of the energy they use.  

On Sept. 17, the EUC considered the rate increase and two draft resolutions, including one that suggested a much lower rate revenue of $15 million, as opposed to the $35 million that Austin Energy is asking for. After nearly two hours of discussion, the EUC decided to allow additional time for parties – including the Sierra Club – to potentially reach a settlement agreement and time for commissioners to consider the resolutions on both rates and a separate resolution on the Value of Solar, which is the payment solar owners earn for generating electricity from onsite solar panels. 

The EUC scheduled an additional meeting on Nov. 14 at 6 p.m at Austin Energy headquarters in Mueller. This will be the final opportunity for the public to speak to the commission, and you can show up in person and sign up to speak.

The general public will be able to voice their views on the rate case to Council both on Nov. 15 and  Dec. 1 at City Council downtown. You can sign up to speak here.

If Council is unable to reach a final decision on Dec. 1, an additional hearing will be held Dec. 8.