Written by: Tahera Rahman
Posted: Oct 10, 2022 / 09:43 PM CDT
Curated by Tony Lazarov

AUSTIN (KXAN) — Austin City Council members are set to vote this week on one of two proposed rate hikes for your Austin Energy bill, which would go into effect next month.

There are two major components of all residential and commercial customers’ bills, explained Austin Energy spokesperson Matt Mitchell, the base rate, and the pass-through rate.

Both are proposed to increase this year, and if city council members approve them, would total about $35 more per month for the average customer, Mitchell said.

Pass-through rate increase

First, up for a council vote is the pass-through rate. City council members postponed the vote, so now it’s set to happen on Thursday.

As it stands now, this would account for $20 of your bill increase, unless council members change this, and would go into effect November 1st.

The pass-through rate is what it costs Austin Energy to buy and supply energy, Mitchell explained.

Those costs include the price of energy, regulatory costs from the Electric Reliability Council of Texas (ERCOT), and transmission costs from the Public Utility Commission (PUC) — all of which are outside Austin Energy’s control.

Mitchell explained that natural gas for electricity production is higher than it has been since 2008– a 106% increase just since last year.

He said these are costs the agency has already paid, and now need to be recovered.

“The important thing to remember is that Austin Energy is a publicly owned utility. There is no other way for Austin Energy to recover the costs, except through the fees that we have for our customers,” he said.

Mitchell said pass-through rates go into effect once a year. He said the council set that timeline so that customers can budget for the whole year.

“At the same time, we’re seeing so much market volatility right now in terms of energy prices and inflationary prices that council members have asked about alternate timelines,” he explained. “So… are these rates something that we should revisit every six months, or every three months?”

That’s one of the options Mitchell said they’ve been discussing with city council members, and will continue during Tuesday’s work session ahead of Thursday’s vote.

“Is there a way to phase in these costs and to… recover those costs, I should say, so that it minimizes the impact to ratepayers, while still making sure that the utility is financially sound? Those are the questions that really need to be answered,” he said.

Base rate increase

Mitchell said city council members are set to vote on the base rate increase on November 17th.

As it stands now, this would account for $15 of your bill increase, unless council members change it, and would go into effect in January.

Mitchell said they review the base rate every several years, as required by law (no longer than five years). This is what it costs to repair poles and wires and pay for employees and trucks. That review process was scheduled for this year and began back in April.

He explained that Austin Energy is increasing this rate because operational needs are increasing with a growing population.

The change would also include a different tier system, going from five to three, and resulting in smaller energy users seeing a bigger percentage increase in bills.

Mitchell explained the current structure is more than 15 years old.

“[It] was predicated on the highest users basically providing for the lowest users,” he said. “But part of the issue is… there are not enough of those high users… to fully supplement those that consume less energy. So, what we’re trying to do is bring all energy all levels, all tiers closer to the actual cost of serving them. And that was the impetus behind that proposal to go from five tiers to three.”

“A phrase from where I’m from… It’s like… squeezing blood from a rock,” said Caroline Messmer, a Midwest transplant in Austin. “A lot of people’s incomes are staying the same, but prices are rising with rent, now potentially energy, with groceries, it’s– where are these people gonna get their money from to pay this?” 

She’s already dealing with a rent increase.

“So, I’ve had to reallocate funds to accommodate that,” Messmer said, explaining she’s cut back on what goes into her retirement fund.

She’s also pitching in with her mom and sister as grocery prices increase.

“We kind of band together and do Costco runs together, so we can split that cost three ways,” she explained.

So, a proposed increase of about $35 per month in her energy bill isn’t what she wants to hear.

“I can’t split my energy bill with them because they don’t live in my household. And I would definitely have to re-budget, my monthly income,” Messmer said.

She said her salary is staying the same as other parts of her budget go up, and she can’t imagine what others on fixed incomes would do.

“I would feel the pressure, and I am just myself in my household. "My sister is a single mother, and she would definitely feel that,” Messmer said.

Businesses have also been vocal about their opposition to both rate hikes. Applied Materials, for example, told KXAN they’d be paying millions of extra dollars for energy.

“You’re looking at operational costs that have to be covered, and you’re looking at pass-through costs that have to be recovered. So, that’s not going away. And what the long-term solution is is what we’re working on right now with council members,” Mitchell said.

Mitchell said usually these two rate changes are nominal; one charge will go up and one will go down. This time, he said not only Austin Energy seeing the highest natural gas prices in 15 years, but the pass-through rate increase is coinciding with the base rate review and increase.

“It’s just one of those sets of perfect storms where there is going to be an impact. The question is how to minimize that impact as much as possible for both our commercial and residential customers,” he said.