Austin Energy customers could see an 8.5% rate hike to a portion of their bills after outages to the utility’s power plants and a lack of production from its wind farms forced officials to buy electricity amid soaring costs during peak energy demand earlier this month.
The public utility’s average residential customer would see a 1.5% increase of $1.33 to their monthly bill, according to the utility’s deputy general manager. The Austin City Council will hold a public hearing 6 p.m. Wednesday on the proposed rates, which would be adopted when the council approves the budget in coming weeks. New rates could begin Nov. 1.
While the average Austin Energy residential customer should see their monthly bill increase by roughly the price of a can of soda, business owners will see larger increases, including Austin’s largest industrial users. Industrial users made up 112 of the utility’s 485,204 customers but accounted for more than 22% of consumption in 2018. They could see electric bills jump millions of dollars.
That could hurt local businesses’ bottom line as operation costs unexpectedly increase.
“Affordability is key,” said Jeremy Martin, Austin Chamber of Commerce senior vice president. “Our members’ businesses need to be able to predict what their costs would be. This is an unfortunate surprise.”
According to an Austin Energy memo released Tuesday, a series of events from Aug. 12 to 16 triggered the call for a rate increase.
In that five-day period, nearly the entirety of Texas’ electric grid saw high temperatures, including Austin, which has seen a string of days with triple-digit highs. Texas set a new record for electricity demand, and, on two days, the Electric Reliability Council of Texas issued emergency alerts as demand – and power prices – spiked, ERCOT spokeswoman Leslie Sopko said.
As Texans cranked up their air conditioners, statewide electricity production from wind farms nearly disappeared, triggering a decrease in power supply.
And with catastrophic timing, Austin Energy also experienced unspecified outages to some of its power plants. Austin Energy sells all of the electricity produced by its plants and contracts on ERCOT’s wholesale market.
Taken together, the outages and the spike in demand forced the utility to buy energy at peak prices, while it was unable to sell its full generating capacity, said Mark Dombroski, the utility’s deputy general manager.
Wind energy averaged about $42 per megawatt-hour (roughly the amount of electricity used by an average home each month) in 2018, according to the investment firm Lazarus. But from Aug. 12 to 16, ERCOT saw real-time market prices reach its cap of $9,000 per megawatt-hour. And in many cases, prices remained above $5,000 and near the $9,000 cap for sustained periods, Dombroski said.
A spokeswoman told the American-Statesman the utility would not provide specific information on how much the utility spent on power or on plant outages because of “competitive matters.”
Bill Peacock, vice president of research at the conservative Texas Public Policy Foundation, told the Statesman that Austin Energy has “put itself in a bad situation” by relying on contracts with wind farms for its electricity.
“They’re so dependent on wind that if the wind doesn’t blow when they need it, they have to go get energy on the real-time market, which is going to be a lot more expensive instead of contracting with, say, a natural gas plant,” Peacock said.
According to a June report, the most recent posted on its website, Austin Energy got roughly 30% of its power from wind, 10% from solar and 59% from nonrenewable sources. A fraction of its power comes from biomass.
Austin Energy reports its average residential electric bill of $90.58 is among the lowest in the state, with the caveat that its customers’ energy use ranks among the lowest.
The utility sets base rates every five years. But each year it adjusts a “power supply adjustment” rate when the city adopts a budget. That rate remains in effect for a year. Last year, the utility lowered that rate amid a $21 million surplus.
The proposed adjusted rate is an 8.5% increase to the current rate and is the highest power supply adjustment rate since 2015.
Austin Energy has proposed mitigating a portion of the rate increase by tapping a surplus of cash collected from regulatory fees.
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