This $1B power plant could become Austin’s next costly mistake

 Austin approved a costly new power plant behind closed doors. Before taxpayers are locked into decades of debt, the city owes the public answers.

By Paul Robbins, Guest columnist June 25, 2026, Austin American-Statesman

Peaker units are seen last month at the Austin Energy Sand Hill Energy Center. The City Council last month approved a contract for a new natural gas peaking plant at a location yet to be disclosed • Jay Janner/Austin American-Statesman

Another day older and deeper in debt

— “Sixteen Tons,” Merle Travis

Most Austinites do not participate in city government. Some are too busy with jobs and families. Some have contempt for the way government functions (and sometimes, does not function). And many feel intimidated by a system that often discourages public participation.

But to this observer, who has participated in Austin’s civic affairs for almost 50 years, the May 21 City Council meeting hit a new low.

The council met in executive session — away from public view — to approve one of the most expensive and misguided projects in Austin’s history. Under the cloak of “competitive matters,” they approved a contract for a natural gas peaking plant, which would be turned on to provide power in periods of peak demand.

They did not disclose the amount of money approved, who would receive the undisclosed money, or even tell the public how each council member voted.

Though the official cost is undisclosed, estimates presented in public were about $2,500 per kilowatt, which comes out to $1 billion for 400 megawatts of peak power. That’s a significant jump from prices just a few years ago: Respected benchmark studies placed the cost of such units at less than $1,000 per kilowatt in 2023. Industry analysts say much of the exorbitant increase stems from competition for gas-plant components as power providers rush to meet soaring electricity demand from data centers.

Even after adjusting for inflation, that suggests Austin’s new gas-powered plant will cost about $610 million more than a comparable plant would have cost in 2023. With debt financing and insurance, this is the equivalent of a “data center tax” of more than $1,200 over the plant’s 30-year life for every person in the Austin Energy service territory.

This rivals Austin’s most expensive mistakes: the poorly built hydroelectric dam that broke in 1900; the South Texas Nuclear Plant with its 460% overrun; and building a fourth water treatment plant a generation before it might be needed.

Testimony prior to the secret vote was civil but polarized. Speakers against the gas plant accurately stated the dangers of global warming, urging a vote against the plant so Austin could make a local contribution to greenhouse gas reduction. However, some of them were overly optimistic about the near-term economics of energy storage batteries as an alternative.

Plant proponents, including business leaders, advocated for a balanced energy portfolio of natural gas, renewables and battery storage. However, since some of the pro-business supporters were relying on what they were told by the utility rather than their own analysis, they missed two big points.

First, while it may be logical to have a balanced variety of energy supplies, buying at the peak of the market makes no business sense, and is going to tie Austin to this economic millstone for decades to come.

Second, the inflated cost is so outrageously high that many things that would normally not be economic can now compete. Energy-saving retrofits could be installed at an unprecedented scale. Local solar with expensive batteries could compete with a gas plant almost three times what it should cost. A hamster on a treadmill might produce electricity at a lower price.

A hamster on a treadmill might produce electricity at a lower price.

There are four actions City Council must take to correct the situation.

1. They need to be transparent: Tell the public how each member voted and why.

2. The council needs to pare back the purchase from 400 megawatts to 100 or 200 megawatts.

3. The purchase needs to be made when data centers are not driving up prices.

4. The city should obtain formal competitive bids before any contract is awarded. I have not seen any indication this is happening.

Learning from history, Austin Energy’s experts are not always right. If the wheels come off this power project, the utility experts will take retirement. However, Austin customers will be left with the excessive cost for the next 30 years.

 Paul Robbins is an environmental activist and consumer advocate. He has been editor of the Austin Environmental Directory, a sourcebook of green issues, products, services, and organizations, since 1995.

 

Invisible Gas: Austin considers prodding its gas utility to do more for customers and the planet

By Patrick M. Davis, The Austin Free Press

July 16, 2024

On July 23, Austin’s Audit and Finance Committee is scheduled to vote on a key resolution that aims to lower natural gas rates – especially for low-income customers – and mitigate the fossil fuel’s environmental and health effects.

The resolution would expand the city’s oversight of Texas Gas Service, which provides natural gas to 95 percent of the Austin residents who use gas to power their appliances or homes. Texas Gas Service is pushing back against this bold move by local consumer and environmental watchdogs.

If the Audit and Finance Committee approves the resolution, it then goes to the full city council for consideration, where it could face additional political hurdles, given the industry’s powerful influence in the Texas Capitol.

The move to expand Austin’s oversight of gas utilities gained momentum last month when the city’s Resource Management Commission passed a resolution to include gas utilities as part of its advisory responsibilities. The commission already advises the Austin City Council on its Austin Energy and Austin Water utilities. It makes recommendations promoting renewable energy, progressive rate structures, and low-income weatherization programs. The City of Austin owns both of those utilities. No commission, however, currently advises city council on policies regarding Texas Gas, a private, publicly traded company.

Eco-warrior

According to Paul Robbins, the resolution’s author and the commission’s vice chair, a lack of oversight has allowed Texas Gas to sidestep accountability to its customers and the environment.

“If we’re going to have a gas utility, it needs to be a fair one,” Robbins told Austin Free Press. “We need to have rates that we can live with, we need to help the poor, and we need to have real conservation programs.”

The author and publisher of the Austin Environmental Directory, Robbins needs no introduction at City Hall. Recognizing his relentless work advocating more environmental responsibility, the city named an eco-friendly downtown chilling plant after Robbins in 2007. “Clad in his signature tweed blazer, penny loafers, and magnifying-glass-like spectacles,” the Austin Chronicle reported at the time, “Robbins is the rail-thin gent with longish gray hair who’s often tersely addressing council during citizens’ communication, skewering the city over an energy-related misgiving or calling for far-reaching reforms.”

Texas Gas Service officials said additional oversight is not warranted given the company’s efficient, transparent, and reliable service. The utility’s gas continued to flow during Winter Storms Gerri and Uri, when large swaths of the electric grid went dark, spokesperson Jason Cleary noted in an email to Austin Free Press.

“We are regulated by both the City and the Texas Railroad Commission,” he said, which review “all our rates and customer programs.”

In addition to serving Austin, Texas Gas Service provides natural gas to customers in many communities around the state. In Central Texas, that includes Bastrop, Bee Cave, Buda, Cedar Park, Dripping Springs, Hutto, Kyle, Lakeway, Pflugerville, Rollingwood, Sunset Valley and West Lake Hills.

Gas bills

Robbins wants the city council to solicit bids from other natural gas providers before the city’s Texas Gas franchise agreement expires in 2026. The Resource Management Commission resolution states that inflation-adjusted Texas Gas rates for Austin customers have doubled since 2008. Robbins said the utility should reform how it calculates those rates.

Under “progressive” rate structures at Austin Energy and Austin Water, the more electricity or water that customers use, the more they pay per unit. This structure aims to reward conservation and it benefits low-income customers, who tend to use fewer resources. By contrast, Robbins said Texas Gas uses a “regressive” rate structure that charges customers the same price per unit regardless of how much gas they burn. That does not incentivize conservation, he said.

The Resource Management Commission resolution also calls for better assistance to low-income customers. Texas Gas contributes about $100,000 a year to a “Share the Warmth” assistance program and encourages customers to contribute to it when they pay their gas bill, according to the resolution. This is a fraction of what Austin Energy and Austin Water pour into their assistance programs. Last year their combined assistance budget approached $19 million.

Gas emissions

A Texas Gas Service report says that it issued more than 30,000 rebates last year to customers who installed energy-efficient appliances worth a projected savings of $1,700,000. Texas Gas said the rebates helped customers conserve energy and save money. “Our energy efficiency programs are cost-effective and validated by third-party research,” company spokesperson Jason Cleary wrote.

Robbins said that the gas utility spends too much on these rebates in exchange for negligible energy savings, thereby driving up everyone’s gas rates.

Critics also have concerns with how Texas Gas calculates the emissions savings of its rebate program. The utility said its rebates led to an expected reduction of 45,593 tons of carbon dioxide emissions in 2023. That’s comparable to taking more than 10,000 cars off the road. But Kaiba White, a Climate Policy Specialist for Public Citizen’s Texas Office, said Texas Gas based that figure on “creative math.”

Real emissions cuts happen, she said, when customers replace old, inefficient appliances with more efficient ones. Yet she said that the utility misleadingly claims emissions reductions when customers buy new appliances for a new home or replace an electric clothes dryer with a gas one.

Austin’s Climate Equity Plan aims to eliminate fossil fuels by 2040. The Resource Management Commission resolution does not advocate turning off natural gas spigots now. Yet some Austinites already are abandoning gas for climate and health reasons. “I personally switched from a natural gas stove to an induction electric stove because I had a kid and was especially concerned about my child’s health,” Kaiba White said.

Research shows that natural gas stoves emit toxic gases. These include the carcinogen benzene, as well as nitrogen oxide, which is linked to increased rates of child asthma.

Natural gas also damages the broader environment and climate. While the industry says that burning gas emits far less carbon dioxide than burning coal or petroleum, White said that isn’t the full picture. Many fracked natural gas wells consume and pollute huge amounts of water. Natural gas pipelines, wells, and storage tanks also emit huge amounts of methane, a gas that White described as “a huge driver of the climate crisis.”

“Some of the most egregious climate impact from natural gas is often left invisible in climate-carbon accounting,” she said.

White said that increasing Texas Gas Service oversight would give city council “more sets of eyes on an important franchise that affects city customers.”

Commission resolution aims to slow down sale of district chilling system

 

City Council is scheduled to consider hiring J.P. Morgan Securities LLC to advise on the potential sale of Austin Energy’s district cooling system, but not everyone thinks that is a good idea.

The Resource Management Commission will likely ask Council to postpone evaluation of the sale of the chilling system at its meeting next Tuesday, Commissioner Paul Robbins – the environmentalist for whom the downtown district chilling system is named – told the Austin Monitor on Thursday. The system provides chilled water to help air conditioners efficiently cool large buildings occupied by thousands of people downtown.

The commission’s resolution says the proposal “was not discussed with community stakeholders in advance of its consideration by the City Council” and that “sale of the system could adversely affect peak demand and energy efficiency” in more than 60 large buildings. One reason Austin Energy developed the chiller system was to keep customers and diversify revenue sources at a time when deregulation was threatening to cut the utility’s customer base. If Austin Energy sold the business now, it would lose the revenue from the current chiller customers and not be able to add chiller customers in the future.

Additionally, the resolution points out that a sale could have an adverse impact on rates for chiller customers. Robbins said members of the commission and the general public “were blindsided” by the appearance of the item on Council’s July 18 agenda.

“This is really bad form on the part of the utility to do it in this manner,” he concluded.

At Monday’s meeting, the Electric Utility Commission is scheduled to consider approving a resolution supporting passage of the item to contract with the securities firm. Commissioner Kaiba White said Thursday that she was not satisfied with the amount of information staff had provided about the possible sale of part of the utility.

“I personally think the utility is perhaps putting the cart before the horse,” she said.

In his memo to Council about the potential sale of the system, City Manager T.C. Broadnax wrote, “Building on the past two decades of system growth, a transition to a new owner would maintain existing benefits and provide opportunities for further growth, resulting in even greater environmental and community benefits. In addition, a sale could improve Austin Energy’s ability to provide clean, affordable, reliable energy to customers by paying off debt and freeing up capital dollars for grid enhancements.”

The memo does not mention the fact that the city may be required to go to voters to seek approval for the sale of part of the electric utility. According to the City Charter, Council does not have the power to “sell, convey, or lease all or any substantial part of the facilities of any municipally owned public utility, provided that the Council may lease all or a substantial part of such facilities to any public agency of the state of Texas if the qualified voters of the city authorize such lease” in an election. The question of whether the city needs to hold an election may well hinge on how many Council members think the facilities are a “substantial part” of Austin Energy’s facilities.

Former Council Member Kathie Tovo, who is running for mayor, believes the chilling system is indeed a substantial part of the utility. She expressed concern about the possibility that Austin Energy might sell a part of the utility that is making money.

“I think the ratepayers of this city should protest mightily,” she said. The system “is an asset and we absolutely have the right to say whether it should be part of Austin Energy.”

Two other mayoral candidates, Doug Greco and Carmen Llanes Pulido, expressed concern about the possibility of selling the district cooling system.

“Austin Energy should not sell the District Cooling System,” Greco told the Monitor. “It’s one of the city’s most effective climate protection programs, and keeping it publicly owned assures it is held to our community’s high environmental and labor standards.”

Llanes Pulido said, “I want to know why it’s being considered now. … I understand there is a need for other investments but we need to have an above-board conversation” about why the city would consider selling the chilling system.

“I think this is the kind of thing that needs to go to the voters,” she said. “This is a very valuable asset.” She stressed the need for a public discussion “before we sell something we can never get back.”

On Thursday afternoon, the union representing city, county and state employees, AFSCME Local 1624, put out a statement opposing the sale of the district cooling system, calling it “a blatant attempt at privatization.” The union urged Council to reject the proposal on next week’s agenda to contract with J.P. Morgan.

“Why sell a profitable, efficient and environmentally friendly system just to line the pockets of J.P. Morgan?” AFSCME Local 1624 President Pedro Villalobos said. “Privatizing the service and its assets is a short-sighted, misguided decision that fails our community and ignores the public’s best interests. Let’s invest in our local infrastructure, not Wall Street.”

He concluded that “Austin Energy’s skilled workforce is ready and capable of maintaining and improving the district cooling system.”

The Austin Monitor’s work is made possible by donations from the community. 

Resource Management Commission sets sights on natural gas utilities in bid to expand oversight

 

As the city prepares to renegotiate its contract with Texas Gas Service, Austin’s Resource Management Commission is vying for a seat at the table, with a proposal to expand its purview to include the utility’s oversight on its way to City Council.

The proposal, spearheaded by Commissioner Paul Robbins, would amend the commission’s bylaws to include advisory duties on issues of rate design, environmental goals and low-income assistance measures. Commissioners passed the proposal in a 6-1 vote, with Commissioner Genell Gary voting against.

Unlike the city’s municipally owned electric and water utilities, Texas Gas Service is a publicly traded company serving large swaths of Central Texas, the Rio Grande Valley and the Gulf Coast. The utility serves roughly 230,000 Austin residents via a franchise agreement with the city, which grants distribution rights in exchange for 5 percent of annual revenues.

Robbins, a longtime utility watchdog, says the nature of this agreement has historically shielded Texas Gas Service from yielding to public pressure. Adjusting for inflation, Robbins claims that rates have risen by nearly 100 percent since 2008, partially due to offloading the cost of system growth onto existing ratepayers. In contrast, Austin Energy and Austin Water employ a robust capital in aid of construction charge to avoid these hikes in cost.

Texas Gas Service has also dodged environmental pressures – while Austin Energy is on track to power 65 percent of its system via renewable energy sources by 2027, the natural gas utility has announced no plans to move toward more sustainable practices. While the utility has begun a number of conservation programs, like rebates on tankless water heaters and efficient furnaces, Robbins says their $1.8 million annual price tag far outweighs environmental benefits.

Commissioners hope that their oversight can provide some overdue pressure to the utility to better align with city’s climate and equity goals. More robust environmental programs, expanded low-income assistance and a less regressive rate structure are all on the table.

“In bringing forth these amendments, we should call attention to the franchise renewal of Austin’s natural gas system in 2026,” District 7 voter Al Braden said before last Monday’s vote. “This represents a once-in-a-lifetime opportunity to negotiate some real improvements to the gas system, requiring serious reductions to methane leaks and in upstream supplies to the city.”

Paying the Gas Bill…for the Next 16 Years

Paul Robbins, Editor, Austin Environmental Directory

There Be Pirates!

Starting October 1 of this year, Texans homes and small commercial businesses that use natural gas for heating, water heating, and cooking will begin to pay a huge surcharge on the fuel they purchase. The surcharge (some would call it tribute) of $1.11 per thousand cubic feet (MCF), will increase fuel costs by 21%. (This assumes a four-year average of Residential gas bills in Texas from 2019 to 2022). This is an overall increase of about $51.  This annual charge might last until the year 2039, 16 years from now.

Given the fuel-cost percentage of the overall bill, the surcharge will increase overall gas utility expenses for the average Texas home by about 8%. (Again, this uses the average bill from 2019 to 2022.)

This surcharge is meant to pay $3.5+ billion “securitization” bond to finance the exorbitant fuel costs charged by gas supply companies and traders during Winter Storm Uri.

Most Texans reading this will recall the cruel frigid storm in mid-February.  Many Texas cities set new records for the number of hours at or below freezing. Between February 14-19, 2021, there were 771 daily records or ties of records for lowest minimum daily temperatures at 194 Texas weather stations.

The extreme weather was layered onto failure of the natural gas and electricity supplies. This was caused by lack of preparation for the storm, as well as skimping on winterizing the infrastructure that would make energy supplies and generators more resilient to cold weather.

To add to the calamity, Texas was shipping Liquefied Natural Gas overseas at the same time its own people were freezing.

At one point, almost 40% of customers on the ERCOT (Texas) grid were without electricity.

As many as 978 deaths were caused by the storm. The Perryman Group estimated $195 billion to $295 billion due to property damage, lost income from business closures, and crop losses.

The desperate effort to secure adequate supplies of natural gas for heating and power plants caused prices to soar to unbelievable levels. Typical gas prices in Texas at the time soared from an average of $3 to $4 per Million BTUs to as high as $400. There were reports of prices in Oklahoma as high as $1,200.

Gas Cost Per Million BTUs in February 2021

Paying these astronomical costs in real time would have been too onerous, so the Texas Legislature passed a bill that essentially mortgages (at rates exceeding 5.1%) these billions of dollars over as long as 16 years.

The number of years might decrease depending on the growth of gas customers. The more growth, the more customers and consumption that can be used to increase payments and reduce the time needed to retire these bonds. However, this higher cost may have the opposite effect by reducing the competitiveness of the fuel.

Some environmentalists want to stop all new natural gas hookups to reduce global warming. In response, the Texas Legislature passed a law forbidding cities within the state to do this. It is ironic that this surcharge helps the cause of reducing gas hookups. The environmentalists here do not have to raise a finger. In this case, the gas industry is its own worst enemy.

Assigning Blame

Pipeline Companies

Two companies that reported incredible profits after the storm included Energy Transfer and Kinder Morgan. Their Texas intrastate pipelines are scantly regulated, and they sold gas they had placed in storage at huge markups. Energy Transfer reportedly made $2.4 billion, and Kinder Morgan made about $1 billion, as a result of desperate price escalations.

Another pipeline company, Energy Product Partners, made about $250 million from the crisis.

Energy Traders

Traders also made a killing (no pun intended).

Petroleum giant BP reportedly made about $1 billion from the opportunity, greatly boosting its quarterly profits from other energy sales and services to a total of $2.6 billion.

The Australian company Macquarie Group made about $234 million. The trading arms of Goldman Sachs and Bank of America also reportedly did well. Goldman was estimated to have cleared about $200 million from this crisis of opportunity, though some of this may have been lost due to utility defaults and bankruptcies.

Gas Utilities

The major gas utilities in Texas, most notably Atmos, CenterPoint, and Texas Gas Service, will be quick to defend themselves by saying they do not make a profit on any fuel they sell. Fuel, to them, is a pass-through cost. They will lay blame on the companies that made these profits.

However, these gas utilities are charged with buying affordable and adequate supplies of fuel. In this sense, they failed, and their customers are paying for their mistakes.

The Texas Legislature

The Legislature never made a successful effort to claw back the excess profits made by the gas industry. There was a bill drafted in the 2023 session to use surplus money in the state budget to pay for this debt. However, it could not gain support.

The Legislature has also never enabled Residential gas customers to buy their own supplies on the open market. It seems strange that while Texas has deregulated most electric customers in ERCOT to purchase their electricity competitively, they are not allowed the same ability with gas service.

Larger Texas Commercial and Industrial customers have this ability, where the gas utility becomes a common carrier for lower-cost fuel procured elsewhere.

Nationwide, almost 20% of gas utility customers have customer choice programs. The percentage of customer choice participants in Georgia and Ohio exceed 80%.

Had customer choice been in effect in Texas during Winter Storm Uri, would it have made a difference in price and reliability?  I cannot say with certainty. But any company that intended to stay in business should have had firm contracts, and an extra incentive to prepare for extreme weather.

In the spring of 2022, Austin Energy began a proceeding to raise rates.  Among other things, the utility intends to raise most Residential bills by jaw dropping amounts: 18 to 84%, depending on the consumption level.

Below is testimony that presented in the proceedings against these bill increases.

Testimony of Paul Robbins

Austin Energy Rate Case

July 15, 2022

1. Austin Energy (AE) New Proposed Residential Rate Does Not Benefit Customers With Low-Incomes.

Austin Energy has proposed a new Residential rate structure.  By the utility’s point of view, it is required to maintain fiscal integrity.  By critics’ standards, including this intervener, it is draconian to the point of cruelty.  The only shared opinion between these polarities is that it is radically different from the current one.

In an effort to make the rate more acceptable, Austin Energy has made the claim that its new rate actually helps low-income customers.  On p. 23 of “Austin Energy Residential Base Rates 2022 Review Process,” presented in April and May of this year to various stakeholders in the Community, AE included a chart (Exhibit 1) that was intended to display that ratepayers enrolled in the Customer Assistance Program low-income discount program have slightly more consumption than average AE customers.

When I questioned Mark Dombrowski, Chief Financial & Administrative Officer of the utility during the June 13 rate hearing, he stated that CAP was used as a proxy for all poor ratepayers in Austin.

However, CAP only represents about 7% of AE Residential customers (7% is documented in Exhibit 1).  Households at 200% of the poverty level, the target for CAP participants, represent about 28% of households in the City of Austin (Exhibit 2).

More contradictory is that during discovery, Austin Energy provided me with data that quantifies how much average electricity is consumed per zip code by house type (single family, multiunit housing, and apartments) for all Residential customers in 2020.  (Exhibit 3 and Exhibit 3 Worksheet.). Matching this consumption to income data in the American Community Survey of the U.S. Census proves an entirely different outcome: consumption tracks income (Exhibit 4).

When I asked Mark Dombrowski why this data was not used instead of the more limited CAP data during rebuttal, he replied that the zip code data was not granular enough since it did not include housing type.

When I informed him that this was erroneous during questioning on June 13, and again asked why the larger dataset of consumption was not used, he had no cogent response.

When I asked him during Rebuttal Discovery what effect this radical restructuring of rates would have on low-income people, he referred me to Table 8-B, p. 133, and 8-D, page 135 in the Base Rate Filing Package showing a range of very small increases to actual bill savings for customers enrolled in the Customer Assistance Program (Exhibit 5).  But he failed to note that the reductions were almost entirely due to increased discounts in the CAP program.

2. Continuing CAP Enrollment Problems

Due to a history of problems in the CAP automatic enrollment procedure, some of the people who are enrolled in CAP are not poor.  Between 2014 and 2020, I have repeatedly proven that some wealthy customers are being enrolled in a program meant to serve customers at or below 200% of the poverty level.

I would have gathered evidence specific to this rate case.   However, the City of Austin supported a state law that passed in 2021 restricting the flow of information that was formerly provided to me, so it is currently not possible to search out further waste.

Suffice to say that if large, more expensive homes and homes with wealthier customers are averaged into the CAP roles, consumption will be higher, and Austin Energy figures showing CAP enrollees as consuming more energy will not be completely reflective of low-income consumption.  Mark Dombrowski admitted this during Direct on July 13, 2022.

Austin Energy, to my knowledge, has never done its own publicly-available study of potentially undeserving customers, instead responding (usually defensively) my criticism.

Below is a photo of the home owned by a customer receiving the CAP discount in 2020 at another property that they own.  Note the tennis court in the bottom left corner.

Enrolling large and expensive homes in CAP distorts the argument that CAP participants have higher consumption than average customers.

The name of the owner of this home came from a Public Information Request made to the City of Austin in 2020.  Austin Energy refused to provide an updated version for this rate case, hence my Special Motion to Compel from July 11, 2022.

3. Austin Energy Using Misleading Benchmarks Comparing Residential Rates

On Table 10-A, p. 152, of AE’s Rate Base Filing Package (Exhibit 6), the utility showed a (supposed) peer group of utilities which have high customer charges similar to the one it proposes.  This is an attempt to normalize its draconian position on rates.

However, Austin Energy’s real peer group is Texas municipal utilities.  While the City of Georgetown meets this criteria, note that Georgetown has not generated its own electricity since W.W.II.

All of the other Texas municipal utilities prioritize affordable access to Residential electric service, and have much lower customer charges.  The chart below (Exhibit 7) lists monthly charges for the larger Texas municipal utilities as of June 20, 2022.  As compared, Austin is very close to the average.

To my knowledge, none of these utilities are facing bankruptcy or credit downgrades because they have lower monthly charges than Austin’s proposed rates.

4. Austin Energy is Increasing CAP Subsidy to Compensate for Radical Rate Restructuring

The utility proposes a $6.1 million, 73% increase in the overall program discount given to them.  This will increase pass-through costs of the Community Benefit Fund (Exhibit 8).  Adjusting for 2021 Residential consumption and the In-City CAP charge, this would increase Residential Bills by $11.15 per year per customer on top of the rate increase already proposed for the 93% of Residential customers who will pay for it (Exhibit 9).  This is tantamount to a hidden rate increase, but since it will be paid as a pass-through cost, it does not show as one.

But as stated in Point 1, many customers absorbing this CAP increase are, ironically, also low- or moderate-income.  Even though they are poor, they do not receive the discount.

5. Austin Energy Uses Faulty Analysis to Justify Radical Rate Restructuring

By using an analysis that shows an astounding trend of new efficiency in newer Residential customers (Exhibit 10 and Exhibit 11), Austin Energy attempts to justify the need to create a much more regressive rate structure in order to collect adequate revenue.

There are several problems with this analysis, however.

• The analysis does not account for customers who have their HVAC needs met with a central system, such as downtown condos and homes with shared geothermal loops. (Exhibit 10.)

• The study does not consider that customers in older dwellings will also become more efficient over time. While a new home has its appliances (e.g., HVAC, refrigerators) immediately installed to national appliance standards, older homes will install appliances with higher standards when their older machines are replaced.

• Austin Energy has not discussed how consumption in rental units in the study might be influenced by consumption through the customers enrolled in the Continuous Service Program (also known as the Multifamily Partners Program). (Exhibit 12.)

6. Austin Energy Seeks to Eliminate Its Progressive Residential Rates

The City of Austin has encouraged a culture of energy conservation since the 1980s.  Between 1982 and 1997, a separate City department was in charge of programs related to energy efficiency retrofits, the energy building code, and the green builder program.  In 1997, these programs were merged into Austin Energy.

These programs, combined with progressive electric rates that discourage use, have resulted in the lowest Residential consumption of any major utility in ERCOT.  However, recent positions and actions by the utility question its commitment to energy efficiency.

According to the annual Energy Information Agency 861 report, in 2020, Austin Energy’s average consumption of 10,212 Kwh was 25% lower than the ERCOT average.  Only 1% of ERCOT’s 9.6 million Residential customers had lower average consumption than Austin.

While Austin Energy has had some type of progressive Residential rate structure since 1981, it began its steeply progressive 5-tier system in 2013.  Since then, there has been a profound drop in consumption of 13%.  (This is not weather normalized.)

While some amount of this can be attributed to the three other efficiency strategies previously cited, or attributed to increase efficiency of federal appliance standards, some of it can be attributed to price elasticity of electric costs that drive consumption down.

Eliminating the progressive rate structure that Austin Energy currently employs will discourage energy conservation.

Price elasticity is an established principle of rate making.  Any number of national and international studies confirm its merits.  Below is one chart from a recent report by the Energy Information Administration.  Note that the longer elasticity continues, the more energy savings will accrue from it.  This is because instead of just short-term modified behavior, efficient appliances and structural energy retrofits are more likely to occur.

Austin Energy has disparaged the progressive rates as a “brutal price signal to focus on conservation” because it allegedly prevents it from collecting enough revenue.

Austin Energy has tried to dismiss price elasticity in its Base Rate Filing Package.  In Table 7-14 on p. 92 (Exhibit 13), Austin Energy displays a graph attempting to show that price elasticity is irrelevant to Austin’s situation.

However, in response to a directed question to Mark Dombrowski on July 13, 2022, he admitted that this chart did not include monthly fees, fuel costs, regulatory charges, and the Community Benefits Fund.  Since these costs profoundly alter what customers really pay, they would alter the conclusions had the methodology been adjusted.

7. Growth and Increased Cost

In 2014, the Austin City Council passed an ordinance mandating that Austin Energy collect 100% of its costs for serving new customers.  This ordinance actually led to a rate decrease in 2016.

However, Austin Energy is partially justifying its rate increase because of increased expenditures for growth to the system.

During rebuttal (Exhibit 14), Mark Dombrowski stated that while new customers were being charged full cost for connecting to the system, new customers were exempt from larger improvements to the general electric system.

If this is correct, then it shows a double standard between Austin’s water and electric utilities.

Attached is an excerpt from the “Water and Wastewater Impact Fee Reports” from the Austin Water Utility for 2018 (Exhibit 15).  (Note that “Exhibit A” appears in the evidence, and is not part of the numerical sequencing of this presentation.)

The study shows pumps stations, transmission mains, reservoirs, water treatment plants, and other infrastructure common to all water customers is part of the capital recovery fees.  Capital Recovery Fees are similar in many respects to CIAC in electric systems.

8. Biomass Plant Savings

It has yet to be determined if the biomass plant will be included in base rates.

If it is included, there are 2 potential points of savings this intervener has identified.

The first is a longer amortization period.  The Nacogdoches power plant will be amortized over a 20-year life, including 10.25 more years with Austin Energy as its owner.  Power plants are typically designed for 30 years.  Extending the amortization by another 5 years (to a total 25-year life) will save about $11.8 million a year.  This assumes current balance and current 1.52% interest (inferred from evidence).  This does not consider times coverage.  (Exhibit 16.)

The second is to reduce taxes paid to local governments.  Austin Energy is a tax-exempt entity.

Taxes in 2021 totaled over $1.4 million (Exhibit 17).

9. Customer Assistance Program (CAP)

Austin Energy has experienced chronic and long-standing problems with its discount program for the poor since it was implemented in 2013.  Some ratepayer money is being misspent by awarding discounts to the wrong customers through its profoundly flawed automatic enrollment program.  This has repeatedly led to documented and embarrassing revelations of Austin Energy customers with documented high-property wealth being on the CAP roles.

Austin utilities spend about $2.8 million a year administering this program.  Austin Energy’s share of this is about $1.3 million, and it is paid for in base rates (Exhibit 18 and Exhibit 18 Worksheets 1 and 2).

If some percentage of this is proven to be going to people who are not poor (above the target market of 200% of the poverty level), then the base revenue expenditures are imprudent.  Current base expenditures should be repaid by the utility to the ratepayers, and future expenditures should be disallowed in base rates.

Austin Energy has hidden information that can assist in documenting these continued problems.  It is my understanding that at the Public Utility Commission, “protective orders” can be made to gather confidential information that will not be made public.  However, this utility is intentionally constricting information, possibly because it continues to be embarrassing to them.

By my own admission, this is not the most expensive item in this rate case.

Yet there are two reasons why I continue working on this issue.  First, this represents money being taken away from the poor.

There could be thousands of CAP customers above 200% of poverty that are receiving discounts. 

If 10% of expenditures are found to be invalid, that is about $830,000 in electric utility discounts that are taken away from people that need them (refer to Exhibit 8) as well as $130,000 in wasted electric utility administration (refer Exhibit 18).  It is even more with wasted water and drainage utility discounts.

The other reason is that I expect more from public servants than acting like bureaucrats.  After 8 years, Austin Energy will not correct the problems in this program.  The rate case might provide some latitude in getting corrections.  Austin Energy employees who are misapplying funds are hiding behind their civil service protections to continue to administer this program in a clumsy, inefficient manner.  As an activist, I refuse to validate this kind of behavior.

The Judge can assist in this endeavor if he will grant the Special Motion I made for this on July 11.

If I can send this information to a data firm that collects information on income and household size, it will be an easy and inexpensive way to learn if CAP is sending money to people with higher income levels.  This information will not be made public, only the summaries.

Austin Energy could have done this on its own, but remains remarkably disinterested.

This concludes my testimony.

I appreciate your attention.

 

Audit: Austin Energy didn’t check eligibility for some in bill discount program

KXAN INVESTIGATIONS

by: David Barer, Tahera Rahman

Feb 23, 2022

AUSTIN (KXAN) – City auditors found Austin Energy did not ensure more than two dozen customers were eligible to receive utility discounts through the city’s Customer Assistance Program, which is meant to serve low-income residents, according to a recently released special report.

Robbins, a local environmental activist and city utility critic, has been critical of the CAP program for years and has written reports about what he describes as flawed eligibility criteria.

“I’m very disappointed in Austin Energy and the way they are running the program,” Robbins said. “Their business model is how much money can you give away, not how much money can you give away to people that are deserving of the assistance.”

“There could be 1000s of people that are undeserving that make over 200% of poverty that are getting poor people’s money.”