Item 9- FY 2025/26 Austin Energy Budget — original pdf

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Austin Energy FY 2026 Proposed Budget Electric Utility Commission John Davis Acting Senior Vice President & Chief Financial Officer 07/17/2025 © Austin Energy Item 9Disclaimer Certain information set forth in this presentation contains forecasted financial information. Forecasts necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance. Although the forecasted financial information contained in this presentation is based upon what Austin Energy management believes are reasonable assumptions, there can be no assurance that forecasted financial information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such forecasts. In addition, this presentation contains unaudited information and should be read in conjunction with the City of Austin’s audited Annual Comprehensive Financial Reports. 2 Agenda Overview and Highlights Financial Health Ratepayer Impact 2026 Annual Budget 3 FY 2026 Proposed Budget Presentation Overview and Highlights 4 FY 2026 Austin Energy Requirements ($ millions) FY 2026 Total Austin Energy Sources FY 2026 Sources Drivers Regulatory and CRR Revenue $244.1 Community Benefit Revenue $123.3 Transmission Revenue $116.3 Interest Revenue $44.0 Other Revenue $76.8 $1.95B Power Supply Revenue $592.9 Base Revenue $749.2 • • • • • Increase Base Rate revenue due to five percent base rate increase - $38.5M Increase in Power Supply revenue – $17.1M Increase Regulatory revenue due to rising costs in the Electric Reliability Council of Texas (ERCOT) market and recovery of GFT - $10.7M Increase Community Benefit revenue primarily due to increases in Customer Assistance Program (CAP) enrollment, Rebates & Incentives in support of the Resource Generation Plan, and recovery of General Fund Transfer (GFT) - $26.9M Increase Transmission revenue based on increased ERCOT demand - $7.5M 5 FY 2026 Austin Energy Costs ($ millions) FY 2026 Total Austin Energy Budget Debt Service $195.0 City-General Fund Transfer $139.0 CIP Transfer $123.5 FY 2026 Operating & Maintenance Expense (O&M) Breakout Transmission & ERCOT $217.7 Power Supply $527.7 $1.99B Joint Projects $124.6 City-Direct Transfers / Other $77.3 O&M $590.0 Personnel $340.1 Contractuals $230.2 $590.0M Commodities $19.8 6 FY 2026 Cost Drivers • • • Increase to employee salary and fringe cost - $14.8M including $2.2M for additional FTEs Increase in Austin Energy's share of operating costs for the South Texas Nuclear Plant (STP) and Fayette Power Project (FPP) - $13.5M Increase transmission expense due to rising costs in the Electric Reliability Council of Texas (ERCOT) market - $11.4M • Bad Debt Expense - $4.1M • • Increase in Nacogdoches operating costs - $3.8M Increase Customer Energy Solutions conservation rebates and incentives, energy efficiency service programs, and electric vehicle programs - $3.7M • Call center contractor cost increase includes living wage increase to maintain service levels for City of Austin utility customers - $2.8M • • Increase for Altec vehicle leases for bucket trucks and other heavy-duty equipment - $2.7M Increase in security enhancements to meet utility compliance requirements - $2.5M • Utility Customer Care increase for Genesys phone system migration from Engage to Cloud CX platform - $2.2M Transfers & Non-Nuclear Decommissioning: • • • Increase in CIP cash transfer - $25.1M Increase in debt service cost - $19.2M Increase to City General Fund Transfer - $14.0M • Transfer to City - Direct & Indirect services - $4.3M • Non-nuclear decommissioning - $6.0M 7 Cost Pressures are Industry-Wide Nationwide and Statewide, Utilities are Raising Rates UNITED STATES TEXAS • Both PG&E (about $40 per customer) and SCE • Central Texas Electric Cooperative raised ($32) increased rates in 2024 revenues by 11.23% • ConEd in New York raised bills by 12% over three years. • PEC raised residential rates by 4.4%,including a $10/month Customer Charge increase. • Duke Energy raised residential bills by 13% in the Carolinas, and base rate increases of $262M in Florida and almost $400M in Indiana. • Colorado Springs approved a 6.5% increase for each year from 2025 to 2029. • Denton raised average residential rates by more than $30/month. • CPS raised rates by 4.25%, effective 2/1/2024. • New Braunfels Utilities raised rates by 4.8% in 2024 and will raise an additional 5.9% in 2025. 8 Capital Improvement Program (CIP) 5-Year Spend Plan ($ millions) Business Unit FY 2025 Approved FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2026 – 2030 Total Distribution 159.1 158.8 133.9 156.3 129.1 149.7 727.7 Distribution Substation Transmission 26.8 56.1 Electric Service Delivery 242.0 Power Production District Cooling General 47.7 25.8 86.3 18.4 108.4 285.5 55.6 31.8 49.5 24.9 80.0 14.1 94.1 238.8 264.5 46.5 49.5 32.8 38.2 37.0 7.1 2.7 124.4 256.2 31.7 25.0 3.6 4.3 64.3 105.1 512.0 259.1 1,304.0 22.6 3.0 3.9 194.7 146.4 96.9 * Recovery of capital expenditures is not a component of electric retail rates 401.8 422.4 Total 367.6 346.8 316.5 288.6 1,741.9 9 FY 2026 CIP Highlights Distribution Transmission and Distribution • Distribution spend impacted by higher materials/labor costs and continued growth • Brackenridge Substation - rebuild of 1975 substation - $43.7M spend plan of which $11.5M is in FY 2026 • Brazos Duct Bank, East Ave Duct Bank, and Kingsbery New Feeder project - $13.6M is in FY 2026 • Distribution System Resilience Program - $83.0M spend plan of which $11.6M is in 2026 District Cooling • District Cooling Plant 4 rebuild – to serve the redeveloped Austin Convention Center and add capacity for customer connections downtown - $100M spend plan of which $9.5M is in FY 2026 • Timber Creek Substation - new substation to serve Austin-Bergstrom Airport expansion and growing load in SE Austin - $21.3M spend plan of which $14.2M is in FY 2026 • North/Central Austin - upgrade remaining 69 kV system to 138 kV adding capacity and reliability to central Austin - $18.1M spend plan of which $11.1M is in FY 2026 Power Production • Decker Dam improvements, Fallwell Lane Bank Stabilization work as well as work at Sand Hill - $19.0M is in FY 2026 10 FY2026 Personnel Requirements 17 Contract Conversions & 15 New Employees Program FTEs Annual Cost Annual Savings (Conversion Offset) Annual Net Cost Job Responsibility Electric System Engineering & Technical Services Electric System Field Operations Customer Energy Solutions Customer Account Management Energy & Market Operations Customer Care Services Power Production Technology & Data Environmental Health & Safety Services 10 $1,288,415 ($672,462) $615,953 Reliability and Resiliency / Safety 4 5 4 2 3 2 1 1 $608,658 ($72,662) $535,996 Reliability and Resiliency / Development Services / Wildfire Mitigation $515,939 ($304,995) $210,944 Resource Gen Plan / Battery Program $402,919 ($336,165) $66,754 Reliability $319,497 $319,497 Real-time trading / Resource Gen Plan / Financial Health $297,237 ($224,880) $72,357 Affordability and Reliability $283,208 $126,801 $283,208 Reliability and Resiliency $126,801 Reliability and Resiliency $114,655 ($65,405) $49,250 Training and Safety Total 32 $3,957,329 ($1,676,569) $2,280,760 11 FY 2026 Proposed Budget Presentation Financial Health 12 Forecast Fund Summary ($ in millions) 5% Annual Base Rate Increase FY2025 Amended Budget FY2026 Proposed FY2027 Forecast FY2028 Forecast FY2025 CYE FY2029 Forecast $285.9 1,856.5 $230.9 1,856.5 $201.2 1,951.3 $157.6 2,039.2 $160.8 2,138.9 $161.9 2,224.8 FY2030 Forecast $163.9 2,316.9 Beginning Balance Revenues/Transfers In Requirements: Operating Expenses Power Supply Expenses Debt Service CIP (Cash Transfer) General Fund Transfer Support Transfers Austin Energy Reserve Transfers Total Requirements Excess (Deficiency) Ending Balance FTEs 851.4 514.5 175.8 98.4 125.0 71.7 49.5 845.2 514.5 182.0 98.4 125.0 71.7 49.5 933.5 527.7 195.0 123.5 139.0 76.2 0.0 946.4 538.4 220.6 96.4 148.0 81.2 5.0 995.7 549.2 226.7 58.2 151.0 89.0 68.0 1,036.5 1,049.2 555.2 243.2 49.0 154.0 95.0 90.0 561.0 243.3 40.4 157.0 101.5 163.0 $1,886.3 $1,886.3 $1,994.9 $2,036.0 $2,137.8 $2,222.9 $2,315.4 (29.8) $256.1 1,934 (29.8) $201.2 1,934 (43.5) $157.6 1,965 3.2 $160.8 1,985 1.1 $161.9 2,005 1.9 $163.9 2,025 1.6 $165.4 2,045 13 Forecasted Key Financial Metrics Summary Minimum or Target CYE FY2025 Proposed FY2026 Forecast FY2027 Forecast FY2028 Forecast FY2029 Forecast FY2030 Operating Margin 10% 12% 10% 12% 15% 15% 17% Net Margin (Millions of $) N/A $67.2 $29.0 $53.3 $72.8 $83.0 $142.1 Quick Ratio > 1.5 2.6 2.2 2.1 2.1 2.0 1.9 Days Cash on Hand 200 Days 176 Days 155 Days 148 Days 156 Days 167 Days 196 Days Debt Service Coverage > 2.5 Debt to Capital < 50% GFT (Millions of $) N/A 2.5 57% $125 2.2 57% $139 2.2 57% $148 2.3 57% $151 2.3 57% $154 2.6 56% $157 14 FY 2026 Proposed Budget Presentation Customer Bill Impact & Rate Comparison 15 Typical Residential Customer Bill Reduced Average Monthly Bill Energy (kWh) FY 2025 FY 2026 $ Change % Change Base Rates Power Supply Adjustment (PSA) Service Area Lighting (CBC) Energy Efficiency Services (CBC) Customer Assistance Program (CBC) Regulatory Charge 860 860 860 860 860 860 $56.09 $59.19 $3.10 $45.77 $35.41 -$10.36 $1.77 $2.18 $0.41 $3.00 $3.93 $0.93 $3.82 $4.85 $1.03 $11.51 $11.51 $0.00 Total Monthly Bill 860 $121.96 $117.07 -$4.89 -4% Total CAP Customer Discounted Bill 860 $92.83 $86.15 -$6.68 -7% 16 Residential Monthly Bills Compared $149 $153 $142 $129 $117 l l i B y l h t n o M $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Austin Energy San Antonio PEC Bluebonnet Georgetown Note: Surrounding utility average consumption data based on CY2023 EIA data and current (July 2025) rates; Austin Energy bill based on 860 kWh at proposed FY 2026 budget rates. 17 ©Austin Energy. 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