Item 14- FY 2025-2026 Austin Energy Budget Recap — original pdf

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Austin Energy FY 2026 Proposed Budget Recap Electric Utility Commission Rusty Maenius Acting Deputy General Manager, Business Services August 11, 2025 © Austin Energy Item 14FY 2026 Proposed Budget Presentation Overview and Highlights Disclaimer This presentation contains forecasted financial information based upon what Austin Energy management believes are reasonable assumptions, but actual results will differ. In addition, this presentation contains unaudited information. 2 Austin Energy’s Recent Financial History 5 year Revenue Adequacy Review COVID COVID Subsides Base rate proceeding Council approves new rates 2% base rate increase in budget 2019 2020 2021 2022 2023 2024 • “AA” Credit Rating • +200 Days Cash • 4X DSC • Positive margins • Revenues = Costs • Costs Increasing • Delay rate case • Temporarily reduced rates • Disconnection and collections moratorium • Commercial revenues down • Negative margins • Used cash to fund deficit • Resumed normal rates • Winter Storm Uri • Negative margins • Used cash to fund deficit • Test year for rate increase • Negative Margins • Used cash to fund deficit • Downgraded to “AA-” • PSA -$100M • Base rate increase in March 2023 • $140M combined losses 2020 to 2023 • 94 days cash • Additional revenues start to improve KPIs including Day Cash on Hand (DCOH) • DCOH below minimum & industry Regulatory Lag Inflation 3 FY 2026 Austin Energy Costs With $1.99B in costs, there is a projected $43M shortfall, even after proposed rate changes FY 2026 Total Austin Energy Budget Debt Service $195.0 City-General Fund Transfer $139.0 CIP Transfer $123.5 Transmission & ERCOT $217.7 Power Supply $527.7 $1.99B costs Joint Projects $124.6 City-Direct Transfers / Other $77.3 O&M $590.0 FY 2026 Operating & Maintenance Expense (O&M) Breakout Personnel $340.1 Contractuals $230.2 $590M Commodities $19.8 4 FY 2026 Cost Drivers • Increase to employee salary and fringe cost - $14.8M • • Call Center contractor living wage increase to maintain service levels - $2.8M • Increase rebates and incentives, energy efficiency service programs, and electric vehicle programs - $3.7M Increase for Altec vehicle leases for bucket trucks and other heavy-duty equipment - $2.7M • Utility Contact Center increase for Genesys phone system platform - $2.2M • Bad Debt Expense - $4.1M • Security enhancements to meet NERC compliance Transfers & Non-Nuclear Decommissioning: requirements - $2.5M • • • Increase in requirements for the South Texas Nuclear Plant (STP) and Fayette Power Project (FPP) - $13.5M Increase in Nacogdoches operating costs - $3.8M Increase transmission expense due to rising Electric Reliability Council of Texas (ERCOT) market costs - $11.4M • • • 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 5 Structurally Imbalanced Rates Revenue Shortfall Under Current Base Rates Under Current Base Rates • $131M Revenue Shortfall in 2026 • Deficiencies through the next 5 years $ Millions $2,400 $2,300 $2,200 $2,100 $2,000 $1,900 $1,800 $1,700 $1,600 Fcast 2026 Fcast 2027 Fcast 2028 Fcast 2029 Fcast 2030 Total Costs Current Revenues 6 Five Year Plan Small, steady, base rate increases avoid larger bill impacts later and pay for rising costs of necessary grid investments. Prudent Cost Management Consistent cost management and finance structure maximizes efficacy of rate increases and moderates bill impacts. 5% Annual Base Rate Increases and 23% Reduction in Power Supply Adjustment Starts to close revenue gap and uses 5-year window to rebuild revenue stream, balancing utility needs and customer bill impact. Net effect reduces typical residential bill by 4% or about $5 per month in FY2026. Directly Recover GFT in Regulatory, EES and SAL Rates Associated GFT accelerating faster than base rates' ability to pay it. Allows for costs to be recovered where the costs are caused, consistent with ratemaking principles. • GFT – General Fund Transfer • EES – Energy Efficiency Services • SAL – Service Area Lighting (SAL) 7 Rate Proposal Supports Financial Stability Current base revenues require annual 5% increase and GFT recovery in pass-through rates Impact of Forecasted Proposal $43M Deficiency Then Catches Up by 2027 Millions $2,400 $2,300 $2,200 $2,100 $2,000 $1,900 $1,800 $1,700 $1,600 Fcast 2026 Fcast 2027 Fcast 2028 Fcast 2029 Fcast 2030 Total Costs Proposed Revenues Current Revenues Note: Pass-through rates consist of Regulatory, Energy Efficiency Services (EES) and Service Area Lighting (SAL) 8 Typical Residential Customer Bill Reduced Average Monthly Bill Energy (kWh) FY 2025 FY 2026 $ Change % Change Base Rates 860 $56.09 $59.19 $3.10 Power Supply Adjustment (PSA) Service Area Lighting (SAL) Energy Efficiency Services (EES) Customer Assistance Program (CAP) Regulatory Charge Total Monthly Bill 860 860 860 860 860 860 $45.77 $35.41 -$10.36 $1.77 $3.00 $2.18 $3.93 $0.41 $0.93 $3.82 $4.85 $1.03 $11.51 $11.51 $0.00 $121.96 $117.07 -$4.89 -4% Total CAP Customer Discounted Bill 860 $92.83 $86.15 -$6.68 -7% 9 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. 10 FY 2026 Budget Process Boards & Commissions Recommendations Made in March 2025 Electric Utility Commission Recommendations 1. Add Full Time Employees (FTEs) to help implement Customer Energy Solutions (CES) goals in the Resource Generation and Climate Protection Plan. Proposed budget adds 5 FTEs and increases funding by $3.7M for CES rebate, incentives and solar programs. 2. Add FTEs for outreach, implementation and enforcement of new energy code. Current and proposed budgets prioritize outreach and stakeholder education on the new energy code in collaboration with the Development Services Department. The City of Austin’s FY 2026 Budget development process included recommendations and feedback received from Boards and Commission by March 31, 2025. 11 Electric Utility Commission Recommendations for Austin Energy Budget ©Austin Energy. All rights reserved. Austin Energy and the Austin Energy logo and combinations thereof are trademarks of Austin Energy, the electric department of the City of Austin, Texas. Other names are for informational purposes only and may be trademarks of their respective owners.