ITEM 2- AE Community Outreach Presentation on Base Rate Review — original pdf

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Austin Energy Residential Base Rates 2022 Review Process Kim Doyal, Community Engagement, Public Information Office Rusty Maenius, Vice President – Finance Tammy Cooper, Sr. Vice President – Regulatory, Communications, and Compliance April – May 2022 © 2019 Austin Energy Today’s Agenda • City of Austin Utilities bill Presented by Kim Doyal, Community Engagement Consultant • Base rate review and proposed changes Presented by Rusty Maenius, Vice President of Finance • Base rate review process Presented by Tammy Cooper, Sr. Vice President – Regulatory, Communications, and Compliance 2 City of Austin Utilities bill Kim Doyal Community Engagement, Public Information Office 3 Austin Energy City of Austin Department • Began operations in 1895 • Governed by the Austin City Council • 3rd largest municipal utility in nation Customer programs • Billing assistance & payment options Energy efficiency & weatherization • • Renewable energy & electric transportation Manage electric rates & bill payments for COA Utilities • 500,000+ customers 437 square miles 4 Your City of Austin Utility Bill • Bundles up to 6 essential City services into one convenient bill • Rates determine the charges that appear in your energy bill each month • Changes to base electric rates only impact the portion of your COA Utility bill labeled Customer Charge and Tier • Electricity represents 40% of your overall bill (for those receiving all 6 City services) Visit coautilities.com/go/billing to learn more. 5 Focused on Changes to These Base Rates Customer Charge Charge designed to cover costs such as metering and billing. These fixed costs do not vary with consumption. The current Customer Charge of $10 per customer is not adequately covering these costs. Energy Use Tiers Price per kilowatt hour for energy used, currently broken into five usage tiers for inside City of Austin customers and three usage tiers for non-COA customers. 6 Base Rate Review Rusty Maenius Vice President – Finance 7 Proposed Systemwide Base Rate Impact • $48 million base revenue increase • 7.6% base rate increase • Impact only to base rates • Base rate review is not related to Winter Storm Uri. Austin Energy’s power supply adjustment, which is not part of a base rate review, was reduced last fall to reflect generation revenues earned during the storm. 8 Base Rate Review • Financial review occurs at least every five years • Examines system operations and revenue over a • Performed to ensure revenues cover costs to study period serve customers • Revenue shortfall identified in 2021 study • Proposed residential base rate increase equals an average of $15 per month for residential customers • Austin Energy’s average monthly residential energy bills remain some of the lowest in the state 9 Austin Energy: Providing Affordable Electric Service Second Lowest Average Monthly Bill – TX Residential Service (2020) EL PASO ELECTRIC CO AUSTIN ENERGY AUSTIN ENERGY (PROPOSED) SOUTHWESTERN PUBLIC SERVICE CO BROWNSVILLE PUBLIC UTILITIES BOARD SOUTHWESTERN ELECTRIC POWER CO CITY OF SAN ANTONIO - (TX) CITY OF NEW BRAUNFELS - (TX) PEDERNALES ELECTRIC COOP, INC GREEN MOUNTAIN ENERGY COMPANY BLUEBONNET ELECTRIC COOP, INC CITY OF DENTON - (TX) TEXAS AMIGO ENERGY RELIANT ENERGY RETAIL SERVICES TXU ENERGY RETAIL CO, LLC $86 $90 $99 $100 $114 $117 $118 $118 $125 $126 $128 $130 $134 $149 $152 $164 Source: U.S. Energy Information Administration Form 861, October 2021 Austin Energy (PROPOSED) based on proposed rates with CY2020 average kWh consumption. 10 History of Base Rate Changes Only two base rate changes since 1994 2013: 6.4% increase 1994 – 2013 2013 - 2017 2017 - 2023 1994 – 2013: No change for nearly 20 years 2017: 6.7% decrease Current proposal equals about a 2.75% per year bill increase since 2017. 11 Only Base Rates Will Be Impacted Supplies & Equipment Tree Trimming Principal + Interest Payments Employees Information Technology General Fund Transfer BASE RATES do not fund: Customer Assistance Program Energy efficiency programs Transmission related costs Power purchases from ERCOT • • • • • District energy and cooling • Streetlights 12 Nearby Utilities: Residential Bill Comparison *$231 *$206 $204 $243 $244 $243 $113 $113 $124 $68 $68 $65 $134 $80 $124 $65 $99 $47 AUSTIN ENERGY CURRENT AUSTIN ENERGY PROPOSED CPS ENERGY GEORGETOWN UTILITIES BLUEBONNET ELECTRIC COOP PEDERNALES ELECTRIC COOP Avg. monthly bill at 500 kWh Avg. monthly bill at 1000 kWh Avg. monthly bill at 2000 kWh 13 Base Rate Change Drivers Rusty Maenius Vice President of Finance 14 Key Reasons for Austin Energy Base Rate Review Outdated Residential Base Rate Structure Additional Infrastructure and Enhanced Reliability Bond Rating Health Base Rate Change Drivers Significant Customer Growth Higher Operation and Maintenance Costs Improved Fixed Cost Recovery 15 Costs are Outpacing Revenues Base Rate Costs vs. Base Rate Revenues $ f o s n o i l l i M $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 B a s e r a t e d e c r e a s e Savings must be used to fill gap between cost and revenue 2014 2015 2016 2017 2018 2019 2020 2021 Revenues Costs Source: Audited Financial Statements 2014-2021 16 Why are Costs Outpacing Base Revenues? The current base rate structure relies too heavily on energy use for revenue. This drives base costs Customer growth drives increased infrastructure investment and higher operating costs Steady Customer Growth This drives base revenues Relatively Flat Sales 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2014 2015 2016 2017 2018 2019 2020 2021 Customers Energy Use (kWh Sales) Not Adjusted for Weather Source: Fund Summary Statements 2014-2021 17 Residential Bill Distribution - Summer FY 2009 FY 2021 • Residential customers have used less energy each summer since 2009, down 22%. s d n a s u o h T 400 350 300 250 200 150 100 50 0 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000 3250 3500 3750 4000 Monthly Energy Use in Kilowatt Hours 18 Current Residential Rate Structure Outdated and no longer applicable to current consumption patterns Current Inside COA Residential Current Outside COA Residential $10 Customer Charge $10 Customer Charge 10.8 ¢ 9.3 ¢ 7.8 ¢ 5.8 ¢ 2.8 ¢ 7.9 ¢ 5.6 ¢ 3.7 ¢ 500 1000 1500 2500 2500+ 500 1000 1000+ kWh kWh 19 Vulnerable Customers Overrepresented in Higher Tiers Austin Energy provides bill payment assistance through the Customer Assistance Program (CAP) 37.6% 39.3% 35.6% 25.4% 22.0% 15.2% 11.9% 8.5% 2.9% 1.5% Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 93% Non-CAP Customers 7% CAP Customers 20 Overview of Proposed Changes Rusty Maenius Vice President – Finance 21 Proposed Changes Increase Customer Charge from $10 to $25 Reduce residential base rate structure to 3 tiers Remove inside/outside rate difference With these changes, customers would move closer to what it costs to serve them. 22 Proposed Residential Base Rate Structure Changes Reduce tiers and remove inside/outside COA rate difference Current Inside COA Residential Current Outside COA Residential $10 Customer Charge $10 Customer Charge Proposed All Residential $25 Customer Charge 10.8 ¢ 9.3 ¢ 7.8 ¢ 5.8 ¢ 2.8 ¢ 7.9 ¢ 5.6 ¢ 3.7 ¢ 500 1000 1500 2500 2500+ 500 1000 1000+ kWh kWh 3.8¢ 300 4.3¢ 1200 kWh 4.8¢ 1200 + 23 Residential Bill Impacts Inside the City Limits $146 $147 $141 Outside the City Limits $147 $145 $141 $122 $124 $116 $89 $79 $55 $60 $36 $19 $55 $36 $20 New Tier 1 New Tier 2 New Tier 3 New Tier 1 New Tier 2 New Tier 3 Current bill Proposed bill Cost to serve Current bill Proposed bill Cost to serve These are sample bill impacts. Your bill impact will vary according to your tier and usage. 24 Expected Outcomes from the Base Rate Review A revised residential rate structure that better recovers costs while enhancing fairness Gradual move for all customers to pay their share of costs Removal of inside/outside COA rate difference Greater equity for our more vulnerable customers through better rate design Result: Equitable rates for customers. Financial stability for Austin Energy. 25 Get Involved in the Process Sr. Vice President – Regulatory, Communications, and Compliance Tammy Cooper 26 Share Your Thoughts An Independent Consumer Advocate (ICA) represents residential and small business customers in the base rate review.  ICA receives customer feedback and presents findings to the Impartial Hearing Examiner  Contribute feedback by July 11 at speakupaustin.org/rates An Impartial Hearing Examiner (IHE) will listen to all issues and positions from formal Participants and make a recommendation to Austin City Council.  Austin Energy customers may submit a request to formally Participate between April 18 – May 18, 2022  Learn how to submit a request to Participate at austinenergy.com/rates 27 Base Rate Review Timeline 28 ©2018 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.