Item 2- Draft Recommendation Franchise Rates 1.0 2 of 6 — original pdf

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RESOURCE MANAGEMENT COMMISSION RECOMMENDATION 20260120-XX Recommendation on High and Inequitable Rates in Texas Gas Service Franchise Agreement WHEREAS, Texas Gas Service (TGS) residential gas rates have gone up about 108% between 2019 and 2025, which is 79% above inflation; and WHEREAS, Texas Gas Service has proposed three rate increases since 2024; and WHEREAS, these rate increases are largely driven by the cost of capital expansion or improvements of the system, and no city or state regulator has the ability to prevent these expenditures prior to their occurrence; and WHEREAS, TGS does not collect full payment for new infrastructure (known as Contribution in Aid of Construction or Capital Recovery Fees) required for new customers, thus subsidizing new customers while increasing gas bills of existing customers; and WHEREAS, when Austin Energy and Austin Water implemented full capital recovery fees, they experienced rate decreases; and WHEREAS, Austin’s municipal utilities have progressive tiered rates that charge less per unit for less usage, while Texas Gas Service has historically maintained a regressive flat rate, which discourages conservation and adversely affects lower-income ratepayers who typically consume less energy; THEN BE IT THEREFORE RESOLVED that the City’s Resource Management Commission recommend that the Austin City Council implement the following policies related to the new Texas Gas Service franchise agreement: • Austin should demand full capital recovery fees for new hookups and developments in the same manner that it employs for its municipal electric and water utilities. This model should emulate how Austin Water collects water infrastructure improvements for the entire system from new customers as well as the infrastructure for the local infrastructure specific to these new customers.1 • The City of Austin, through the Resource Management Commission and the Austin City Council, should require an annual report by Texas Gas Service of its expected Plant Costs (Capital Improvements) for the coming year prior to their expense. 1 The Commission particularly disagrees that revenue collected from new customers, for example during the first 10 years of their service, can be used as a justification for burdening existing customers by requiring them to subsidize the new development capital expenses. The City should require that this practice ends within the City and that developer contributions reflect the full cost of development so that existing customers are no longer burdened by system expansion. City should require that Austin ratepayers not be billed for uncollected development expenses within or outside of city limits. • The City should hire a consultant to review the proposed Plant Costs for prudent expenditures. • This consultant should be funded with either an increased franchise fee or a bill rider similar to the Texas Gas Service’s Conservation Adjustment Charge or Austin Energy’s Community Benefits Charges. • Other large cities served by Texas Gas Service should be encouraged to co-fund this consultant and hold their own review of proposed Plant Costs. • Financial penalties should be specified in the franchise should TGS withhold information from the City or the consultant. • The City of Austin should require Texas Gas Service to implement a progressive residential tiered rate structure with no less than three tiers.