Item 2- AE Memo — original pdf

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To: From: Date: MEMORANDUM Resource Management Commission (RMC) Stephanie Koudelka, Interim Senior VP & Chief Financial Officer February 13, 2026 Subject: February 17, 2026 RMC Agenda Item # 2 This memo clarifies and corrects information in the draft resolution on the February 17, 2026, meeting agenda. Austin Energy is a cost-recovery utility. Austin Energy’s rates are designed strictly to recover the utility’s costs incurred in providing electric service to customers. Austin Energy’s retail rate structure includes base rates, which cover fixed costs outlined below, and pass-through rates, which include the Power Supply Adjustment, Community Benefit Charge, and Regulatory Charge. Information about Austin Energy’s residential rates and charges is available on Austin Energy's website. Austin Energy’s rates are determined using careful planning and analysis, ensuring system reliability and the utility’s financial health. • Base rates are set to recover costs such as billing, metering, debt service, equipment, and employee salaries. Base rates include a customer charge and energy charges. The customer charge is $16.50 per month and remains low compared to our peers. Austin Energy’s Customer Assistance Program (CAP) customers, a set of customers that has been vastly expanded in recent years to reach more low income customers, do not pay the customer charge. Energy charges are based on the actual electricity used by customers each month, through an escalating tier structure. The less a customer uses, the lower their bill. • Customers’ energy usage has decreased consistently over the years due to Austin Energy’s industry leading conservation programs. Austin Energy must recover rising costs through a balanced approach in the fixed customer charge and energy charges. • Base rates are applied consistently to Austin Energy customers, and any difference among customer bills is due to consumption patterns, not Council district. • Rising costs, due mostly to rapid and substantial inflation in our sector but also due to critical system investments, mean that Austin Energy must increase base rates to achieve financial stability. In FY26, Austin Energy’s base rates increased 5% to ensure continued system resilience and effective cost recovery. Current base rates were approved by Council ordinance as part of the FY26 budget process. Page 1 of 2 • Austin Energy presents annual budget forecasts and departmental requests to the Electric Utility Commission and City Council. The EUC has purview over rates and has the opportunity to make recommendations to Council. City Council votes on Austin Energy’s rates every year as part of the budget process. • It is worth noting that even with the approved base rate increase last year, the overall average residential customer’s bill decreased compared to the prior year’s approved rates due to lower pass-through rates. In addition, the CAP customer bill reduction was even greater. • Consistent with its financial policies, Austin Energy expects to conduct a rate adequacy review based on a 2026 test year. Page 2 of 2