Business groups alarmed at proposed Austin Energy fee hikes

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The prospect of a big and sudden increase in a critical expense — such as the cost of electricity — can trigger nightmares for many business owners.

That’s the position in which Austin Energy has put local companies, according to industry groups that are expressing alarm at the utility’s recent proposal to sharply raise some fees beginning Nov. 1.

Austin Energy has said its proposed increases to so-called "pass-through" charges intended to recoup costs that are beyond its control — such as higher prices for natural gas — would boost monthly electricity bills for average residential customers by about $20, or $240 annually, not including the impact of unrelated proposed increases to the utility's base electricity rates.

While the sum is significant, it's a fraction of what the city-owned utility's local commercial and industrial customers are facing.

The impact on small and medium-sized businesses could be thousands of dollars, and in some cases tens of thousands of dollars, annually in extra costs from the pass-through increases, city figures show. Meanwhile, top industrial users — such as semiconductor factories, which draw large amounts of electricity 24 hours a day and use many times the volume of residential customers and most commercial operations — would be on the hook for millions of dollars annually from the higher fees, industry experts say.

The Austin City Council was scheduled to vote last Thursday on the fee increases but postponed the action for two weeks after a variety of groups — including the Austin Regional Manufacturers Association, the Austin Chamber of Commerce and the Coalition for Clean, Affordable, Reliable Energy — sought a delay.

Had the City Council approved the fees according to the original schedule, it would have done so barely a week after Austin Energy first proposed them Sept. 21 — a time frame that business advocates said provided scant opportunity to assess the need for them or for the utility's customers to plan for them.

"It will lead to large users seeing over 40% increases on their electric bill and business owners struggling with millions of unbudgeted costs," said Ed Latson, CEO of the manufacturers association. "It is another example of Austin Energy's disregard of their customers, who were not provided any guidance or forecast."

Austin Energy annually modifies the pass-through fees that show up on monthly bills, called the power supply adjustment and the regulatory charge.

This time, however, the utility says steep hikes are needed — including a 71% increase in the power supply adjustment and a 24% increase in the regulatory charge. It attributed the proposed hikes mainly to big increases in the price of natural gas used to fuel many power plants, an exceedingly hot summer and higher expenses on the state's main electricity grid, which is operated by the Electric Reliability Council of Texas.

"Over the peak summer months Austin Energy has seen an extraordinary rise in ERCOT market costs," the city utility said when it announced the proposed fee increases. "Like other ERCOT utilities, Austin Energy has experienced substantially higher congestion costs in transporting power through the ERCOT system, exacerbated by the highest natural gas prices seen since 2008. Utilities nationally are experiencing similar power and commodity price shocks."

Austin Energy's estimate that, combined, its proposed increases would equate to about $20 per month extra for typical residential customers is based on average monthly residential usage of about 860 kilowatt-hours systemwide.

But commercial customers use much more power than residential customers do.

Small restaurants and convenience stores that typically use about 20,000 kilowatt-hours per month, for instance, would pay about $455 a month extra because of the higher fees, according to figures from Austin Energy. That's the equivalent of about $5,500 extra a year. Businesses such as department stores and small hotels might use 80,000 kilowatt-hours a month and could see their monthly bills rise by $1,800, or almost $22,000 a year.

Still, major industrial customers would see the biggest increases, with industry experts saying the higher charges could add up to millions of dollars annually for the top electricity users, such as semiconductor companies with factories here.

Neither Samsung, which has semiconductor manufacturing facilities in North Austin and is building another in Taylor, nor Infineon Technologies, which has a chip plant in Southeast Austin, commented on the proposed fee increases when contacted by the American-Statesman.

NXP, which has two plants in Austin, declined to comment on its electricity usage but said in a statement that it hopes the fee increases aren't enacted abruptly as initially proposed.

“As one of the city’s largest employers and manufacturers in Austin, we encourage Austin Energy and the Austin City Council to work to find a more gradual approach to increasing these rates to avoid such a drastic financial impact to residents and businesses," NXP said.

Trey Salinas, a spokesperson for the Coalition for Clean, Affordable, Reliable Energy, said his group also would like the increases to be phased in if a determination is made that they're needed — an idea that Austin Energy raised as a possibility at a City Council work session just days after initially proposing that they be implemented all at once.

The coalition, known as CCARE, represents commercial and industrial customers, including school districts, hospitals and manufacturers.

"The Austin City Council and Austin Energy need to work with the community to implement a more gradual approach that avoids this significant economic impact to Austin residents and businesses," Salinas said.

Matthew Geske, vice president of regional and local policy for the Austin Chamber of Commerce, said the proposed increases need more scrutiny, which is why the chamber also pushed for a postponement of the council vote.

“This is a very complex issue, and it came up quite rapidly, (so) having a little bit of time to better understand why this increase is so sharp is important," Geske said. “We just really want to better understand this."

Overall, Austin Energy has said it is aiming to recoup about $796 million by increasing the power supply adjustment and the regulatory charge. While it presented council members during the recent work session with options to more gradually recover the funds, it also said it would not have enough money for some of those scenarios and would need assistance from the city.

Austin Energy has 520,000 customers and an annual operating budget of more than $1 billion.