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The Deal Gets Done

City Council settles AE rate case in principle, details to come

By Mike Kanin, Fri., March 8, 2013

Austin Energy Settlement Week™ closed Friday mid-day, with a quick, unanimous City Council vote to accept a deal between the utility and its rate case challengers. Indeed, if it hadn't been for the spirited (and frustrated) testimony of consumer advocate Paul Robbins, the special-called 12:30pm meeting would have lasted less than 10 minutes. As it was – with Mayor Lee Leffingwell and most Council members committed to attend the 1:30 grand opening of the African-American Cultural & Heritage Facility – it passed in fewer than 20.

Not that expedience should say anything about a lack of complexity. In simple terms, the agreement, when presumably ratified by the state Public Utility Commission, will cost the utility just under $6 million. The utility will retain its overall five-tier block rate structure (though out-of-city users will see the top two tiers trimmed to match the third), as well as the customer assistance program charges, transfers to the city's general fund, and discounts for houses of worship and school districts so roundly criticized by case intervenors.

Some out-of-city ratepayers – mostly high-energy summer users – will see discounts on their bills. The bulk of that cut, about $4.3 million total, will come from reductions in energy charges. The rest – $1.2 million – will result from discounts to the Community Benefit Charge, including the customer assistance program. Despite that, AE will retain the full, Council-approved $9.6 million in funding for the customer assistance program.

Tom "Smitty" Smith of Public Citizen – a sharp critic of the utility's initial ratemaking plans during Council's portion of the process – said he was convinced that this was the best that the city could do. "This is not a perfect settlement," he told Council, "but we think ... that it preserves a number of things that are very important to the city: the energy efficiency programs, the renewable programs, the value of solar programs, and the multi-tiered block rates designed in such a way to discourage consumption on the hottest days." Though he went on to note that Public Citi­zen did not "think it's a good idea or good precedent to give anybody a discount just because they live out of town," Smith endorsed the settlement on behalf of Public Citizen, given "the alternative of prolonged litigation and a hearing before the Texas Public Utilities Commission that may not have resulted in a settlement as favorable as this one is at this time."

Attorney Roger Borgelt, representing Homeowners Unit­ed for Rate Fairness, the suburban consumer group that had filed the rate case, seconded Smith's opinion that the deal is a good one.

By contrast, Robbins was adamantly opposed. Appearing with indirect support from the Sierra Club, Robbins loudly denounced the process and the proposed settlement. While noting angrily that the precise terms remain unclear, he called the pending agreement "abhorrent," "abominable," and an all-around "bad deal," suggesting that citizens of Austin were in effect being treated as "second-class citizens" to suburban ratepayers who had sought the intervention of the PUC. Robbins said he was convinced that the settlement, in detail, would find the utility providing electricity to suburban customers at less than cost. "I have never seen a rate devised that is so arbitrary and so poorly linked to the cost of service," he added.

Council members did not respond to Robbins, Borgelt, or Smith. They asked no questions, and voted, unanimously, without debate. And that's how two years of bickering and anxiety ended – at least for now.

Up next for consideration is a detailed settlement document that will need to be approved by all parties. The whole megillah will then head to the PUC for review and confirmation – likely to be pro forma.


Posted here are: 1) The preliminary "term sheet" of agreement among the principal parties to the Austin Energy rate case appeal filed before the Public Utility Commission, subject to a completed agreement and PUC review;

2) Paul Robbins testimony to City Council objecting to the agreement and the process (actual testimony may have varied slightly from this prepared statement).

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