Austin Energy Rate Proposal Disincentivizes Conservation, Includes Imprudent Investments in Coal, Undervalues Solar Energy

AUSTIN – Austin Energy’s rate proposal is unfair and not aligned with established City of Austin and Austin Energy goals for energy efficiency, customer-sited solar energy, and coal retirement, experts from Public Citizen, Sierra Club, and Solar United Neighbors said today in testimony submitted to the Independent Hearing Examiner. The organizations commissioned testimony by respected experts who offered detailed recommendations on how Austin Energy could develop and propose rates that are more just and reasonable.

Electricity market and rate design expert Ezra Hausman, Ph.D. notes in his testimony:

“The price signals that are designed to encourage conservation under the current rate structure would be effectively eliminated. Moving toward higher fixed charges and lower variable costs disincentivizes beneficial energy use practices and increases payback times for customer investments in energy efficiency measures or distributed energy resources, because the customer sees less financial benefit for each unit of savings. It penalizes customers who have already invested in reducing their energy usage, and raises the bills of other low-usage customers, who may also be low-income customers.”

Austin Energy’s rate proposal would increase the fixed customer charge by two and one-half times, from $10 per month to $25 per month. Austin Energy also proposes to raise rates for residential customers who use the least energy while decreasing rates for those who use the most. These changes create a disincentive to conserve, frustrating Austin’s climate and energy goal, and its commitment to transitioning to net-zero energy buildings and total decarbonization of Austin’s electric supply.

Hausman’s testimony also addresses Austin Energy’s proposed continued investments in the Fayette coal-fired power plant. The city has abandoned a pledge to close its portion of the plant by the end of 2022. He concludes:

“The City should direct Austin Energy to oppose all life-extending capital investments at Fayette, including any capital investment necessary to comply with impending environmental regulations; to take all actions necessary to prepare to exit the plant, including ensuring the adequacy of its non-nuclear decommissioning fund; and to continue or redouble its efforts to close the plant permanently in favor of cleaner generation sources.”

Utility regulatory expert Karl R. Rábago critiqued Austin Energy’s proposed changes to the Value of Solar Tariff (VOST), which is key for continued solar adoption at homes and businesses. He concludes that “Austin Energy intends to terminate its VOST in almost everything but name” and “it appears that Austin Energy’s VOST changes will economically disadvantage customer-generation in favor of utility generation.” Rábago identifies several ways in which Austin Energy’s VOST denies just and reasonable compensation to customers with solar for the benefits they provide to Austin and the utility, and he makes several recommendations that would result in a fair Value of Solar Tariff. Rábago points out:

“Whenever the production credit for customer-sited solar generation is artificially suppressed in a VOS credit that does not reflect the full range of avoided costs and benefits, an uneconomic subsidy is created in which customer-generators are required to subsidize other non-solar customers (especially large users of electricity) and the utility. Whenever customer-generators are forced to subsidize other customers, they will be less likely to invest in solar generation, frustrating policy and economic goals for the community.”

Cyrus Reed, Ph.D. submitted testimony addressing the importance of the Energy Efficiency Services (EES) Fee, which pays for programs that assist customers with energy efficiency and solar energy upgrades at homes and businesses. He objects to Austin Energy’s proposal to exempt the largest commercial and industrial energy users from paying the fee and highlights the need for a much more robust and transparent public process for the annual updates to the EES fee and the program budgets that are paid for by the fee.

The Austin Energy rate proposal is pending before an Independent Hearing Examiner and City Council is expected to make a final decision before the end of the year.