As you may know, Austin Energy (AE) is about to increase the cost of electricity in the City of Austin. There is some good news, it is however mostly bad news.
First a little bit of background. Electric generation fuel cost for all utilities in the USA have increased significantly the past 12-18 months. In particular, natural gas prices have increased 222% since 2020 as can be seen in this table (2022 average price is for first 9 months of 2022):
As natural gas comprises some 35% of AE’s fuel mix, some cost increase was expected. Not expected, was the bombshell of a letter sent by AE to the City of Austin on 9-21-2022, where AE requested a 71% increase in the Power Supply Adjust charge (AKA Fuel Cost) effective 5 weeks later!! The proposed 71% increase, or some 2 cents per kWh, would have meant ADDITIONAL energy cost for AE customers (commercial and residential) of almost $300,000,000.It is clear that Austin Energy does not control the commodity markets, and as such a rate increase was inevitable. Better and more timely communication, however, from AE would have lessen the impact for its customers.
Short list of good news:
City Council rejected the 71% PSA cost increase and instead have authorized a “phased in approach” over the next 3 years.
Long list of bad news:
City Council approved an increase of the Power Supply Adjustment (PSA) of 52%
The PSA increase is effective with the November invoices (Yes, in 16 days)
More AE rate increases likely in January
Blue Ocean estimates the PSA increase alone will add 13% – 15% to energy costs in 2023 for commercial customers
2023 Building/Property Budgets likely will have to be redone
The new rates impact on your facility(ies) will vary as peak demand and kWh changes from month to month. If you are already a client (thank you!), Blue Ocean will be monitoring your rates and providing more detailed information.
Again, the best approach to mitigate rising energy cost continues to be Pro-active Energy Management Strategies.
As you may know, Austin Energy’s new rates became effective November 1st, 2021 and rate changes were less than we anticipated and may even equate to an energy cost reduction in months with lower peak demand.
Here are the specific rate changes for commercial customers on the AE 300kW plus rate; The new rates consist of a $0.55/kW (4%) increase in the Peak Demand (kW) charge and a decrease of $0.002/kWh (-6.5%) in the fuel (PSA) rate. Austin Energy’s “Power Supply Adjustment” (PSA), sometimes referred to as the “fuel charge”, is intended to cover the volatility in fuel cost for AE’s generation facilities.
As can be seen in this image of Austin Energy’s fuel charges and Natural Gas (NG) prices, a seeming disconnect has occurred between Austin Energy’s PSA charges and NG prices.
The new rates impact on your facility(ies) will vary as peak demand and kWh changes from month to month. On average, we would assume the all-in ($/kWh) unit cost to increase between 0% to 1/2% which is much less than anticipated. Which is great news for energy cost in 2022. We do think, however, that another fuel cost increase (PSA) may be implemented in 2022. It is also not great news for Austin Energy clients who signed up for Green Patron in 2021 as they will not benefit from the lowering of the PSA charge.
Again, the best approach to mitigate energy cost continues to be Pro-active Energy Management Strategies.
As you are probably aware, Austin Energy just approved a new rate plan which becomes effective on November 1, 2017. Although these new rates are not available yet on the Austin Energy website, the rate plan was distributed by Austin Energy’s key account group, as well as BOMA Austin. Unfortunately, these distributions included a number of “typos,” originally indicating fuel cost (PSA) increases of 17%.
The good news is that Austin Energy has now sent out a corrected rate plan. In the image below, we are comparing the current rate plan with the rate plan that becomes effective on November 1st for buildings inside the Austin city limits, that are either on the 300kW plus or the 10kW – 300 kW rate plan.
As you can see, the fuel cost is increasing by almost 8% during the 8 non-summer months. We have calculated the implication for a typical commercial office building, and it would appear that on average the monthly Austin Energy utility cost will increase between 2 and 2.5%.
As there have been at least two previous rate plans distributed by Austin Energy, we want to stress that we cannot guarantee this will be the final version. Should a new rate plan be distributed by Austin Energy, we will update accordingly.
Many of our clients were surprised to hear about the increase in fuel cost (PSA). As we understand it, the fuel cost is intended to reflect Austin Energy’s cost of fueling their power plants. As these prices are influenced by market forces, the argument is that Austin Energy can pass increases (or decreases) to their customer base without the approval of the Austin City Council. In the past, Austin Energy has only changed these rates once or twice per year. Other utilities (CPS Energy in San Antonio, for example), change the fuel component on every invoice.
ENERGY STAR News
Please note that the EPA has extended the deadline for applying for ENERGY STAR® Certification for 2017 until December 15th. Blue Ocean has grown our portfolio of clients we assist with the ENERGY STAR certification process and to date we have certified approximately 30% of all office buildings in the Austin area.
Today is ENERGY STAR Day! Give us a call if you are interested in achieving the ENERGY STAR certification.
Austin Energy (AE) finally settled on a new rate structure for all customers. In general, most, if not all AE customers, will see a decrease in energy costs. For commercial accounts, the reduction will be most pronounced during the summer months as AE is eliminating the seasonality charges for peak demand and energy charges. The new rates will be implemented over a two month period starting with the November 2016 AE invoice.
The biggest change, in our view, is the changes to the commercial customer rate classes. Please recall that the commercial rate applicable to your property depends on which “demand class” your property belongs to as measured (metered) by summer month’s peak demand (kW).
The bulk of Austin Energy’s commercial customers fall into two rate classes based on peak demand. Smaller commercial properties are typical in the 10>50kW rate class and larger commercial properties in the 50kW and greater rate class. With the new rate plan the commercial rate classes are changed per the chart above.
Please note that AE has not yet published the approved rate plan but we believe the information provided above to be correct. Unfortunately, it is not all good news as some components of the AE rate plan will result in increases of certain charges. Furthermore, it is our view that the recent increase in energy prices, specifically natural gas prices will result in AE having to increase the fuel charge (Power Supply Adjustment) in 2017.
If you want to find out more about Austin Energy’s new rate structure for commercial properties the Building Owners and Managers Association (BOMA) Austin, who was a key player in the rate discussions, is hosting a seminar on October 13th at Frost Bank where Blue Ocean will be talking about the new rates, load factor, peak demand and managing your electric bills. The seminar is open to all.