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.
We have had many questions with regards to the impact on Energy Cost due to the recent weather.
The “Perfect Storm”:
As you likely experienced, Austin had 144 hours of consecutively being below 32F for the first time in recorded history (1890’s). The Arctic Blast did not just impact Austin, but in fact all of Texas. The grid operator for most of Texas is called ERCOT. Please note that ERCOT is charged with balancing the grid and that ERCOT does not own nor control any generation capacity.
At some point during last week, ERCOT lost 40% of generation capacity resulting in massive black-outs throughout the state. This lack of generation capacity was further compounded by snow and ice covered trees succumbing to the weight taking out power lines everywhere and as such last week’s Arctic Blast became the “perfect storm”.
Austin Energy (AE), like all other utilities in the US, have generation capacity that covers electrical demand for the majority of the time. When local demand outstrips local supply, Austin Energy, again like all other utilities, will enter the whole-sale electrical market to purchase power to balance supply and demand.
ERCOT has a state mandated price cap of $9,000/MWh, which prior to last week, had only been reached a few times in the past decade. During the winter storm the whole sale electricity price in Texas stayed at $9,000 for several days. The immediate implication of this is that any residential or commercial customer located in a DEREGULATED MARKET, who had chosen an index (floating) price option for procuring electricity , will incur very high energy cost on their next utility invoice. This is NOT the case in Austin as our market is a REGULATED Market and NO Austin Energy customers are on a floating price as far as we know..
Austin Energy has as a part of their overall rate structure a component called “Power Supply Adjustment” (PSA) sometime referred to as the “fuel charge”. This item is meant to cover the volatility in fuel cost for AE’s generation plants. Typically, the PSA is adjusted once a year. As can been seen in the image below, the PSA was last updated in November of 2020, where is was lowered by some 2%. Last time AE changed the PSA twice in one year was in 2016.
Please note that Blue Ocean does not have any “inside” knowledge of AE’s hedging strategy nor do we know how much power, if any, was purchased from the electrical whole-sale market by AE last week. We do anticipate, however, that AE will increase the PSA later this Spring, as AE likely did purchase some whole-sale power and as Natural Gas Prices have spiked due to the winter blast. A conservative guesstimate would be a 5%-8% increase in the PSA unit cost which should translate to an overall increase in energy cost of 1%- to 2%.
As you know, most commercial buildings in Austin are heated with electrical strip heat. The very nature of this kind of heat generation is that it causes high peak demand (kW). If the energy cost seems high on the next utility invoice, please note that it is likely caused by a spike in heat load and not as a result of rate changes.
No Austin Energy customer will see a spike in energy cost due to whole-sale price increases on their next utility invoice.
Overall energy cost on next AE invoice will likely jump due to increased consumption (kWh) and peak demand (kW).
Later in the Spring, Blue Ocean does anticipate a relatively moderate increase in Austin Energy’s fuel cost (PSA) charge.
We do understand that many tenants are concerned about the impact on energy cost as result of the Arctic Blast.
BOMA Austin Sustainability Committee is sponsoring a series of workshops presenting the BOMA Energy Efficiency Program (otherwise known as BEEP). Previous modules were taught in 2019 and the remaining 4 modules are in the Spring of 2020. Course 5 & 6 will be held April 30th and Course 7 & 8 TBD all at Colorado Tower (thank you Cousins Properties). To find out more please visit BOMA AUSTIN:
U.S. Green Building Council® unveiled the next step for the LEED rating systems: LEED v4.1. For existing buildings, LEED v4.1 will be new, improved and agile to make it easier for every type of existing building. This is not a full version change but rather an incremental update to LEED rating systems.
LEED v4.1 O&M shifts from documents for documentation TO data for documentation by tracking performance in energy, water, waste, transportation, indoor air quality, toxin free environment and occupant satisfaction.
The Blue Ocean Energy team is very excited about LEED v4.1 O&M as this shift from documentation to more performance data allows existing properties to achieve LEED points based on performance metrics such as actual energy and water usage. Transportation is now a performance metric based on building occupant’s survey responses and Indoor Environmental Quality has tenants reporting on building satisfaction.
Bo Petersen with Blue Ocean Energy has been invited to speak at the Eco El Paso 11th Annual Conference – From Sustainable to Regenerative. Bo will be speaking about Energy Management in Commercial Buildings, Risk Management and Sustainability, Why Benchmarking is essential and Big Data paralysis. Join us on October 24 – 25, 2018, at the El Paso Scottish Rite Theater in Downtown El Paso.
Blue Ocean Energy sponsors a building tour of Cousins Properties’ 816 Congress Avenue. During this BOMA Austin event, the incredible results gained through effective management and the commitment of savvy ownership will be showcased. The building has completed significant retrofits and is now one of the most sustainable properties in the Cousin’s portfolio. We’ll tour the central plant, lobby, tenant amenities and the lounge/terrace at816 Congress.
Yet another City of Austin ECAD compliance season is upon us. Austin Energy is intending to send out a letter early April to all commercial building owners informing them of the ECAD Ordinance and the June 1st deadline. IF you have already contracted Blue Ocean to ensure compliance, please disregard these letters. If you haven’t yet made arrangements for ECAD compliance, Blue Ocean can help you comply. As our agreement states, we guarantee your ECAD compliance!
ENERGY STAR Rating Changes
As you may or may not know, ENERGY STAR Ratings are based on the Commercial Buildings Energy Consumption Survey (CBECS), which is only updated periodically. The next update will be implemented in August of this year. As more new buildings are being developed with ENERGY STAR and LEED standards it is not a surprise that the office building stock is becoming more energy efficient. The implication of this is that most buildings will see a decrease in their ENERGY STAR rating of 10-12 points after August of this year.
We recommend completing the ENERGY STAR Certification (if eligible) for 2018 well before this change.
Please feel free to contact us should you have any questions regarding ECAD Compliance and/or ENERGY STAR certification.
The US EPA ENERGY STAR® Program has announced that an update to ENERGY STAR® Portfolio Manager Metrics will take place on August 26, 2018. This update will include new 2012 CBECS survey results. These results have a larger sample size to better reflect the building stock which changes over time. As the new sample size is larger and as buildings are becoming more efficient, it is likely that ENERGY STAR scores will go down. Here are a few important tips to prepare for this update:
It is important to document your “pre-update” scores and details before July 2018
Qualifying buildings should apply for ENERGY STAR certification by July 26, 2018 …especially if your score is close to 75!
All 2017 ENERGY STAR certified buildings can apply for 2018 certification using a “Year Ending Date” of April 30, 2018 or earlier.
For buildings with data centers, there will be changes/updates coming which we will continue to follow and update our clients.
Some property types will have additional space requirements (warehouse, house of worship, K-12 Schools and Supermarkets).
Both are Class “A” office buildings located at The Domain in Northwest Austin, Texas and have received the ENERGY STAR two years in a row. Blue Ocean Energy was chosen to assist the owner and property managers in obtaining this esteemed award.
This certification represents proven, verified superior energy performance over a 12-month period. ENERGY STAR certified buildings perform in the top 25% of similar buildings nationwide and use on average 35% less energy versus similar buildings.