Insiders Continuing Series: Consumers pay tens of millions for mismanagement on which they lose hundreds of millions in higher rates.
Texas Insider Report: AUSTIN Texas According to the pleadings of at least one party involved in the case the customers of
the electric utility controlled by the City of Austin are paying at least $200 million more than they should annually with the over-charges possibly running much higher. And the latest evidence reveals Austin Energys wholesale operations
lost $210 million on which the company wants captive customers to cover the costs.
The proceedings which bring to light the inner workings of the City of Austins monopoly utility are part of what in formal industry terms is known as Austin Energys Tariff Package: 2015 Cost of Service Study & Proposal To Change Base Electric Rates.
The Austin Chamber of Commerce and other ratepayers will be filing their arguments with the Independent Hearing Examiner overseeing the rate case this week.
The proceedings initial revelations amongst other things demonstrate that Austin Electrics customers are faring worse under the existing company-owned generation model than they would be if the utility simply purchased all its electricity from
ERCOT the Electric Reliability Council of Texas.
At the same time evidence also now points to a dollar cost that Austin Energys customers pay for being held captive in a monopoly non-competitive system. If there was competitive choice in Austin retail ratepayers would pay $200 million dollars per year less than they do now.
In other words the complaintants Austin Energys captive customers suffer a $200 million No Choice Penalty."
A more detailed explanation shows that all of Austin Energys power or electricity generation is entirely dedicated for sale to
ERCOT the Electric Reliability Council of Texas. In fact none of its generation is directly delivered to Austin Energys retail customers.
At the same time Austin Energy sells its electricity generation to ERCOT Austin Energy also buys all of its energy from ERCOT.
Austin Energy could choose to exit the wholesale generation and sales portion of the market critics point out and continue buying from ERCOT. However they continue to provide wholesale generation and sales to ERCOT justifying the practice of doing so by claiming the sales incomes offset the purchases costs.
While the implication has been that customers are better off under the current arrangement to date Austin Energy has refused to disclose its actual numbers when asked to prove
the revenues involved in the companys sales to ERCOT exceeded its purchasing costs. Only after considerable efforts by the utilitys critics were relevant production costs able to be estimated and has it became clear the monopoly utility is losing millions of dollars a year by participating in the competitive wholesale electricity generation market.
Newly released figures show that Austin Energy incurs approximately $697 million each year in production expenses (including debt service) to run the nuclear coal gas and solar plants that it owns excluding the other directly contracted purchased solar and biomass.
The proper way to look at this critics now contend is that Austin Energy spends some $697 million to participate in the ERCOT generation and sales market while receiving only $510 million in revenues.
This shows that Austin Energy has a precise difference of $187275000 critics point out despite the companys claims of being profitable and transferring millions annually to the Citys General Fund.
State Representative Paul Workman noted earlier in the year that the Citys cost per kWh (about 15 cents/KWh) for its Webberville solar plant and the nearly-never-used biomass plant (costing approximately $54 million per year) have increased cost burdens paid by ratepayers who are part o the citys monopoly operated system.
Both the solar and biomass purchases approved and authorized by previous Austin City Councils were based purely on the desire to be green" and were without regard to the cost to the ratepayers of Austin Energy.
They are unnecessarily increasing rates for Austin Energy customers both inside and outside the city limits when power could be purchased for as little as 2.5 cents per kWh
Representative Workman said.
If Austin Energys customers had the ability to benefit from a choice of providers similar to consumers in most of Texas other major metropolitan areas and all the utilitys ratepayers customers purchased from competitive retail electric providers critics now say they have the information and numbers to show consumers would pay approximately $201 million less per year.
