The Austin City Council has approved a $71 million electric rate hike for municipally-owned utility Austin Energy, which serves city residents as well as customers in outlying areas under a monopoly.
Austin Energy is one of 70 publicly owned utilities in Texas, serving 3 million customers in aggregate, that are not open to electric choice, or competition which allows customers to choose lower electric rates from competing energy providers.
As a result, residential customers at Austin Energy, who already pay electric rates that are higher than rates in Dallas and Houston where customers can shop for a low electric rate, will have to pay the rate hike, which works out to about a 14% increase in the average residential monthly bill.
A typical home, which uses an average of 1,000 kilowatt-hours (kWh) a month over the course of a year, will see its monthly bill rise to $113 under the Austin Energy rate hike. That's the equivalent of 11.3 cents per kWh -- or nearly 40% higher than residential rates in Dallas and Houston, where competition has pushed prices down to the 8-cent range.
Not only do customers at Austin Energy have no choice to find a lower electric rate, they are forced onto a "one-size-fits-all" electric rate structure that penalizes higher usage with higher electric rates. While this is beneficial to low-use customers, in areas where customers have choice, customers can find an electric plan tailored to their unique usage, so that both low-use and high-use customers get the best rate for their individual needs.
More rate hikes may soon be coming at Austin Energy as well. The utility has said that it needs $35 million to $55 million by 2015 to replenish its reserves.
According to the Austin-American Statesman, "the once flush utility spent down its huge cash reserves to fund a departure from fossil fuels as well as paying for capital projects and transfers to the general fund, among other things."
When customers have a choice in electric providers, they can "fire" companies that mismanage their finances, and switch to a supplier with a cheaper rate if an electric company tries to make up its losses on the backs of customers. Not so with municipal utilities, given their monopoly status.
The use of Austin Energy ratepayer dollars for the city's general fund has also rankled customers living outside of the city's limits, as the municipally owned utility spends their money but they have no say in city council elections.
Most Texans upset with their power provider can simply switch to a company with better rates and service. The Austin-American Statesman notes that Austin Energy's current rate controversy, "has the potential of becoming a fight over the future of the monopoly status of municipally owned utilities."
However, if Texans want the opportunity to save money on their electric bills by expanding choice to all areas of the state, they will need to step up and be heard, because wresting power away from a monopoly is not going to be easy.