Increasing Energy Prices in Austin

It is no secret that energy prices have increased in the past 10-20 years due to factors such as increased energy needs and inflation. The figure below shows the general U.S. trend of energy prices by sector for 2000-2008.

source: energy.gov

In Austin,TX, the energy provider Austin Energy claims on their website that their customers enjoy “some of the lowest rates among major Texas cities.” This may be true. However, the next line on austinenergy.com states that, “Austin Energy’s base electric rates have not increased since 1994.” According to statesman.com on 12:21 a.m. Friday, Feb. 3, 2012, “The city-owned utility is seeking to keep the 12.5 percent average rate increase it initially proposed but phase it in over two steps. Sometime this year, rates would rise 8.7 percent, although the increase would hit homes, churches and some other classes of customer much harder. Another 3.8 percent increase would kick in around October 2014.”

It seems that Austin Energy can no longer claim that their rates have not increased. The question is: why? Because this is the first increase in base price in 17 years in Austin, many are alarmed. The fact is, however, that Austin is behind in increasing rates, meaning that they have not kept up with inflation and increasing costs of energy. Austin Energy is in major need of price increase to salvage their finances. In addition, with an increase in revenue, Austin Energy will be able to add to their operations and improve overall the utility in Austin.

As is common in Austin, this change did not happen quickly. The need and movement for this energy price increase has taken place over many years, starting in late 2009 publicly and not coming to resolve until 2012 – a resolution that ends in 2014.

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2 Comments

by | 25 March 2012 · 10:26 pm

2 responses to “Increasing Energy Prices in Austin

  1. mpl

    I agree, ksberns; it is definitely time for Austin Energy to increase their electricity rates, not only to salvage their finances but for multiple reasons. The reliability of the Texas grid is in jeopardy this coming summer, as current available generation is coming dangerously close to demand, especially during hot summer months where electricity use is at its highest. A Texas Tribune article, “Electric Grid in Texas Faces Multiple Challenges”, discusses the need for new power plants to accommodate increasing demand; however, current electricity rates cannot cover the high capital investment needed for such infrastructure [1]. According to the article, the PUC is considering lifting the cap on the wholesale price of electricity to help alleviate some of the stress electricity companies are currently feeling. Although conservation measures may help to widen the gap between generation and demand, this will not solve the problem.

    Another question that has been posed in this class is whether or not the price of electricity is too cheap all around, despite current stresses on the grid. I just paid my electricity bill to Austin Energy, and I paid approximately $0.04/kWh. I find it very hard to believe that that extremely small price can cover the high costs of producing electricity, especially when all of the externalities of energy production are considered such as air pollution, land destruction, and waste. Looking briefly at electricity prices in Europe, only one country has an electricity price below $0.10, with most above $0.15 [2]. However, when looking at prices across the US, they were considerably lower with many prices below $0.10/kWh [3]. Despite the need to increase rates to create new generation, I think all utilities across the country need to evaluate their current rates and consider raising them to accommodate the real price of electricity–environmental impacts included.

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