EUC debates restarting formal rate review as staff warns of multi‑year deficits

The Electric Utility Commission on March 9 pressed Austin Energy to ensure the utility’s upcoming budget preserves funding for climate and reliability goals while debating whether the city should start a formal rate review rather than include residential rate increases in the budget.

Cyrus Reed, an EUC member, offered a two‑part recommendation: ask Austin Energy to budget sufficient funds to meet the Resource Generation and Climate Protection Plan goals and to refrain from increasing residential rates through the budget process, instead initiating a rate review or rate case process. “We recommend not increasing Austin Energy rates for residential customers in the next fiscal year and instead beginning a rate case process,” Reed said.

Austin Energy staff described the mechanics and timing for a rate adequacy review and a full rate case. John Davis, acting senior vice president and chief financial officer, said audited financials drive the cadence: audited results for a test year typically arrive in late March or early April, and an adequacy review filed afterward would determine whether a full rate case is needed. Davis noted recent financial shortfalls: a $42 million deficit for fiscal year 2025 and a forecasted $44 million shortfall for fiscal year 2026.

Stuart Riley, Austin Energy general manager, told commissioners that the financial policy requires a rate adequacy review at least every five years. Riley said that review presents audited results and that council would then decide whether to pursue a formal rate case. “If they want to go forward with the rate case, that’s their prerogative,” he said, adding that staff has sought to balance cost recovery with avoiding rate shock.

Commissioners pressed staff on rate design questions that came up in prior proceedings, especially changes last cycle that shifted more of the increase into the fixed customer charge. One commissioner cited that the fixed charge rose to $16.50 and said shifting increases into fixed charges can make rates less progressive and soften conservation incentives. Staff provided distribution of residential consumption across tiers — roughly 34% in tier 1, 40% in tier 2, 20% in tier 3 and 6% in tier 4 — and warned that as customers become more efficient, higher tiers provide less capacity to make up shortfalls.

Commissioners and public commenters urged more stakeholder participation than routine budget adjustments provide. Paul Robbins, vice chair of the Resource Management Commission, said a past intervenor’s discovery in a rate case found a roughly $9.3 million double‑counting error that reduced rates and argued that similar scrutiny requires a formal review.

The commission agreed to continue discussion next month after a planned staff presentation and to ask staff for clearer timelines and options — including truncated or phased review approaches that could provide public input without the full cost and duration of a traditional rate case. The EUC did not adopt a final binding recommendation on rate increases at the March meeting.