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[00:00:04]

GO AHEAD AND CONVENE.

TODAY'S, UH, WE'RE GONNA GO AHEAD AND CONVENE TODAY'S AUSTIN CITY COUNCIL WORK SESSION.

TODAY IS, UH, TUESDAY, UH, NOVEMBER 1ST, 2022, AND WE ARE IN THE BOARDS AND COMMISSION ROOM HERE AT CITY HALL.

UH, THE TIME IS, UH, NINE 16 COLLEAGUES.

WE'RE GONNA START TODAY WITH, UH, AUSTIN ENERGY BASED RATE DISCUSSION.

UH, WE'LL SEE HOW LONG THAT GOES.

AT THE END OF THAT, UM, UH, THE MARI PRO TAB ASKED FOR THERE TO BE DISCUSSION ABOUT SPEAKER TIMES, I THINK, UM, UH, AT, UH, MEETINGS.

AND WE, UH, WE HAVE A FEW OF THOSE LEFT.

UH, AND THEN I WOULD IMAGINE AS A COUNCIL YOU'LL REVISIT THAT.

UH, YES.

REMEMBER, UM, MAYOR IS MY UNDERSTANDING THAT ITEM 73 WAS POSTPONED.

I DON'T WANNA MAKE THE STAFF STAY JUST FOR ME TO ANNOUNCE THAT IT'S POSTPONED.

WHEN IS, WHAT'S THIS? IS THE, UH, I ILA TRAVIS REIMBURSEMENT? IT'S POSTPONE.

WE'RE WE'RE POSTPONED, I'M SORRY, WITH THE COUNTY.

WOULD A CONVERSATION ON THAT HELP AT ALL? NO.

NO.

OKAY.

SO 73.

OH, OKAY.

GOT IT.

73 IS PULL.

SO AGAIN, WE'RE GONNA START WITH THE AUSTIN ENERGY BASE RATE DISCUSSION.

WE'RE GONNA GO TO A DISCUSSION ABOUT SPEAKER TIMES WHEN WE'RE DONE WITH SPEAKER TIMES, AND WE'LL DO PULLED ITEMS. AT THIS POINT, THE ONLY PULLED ITEM I'M AWARE OF IS, UM, UH, COUNCIL MEMBER TOVO IS, UH, UH, IFFC WITH RESPECT TO PROPERTY COUNCIL MEMBER KITCHEN.

I WAS WAITING TILL YOU'RE DONE.

ARE YOU DONE? NOT QUITE YET.

OKAY.

AND THEN WE HAVE AN EXECUTIVE SESSION.

THERE ARE TWO THINGS THAT ARE NOTICED ON EXECUTIVE SESSION.

ONE IS A COPYRIGHT MATTER AND THE OTHER ONE WAS, UH, POSTED FOR THE AVAILABILITY TO DISCUSS, UH, LABOR NEGOTIATIONS.

UM, IF SOMEBODY WANTS TO HAVE THE EXECUTIVE CONVERSATION ON LABOR NEGOTIATIONS, LET ME OR ANN NO, WE PUT IT ON THERE JUST IN CASE.

UM, BUT THAT'S WHY IT'S ON THERE.

IF NO ONE ASKED FOR IT, THEN THE ONLY THING WE WOULD TALK ABOUT WOULD BE COPYRIGHT.

OKAY.

AND WE'LL COME BACK TO IT.

UM, I HAD ASKED FOR AN EXECUTIVE SESSION THIS TIME I'M NOT SEEING IT, SO I JUST WANT, MY QUESTION IS, WHEN ARE WE HAVING IT? I HAD ASKED FOR EXECUTIVE SESSION ON MY BUDGET WRITER, UH, MY BUDGET WRITER RELATED TO, UM, UH, REPLACEMENT OF THE NORTHBRIDGE SHELTER.

SO, UM, I, I APOLOGIZE.

I MUST HAVE MISSED THE RESPONSE TO MY EMAIL.

SO WHEN IS IT SCHEDULED FOR? AND, AND MAY I ADD TO IT? CAN IT BE, IS IT SOMETHING THAT WE COULD TALK ABOUT AS PART OF, UM, THE PUB, THE PRIVATE, THE PUBLIC PROPERTY, IFC THAT I BROUGHT THIS? WELL, WE, WE COULD, SO WE COULD DO IT ON THURSDAY, I MEAN, OR, OR TODAY.

IS IT ? YEAH.

OR TODAY.

I MEAN, BUT THE, I MEAN, THE STAFF'S GOTTA BE PREPARED CUZ THEY HAVE TO.

UM, DO YOU KNOW THE QUESTION THAT, UH, CUSTOMER KITCHEN IS WANTING TO ADDRESS? I THINK IT'S A REAL ESTATE EXECUTIVE SESSION AND APOLOGIES FOR NOT CATCHING IT, FOR PUTTING IT ON TODAY.

I DON'T KNOW.

I CERTAINLY KNOW THAT THE STAFF WOULD NOT BE READY TODAY TO TALK ABOUT IT, THE REAL ESTATE FOLKS AND, AND DIANA GRAY.

UM, AND IF WE COULD, WE COULD PROVIDE A MEMO FOR INFORMATION.

NO, THIS IS A CONVERSATION FOR COUNSEL.

UH, IT IS A CONVERSATION ABOUT HOW ARE WE GOING TO PROCEED WITH, UM, THE FUNDING OPTIONS THAT MIGHT BE AVAILABLE FOR A, A SHELTER.

UH, AND THERE'S A NUMBER OF PLACES TO POTENTIALLY, UH, CHOOSE FROM IT.

THIS IS MORE ABOUT THE FUNDING, UH, CHECK NOT MUCH ABOUT WHICH PLACE.

WOULD YOU CHECK AND SEE IF WE COULD DO THIS ON THURSDAY? YES, PLEASE.

IT'S VERY TIME SENSITIVE, UH, BECAUSE IF WE'RE GONNA TAKE ACTION, WE ONLY HAVE A FEW MORE, UM, MEETINGS TO DO IT.

AND AGAIN, MY FOCUS HERE IS ON THE, THE THRESHOLD QUESTION IS HOW MIGHT WE FUND THIS? I MEAN, THERE ARE QUESTIONS ABOUT THE LOCATION, AND I'M NOT TRYING TO PUSH A PARTICULAR LOCATION, BUT, BUT I DO WANT US TO GET CLEAR, UH, BECAUSE OUR, UM, OUR STAFF IS NOT BEING ABLE TO MOVE FORWARD BECAUSE WE HAVEN'T ANSWERED THE FUNDING QUESTION.

AND TO THE DEGREE THAT THE INTERCESSION NEEDS TO BE ABOUT A BETTER PARTICULAR PIECE OF PROPERTY, I DO HAVE SOME PARTICULAR PIECES OF PROPERTY.

OKAY, THAT'S FINE.

THAT I WOULD RAISE IS THE, AS THE BASIS FOR US TO BEING ABLE TO DO IT ON THURSDAY, BUT IT'S HOLD OFF ON THE CONVERSATION.

GOTCHA.

MM-HMM.

TILL WE, TILL WE TILL WE GET TO THE, TO THERE ON THURSDAY.

OKAY.

OKAY.

UM, MAYOR PRO TEMP.

UM, I, I BELIEVE THAT WHEN WE SET THE EXECUTIVE SESSION FOR THE LABOR NEGOTIATIONS, WE WANTED THAT TO BE ON THURSDAY BECAUSE THEY'RE NEGOTIATING TODAY.

UM, SO I WOULD ASK THAT WE PLANNED TO HAVE THAT ON THURSDAY'S.

FINE.

OKAY.

I THINK IT'S SET FOR BOTH DAYS.

NO.

YES, WE HAD SET IT THAT WAY.

WE JUST WANNA MAKE SURE NO

[00:05:01]

ONE, SO IT'S ON THE AGENDA ON THURSDAY, PEOPLE COULD CALL FOUR 10, BUT IF ANYBODY WANTED IT TODAY, THERE'S CERTAINLY THAT OPPORTUNITY.

SO I WANT IT ON THURSDAY.

IT COULD BE BOTH DAYS.

I'M JUST SAYING THAT I WANT IT ON THURSDAY.

THAT'S ALL.

I'M ALL, I'M, YOU ASKED IF WE WANT IT.

GOT IT.

SO STILL, IF SOMEBODY WANTS IT TODAY, FIND ME, FIND ANN.

OTHERWISE, IT'S NOT GONNA BE ON TODAY.

LESLIE, LET ME KNOW WHEN YOU'RE READY TO CALL UP THE AUSTIN ENERGY STAFF AND I'LL KIND OF INTRODUCE IT.

OKAY.

ANYTHING ELSE BEFORE WE START?

[B1. Austin Energy Staff Briefing on Proposed Revisions to the Base Rate Structure and Cost of Service.]

LET'S GO AHEAD AND START.

LESLIE CHAIR, WE'LL START WITH YOU.

IF OUR PRESENTERS FROM AUSTIN ENERGY COULD COME UP.

AS YOU ALL KNOW, UM, WE'RE LOOKING AT HAVING A NUMBER OF ADDITIONAL WORK SESSIONS AND PUBLIC HEARINGS ALL LEADING UP TO A VOTE ON, UH, THE BASE RATE CASE.

UM, HOPEFULLY THE 1ST OF DECEMBER AT OUR REGULAR MEETING THAT DAY.

WE DO HAVE DECEMBER 8TH AS A REGULAR MEETING AS A FALLBACK, BUT TODAY WE ARE GOING TO GET KIND OF A LAY OF THE LAND FROM OUR GENERAL MANAGER AND, UM, FROM MS. COOPER AND MR. DON BROSKI.

AND I JUST WANTED TO KIND OF LAY OUT SOME EXPECTATIONS IN ADVANCE.

UM, WE'RE GONNA BE LOOKING AT ASKING AUSTIN ENERGY.

WHAT IS THE GAP THAT AUSTIN ENERGY IS TRYING TO FILL? THEY'RE LOOKING FOR A PARTICULAR AMOUNT OF MONEY.

THAT NUMBER HAS BEEN QUESTIONED BY THE IE AND THE ICA.

THAT'S THE INDEPENDENT HEARING EXAMINER AND THE INDEPENDENT CONSUMER ADVOCATE.

SO WE'RE GONNA BE LOOKING AT COMPARISONS OF THE BASELINE AMOUNT FROM THE VARIOUS REPORTS.

WE CAN LOOK AT THE NUMBERS IN THAT CONTEXT AND MAKE SOME INFORMED DECISIONS.

AND THEN THE SECOND PIECE IS WE LOOK AT DIFFERENT STRATEGIES.

MUCH LIKE WHEN WE'RE LOOKING FOR OPTIONS THAT WE CAN ALL CONSIDER, I'D LIKE TO MAKE SURE THAT WE DO THAT HERE.

IN OTHER WORDS, THAT WE BRING SUFFICIENT OPTIONS AND DIFFERENT LEVERS, UH, FOR THE CALCULATIONS SO THAT WE HAVE REALLY GOOD INFORMATION TO BUILD, UM, OUR DECISIONS BASED ON THE OPTION SCENARIOS.

UM, AND THEN I HAVE SOME SCENARIOS THAT I'VE DESCRIBED HERE AND I'VE PROVIDED THEM TO AUSTIN ENERGY.

A SCENARIO THAT USES A GRADUATED INCREASE OF THE CUSTOMER CHARGE.

THAT STEADILY GOES UP OVER THREE TO FIVE YEARS, MUCH LIKE WE ARE DOING WITH THE, UM, UH, WELL THE GRADUATED, MUCH LIKE WE'RE DOING WITH THE PSA TO AVOID RATE SHOCK, A SCENARIO WITH FOUR TIERS INSTEAD OF THE PROPOSED THREE A SCENARIO BASED ON PROJECTIVE GENERAL FUND TRANSFER.

AND THAT GETS INTO HOW MUCH MONEY COMES FROM, UH, AUSTIN ENERGY INTO THE GENERAL FUND EACH YEAR.

UM, A SCENARIO WITH ANY SAVINGS IDENTIFIED BY THE INDEPENDENT CONSUMER ADVOCATE THAT IS SUPPORTED BY THE INDEPENDENT HEARING, EX HEARING EXAMINER.

AND A, A VARIETY OF COMBINATIONS OF THESE ITEMS THAT WORK TO FILL IN THE FUNDING GAP.

THE POINT IS WE NEED TO FILL THE FUNDING GAP AND WE NEED TO MAKE SURE WE HAVE SUFFICIENT MONEY IN THE RESERVE SO THAT AUSTIN ENERGY IS NOT ONCE MORE IN THE FUTURE CONFRONTED WITH THE SITUATION LIKE WE HAVE BEEN DEALING WITH THIS YEAR.

SO JUST TO RECAP, WE'RE LOOKING AT 1, 2, 3, 4, 5, MAYBE SIX, UM, OPPORTUNITIES TO HAVE, UH, DISCUSSIONS WITH AUSTIN ENERGY AMONG, UH, WORK SESSION, PUBLIC HEARING, AND THEN OUR VOTING MEETING.

SO THANK YOU VERY MUCH FOR, UH, FOLKS BEING HERE AND GENERAL MANAGER SERGEANT, TURN IT OVER TO YOU.

UM, MAYOR, MAY I ASK MY COLLEAGUE A QUESTION? COUNCIL MEMBER POOL, ARE THOSE, UM, IS THAT LIST OF QUESTIONS POSTED SOMEWHERE? THE SCENARIOS THAT YOU JUST RAN THROUGH? I HAVE A COUPLE THAT I'M ASKING STAFF TO PREPARE AND I WANNA, I DON'T THINK I HEARD IT ON YOURS, BUT, UM, IF YOU COULD SHARE THAT LIST THAT WOULD BE HAPPY, HAPPY TO SHARE IF IT'S NOT ALREADY UP ON THE MESSAGE BOARD.

SURE.

OKAY, GREAT.

THANK YOU.

THIS IS GENERALLY WHAT, UM, HAS BEEN A TOPIC OF CONVERSATION THROUGHOUT SO, AND DRAWS FROM THE ICA AND THE I H E AS WELL AS AUSTIN ENERGY.

GOOD MORNING, MAYOR.

MAYOR APPROACH HIM.

COMMITTEE CHAIR COUNCIL MEMBERS.

I'M JACKIE, SERGEANT AUSTIN, ENERGY GENERAL MANAGER.

WITH ME TODAY ARE MARK DOMBROSKI, OUR DEPUTY GENERAL MANAGER AND CHIEF FINANCIAL OFFICER.

AND TAMMY COOPER, OUR SENIOR VICE PRESIDENT OF COMMUNICATIONS, REGULATORY AND COMPLIANCE.

I WANNA THANK YOU FOR TAKING TIME THIS MORNING TO ENGAGE IN THE AUSTIN ENERGY BASE RATE REVIEW PROCESS WITH YOUR SUPPORT.

AUSTIN ENERGY HAS BECOME A RECOGNIZED LEADER IN CLEAN ENERGY, GREEN BUILDING DEMAND SIDE MANAGEMENT AND ENERGY EFFICIENCY, CUSTOMER ASSISTANCE, AND MANY MORE PROGRAMS TO ADDRESS CLIMATE CHANGE.

YOU AND OUR COMMUNITY SHOULD BE PROUD OF THE MANY ACCOMPLISHMENTS AS YOU AS WE BEGAN OUR CURRENT BASE RATE REVIEW PROCESS.

WE SOON REALIZE THAT THE PARTICIPANTS IN THIS CASE ALL

[00:10:01]

SHARE A FEW THINGS IN COMMON WITH US.

THEY WANT US TO CONTINUE TO PROVIDE AFFORDABLE AND RELIABLE SERVICE.

THEY WANT US TO BE RESPONSIBLE AND EFFICIENT WITH BOTH OUR ENERGY AND USE OF DOLLARS, AND THEY WANT US TO CONTINUE TO LEAD ON IMPORTANT GOALS WHILE ALSO BEING RESPECTED A RESPECTED COMMUNITY PARTNER.

I SAY ALL THIS BECAUSE I KNOW THAT YOU WANT THESE THINGS TOO.

WE REVIEW OUR COST OF SERVICE EVERY YEAR, AND AT A MINIMUM EVERY FIVE YEARS PRODUCE A FULL COST OF SERVICE STUDY AND IF WARRANTED, CONDUCT A FULL BASE RATE REVIEW PROCESS.

THIS HASN'T ALWAYS BEEN THE APPROACH.

FROM 1994 TO 2011, AUSTIN ENERGY DID NOT SEEK BASE RATE CHANGES, BUT IN 2011, IT BECAME CLEAR THAT OUR FINANCIAL CONDITION HAD SIGNIFICANTLY DETERIORATED.

WE WERE NOT MEETING OUR FINANCIAL POLICIES AND BOND COVENANTS AND OUR CASH RESERVES HAD BEEN SPENT.

IT BECAME IMPERATIVE THAT WE ADJUST RATES AND SET A PATH FORWARD TO ENSURE THAT REVENUES WOULD COVER OUR COSTS TO SERVE CUSTOMERS, MEET FINANCIAL POLICIES, AND REBUILD OUR RESERVES.

SO IN 2012, THE CITY COUNCIL EMBARKED ON A PROCESS OF REVIEWING RATES AND MANY OF THE STAKEHOLDERS WHO PARTICIPATED AT THAT TIME ARE THE ONES THAT ARE ENGAGED TODAY.

ALTHOUGH THE 2012 RATE REVIEW WASN'T EXACTLY A SMOOTH PROCESS, WE LEARNED A LOT.

AND WITH THE CONTINUED WATCH OF THE STATE LEGISLATURE, THE CITY COUNCIL AND AUSTIN ENERGY REALIZED THAT WE WOULD NEED TO HAVE A MORE STRUCTURED PROCESS GOING FORWARD.

WE REVIEWED THE PUBLIC UTILITY COMMISSION OF TEXAS RATE MAKING PROCESS AS A GUIDE AND CRAFTED A MORE STRUCTURED PROCESS FOR OUR 2016 RATE REVIEW.

IN 2016 THROUGH THE CITY COUNCIL ADOPTED PROCESS, THE CITY HIRED AN IMPARTIAL HEARINGS EXAMINER, AN ADMINISTRATIVE LAW JUDGE TO PRESIDE OVER WHAT IS ESSENTIALLY A LEGAL CASE.

THAT PROCESS WENT WELL.

WE REACHED A SETTLEMENT WITH MOST OF THE PARTIES IN THE CASE, AND RATES WERE ULTIMATELY DECREASED STARTING JANUARY 1ST, 2017.

FAST FORWARD TO TODAY, AND WE'VE GONE THROUGH THE SAME STRUCTURED PROCESS WITH AN IMPARTIAL HEARING EXAMINER.

HOWEVER, THIS YEAR IT'S MORE CHALLENGING TO FIND AN OUTCOME EVERYONE CAN AGREE ON.

AUSTIN ENERGY HAS NOT HAD A BASE RATE INCREASE IN OVER 10 YEARS.

LET ME SAY THAT AGAIN.

WE HAVE NOT HAD A BASE RATE INCREASE IN OVER 10 YEARS, AND IN FACT, AS A RESULT OF THE 2016 BASE RATE REVIEW, WE REDUCED BASE RATES BY 42 AND A HALF MILLION DOLLARS.

I CAN'T THINK OF ANYTHING THAT HASN'T INCREASED OVER THE PAST DECADE, BUT WE DO SHARE YOUR CONCERN FOR OUR CUSTOMERS WHO ARE FACING COST PRESSURES AS WELL.

UNFORTUNATELY, WE'VE ALSO REACHED A POINT WHERE WE CAN NO LONGER DELAY ADJUSTING OUR BASE RATES.

AS PEOPLE MOVE INTO AUSTIN, THEY ARE MOVING INTO INCREASING INCREASINGLY MORE ENERGY EFFICIENT HOMES.

CUSTOMERS ARE SIMPLY NOT USING AS MUCH ELECTRICITY, AND THAT'S A GOOD THING.

IT ALSO MEANS THAT DUE TO OUR CURRENT TIERED RESIDENTIAL RATE STRUCTURE, 77% OF THESE CUSTOMERS ARE NOT PAYING THEIR FAIR SHARE OF FIXED COSTS.

AN ASSUMPTION THAT MANY PEOPLE MAKE IS, SHOULDN'T IT COST LESS TO SERVE PEOPLE IN THOSE MORE EFFICIENT HOMES? AND THE ANSWER IS YES AND NO.

YES, THEY USE LESS ENERGY AND THAT REDUCES OUR POWER SUPPLY COSTS.

BUT OUR FIXED COSTS, COSTS THAT ARE RECOVERED IN BASE RATES ARE INCREASING.

OUR INFRASTRUCTURE IS AGING AND MUST BE MAINTAINED, REBUILT, AND UPGRADED.

ADDITIONALLY, WE MUST ADD NEW SUBSTATIONS TO SERVE NEW NEIGHBORHOODS AND LARGER BUILDINGS.

WE'RE PAYING FOR THE ONGOING OPERATION AND MAINTENANCE OF A MUCH LARGER AND MORE COMPLEX SYSTEM THAN IN THE PAST.

AND WE CONTINUE TO SEE INCREASING COSTS FOR BOTH LABOR AND MATERIALS.

SO AS OUR CO COSTS OUTPACE OUR REVENUES, WE MUST STRUCTURE OUR RATES IN A WAY THAT FAIRLY CHARGES CUSTOMERS CLOSER TO WHAT IT COSTS TO SERVE THEM.

WE CANNOT CONTINUE TO DELAY WHAT NEEDS TO OCCUR NOW AND HOPE THAT THE SITU WILL WILL IMPROVE BECAUSE I CAN TELL YOU IT WILL NOT.

AND IN FACT, WE'LL ONLY GET WORSE.

WE KNOW THAT OUR CUSTOMERS WANT STABLE AND PREDICTABLE RATES, AND THAT MAKES OUR WORK ON DEMAND SIDE MANAGEMENT, ENERGY EFFICIENCY, GREEN BUILDING, WEATHERIZATION AND CUSTOMER ASSISTANCE.

EVEN MORE IMPORTANT, AUSTIN ENERGY IS, IS COMMITTED TO CONTINUED LEADERSHIP IN ALL OF OUR PROGRAM AREAS AS WE WORK WITH ALL OF YOU TO ADVANCE THE CITY'S OUTCOMES AND GOALS.

AND WITH THAT, I WILL TURN IT OVER TO TAMMY COOPER FOR A BRIEF PRESENTATION.

THANK YOU.

JACKIE, I'M SORRY TO INTERRUPT.

MAY I, I HAVE A QUICK QUESTION.

ARE THE INTERVENERS, WHAT IS THE EASIEST PLACE TO FIND THE DIFFERENT INTERVENERS REPORTS, INCLUDING THE CONSUMER, THE

[00:15:01]

INDEPENDENT CONSUMER ADVOCATE? I KNOW WE'VE GOTTEN A FEW BINDERS AND I'M, I'M TRYING TO FIND THAT REPORT AGAIN AND I CAN'T.

SO ALL OF THAT INFORMATION IS AVAILABLE ON THE CITY CLERK'S WEBSITE, AND WE HAVE THE URL AND THE PACKET, AND WE CAN CERTAINLY SEND THAT TO YOU VIA EMAIL SO THAT IT'S SOMETHING EASY TO CLICK ON.

AND WHAT YOU FIND IN YOUR BINDERS IS JUST A, A SMALL FRACTION OF THE MATERIAL, UH, THAT IS PART OF THE PROCEEDING.

AND THERE'S, THERE'S FRANKLY, HUNDREDS OF DOCUMENTS AND IT WAS, IT WAS TOO MUCH TO PRINT OUT.

SO WE KIND OF PUT SOME HIGHLIGHTED, UH, YOU KNOW, KIND OF INFORMATION FOR YOU IN THE BINDERS, BUT THEY'RE, UH, AVAILABLE ON THE CITY CLERK'S WEBSITE.

THANKS.

SO, SO THE PREVIOUS BINDER, AGAIN, I HAVE IT, I'M JUST TRYING TO, I'M TRYING TO REMEMBER WHERE I SAW IT.

SO IT'S NOT, SO THE CONSUMER ADVOCATES REPORT IS NOT IN THIS BINDER, IT'S NOT IN THE PREVIOUS BINDER.

IT IS PART OF THE FULL DOCUMENTS.

UM, AND IS, ARE THOSE FULL DOCUMENTS LINKED AS A BACKUP FOR TODAY'S, IS THAT URL PART OF THE BACKUP FOR TODAY'S SESSION? IT'S, WELL, IT, I DON'T KNOW THAT IT'S OFFICIALLY AS A BACKUP, BUT THE URL IS LISTED IN THE SLIDES I'M ABOUT TO GO THROUGH.

GREAT.

THANK YOU.

AND IF I COULD ASK THE CITY CLERK TO ADD THAT LINK, UM, AND AT, AT EVERY AE SESSION THAT WE HAVE FROM HERE ON OUT, IF WE COULD HAVE THAT URL LISTED AS THE BACKUP, I THINK THAT WOULD BE HELPFUL.

THAT WAY, UM, THE PUBLIC CAN ALSO EASILY ACCESS ALL THAT, THAT FULLER INFORMATION.

THANK YOU.

AND, AND THAT SAME URL AND, AND SPECIFIC LINKS TO THE DOCUMENTS SHOULD BE PART OF THE AUSTIN ENERGY, UM, PAGE THAT HAS THE RATE CASE ON IT.

YES.

WE ALSO HAVE A LINK TO THE CITY CLERK'S WEBSITE ON OUR WEBSITE AS WELL.

SO THE TWO CONNECT, YEAH.

OKAY.

THEY DO.

ALL RIGHT.

THANK YOU.

UM, IF YOU CAN PULL UP THE SLIDES, AND WHAT I'M GOING TO DO IS JUST GIVE A QUICK REFRESHER ON SOME OF THE PROCESS.

I KNOW THAT WE'VE DISCUSSED THIS WITH YOU BEFORE, BUT AS WE KIND OF CULMINATE HERE IN THE FINAL PHASE, I THOUGHT IT WOULD BE A GOOD IDEA JUST TO DO, UM, A LITTLE REMINDER OF THE PROCESS AS JACKIE ALLUDED TO.

NEXT SLIDE, PLEASE.

NEXT SLIDE.

OH, SORRY.

I HAVE A CLICKER.

THANK YOU, .

UM, AND AS JACKIE MENTIONED, IN 2012, COUNCIL ESTABLISHED THE PROCESS TO REVIEW AUSTIN ENERGY'S BASE RATES.

AND I JUST TOOK A QUOTE FROM THAT PARTICULAR ORDINANCE SO THAT YOU CAN SEE, UH, WHERE THAT WAS CODIFIED.

AND IT REFERENCES THE HIRING OF AN INDEPENDENT CONSUMER ADVOCATE AND ALSO AN IMPARTIAL HEARING EXAMINER.

AND I'LL TALK ABOUT THAT MORE, UH, AS I GO THROUGH THE SLIDES.

AND I THINK JUST, JUST TO, FOR YOUR AWARENESS, THERE'S GONNA BE SOME, SOME ACRONYMS THAT YOU'LL HEAR.

SO YOU'LL HEAR FOR INDEPENDENT CONSUMER ADVOCATE, YOU WILL HEAR I C A AND FOR IMPARTIAL HEARING EXAMINER, YOU WILL HEAR, HEAR I H E.

AND SO, WE'LL, I'LL, I'LL TRY TO SAY THAT OUT AND, AND NOT SLIP INTO ACRONYMS. BUT IF YOU DO HEAR THAT, UH, THAT'S THE DISTINCTION.

AND ESSENTIALLY WHAT, UH, YOU KNOW, THOSE TWO ROLES ARE CLEARLY IMPORTANT ROLES IN THIS PROCESS.

UM, THE INDEPENDENT CONSUMER ADVOCATE IS SPECIFICALLY RETAINED BY THE CITY TO REPRESENT THE INTEREST OF RESIDENTIAL AND SMALL COMMERCIAL CUSTOMERS.

AND THE REASON THIS IS DONE REALLY IS BECAUSE IT'S DONE THROUGHOUT THE UNITED STATES, FOR THE MOST PART, IN INVESTOR OWNED UTILITY RATE MAKING PROCEEDINGS.

MANY, UH, STATES HAVE A SEPARATE AGENCY OR PERHAPS A DIVISION WITHIN, SAY, AN ATTORNEY GENERAL'S OFFICE TO REPRESENT THESE INTERESTS BECAUSE TYPICALLY THEY ARE NOT NECESSARILY, UM, ORGANIZED IN SUCH A WAY THAT THEY CAN BE REPRESENTED AS A WHOLE IN MANY RATE MAKING PROCEEDINGS.

AND THEN THE IMPARTIAL HEARING EXAMINER, OR THE I A E IS MODELED AFTER AN ADMINISTRATIVE LAW JUDGE.

AND YOU MAY HEAR AN ACRONYM, ALJ, UH, WE, YOU KNOW, WE, WE, WE'VE, WE'VE REALLY MIXED UP ALL THE TERMS HERE, BUT ESSENTIALLY IT'S, IT'S VERY SIMILAR, UH, AT WHERE THE IMPARTIAL HEARING EXAMINER IS.

SOMEONE WHO IS NOT AFFILIATED WITH ANY OF THE PARTIES, DOES NOT HAVE ANY FINANCIAL STAKE IN THE OUTCOME, AND IS THERE TO SIT AS A JUDGE BETWEEN, UH, ALL OF THE PARTICIPANTS, INCLUDING AUSTIN ENERGY, THE INDEPENDENT CONSUMER ADVOCATE, AND ALL OF THE OTHER PARTIES WHO ARE PARTICIPATING IN THIS PROCESS.

AND HERE'S THE BUSY TIMELINE SLIDE.

WE HAVE SHOWED THIS TO YOU BEFORE, BUT WE'RE, WE'RE HEADING NOW TOWARD THE FINAL PART OF OUR TIMELINE.

AS YOU CAN SEE, WE HAVE COMPLETED, UH, KIND OF THE GRAY, THE BLUE AND THE GOLD SECTIONS OF THIS.

SO A LOT OF EXTENSIVE OUTREACH PARTICIPATION BY THE PARTIES.

WE HAVE HAD, UM, YOU KNOW, MULTIPLE, UH, DOCUMENTS FILED AS, AS A COUNCIL MEMBER NOTED.

AND SO THERE'S BEEN A LOT OF ACTIVITY.

AND AS WE ARE HERE TOWARD THE END IN THE ORANGE SECTION, WE HAVE HIGHLIGHTED AS WELL ALL OF THE DIFFERENT MEETINGS THAT ARE COMING UP.

SO YOU CAN SEE THAT REALLY SINCE THE BEGINNING OF THE YEAR, THIS HAS BEEN A VERY INTENSIVE PROCESS

[00:20:01]

FOR BOTH AUSTIN ENERGY AND THE PARTICIPANTS.

AND AS I MENTIONED, WE HAD MULTIPLE COMMUNITY OUTREACH MEETINGS BEFORE WE HAD THE HEARING.

THOSE WERE TARGETED SPECIFICALLY AT RESIDENTIAL AND COMMERCIAL CUSTOMERS.

AND THROUGH THE SPEAK UP AUSTIN.ORG WEBSITE, WE HAD OVER 600 PUBLIC COMMENTS SUBMITTED.

AND AS PART OF THE FORMAL PROCESS, UH, THE PARTICIPANTS ARE LISTED THERE ON THE RIGHT HAND SIDE, AND YOU CAN SEE ALL OF THESE.

AND AGAIN, THE, THE INDEPENDENT CONSUMER ADVOCATE OR ICA, IS JUST ONE AMONG MANY OF THE PARTIES WHO PARTICIPATED IN THE PROCEEDING.

AND THEY ASKED A LOT OF QUESTIONS OF AUSTIN ENERGY.

WE CALLED THAT DISCOVERY, AND THEY, UH, SUBMITTED AND WE RESPONDED TO MORE THAN 500 QUESTIONS ABOUT OUR PROPOSAL AND PROVIDED ALL THE INFORMATION, UH, THAT WAS PUBLICLY AVAILABLE TO THE PARTIES.

WE ALSO HAD THE FORMAL HEARING PROCESS THAT INCLUDED ALL OF THE PARTICIPANTS.

IT WAS OPEN TO THE PUBLIC, AND IT LASTED OVER THREE DAYS AT AUSTIN ENERGY'S HEADQUARTERS.

AND AS I NOTED, UH, THIS WAS LED BY THE IMPARTIAL HEARING EXAMINER, AND AS I SAID EARLIER, HE IS AN EXPERT IN UTILITY RATE MAKING WITH NO SPECIFIC AFFILIATION TO AUSTIN ENERGY OR ANY OF THE PARTICIPANTS.

AND IN FACT, HE HAS NOT SPOKEN, UH, SUBSTANTIVELY WITH ANY OF THE PARTICIPANTS ABOUT THIS PROCEEDING.

THE ONLY, UH, INTERACTION ON THE SUBSTANCE THAT THE PARTICIPANTS, INCLUDING AUSTIN ENERGY HAVE WITH THE IE, IS EITHER IN A PUBLIC MEETING OR THROUGH WRITTEN DOCUMENTS THAT ARE FILED ON THE CITY CLERK'S WEBSITE.

SO AT THIS THREE DAY HEARING, A VARIETY OF WITNESSES WERE, UH, MADE AVAILABLE FOR QUESTIONING.

AND THEN FOLLOWING THE HEARING, ALL OF THE PARTIES FILED A POST HEARING BRIEF OR KIND OF A SUMMARY OF THEIR POSITION FOR THE INDEPENDENT, THE IMPARTIAL HEARING EXAMINER TO REVIEW.

AND THE IMPARTIAL HEARING EXAMINER'S RECOMMENDATION WAS ISSUED ON SEPTEMBER 9TH.

IT WAS 148 PAGES, AND IS A DETAILED SUMMARY AND ANALYSIS OF AUSTIN ENERGY AND ALL THE PARTICIPANTS' POSITIONS ON MORE THAN 40 DISCRETE ISSUES THAT WERE RAISED.

AND THAT, UH, MATERIAL, THAT RECOMMENDATION IS IN THE BINDER THAT IS IN FRONT OF YOU.

AND THIS RECOMMENDATION IS REALLY INTENDED AS A STARTING POINT FOR COUNCIL DELIBERATIONS.

YOU KNOW, AS JACKIE MENTIONED, UH, YOU KNOW, COUNCIL HAS REFINED THE PROCESS OVER THE LAST FEW YEARS AND IN DETERMINING TO REACH OUT AND BRING IN THE THIRD PARTY IMPARTIAL HEARING EXAMINER, THAT ENABLES COUNCIL TO REALLY HAVE A PLACE WHERE IT CAN GO TO LOOK AT A, UH, INDEPENDENT ANALYSIS OF THE ISSUES FROM AUSTIN ENERGY'S PERSPECTIVE, AS WELL AS FROM THE OTHER PARTICIPANTS.

JUST A QUICK HIGH LEVEL SUMMARY OF THE RECOMMENDATION.

UH, GENERALLY THE IA E AGREED WITH AUSTIN ENERGY ON THE MAJORITY OF OUR REVENUE REQUIREMENT REQUESTS.

HE DID NOTE THAT THE RATE DESIGN CHANGES THAT AUSTIN ENERGY WAS SEEKING OR WELL ARTICULATED AND CONSISTENT WITH CERTAIN CITY RATE MAKING POLICIES AND PRINCIPLES, HE OBSERVED THAT AUSTIN ENERGY PROPOSES A REASONABLE STANDARDIZED APPROACH THAT WOULD ULTIMATELY MOVE ALL CUSTOMER CLASSES CLOSER TO THE COST OF SERVICE.

NOW, IN THAT, THOUGH, HE DID EXPRESS CONCERN ABOUT RAY CHALK FOR SOME RESIDENTIAL CUSTOMERS, BUT FINALLY NOTED THAT ONE WAY OR ANOTHER AUSTIN ENERGY MUST RECOVER ITS REVENUE REQUIREMENT THROUGH ITS RATES.

AND HERE IS THE LINK TO THE CITY CLERK'S WEBSITE THAT WAS DISCUSSED EARLIER.

YOU CAN SEE THERE, AGAIN, EVERY DOCUMENT THAT IS PUBLICLY AVAILABLE, UH, IS INCLUDED HERE, INCLUDING OUR BASE RATE FILING PACKAGE, ALL OF THE PARTY'S WRITTEN TESTIMONY, THE BRIEFS, THE IE RECOMMENDATION, AND THEN WHAT WE CALL EXCEPTIONS TO THAT RECOMMENDATION, WHERE THOSE ARE WHERE THE PARTIES HAVE, UH, TAKEN ISSUE WITH SOME OF, OF THE THINGS THAT THE IE PROPOSED.

ALL OF THE VIDEOS OF THE HEARINGS ARE ARCHIVED ON ATX N FOR ANY ONE OF YOU OR THE MEMBER OF THE PUBLIC WHO WOULD LIKE TO REVIEW THOSE.

AND AS, UH, COUNCIL MEMBER PAUL MENTIONED, WE DO HAVE A SEPARATE WEBPAGE FOR OUR RATES.

AND WITH THAT, I'LL TURN IT OVER TO MR. DOMBROSKI.

MORNING, MARK DEBROWSKI, THE CHIEF FINANCIAL OFFICER FOR AUSTIN ENERGY.

UM, THIS MORNING I'M GONNA WALK YOU THROUGH A LITTLE BIT OF INFORMATION THAT MORE ADDRESSES WHY, WHY DID WE MAKE THE PROPOSAL WE DID, UM, IN, IN THE DATA THAT, THAT WE LOOKED AT.

SO THE FIRST IS WE WERE REALLY TRYING TO ADDRESS THREE ISSUES.

AND THE FIRST IS, UH, THAT WE NEED AN INCREASE OF $35.7 MILLION IN REVENUE.

AND WHAT THIS DOES ALLOWS US TO RECOVER OUR ACTUAL COSTS THAT WE SPEND TO SERVE OUR CUSTOMERS.

IT ALSO IMPROVES THE FINANCIAL STABILITY OF THE UTILITY.

AS YOU KNOW, WE'VE GOTTEN THROUGH, UH, TWO CREDIT DOWNGRADES OVER THE LAST FEW MONTHS.

UM, THIS WILL START TO, UH, MOVE THE NEEDLE IN THE OTHER DIRECTION.

WE ALSO NEED TO CHANGE THE, THE BASE RATES STRUCTURE TO REFLECT THE ACTUAL CONCEPTION PATTERNS.

[00:25:01]

UM, OUR CURRENT BASE RATES ARE BASED UPON HOW CUSTOMERS USE ENERGY IN 2009.

IT IS SIGNIFICANTLY DIFFERENT NOW IN 2021.

IN FACT, WE'RE SELLING 77% OF THE KWH UH, KILOWATT HOURS BELOW THE ACTUAL COST OF SERVICE.

SO IT'S HARD FOR US TO RECOVER OUR COST.

IT ALSO RECALIBRATES THE TIERS TO REFLECT OUR ACTUAL CONSUMPTION PATTERNS THAT WE'RE SEEING.

OUR THIRD GOAL IS TO MOVE RESIDENTIAL AND COMMERCIAL CUSTOMERS CLOSER TO THEIR COST OF SERVICE.

UM, THIS IS PART OF THE ISSUE ABOUT THE RATE SHOCK.

UM, PART OF THE REASON WHY WE'RE SEEING RATE SHOCK NOW IS WE DID IT TO OURSELVES.

WE DID IT TO OUR CUSTOMERS, UH, BOTH IN HOW WE SET RATES IN 12 AND WHAT WE DID IN 2016.

SO AS YOU MOVE YOUR CUSTOMERS CLOSER TO WHAT WE CALL UNITY OR, UH, CLOSER TO THE COST OF SERVICE, FUTURE RATE CHANGES WILL BE MORE EQUAL AMONG CLASSES OF CUSTOMERS.

AND FINALLY, IT REDUCES SUBSIDIES BETWEEN CLASSES OF CUSTOMERS.

AND SO, UH, AS A RESULT, WE HAVE OUR COMMERCIAL CUSTOMERS THAT ARE PICKING UP MORE OF THEIR, OF THE COST THAN THEY, UM, ATTRIBUTE AND RESIDENTIAL LESS.

SO FIRST A LITTLE BIT ABOUT SOME OF THE THINGS THAT, UH, THE LANGUAGE THAT YOU'LL, YOU'LL, YOU'LL HEAR US USE, UH, AND AND HOW THAT COMES INTO PLAY.

SO, REVENUE REQUIREMENT.

SO REVENUE REQUIREMENT IS THIS SIMPLY WHAT DOES IT COST US TO OPERATE THE UTILITY? AND THIS IS BASED UPON THE ACTUAL HISTORICAL COST.

IT'S NOT PROJECTED COSTS, IT'S WHAT WE ACTUALLY SPENT AND INIT THIS CASE.

IT'S WHAT WE SPENT IN, UM, 2021.

WE'LL THEN TAKE THOSE COSTS AND THOSE BECOME THE AUSTIN ENERGY'S COST OF SERVICE.

WE TAKE THOSE COSTS AND THEN WE ALLOCATE THE AMONGST ALL THE CLASSES OF CUSTOMERS.

SO WE HAVE, UH, RESIDENTIAL CUSTOMERS, OUR COMMERCIAL INDUSTRIAL BROKEN UP BY SECONDARY ONE, TWO, AND THREE, PRIMARY ONE AND TWO, UH, TRANSMISSION CUSTOMERS AND LIGHTING.

SO EACH OF THOSE THEN BECOME THAT CUSTOMER'S CLASS COST OF SERVICE.

SO YOU HEAR ME SAY A RESIDENTIAL COST OF SERVICE.

SO IT'S THOSE COST THAT WE'VE ALLOCATED TO THE RESIDENTIAL CLASS.

AND FINALLY, RATE DESIGN.

RATE DESIGN IS HOW WE CONSTRUCT TO COLLECT, UH, THOSE REVENUES FROM EACH CLASS OF CUSTOMER BASED UPON BILLING DETERMINANTS.

SO THIS IS KILOWATTS KILOWATT HOURS OR THE NUMBER OF CUSTOMERS OR THE THREE MAIN WAYS THAT, UH, BILLING DETERMINANTS.

AND IF YOU MULTIPLY ALL THAT TIMES THOSE RATES, WE SHOULD GET THE TOTAL REVENUE REQUIREMENT FOR THE UTILITY.

WE ALSO HAVE SOME CONFUSION ON, UM, YEARS.

AND SO TO KIND OF CLARIFY, UH, ALL OF YOU'RE FAMILIAR WITH THE FISCAL YEAR.

SO THIS IS, UH, FROM OCTOBER 1ST THROUGH SEPTEMBER 30TH OF THE YEAR IN WHICH, UH, THE TITLE IS.

SO IN THIS CASE, UH, OUR COSTS ARE BASED UPON FISCAL YEAR 2021.

SO THAT'S SEPTEMBER, OR EXCUSE ME, OCTOBER 1ST, 2020 THROUGH SEPTEMBER 30TH, 2021.

DANIEL HEARS TALK ABOUT THE TEST YEAR AND ALL THE TEST YEAR IS IT'S THAT FISCAL YEAR.

UM, AND THEN WE MAKE KNOWN AND MEASURABLE CHANGES.

SO IF WE KNOW THAT WE'RE NOT GONNA HAVE AN EXPENSE IN FUTURE YEARS, WE'LL TAKE IT OUT OF THE FISCAL NUMBERS IF WE KNOW WE'RE GOING TO HAVE AN EXPENSE AND WE'LL ADD IT IN THERE, THAT BECOMES OUR KNOWN AND MEASURABLE CHANGES.

AND FINALLY, THE BASE RATE REVIEW, THAT'S THE YEAR IN WHICH WE'RE ACTUALLY DOING THE REVIEW.

SO THIS CASE, IT'S 2022.

WE DID A BASE RATE REVIEW IN 2012, BUT 2009 WAS THE TEST YEAR, UH, JUST TO GIVE AS AN EXAMPLE.

AND FINALLY THE EFFECTIVE YEAR, THAT'S THE YEAR IN WHICH THE RATES ACTUALLY CHANGE.

AND IN THIS CASE, WE'RE, UH, FORECASTING TO CHANGE THOSE IN 2023.

AS JACKIE POINTED OUT, UH, WE DON'T CHANGE BASE RATES THAT OFTEN.

IN FACT, FOR 20 YEARS, WE DIDN'T CHANGE THEM AT ALL.

AND THE REASON WHY WE WERE ABLE TO DO THAT WAS GENERALLY LOAD GROWTH OR MORE CONSUMPTION ALLOWED US TO RECOVER OUR INCREASING COSTS.

SO AS YOU ADD MORE CUSTOMERS, YOU ADD MORE LOATH LOAD AND THAT INCREASES THE REVENUE AND ALLOWS US TO COVER OUR COST.

IN 2000 AND UH, 13, WE DID, UH, INCREASE BASE RATES BY ABOUT 6.4%.

UM, AND THEN ABOUT FIVE YEARS LATER, WE HAD ANOTHER RATE CASE AND WE REDUCED THEM 6.7% OR THE 42 AND A HALF MILLION DOLLARS.

AND SO THIS YEAR, UH, WE ARE PROPOSING A BASE RATE INCREASE OF ABOUT 5.6.

SO IT'S LESS THAN WHAT WE REDUCED BY LAST TIME.

AND WHAT ARE BASE RATES? SO BASE RATES ARE USED TO RECOVER OUR FIXED COST.

IT IS NOT THE COST OF ELECTRICITY.

SO BASE RATES FOR THINGS LIKE OUR SUPPLY AND EQUIPMENT TREE TRIMMING, OUR DEBT SERVICE EMPLOYEES TECHNOLOGY DRONE FUND TRANSFER, WE CALL THEM FIXED.

NOT BECAUSE THEY DON'T CHANGE, BUT BECAUSE THEY DON'T CHANGE BASED UPON HOW MUCH KILOWATT HOURS THAT CUSTOMERS USE.

THAT'S NOT THE DRIVER, THAT'S THE DRIVER OF THE ELECTRICITY AND SPECIFICALLY EXCLUDED IN BASE RATES OR POWER SUPPLY COSTS, A CUSTOMER ASSISTANCE PROGRAM, ENERGY EFFICIENCY, STREET LIGHTS, TRANSMISSION TYPE, UH, COST.

THOSE ARE

[00:30:01]

ALL COLLECTED IN OTHER TYPES OF RATES THAT WE ASSESS OUR CUSTOMERS.

AND A GOOD EXAMPLE I LIKE TO USE THAT, UH, MOST PEOPLE ARE FAMILIAR WITH IS, UH, AN AUTOMOBILE.

SO MOST PEOPLE BUY AN AUTOMOBILE THAT'LL GO OUT AND THEY'LL BORROW THE MONEY FROM A BANK.

UM, AND THEY'LL, THEY'LL TAKE THAT OUT FOR FIVE YEARS AND THEY'LL PAY A FIXED AMOUNT EACH MONTH FOR THAT CAR.

AND AS THEY DRIVE THAT CAR, THEY HAVE TO PUT FUEL IN IT.

UM, AND THEY MIGHT DECIDE TO BE MORE EFFICIENT OR CONSERVE.

AND SO THEY MIGHT TAKE THE BUS TO WORK RATHER THAN DRIVE.

SO THEY, THEY DRIVE FEWER MILES.

AND IN THAT CASE THAT THEY WOULD HAVE THE SAME CAR COST, THE SAME CAR PAYMENT, BUT THEY'D HAVE A, A LOWER FUEL BILL.

YOU WOULDN'T CALL YOUR CAR A LOAN COMPANY AND SAY, I ONLY DROVE HALF AS MANY MILES THIS MONTH, SO I'M JUST GONNA SEND YOU HALF MY CAR PAYMENT.

BUT THAT'S KIND OF WHAT WE DO WITH BASE RATES.

SO BASE RATES RECOVER THOSE FIXED COSTS.

THINK OF ALL THE INFRASTRUCTURE, THE POLES, THE TRANSFORMERS, THE WIRES, THE EMPLOYEES, THE TRUCKS.

THAT'S WHAT WE'RE RECOVERING.

UM, AND IF YOU WERE TO ADJUST YOUR THERMOSTAT TO CONSUME FEWER K H, UH, YOU WOULD GET A LOWER BILL, YOU'D GET A LOWER POWER SUPPLY COST, CUZ THAT'S THE VARIABLE PIECE, OUR SAME BASE RATE COST, BUT THE LOWER POWER SUPPLY COSTS.

AND I THINK THAT'S A GOOD ANALOGY AS WE GO THROUGH THIS TO THINK ABOUT WHAT WE'RE TALKING ABOUT.

AND ON A CUSTOMER'S BILL, UM, WE RECOVER A LOT OF DIFFERENT TYPES OF COST.

AND SO THIS, UH, IS CALLED A WATERFALL CHART AND SORT OF SHOWS YOU IN PROPORTION WHAT WE RECOVER IN A TYPICAL INSIDE CITY OF AUSTIN NON CAP RESIDENTIAL CUSTOMER THAT USES 860 KILOWATT HOURS.

SO THIS IS USING THE, THE RATES AS EFFECTIVE AS OF TODAY.

AS YOU KNOW, THE PSA THAT WE ADOPTED BECAME EFFECTIVE NOVEMBER 1ST.

SO YOU CAN SEE ABOUT, UM, 80% OF THAT BILL IS REALLY DIRECTLY RELATED TO THE PROVISIONAL ELECTRICITY.

SO, UM, UH, THE, THE BAR ON THE FAR LEFT, THE, THE, THE BLACK BAR THERE, UH, ABOUT 30% IS FOR THOSE FIXED COSTS.

THE ON AND M, THE DEBT SERVICE LABOR VEHICLES, UM, ABOUT 38% IS THE POWER SUPPLY ADJUSTMENT.

THAT'S THE COST OF THE ACTUAL ELECTRICITY THAT THE CUSTOMERS USE.

AND ABOUT 13% IS TRANSMISSION.

THAT'S THE COST IT TAKES TO GET THE ELECTRICITY FROM WHERE IT'S GENERATED TO THE CUSTOMERS.

UM, OR TO AUSTIN ENERGY LOAD ZONE.

UM, WE HAVE THE JOB FUND TRANSFER IN DIRECT SUPPORT, UH, CAP, STREET LIGHTS, ENERGY EFFICIENCY PIECE AND ECONOMIC DEVELOP.

YOU ADD ALL THOSE TOGETHER, IT'S ABOUT $99 AND 86 CENTS FOR A TYPICAL CUSTOMER IN RECOVERING THOSE FIXED COSTS AT A VARIABLE ENERGY RATE OR THAT KILOWATT HOURS IS OUR CHALLENGE.

UM, IF YOU GO BACK TO 2014, WHICH WAS OUR LAST TEST YEAR, SINCE THAT TIME WE'VE INCREASED CUSTOMERS BY 18%.

UM, THAT'S A LOT OF CUSTOMERS ADD A LOT OF INFRASTRUCTURE CAPACITY, RELIABILITY TO ENSURE, WELL, AT THE SAME TIME OUR SALES OF KILOWATT HOURS, HOW WE RECOVER THOSE COSTS HAS ONLY INCREASED BY 4%.

UM, SO THERE'S A REAL DISCONNECT BETWEEN THE COST YOU'RE TRYING TO RECOVER AND WHAT WE'RE RECOVERING IT IN.

AND THE, THE YELLOW LINE THERE, THAT'S THE, THE ACTUAL REVENUES, UH, EACH YEAR.

AND YOU CAN SEE THAT WEATHER PLAYS A BIG, UM, UH, PART OF, OF HOW MUCH REVENUE WE COLLECT.

AND YOU'LL SEE IN OUR QUARTERLY UPDATE, UH, THAT YOU'LL SEE IN NOVEMBER, 2022 WAS A VERY HOT YEAR.

AND SO OUR CUSTOMERS USED A LOT OF ENERGY TO COOL THEIR HOMES.

THEY REALLY OVERPAID THIS YEAR, UH, BECAUSE IT'S A, IT'S A FIXED RATE TIMES OF VARIABLE KILOWATT HOUR.

SO WE EARNED ABOUT 40 MILLION MORE, UH, BECAUSE OF THAT HOT WEATHER.

WE DIDN'T HAVE 40 MILLION MORE OF EXPENSES BECAUSE OF IT, BUT WE COLLECTED IT.

AND THEN WE HAVE OUR MILLION REALLY MILD YEAR, LIKE YOU SAW BACK IN, UM, SOME OF THESE PRIOR YEARS.

THEN WE UNDER COLLECT AND THAT'S THE RESULT OF COLLECTING A FIXED COST AND A VARIABLE RATE.

SO WHY DO WE NEED $35.7 MILLION? A COUPLE REASONS WHY.

SO THE FIRST ONE IS WE HAVE WHAT'S CALLED A MASTER BOND ORDINANCE.

AND THAT'S GOVERNS THAT.

WE GO OUT AND WE, WE BORROW MONEY, UH, FROM INVESTORS THAT GIVE US THAT MONEY AND WE MAKE CERTAIN PLEDGES TO THEM, UM, THAT WE WILL ENSURE THAT WE HAVE ENOUGH REVENUE TO PAY BACK THOSE BONDS.

AND THEY'VE, UH, HAVE IN THERE A SPECIFIC FORMULA CALLED THE THE NET REVENUES FORMULA.

AND HERE I'VE DEMONSTRATED IT FOR YOU.

AND SO IT SAYS, EVERY YEAR THEN IN WHICH YOU HAVE YOUR AUDITED, UH, RESULTS, YOU'LL, YOU'LL MEASURE YOUR NET REVENUES.

AND IF IT'S NOT ENOUGH, UH, TO, TO COVER, IF IT'S NOT POSITIVE, THEN YOU WILL ADDRESS, UH, YOUR RIGHTS CHARGES AND FEES AND YOU'LL ADJUST THEM TO MAKE SURE THAT IT HAS POSITIVE NET REVENUE.

SO LOOKING BACK IN 2021, YOU CAN SEE HERE, UM, THE COLUMN ON THE LEFT, UH, THE FORMULA, AND YOU'LL SEE THAT WE HAD A FUND BALANCE OF $383.8 MILLION.

THAT'S OUR CASH AND RESERVES.

UM, AND YOU'LL SEE

[00:35:01]

THAT THE NET REVENUES WAS 257 MILLION.

SO WHAT THAT TELLS YOU IS IF IT WASN'T FOR THE FUND BALANCE, THE AMOUNT OF CASH WE HANDED IN A BANK, THEN WE WOULD NOT HAVE PASSED THIS TEST.

AND SO IF YOU REMOVE THAT FUND BALANCE, WE WOULD BE, UM, NEGATIVE BY $126 MILLION.

AND I'VE BEEN REPORTING TO YOU EACH, EACH QUARTER, UM, OUR CASH HAS BEEN BEING DEPLETED.

SO THAT FUND BALANCE IS GETTING SMALLER AND SMALLER.

UH, WE DON'T YET HAVE AUDITED RESULTS FOR 2022.

UH, BUT GIVEN WHERE I SEE THE CASH BALANCES, I THINK WE'RE GONNA SEE A MUCH CLOSER MARGIN IN 22.

SO AT SOME POINT WE ARE REQUIRED TO JUST RATES, UH, AS A PLEDGE TO OUR BOND HOLDERS.

THE NEXT IS OUR FINANCIAL PERFORMANCE.

UM, AND AGAIN, UH, EACH QUARTER WE REPORT TO YOU OUR, OUR FINANCIAL PERFORMANCE.

UM, AND HERE IS A, UM, A TREND, UH, FOR YEAR END FOR 19 20 21 AND 22.

AS YOU CAN SEE, UM, WE HAVE NOT HIT AT LEAST FOUR OF THOSE, UM, UH, UH, METRICS, UH, SINCE SINCE 2019.

UM, AND, UH, THE REASONS WHY WE HAVE THESE FINANCIAL POLICIES THAT IT PROVIDES US A BASIS FOR, FOR GOOD FINANCIAL MANAGEMENT AND RISK MANAGEMENT FOR THE UTILITY.

SO YOU DON'T JUST CHANGE YOUR METRICS, UH, IN ORDER TO COMPLY WITH THEM.

THE IDEA IS YOU CHANGE YOUR PRACTICES TO COMPLY WITH THE METRICS.

UM, AND HERE YOU CAN SEE THAT, UM, IN 2022, THE POINT I I MADE EARLIER, WHICH WAS WE HAD A REALLY HOT SUMMER.

SO WE SAW, UH, WE HAD FORECAST A NEGATIVE 4% OPERATING MARGIN AND WE CAME UP WITH A 2% POSITIVE MARGIN, WELL BELOW OUR TARGET OF 10%.

UH, BUT IT WAS POSITIVE.

UM, AND THAT'S BECAUSE OF THE HOT SUMMER, BUT WE STILL HAD A BUDGET DEFICIT OF $3 MILLION.

SO CURRENT REVENUES DID NOT COVER CURRENT OPERATING EXPENSES.

THAT'SS, CUZ WE NEED MORE REVENUE TO COVER OUR COST.

ANOTHER WAY TO LOOK AT THIS IS WHAT DO OUR CUSTOMERS SEE OVER THE YEARS? AND SO, UH, THIS CHART SHOWS YOU WHAT A, UM, WHAT A TYPICAL CUSTOMER HAS PAID SINCE 2012.

THOSE ARE THE, THE ORANGE BARS THERE, AND WE MATCHED THAT WITH INFLATION.

SO HOW MUCH IN DID INFLATION CHANGE THOSE, THOSE, UH, COSTS FOR US? AND YOU CAN SEE THAT STAYED WELL BELOW THE LINE OF INFLATION.

AND IN FACT, UM, CUSTOMER BILLS HAVE ACTUALLY BEEN GOING DOWN OVER THE YEARS.

AND SO ONE OF THE REASONS WHY WE'RE SEEING THIS, WHAT'S TERMED RATE SHOCK IS BECAUSE RATES ARE SO LOW RELATIVE TO THOSE INFLATIONARY COSTS THAT, UH, WE NEED TO RECOVER.

UM, THAT'S ONE OF THE REASON WHY UM, RATES NEED TO GO UP TO 5.6%.

AND BECAUSE, UM, THE RESIDENTIAL CUSTOMERS BELOW THEIR COST OF SERVICE, IT NEEDS TO GO EVEN MORE.

AND THAT DESCRIBES THE RATE SHOCK THAT WE'RE SEEING.

SO SOME OF THE, UM, UH, PREVAILING THOUGHTS OR ASSUMPTIONS THAT, THAT WE'RE HEARING IS THAT, UM, UM, YOU KNOW, WE'RE, WE'RE PENALIZING FOLKS WHO CAN CONSERVE ENERGY OR PENALIZING ENERGY EFFICIENCY.

UH, SO WE SPEND A LOT OF TIME LOOKING AT THIS.

AND THE, THE THINGS THAT, THAT WE'RE SEEING IN THE DATA IS FIRST IS, UM, ALL HOMES ARE BECOMING MORE, UH, ENERGY EFFICIENT AND, UH, OVER THE YEARS, AND SO THIS CHART IS FROM THE EIA OR THE ENERGY INFORMATION, UM, ADMINISTRATION.

AND SINCE THE 1980S, UH, ON AVERAGE ALL HOMES CONSUME LESS ELECTRICITY.

UM, THAT'S A TREND WE'RE SEEING ACROSS THE COUNTRY, AND IT'S FOR A NUMBER OF REASONS.

UM, IMPROVEMENT IN IN BUILDING INSULATION AND MATERIALS, UH, IMPROVEMENTS IN EFFICIENCIES LIKE HEATING AND COOLING EQUIPMENT, WATER HEATERS, REFRIGERATORS, LIGHTING AND APPLIANCES.

THINK BACK IN THE 1980S, EVERYONE HAD INCANDESCENT BULBS, USED A LOT OF ENERGY WITH RESISTANT HEAT.

NOW MOST HOMES ALL COME WITH L LED LIGHTING.

UM, THE CODES THAT YOU PASS FOR THE CITY OF AUSTIN THAT MAKES HOMES MUCH MORE EFFICIENT WHEN THEY'RE BUILT.

SO AS A RESULT, WE'RE SEEING THIS DECREASE IN CONSUMPTION ACROSS THE BOARD, NOT HAVING TO DO WITH RATES OR TIERED RATES, BUT JUST BECAUSE OF THE WAY WE BUILD HOMES.

AND IN FACT, WE SEE THAT EXACT SAME TREND HAPPENING, RIGHT, RIGHT HERE IN AUSTIN.

UM, THIS CHART SHOWS, UH, TWO VIEWS.

UM, SO THE, THE ONE ON THE LEFT WITH THE YELLOW BARS, THIS IS SINGLE FAMILY HOMES AND THE ONE ON THE RIGHT IS MULTI-FAMILY HOMES.

AND YOU CAN SEE IF YOUR HOME WAS BUILT PRIOR TO 2012, YOU USE ABOUT 1100 KILOWATT HOURS PER MONTH.

AND THAT STAYED PRETTY CONSTANT THROUGH 2014.

AND THEN WE STARTED SEEING A DRAMATIC DECREASE IN CONSUMPTION.

IN FACT, HOMES BUILT A STAR TAKING SERVICE IN 2020, USED HALF AS MUCH ENERGY AS THE ONES BUILT PRIOR TO 2012.

AND IF YOU LIVE IN A MULTIFAMILY HOME, YOU USE HALF AS MUCH ANY OF THAT.

WE'RE SEEING THE SAME TREND IN THOSE IF YOU LIVE IN A MULTIFAMILY HOME.

BUILT TO, PRIOR TO 2012, HE USED ABOUT 654 KILOWATT HOURS.

A BRAND NEW CONDO OR TOWN TOWNHOUSE

[00:40:01]

TODAY USES ABOUT 336 KILOWATT HOURS PER ABOUT HALF AS THAT.

SO RESIDENTIAL USES MORE THAN MULTI-FAMILY, BUT THEY'RE MUCH MORE EFFICIENT.

AND MULTI-FAMILY USES ABOUT HALF AS MUCH AS RESIDENTIAL.

AND THE REASON WHY THAT'S IMPORTANT FOR US IS YOU'VE DRIVEN AROUND AUSTIN AND WHAT WE'RE SEEING BUILT ARE MULTIFAMILY HOMES.

IN FACT, I THINK WE'RE JUST ABOUT 50 50 NOW.

UH, AND THE PERMITS WE'RE SEEING ISSUED ARE MUCH MORE TOWARDS MULTIFAMILY HOMES AND SINGLE FAMILY HOMES.

SO THAT'S WHAT WE'RE MOVING INTO.

AND THE WAY WE'RE PICKING, PICKING THAT UP IS IN THE CONSUMPTION PATTERNS OF OUR CUSTOMERS.

AND SO THIS DRAFT SHOWS, UH, RESIDENTIAL SUMMER CONSUMPTION, UH, THE ORANGE BARS ARE WHAT WE SAW IN 2009.

AND AGAIN, THIS IS WHAT WE BASED OUR CURRENT TIER STRUCTURE ON.

AND THE GOLD BARS ARE WHAT WE SAW IN 2021.

UM, AND THE REASON WHY WE'RE SHOWING YOU SUMMER IS THAT'S, WE, WE CALLED SUMMER PEAKING.

WE USED MOST OF OUR ENERGY IN THE SUMMER BECAUSE IT'S REALLY FOR COOLING, AND THAT'S THE ONE WE USE MOST OF OUR LOAD.

UM, AND YOU CAN SEE HERE THAT, UM, THOSE GOLD BARS GREATLY INCREASED, UM, IN TIERS ONE AND TWO.

IN FACT, UM, THE TOP OF TIER THREE IS 15,000.

AND SO WE SAW A 78% INCREASE IN CONSUMPTION IN THOSE LOWER TIERS VERSUS A 12% DECREASE IN THE UPPER TIERS.

AND BECAUSE WE HAVE A DEEPLY TIERED RATE, WE EXPECT TO RECOVER MORE.

AND THERE'S HIGHER TIERS WITH CONSUMPTION THAN LOWER TIERS.

THAT'S SORT OF THE, THE, THE SUBSIDY THAT'S OCCURRING.

BUT IT CAN'T OCCUR IF YOU HAVE TOO MUCH GROWTH IN THE FIRST TIER AND NOT IN THE UPPER TIERS.

THAT'S ONE REASON WHY WE'RE NOT RECOVERING ENOUGH FROM THE RESIDENTIAL CLASS.

ONE OF THE QUESTIONS THAT WE HAVE IS, WELL, WE HAVE, UH, THESE TIERED RATES AND IT'S INTENDED TO SEND A PRICE SIGNAL TO OUR CUSTOMERS.

SO WE SPEND A LOT OF TIME LOOKING AT THAT AND SAYING, WELL, HOW DO CUSTOMERS REACT TO THESE PRICE TIERS? AND SO, UM, IN THEORY, AND IT'S, IT'S A SOLID THEORY.

IT SAYS THAT IF, UM, WHEN A CUSTOMER GETS, UH, TO A CERTAIN POINT AND IT IT COSTS THEM MORE, THEY WILL, UH, UM, REDUCE THEIR CONSUMPTION.

AND SO, UM, THIS IS, UM, A HYPOTHETICAL, UH, THAT WOULD SHOW YOU THAT IF, UM, IF A CUSTOMER WAS RESPONDING TO A PRICE TIER, THEY WOULD GET UP TO THE, TO THE TOP OF ONE TIER, LIKE TIER ONE OR TIER TWO, THEN I'D SAY, WELL, I DON'T WANNA GO IN INTO THE NEXT TIER, SO I'M, UH, CONSERVE OR, OR USE LESS.

AND SO YOU'D SEE THEM BUNCH AT THE TOP OF THAT TIER, AND THEN THE NEXT TIER WOULD DROP DOWN AND THEN THOSE CUSTOMERS WOULD BUNCH UP UNTIL THE NEXT TO THE TOP OF THE TIER.

THIS IS WHAT YOU WOULD EXPECT TO SEE OF CUSTOMERS RESPONDING TO THESE, UM, PRICE SIGNALS OR THE, THE TIERED PRICING.

WHEN WE ACTUALLY LOOK AT OUR CUSTOMERS AND HOW THEY RESPOND TO 'EM, IT'S, THEY DON'T, THEY SMOOTHLY CROSS OVER THESE TIERS INDICATING THEY ARE NOT RESPONDING TO THESE, THESE PRICE SIGNALS.

IT'S FOR A MULTIPLE OF REASONS.

ONE, IT'S DIFFICULT TO KNOW WHAT TIER YOU'RE ON, WHAT TIER YOU'RE IN, UM, AND IT MAY HAPPEN IN THE MIDDLE OF THE NIGHT, UM, WHEN YOU'RE SLEEPING.

UM, AND IT'S, UM, UM, THE DIFFERENCE IS JUST NOT ENOUGH FOR CUSTOMERS TO, TO REACT TO.

IT'S, IT'S, IT'S A DIFFICULT CONCEPT IN IN, IN USING ELECTRIC INDUSTRY.

TIERED PRICING REALLY FIRST CAME, UM, IN FASHION IN CALIFORNIA, AND IN FACT THEY'VE GONE AWAY FROM IT, UM, BASED UPON SOME OF THE SAME REASONS THAT THAT, THAT WE'RE SEEING HERE.

SO CUSTOMERS DO NOT REACT TO THE PRICE TIERS.

WE DO THINK THEY REACT TO, UM, HIGHER BILLS OVER TIME.

SO IF YOU HAVE A HIGHER BILL OVER A LONG PERIOD, THEY MIGHT, UH, INSTALL ENERGY EFFICIENCY MEASURES, BUT THEY DON'T CONSERVE AS A RESULT OF PRICE SIGNALS.

AND WE HAVE A NICE, UM, COMPARISON THAT WE CAN LOOK AT, RIGHT, RIGHT HERE IN AUSTIN, AS YOU KNOW, UH, BACK IN 2012 WHEN WE SET RATES, CUSTOMERS OUTSIDE THE CITY OF AUSTIN HAVE THREE TIERS SET AT DIFFERENT INTERVALS.

AND CUSTOMERS INSIDE THE CITY HAVE FIVE TIERS.

UM, AND SO WE, WE LOOKED AT THAT, WE SAID, WELL, UM, HOW DID THEY CHANGE THEIR ENERGY CONSUMPTION OR, OR HOW MUCH ENERGY THEY, THEY USED OVER TIME? AND WHAT WE FOUND WAS, UH, THIS IS CALLED AN INDEX.

UH, WE, WE, WELL, IN 2012, IT MEASURED HOW MUCH THEY CHANGED INSIDE VERSUS OUTSIDE CITY CUSTOMERS, AND IT'S NEARLY IDENTICAL.

SO YOU CAN SEE THAT THE THINGS THAT ARE CAUSING A REDUCTION IN ENERGY, UM, USE ARE OCCURRING RE ARE OCCURRING REGARDLESS OF THE NUMBER OF TIERS.

AND AGAIN, IF YOU GO BACK TO THE REASONS WHY WE'RE SEEING THESE REDUCTIONS, UM, LIGHTING, UH, MORE EFFICIENT, UH, HVAC UNITS, UH, MORE EFFICIENT APPLIANCES, UM, ALL THOSE REASONS ARE WHAT'S DRIVING THIS.

IT'S NOT THE TIERS.

ANOTHER POINT WE OFTEN HEAR IS, WELL, UM, THE, THE TIERS ARE IMPORTANT TO, UH, PROTECT LOW INCOME CUSTOMERS.

AND SO, UM, WE, WE LOOKED

[00:45:01]

AT THAT AND WE, WE TRIED TO DETERMINE WHETHER THAT, THAT THAT WAS IN FACT TRUE.

UM, WE DON'T COLLECT, UH, INCOME DATA IN OUR, ON OUR CUSTOMERS, HOWEVER, WE DO HAVE THE CUSTOMER ASSISTANCE PROGRAM, WHICH IS INCOME BASED.

SO IN ORDER TO BE ON THE, GENERALLY ON ON THE CUSTOMER ASSISTANCE PROGRAM, YOU HAVE TO BE 200% OR LESS OF THE FEDERAL POVERTY LEVEL.

SO FOR A FAMILY OF FOUR, THAT'S $55,500.

SO LOOKING AT THE CAP CUSTOMERS AS A PROXY, WE LOOKED AT IT AND WE SAID, WELL, WHERE DO THEY FALL IN TERMS OF, UM, THEIR, THEIR ENERGY USAGE? AND WE FIND OUT WAS THOSE GRAY BARS ARE THE CUSTOMERS ON THE CUSTOMER ASSISTANCE PROGRAM, AND THEIR ENERGY USE TENDS TO BE IN TIERS TWO AND THREE AND FOUR, UH, AS A PERCENTAGE.

THEY'RE TAKING MORE OF THEIR ENERGY IN THOSE TIERS.

UH, FOR NON CAP CUSTOMERS.

UM, THOSE ORANGE BARS, YOU CAN SEE THAT THEY'RE TAKING THE PREPONDERANCE OF THEIR ENERGY IN TIER ONE AND TWO.

UM, AND AGAIN, IF YOU DRIVE AROUND OFTEN THIS KIND OF MAKES SENSE, UH, THINK OF ALL THE NEW CONDOS AND THE APARTMENTS WE'VE HAD IN DOWNTOWN, THE RAINY STREET AREA, UH, THE, THE THE MILLER NEIGHBORHOOD.

THOSE ARE VERY EFFICIENT TYPE UNITS AND THAT'S WHERE, UM, UM, A LOT OF THE FOLKS ARE MOVING IN AND THOSE ARE EXPENSIVE UNITS, SO IT TAKES A HIGHER INCOME TO BUY ONE.

UM, AND SO WE TESTED THIS THEORY IN REAL LIFE AND WE GRABBED TWO ZIP CODES, UH, 7 0 1, WHICH IS OUR DOWNTOWN AREA, AND, UH, 7 24, WHICH IS UP IN THE, UH, NORTH EAST.

AND SO THESE TWO ZIP CODES, UH, LOOK VERY DIFFERENT IN TERMS OF THE DEMOGRAPHICS, UM, THE HOUSING VALUES, UH, BETWEEN DOWNTOWN AND NORTHEAST.

SO THAT, UH, 7 24 IS ABOUT ONE THIRD OF THE HOUSING VALUE.

UM, THEY'RE MEDIAN INCOME, UM, 7 24, ABOUT 40% OF THE INCOME LEVEL OF DOWNTOWN 122 VERSUS 50,000.

REMEMBER I TOLD YOU THAT 55,500 FOR A FAMILY OF FOUR IS 200% OF FPL.

SO BASED UPON THAT, YOU KNOW, WE HAVE A LOT OF CUSTOMERS.

IN FACT, THAT'S WHAT WE SEE 0.2% OF THE CUSTOMERS DOWNTOWN ARE ON THE CAP PROGRAM.

ALMOST 22% OF THE CUSTOMERS IN 7 24 ARE ON OUR, ON OUR CAP PROGRAM.

SO WE CAN TELL YOU THAT THAT'S A, UH, LOWER INCOME LEVEL.

BUT IF YOU GO DOWN, LOOK AT THEIR BILLS IN DOWNTOWN, THEIR AVERAGE BILL IS $66.

AND AT 7 24, EVEN WITH 22% OF THOSE CUSTOMERS ON CAP, THEIR AVERAGE BILL IS $102 OR ABOUT 155% HIGHER.

SO JUST LIKE YOU CAN GET ZIP CODES THAT TELL YOU THAT A LOWER INCOME ZIP CODE IS PAYING HIGHER BILLS THAN 7 0 1, WHICH WOULD BE A FAIRLY AFFLUENT ZIP CODE IN AUSTIN.

THE OTHER THING WE'VE LOOKED AT THAT WE'VE HEARD IS, WELL, WE HAVE TO HAVE TIERED PRICING TO GENERATE ENERGY EFFICIENCY.

AND THE CUSTOMER CHARGE RELATIVE TO THE TIERED PRICING WOULD, WOULD SKEW THOSE.

AND SO WE LOOKED AT SOME UTILITIES AND, UH, THESE WERE, UM, UTILITIES IN CENTRAL TEXAS AS AS WELL AS LUBBOCK, WHICH IS OUTSIDE OF OUR COT AND SOME MUNICIPAL UTILITY.

AND FROM 2013 AND 20, THE CHART ON THE RIGHT, YOU CAN SEE THAT THERE WAS A REDUCTION IN AVERAGE RESIDENTIAL CONSUMPTION IN ALL OF THOSE UTILITIES.

IN FACT, THE ONLY UTILITY THAT HAS TIERED RATES IS, IS AUSTIN ENERGY.

UM, CPS DOES HAVE AN ADDER DURING THE SUMMER, AND SO I GUESS YOU COULD MAYBE CONSIDER THAT A TIER.

SO IF YOU USE MORE THAN 600 KILOWATT HOURS THAT THEY HAVE AN ADDER ON YOUR BILL, UH, IN THE SUMMERTIME.

UM, BUT YOU CAN SEE THERE THAT, UM, WE HAD SIGNIFICANT ENERGY REDUCTIONS ACROSS THE BOARD REGARDLESS OF TIER STRUCTURES AND REGARDLESS OF THE CUSTOMER CHARGE.

UM, AND I THINK THAT REALLY HAS TO DO WITH, WITH THE, HOW THE RATES ARE SET RELATIVE TO THE AVERAGE CONSUMPTION THAT EACH UTILITY SEES.

UM, AND AGAIN, BECAUSE IF YOU HAVE MORE OF YOUR, YOUR SALES IN THE LOWER TIERS AND YOU AGGREGATE MORE CUSTOMERS LOWER TIERS, YOU RECOVER LESS REVENUE.

THIS KIND OF PUTS ALL THIS TOGETHER IN PERSPECTIVE.

AND SO, UH, WHAT THIS CHART IS SHOWING YOU HERE IS, UH, THE YELLOW BARS IS WHERE WE HAD CONSUMPTION IN 2009 WHEN WE CREATED THESE, THESE RATE DESIGNS.

AND THE GRAY PORTION IS WHAT WE'VE ADDED, UH, THROUGH 2021.

SO YOU CAN SEE THAT WE'VE HAD A, UM, A SIGNIFICANT INCREASE, 27% IN TIER ONE OF SALES, AND TIER TWO IS ABOUT 11%.

AND YOU ADD THAT TOGETHER, THAT'S A 21% INCREASE IN TIERS ONE AND TWO, AND THAT'S THE 77% THAT'S BELOW THE COST OF SERVICE.

AND IF YOU LOOK AT TIERS THREE, FOUR, AND FIVE, UM, WE ACTUALLY SAW A REDUCTION IN THOSE TIERS.

SO, UH, OVERALL, YOU KNOW, IT'S, UM, PRETTY SIGNIFICANT THERE.

AND SO WHEN YOU HAVE A FIXED RATE, MULTIPLY THE K H IN EACH TIER, UH, THIS CAUSES US TO UNDERCOVER OUR REVENUES.

THE OTHER THING WE'VE HEARD IS, UM, WELL YOU'RE, YOU'RE, YOU KNOW, YOU'RE,

[00:50:01]

YOU'RE PENALIZING THESE CUSTOMERS WHO'S CONSERVING I'VE CONSERVED.

AND THAT'S THE REASON WHY YOU SEE THIS GROWTH IN TIER ONE AND TWO.

AND WHAT WE'RE FINDING IS, UM, IT IS THE GROWTH OF NEW CUSTOMERS AND NOT THE MIGRATION OF CUSTOMERS THAT'S CAUSING THE SIGNIFICANT INCREASE IN THESE LOWER TIERS.

AND SO WE TOOK ALL THE CUSTOMERS THAT FIRST STARTED TAKING SERVICE BETWEEN, UH, 2013 AND 2020 AND WE SAID, WHAT'S IN THEIR BILLS? WHAT'S THE MAXIMUM AMOUNT OF USAGE WE'RE SEEING FROM THOSE CUSTOMERS? AND IN HERE, OUT OF ALL THOSE CUSTOMERS, 38% OF THEM STAY WITHIN THEIR SALES STAY WITHIN TIER ONE AND 39% STAY WITHIN TIER TWO.

SO THAT'S AS HIGH AS THEY'RE GOING INTO TIER STRUCTURE.

SO THAT BIG GROWTH WE'RE SEEING IN THE FIRST TWO TIERS, THAT'S FROM NEW CUSTOMERS, NOT EXISTING CUSTOMERS CONSERVING AND MIGRATING DOWN, ALTHOUGH THAT CAN HAPPEN AND IT DOES HAPPEN.

BUT THE PHENOMENON WE'RE SEEING IS NEW CUSTOMERS COMING IN.

AND THE REASON WHY THIS IS IMPORTANT IS WE OFTEN HEAR PEOPLE SAY GROWTH SHOULD PAY FOR GROWTH.

WELL, IF YOU HAVE A NEW CUSTOMER COMING ONLINE AND THEY'RE ONLY PAYING HALF OF THEIR COST OF SERVICE, THEY'RE NOT PAIRING THEIR SHARE OF GROWTH, WE'RE PUTTING THAT EITHER ON OTHER CUSTOMERS ON THE SYSTEM OR ON OUR COMMERCIAL CUSTOMERS.

THE OTHER ISSUE WE'RE TRYING TO ADDRESS HERE THAT I, I POINTED OUT WAS TRYING TO MOVE OUR CUSTOMERS CLOSER TO THEIR COST OF SERVICE.

AND WHAT THIS GRAPH SHOWS YOU, UH, IS THAT BLACK BAR, UH, AUSTIN ENERGY AS A WHOLE, OUR COST OF SERVICE, WE ARE $35.7 MILLION BELOW OUR COST OF SERVICE.

THAT'S HOW MUCH MORE REVENUE WE NEED TO RECOVER OUR COSTS BASED UPON THE TEST YEAR 2021.

AND YOU CAN SEE IF WE ADD THAT 35.7, THEN WE GET TO ZERO.

UM, FOR OUR RESIDENTIAL, UH, COST OF SERVICE FOR THAT CLASS, THERE ARE CURRENTLY ABOUT 70.2 MILLION UNDER THEIR COST OF SERVICE.

UM, AND SO WHAT WE'RE PROPOSING THROUGH CHANGING RATES AND THROUGH, UH, THE COST ALLOCATIONS IS TO MOVE THEM A LITTLE BIT CLOSER ABOUT, UM, UH, ABOUT HALF PERCENT, 50% TO THEIR COST OF SERVICE.

SO THEY WOULD BE ABOUT $24 MILLION BELOW COST OF SERVICE STILL BEING SUBSIDIZED.

UM, BUT THAT'S ABOUT A HALF STEP GETTING TO WHERE THEY SHOULD BE.

UM, AND THIS IS PART OF THE REASON WHY WE'RE HEARING THAT THE RATE SHOCK, UM, AND I WANNA PUT IN PERSPECTIVE WHAT WE DID LAST IN 2016.

AND SO WE REACHED A SETTLEMENT WITH ALL THE INTERVENERS AND PART OF THAT SETTLEMENT WAS WITH THE CONSUMER ADVOCATE, THE SAME ONE WE HAVE THIS TIME.

AND HIS REQUIREMENT WAS, WAS WE TAKE $5 MILLION AND WE APPLY IT TO THE FIRST TIER.

THAT WAS HIS RE HIS, UH, REQUIREMENT FOR US TO SETTLE.

UM, SO WE DID THAT IN ORDER TO GET A SETTLEMENT.

SO WE PUT $5 MILLION INTO THAT FIRST TIER AND THAT REALLY DROVE DOWN THAT PRICE.

AND THEN WE GOT THE CITY COUNCIL AND WE BROUGHT THAT SETTLEMENT BEFORE YOU.

UM, AND UH, WE, WE SHOWED YOU HOW THE BILLS LAID OUT AND WE STILL HAD A SLIGHT INCREASE IN THE CUSTOMER THAT WAS DOWNTOWN, AND WE WERE INSTRUCTED TO MAKE SURE THAT THAT CUSTOMER RECEIVED A DISCOUNT OR A REDUCTION IN BILL.

SO IN ORDER TO DO THAT, WE HAD TO PUT ALMOST ANOTHER $4 MILLION IN THE FIRST TIER TO BRING THAT CUSTOMER BELOW THE COST, UH, BELOW THAT, THAT LINE.

AND SO AS A RESULT, THAT RESULTED IN A 2.80 CENT PER KILOWATT HOUR.

IN THE TIER ONE.

AS I'VE SHOWED YOU EARLIER, WE'VE HAD A LOT OF GROWTH IN CUSTOMERS IN TWO POINT IN THAT, IN THAT TIER, AND THEY'RE BUYING THAT ENERGY AT 2.80 CENTS AND A SIGNIFICANT REDUCTION FROM THE COST OF SERVICE.

SO THAT'S ONE REASON WHY WE'RE SEEING THIS ORANGE BAR SO LOW ON THE COMMERCIAL SIDE, WHAT WE CALL SECONDARY TWO AND SECONDARY THREE, THESE ARE RETAIL STORES.

THEY'RE RESTAURANTS, UH, MID-SIZE, UM, UH, STRIP MALL TYPE STORES, UH, UH, SMALL BUSINESS OFFICES, THINGS LIKE THAT.

UM, THOSE CUSTOMERS ARE PAYING ABOVE THEIR COST OF SERVICE, UM, AND IN, IN TOTAL ABOUT 42 AND A HALF MILLION DOLLARS.

AND SO WHAT WE'RE PROPOSING IS TO BRING THEM DOWN A LITTLE BIT CLOSER TO COST OF SERVICE.

SO THEY WOULD BE GETTING A REDUCED, UH, A BILL.

AND SOME FOLKS HAVE POINTED US BEING UNFAIR.

WHY ARE WE GETTING INCREASED? BECAUSE THEY'RE GETTING A DECREASE.

WELL, THIS IS THE REASON WHY IS BECAUSE THEY'RE SO FAR FROM THE COST OF SERVICE AND WE'LL NEVER MAKE PROGRESS ON GETTING FOLKS CLOSER TO THEIR COST OF SERVICE.

WE DON'T TAKE THIS STEP.

AND A GOOD EXAMPLE OF WHAT WE'RE SHOWING YOU IS THAT LOOK AT THE REST OF THOSE, UH, CLASSES OF CUSTOMERS, PRIMARIES, 1, 2, 3, TRANSMISSION CUSTOMERS.

THEY'RE BARELY MOVING AT ALL.

AND THE REASON WHY THEY'RE BARELY MOVING AT ALL IS WE MOVE THEM CLOSER, THEIR COST OF SERVICE BACK IN 2012 AND 2016.

SO AS A RESULT, UM, THEY'RE ALL GETTING, UM, UH, VERY SMALL ADJUSTMENTS BECAUSE THAT'S APPROPRIATE.

THEY'RE MUCH CLOSER TO THE COST OF SERVICE.

IF WE CAN GET RESIDENTIAL COMMERCIAL CUSTOMERS, UH, THOSE S TWO S AND S THREES CLOSER TO THAT, WHAT WE CALL UNITY OR ZERO, THEY TOO WOULD ALSO SEE LESS CHANGE WHEN WE ADJUST RATES.

SO HOW DOES THIS ALL COME TOGETHER?

[00:55:01]

THE ORANGE, UH, BOX ON THE TOP HERE, THAT'S OUR CURRENT RATE STRUCTURE.

WE HAVE FIVE TIERS INSIDE THE CITY OF AUSTIN, AND AS YOU POINTED OUT, THAT'S FROM 2.80 CENTS UP TO 10.80 CENTS.

AND, UM, FOR OUR, OUR TEST YEAR, AND AGAIN, IT'S A SLIGHTLY DIFFERENT BECAUSE WE CALL WEATHER NORMALIZED.

SO WE ASSUME THAT THE WEATHER IS NORMAL AND THAT'S BASED UPON A 20 YEAR HISTORY.

UH, AND SO WHEN WE RATHER NORMALIZE IT, THAT PUTS ALMOST 80% OF THE SALES IN TIER ONE AND TWO.

UM, THE WEATHER CHANGES HOW WE COLLECT THE ACTUAL REVENUE FROM CUSTOMERS, BUT FOR THE TEST YEAR, THAT'S ALMOST 80%.

AND SO YOU CAN SEE THAT'S HEAVILY WEIGHTED IN THOSE LOWER TIERS AND THAT PREVENTS THE COST RECOVERY.

WHAT WE ARE PROPOSING IS THREE TIERS.

WE HAVE THREE TIERS OUTSIDE THE CITY.

NOW WE'RE PROPOSING THREE TIERS FOR BOTH INSIDE AND OUTSIDE AND PROPOSING THE CHANGE WHERE THEY BREAK.

SO RATHER THAN BREAKING THE FIRST TIER AT 500 KILOWATT HOURS, PROPOSING TO BREAKING AT 300, AND THEN SECOND TIER WOULD BE 300 TO 1200.

AND THEN ABOVE, UH, TIER THREE IS WOULD BE 1200 OR MORE.

AND THAT FIRST TIER IS JUST BELOW THE COST OF SERVICE.

THE SECOND TIER IS APPROXIMATELY THE COST OF SERVICE, AND THE THIRD TIER IS ABOVE THE COST OF SERVICE.

AND WHAT THIS PRODUCES IS MUCH MORE PROPORTIONAL TIERS.

SO IT ALLOWS US TO RECOVER THAT REVENUE FROM OUR CUSTOMERS, UH, BASED UPON HOW THEY'RE USING ENERGY NOW, THOSE, THOSE CONSUMPTION PATTERNS.

AND WITH THAT, I CAN ANSWER ANY QUESTIONS THAT YOU MIGHT HAVE.

UM, I'VE PUT THE SCENARIOS UP ONTO THE MESSAGE BOARDS SO EVERYBODY CAN SEE THAT.

A QUESTION ON THIS LAST PAGE, UM, MR. DOMBROSKI, IF I'M INTERESTED IN LOOKING AT WHAT IT WOULD, WHAT THE BREAKS WOULD BE FOR FOUR TIERS, FOR EXAMPLE, WOULD YOU BE ABLE TO RUN US SOME NUMBERS THAT THAT TAKES YOUR SECOND TIER AND MAYBE MAKE SECOND TIER AND I'M JUST BLUE SKY IN HERE, 300 TO 6, 3 0 1 TO 600, AND THEN 6 0 1 TO 1200 AND SEE HOW THAT 51.1% BREAKS OUT IN THOSE IN A, IN A FOURIER SCENARIO? SURE.

SO THERE'S, UM, WE, WE CAN DO THAT.

SO, AND UM, UM, I CAN GET JUST A LITTLE BIT MORE, UM,