After 17 years of a stagnant base rate, Austin Energy said in September that a $131 million shortfall necessitated a 12.5 percent system-wide rate increase that it hoped to have in effect by January. Now, at the end of February, the utility—as well as members of City Council—continues to work toward bringing residents an acceptable proposal.

Under AE's original plan, depending on usage, rates would have changed a residential customer's bill by as much as 60 percent or as little as 5 percent, and the fixed monthly fee would increase from $6 to $22. Commercial and industrial users would face a change as high as 22 percent or as low as 1 percent.

Opponents of the plan said the increase would burden residential customers in favor of industrial and commercial users.

"The proposal is upside-down and backward," said Carol Biedrzycki, executive director of Texas Ratepayers Organization to Save Energy, at Austin Energy's first rate increase public hearing held Jan. 12.

AE's modifications to this plan were presented to council on Feb. 2. The proposal outlined four main changes, including phasing in the 12.5 percent rate increase in two steps. The first phase would mean an 8.7 percent increase in 2012 and a 3.8 percent increase in 2014.

The utility stated that if the proposed increases are not in place by summer, it will lose $77 million this year. To have the rates solidified by summer, City Council would need to take action in March.

While the residential monthly fixed fee set in the original proposal would remain at $22, the first 200 kilowatt-hours would be included. AE would also remove delivery and demand charges for small businesses as well as some small worship centers, which would also have a time-of-use fee option.

Although it was an attempt to resolve concerns, members of City Council still took issue with the modifications. On Feb. 9, Councilwomen Laura Morrison and Kathie Tovo proposed an interim 3.5 percent system-wide rate increase as an alternative measure that would begin in June and expire after one year.

"We've heard from the community loud and clear that the Austin Energy rate proposal will have too much impact on ratepayers, especially our families, our small businesses and our faith community, all of whom would experience very high rate increases," Morrison said.

At a special called meeting Feb. 22, council directed the city auditor to conduct a review of AE's revenue requirements with completion of the review targeted for late April. Council also began debate on an interim increase, but further discussion is set for its regular meeting March 1.

The next public hearing on the rate increase will be held at 6 p.m. March 1 at City Hall, 301 W. Second St.