Three Austin City Council members unveiled an alternative energy rate plan May 14 that cuts the residential rates in Austin Energy's proposal by about half.

Council members Bill Spelman, Chris Riley and Sheryl Cole designed a system of rate hikes to occur in two phases in an effort to "reduce rate shock." Under the plan, the average household would see about an 8 percent increase compared with the 20 percent increase under AE's proposal.

"This is a terrible time for a rate increase," Spelman said. "I wish we could wait another year or two, but we can't."

He said the utility expects to lose $89 million this year, and that Phase 1–which would begin September 1–would generate about $71 million in an effort to slow the budget bleeding "just enough."

Spelman explained that the second phase would result in $35 million in additional revenue and would begin when AE can cut costs, build reserves and when the contracts with big businesses expire in the next couple years. Once these contracts expire, the council members said revenue rates could be more evenly distributed among classes. The expected start date for Phase 2 is October 2015.

Specifically, the plan includes a five-tier rate structure based on energy usage similar to the in the utility's original proposal, but the council members' plan reduces the proposed residential fixed rate from $22 to $10.

Additionally, for houses of worship, the average increase would be reduced from 80 percent to 18 percent and would cap the maximum total of the monthly bills to no more than 12.5 cents per kilowatt hour. The new design would also give Austin-area schools a 10 percent discount on energy bills.

The utility had originally requested a total of $126 million in additional revenue, but the new plan would only net a total of $106 million.

AE Spokesman Ed Clark said while the number is lower than requested, the company would look at the budget again and try its best to work with those figures.

Carol Biedrzycki, executive director of Texas Ratepayers Organization to Save Energy, acknowledged this plan was much better than AE's, but said she is skeptical of how much the utility really needs to operate.

"I'm still concerned rates will be going up more than they have to," she said.

Riley said while he believes the proposal is solid, it is not the final word on the rate package.

"I look forward to that continued conversation as we move toward a final adoption of the rate package," he said.

City Council is scheduled to hold its last Austin Energy work session May 17. A vote on a final rate plan could be taken at council's regular meeting June 7.