Some Southwest Austin business owners experience significant increases to power bills

Local businesses are adjusting to Austin Energy's 7 percent system average rate hike and updated electric rate structure that went into effect in October. While some commercial customers have accepted the new rates as just another rising cost, others were surprised by how their bills changed.

James McLane, owner of McLane Family Dental, said although electricity use at his 3,200-square-foot offices and dentistry practice only increased slightly, his 2011 electric bill for December usage was about $353, while last year's was $858.

"I fall into a category of businesses that have monthly [energy use] peaks between 10 and 20 kilowatts most months of the year," he said. Under AE's previous rate structure, that peak energy use, or demand, was not charged to businesses with peaks of fewer than 20 kilowatts of energy. With the new system, businesses with 10–20 kW peaks receive a demand charge, he said.

What changed

Last year, Austin City Council approved a 7 percent systemwide rate increase for AE's 420,000 customers.

AE has more than 44,000 commercial customers, 7,500 of which are in Southwest Austin, according to AE spokesman Carlos Cordova. Customers' usage varies, but the average bill increased "between 1 percent and 18 percent," Cordova said.

The estimated 5,000 businesses using between 10–20 kW could see "between $51.50 and a little over $100" being added to their bill per month with the new demand charges depending where they are on the scale, he said. If business owners receive unusually high bills, they should call AE to ensure they're accurate, Cordova said.

McLane said he understands why AE charges for demand—if one business might need 40 kilowatts, that energy must be available—but he thinks the rates could be fairer. He said he called AE about what he could do to lower his bills, but there were few improvements he saw as feasible.

"I feel quite helpless because there's really nothing I can do," he said.

Reel Popcorn owner Sharon Easley said she is now paying demand charges as well.

"So that means that if I close the doors and don't use anything and close down for 15 days I'm charged for [peak usage]. That's so unfair. Why? I'm not using it."

Understanding the charges

All customers pay for demand, Cordova said. For example, the demand charges for residential customers and some commercial customers are built into their kwh charge, which represents energy use. AE has about 380,000 residential customers, and their average base rate increase was 11.6 percent, with a five-tier rate structure based on energy usage. More than 80 percent have summer bills of less than 2,000 kwh per month, Cordova said. As a result, the average monthly residential electric bill increase this summer will be $44 or less.

AE expects to receive $71 million more annually as a result of the hike. The utility company will evaluate the hike in 2014 and possibly seek a second increase, Cordova said, noting the goal is to review the base rates every five years. This is AE's first base rate hike in 18 years, Cordova said.

"We hadn't changed [the base rates] for so long that customers in different categories weren't paying what it cost us to serve them. So if they weren't paying for demand, that had to be made up somehow. Either other customers were paying for it, or AE was making up for it, and that's why we started operating at a loss," he said. "And that's just one of the reasons [for the increase]."

But rates such as fuel charges increased, said Mark Farrar, executive director for both the Austin Competitive Energy Alliance, a group of businesses against the rate hike, and Homeowners United for Rate Fairness, an association of AE customers living outside Austin.

The Public Utility Commission of Texas is hearing HURF's case to roll back the rate increase, with results expected in June.

"We're hoping the big relief will come from the PUCT determining that these rates are not acceptable and forcing them to be lowered," he said.

Businesses react

In winter, CrossFit Austin on South Congress Avenue does not need much heat, owner Boone Putney said.

"People are running around and jumping and lifting weights," he said. "They're already sweating."

But with inevitable 100-degree days coming, electric bills could increase, he said.

Austin Energy said that it will charge summer energy rates during June, July, August and September; previously summer rates were charged for a six-month period.

Putney said a recent bill nearly doubled year-over-year, but his energy use did not.

"I looked around the gym to see if there are things we could be doing to decrease our electricity use," he added.

Putney said he owns properties outside Austin where he can choose his energy provider. In Austin, AE is the only option.

Another business owner, Vicom PC's Duncan Curtis, said he didn't see shocking bills despite all the computers in his shop.

"I haven't noticed any difference so far," he said, adding: "I'm probably going to have a big increase in my bill this summer."

Amber Santa Cruz, Galaxy Cafe director of operations, said the restaurant views expenses as "controllable" and "noncontrollable," and energy bills are the latter.

"If we want electricity, that's how much we are going to pay for it," she said. "We're not trying to argue that or refute that, and we don't feel that we're treated unfairly because of that."

An AE audit helped Galaxy Cafe, she said.

"The silver lining any time prices go up is you learn to be really careful with what you use," she said.