Photo courtesy Austin Energy

Members of the Austin City Council are scheduled to vote on the Austin Energy rate increase May 24 after agreeing to study alternative options at its March 1 meeting.

An alternative rate hike proposal was on the March 1 meeting's agenda and was sponsored by Councilwomen Laura Morrison and Kathie Tovo and Councilman Mike Martinez. The proposal, which called for an interim 3.5 percent system-wide increase targeted to begin in June, was not added.

The proposal also included the addition of an independent residential, low-income and small business consumer advocate.

The utility had stated previously that if new rates are not in place by this summer, it will lose $77 million this year, and in order for new rates to occur, City Council would have to take action in March.

However, AE General Manager Larry Weis said a 3.5 percent, one-year interim increase beginning in June would not be sufficient, resulting in a $78 million shortfall by June 2013.

Weis said the utility actually prefers no interim increase and for council to instead focus on working on a final rate plan.

"Long-term financial viability is more important than a short-term fix," Weis said.

Morrison commented that this was the first time she heard that preference.

Council ultimately decided to amend the proposal to not include the interim hike.

Martinez expressed concern that May 24 did not allow enough time to make a decision on final rate plan. He was the lone opposing vote on the amended plan.

Council's schedule to review proposal options includes a round of work sessions that will be held before May 24.

Mayor Pro Tem Sheryl Cole said she is in favor of a shorter work schedule that ends with a final vote in the next few months.

"My goal is for us to have drop-dead date in which we're going to go make a decision on the rates and rate designs," she said.

While council set May 24 as a date for a vote on a final increase, Mayor Lee Leffingwell and other members agreed that if more time is needed at that point, they would extend the time. The council made sure to adjust language to add "projected" in front of the May 24 date.

On Feb. 22, council ordered City Auditor Ken Mory to conduct a review of AE's proposed revenue requirements. The results of the audit are expected in late April.