Austin Energy 2023 Power Supply Adjustment - City Council Discussion Mark Dombroski - AustinTexas.gov
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Austin Energy 2023 Power Supply Adjustment City Council Discussion Mark Dombroski Chief Financial Officer October 11, 2022 © 2022 Austin Energy
2023 Power Supply Adjustment Discussion
Agenda for Discussion
• Follow-up Requests from September 27th Work Session
• Comparison of Option 1: As Proposed vs. Option 2: 3-Year
Gradual
• Recommendation for the 2023 PSA and Future PSA Methodology
22023 Power Supply Adjustment Discussion
Follow-up Requests from September 27th Work Session
3Power Supply Cost Impacting Other Utilities
Recent Headlines
• “CPS Energy Bills Top $234 in August, Up 32 Percent From A Year Ago. In Past 5 Months, Up 35
Percent”—San Antonio Express-News 9/27/22
• “New Braunfels Utilities' electricity, water, wastewater rates to rise: Increases approved in 2020
but come at a time when power bills are already high” –The Herald-Zeitung 8/2/22
• “‘We’re in trouble’: Electric rates in Texas have surged over 70% as summer kicks in: Natural gas
prices have soared, and gas-generation plants produce the most electricity in the state — and
set the market rate”—Dallas Morning News 6/2/22
4Recent Credit Actions on Texas Electric Utilities
Utility Uri Costs per Customer(1) Agency Movement Prior Rating Rating Rating Date
Brazos Electric Power Cooperative, Inc. $2,858 S&P Downgrade A D 3/1/2021
Brazos Sandy Creek Cooperative - S&P Downgrade A CCC 3/1/2021
Rayburn Country Electric Cooperative $3,711 S&P Downgrade A- CC 3/3/2021
Georgetown $1,562 S&P Downgrade AA- A+ 3/3/2021
Denton $1,081 S&P Downgrade AA- A+ 3/3/2021
San Antonio City Public Service $1,162 S&P Downgrade AA AA- 3/10/2021
Denton County Electric Cooperative - Fitch Downgrade AA- A 3/10/2021
Greenville Electric Utilities System $1,298 S&P Downgrade A+ A 3/25/2021
Pedernales Electric Cooperative $459 S&P Downgrade NR A-1 4/7/2021
Golden Spread Electric Cooperative $787 S&P Downgrade AA- A+ 4/8/2021
Grey Forest Utilities $1,299 S&P Downgrade A+ BBB+ 4/15/2021
Brownsville Public Utility Board $661 S&P Downgrade A+ A- 4/16/2021
New Braunfels $2,026 S&P Downgrade AA- A+ 4/19/2021
Bryan Rural Electric System $423 S&P Downgrade AA- A+ 4/29/2021
Garland Power & Light $1,840 S&P Downgrade A+ A 5/4/2021
Seguin - S&P Downgrade A+ A 5/19/2021
Floresville $1,771 S&P Downgrade AA- A+ 5/26/2021
Rayburn Country Electric Cooperative $3,711 S&P Downgrade CC CCC 7/19/2021
Texas Municipal Power Agency - Fitch Withdrawn A+ WD 8/5/2021
Guadalupe Valley Electric Cooperative - S&P Downgrade AA- A 10/27/2021
Rayburn Country Electric Cooperative $3,711 S&P Upgrade CCC BBB- 3/7/2022
Brazos Sandy Creek Cooperative - S&P Downgrade CCC D 3/18/2022
Lubbock $213 S&P Downgrade A+ A 8/2/2022
Austin (Represents a credit for our customers) ($199) S&P Downgrade AA AA- 8/23/2022
Brazos Electric Power Cooperative, Inc. $2,859 Fitch Withdrawn D WD 8/25/2022
San Marcos $38 S&P Downgrade A- BBB+ 9/26/2022
(1) Costs per customer provided by S&P Global Ratings Research, November 1, 2021
5Actual to Budget Analysis: Power Supply Adjustment
As Presented during 3rd Quarter Financial Update in August 2022 with Updated July & August Results
$93.1
90
80
$68.0 $65.4 $71.0
70 $66.6
60
$ millions
50
40
30
20
10
0
Actual Cost Budget Cost PSA Revenue Note: Sept-22 cost is estimated and hatched
This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on
http://finance.austintexas.gov/web/controller/annual_comprehensive_financial_report/annual_comprehensive_financial_report_2021.pdf
6Power Supply Adjustment Cost Components
As Presented during 3rd Quarter Financial Update in August 2022 with Updated July & August Results
Twelve Months Ending August 2022
$1,200
$1,079
Difference between Load Zone
$1,000
And Power Supply Costs:
$800
$544m or 50%
$535
Cost
$600
$ millions
$400
$200
$0
($16) ($58)
($200) ($85)
($400)
($386)
Revenue
($600)
Load Zone Owned Contracted GreenChoice ® Bilateral Net Power
Assets Assets and and Supply
Value of Solar Hedging
This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on
http://finance.austintexas.gov/web/controller/annual_comprehensive_financial_report/annual_comprehensive_financial_report_2021.pdf
7Primary Factor: Over/Under Collection of Power Supply Costs
Uri Funds Passed to Retail Customers while May-August was $113 million Under Collected
Change Balance Actual Forecast
$100
83
75 76 72 71
$80 65
$60
37
$40
16
$20
1
$mm
$
-4 -1 -6
-$20 -8 -8 -13
-21 -21 -16
-$40 -28 -27
-$60 -43 -48
-61
-$80
-77
-$100 $104.2mm
-$120 With the ERCOT
Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 receivable
associated with
Brazos bankruptcy
Disclaimer: Accounting data and ERCOT settlement is subject to change. Default uplifts, resettlement and true-up cycles, and CRR Auction
Revenue completion may alter these results.
8Comparison of Bills for Central Texas Utilities
$180.00 $171
Bill components may not be comparable. For example,
$160.00 Austin Energy’s rates include costs for 12% GFT,
Economic Development, Street Lights, Energy Efficiency
programs, and the Customer Assistance Program. $137 $139
$140.00 $134
$127
$119 $118 $119 $119 $119
$120.00 $115
$108 $106
$101 $103
$96 $97
$100.00
$88
$83 $83 $85
$80.00
$60.00
$40.00
$20.00
$0.00
San Marcos Austin Energy (1) Georgetown Bluebonnet San Antonio PEC New Braunfels
2021 Bills at AE Typical Consumption (860 kWh)
2022 Bills at AE Typical Consumption (860 kWh)
2022 Bills at Each Utility's Average Consumption ( ~ 850 - 1200 kWh) (2)
(1) Austin Energy 2022 based on proposed base rates, PSA, and Regulatory Charge.
(2) Energy Information Administration, Form 861, Calendar Year 2020 Data, available October 2021
9Power Supply Adjustment Rate Historical Change
The PSA Rate is Strongly Influenced by the Price of Natural Gas
0.0600 $10.00
$9.00
0.0500
$8.00
$7.00
0.0400
Dollars per MMBtu
Cents per kWh
$6.00
0.0300 $5.00
$4.00
0.0200
$3.00
$2.00
0.0100
$1.00
0.0000 $0.00
Oct 2012 Nov 2013 Nov 2014 Nov 2105 Apr 2016 Nov 2016 Nov 2017 Nov 2018 Nov 2019 Nov 2020 Nov 2021 Aug 2022 Nov 2022
System Average Power Supply Adjustment Rate Henry Hub Natural Gas Monthly Settlement Price
Proprietary & Confidential
10Dollar Value for Primary Factors Causing Increase in PSA
In Millions of $ Other Factors, Completed Return
2021 PSA Amount $350.9 $42.4 of Winter Storm Uri
Wholesale
Increase in PSA Costs $288.3 Revenue, $69.0
2022 PSA Amount $639.2
Undercovery of
costs from 2022, Extrordinary
$86.2 Congestion Costs,
$40.5
Extrordinary
Natural Gas Costs,
$50.5
(1) The $86.2M represents the incremental change in over/under from 2022 to 2023 and not the $104M balance.
(2) Increases in other fuel, hedging, transportation, and commodity costs. 11Reconciliation of Under Recovery Balance of $104M
Component Amount in Millions of $
Under recovered from Winter Storm Uri – Net receivable from ERCOT $27
associated with the Brazos Bankruptcy (1)
Under recovered at August 2022 (actual) $48
Under recovered from September and October 2022 (forecast) $29
Total under recovered $104
(1) Brazos Coop did not pay ERCOT for power received during Winter Storm Uri. ERCOT passes those “short pays”
on to the generating market participants by withholding payment. Austin Energy’s allocated share of that amount is $42M.
This short payment will eventually be paid by either Brazos, within the framework of the bankruptcy, or by all market participants in
ERCOT through an “uplift,” of which Austin Energy’s share would be $15.6M. $42.4M less the $15.6M is $26.8M, the net receivable.
Proprietary & Confidential
Proprietary & Confidential 122023 Power Supply Adjustment Discussion
Comparison of Option 1: As Proposed vs. Option 2: 3-Year Gradual
13Option 2: 3-Year Gradual for Under-Recovery
Typical Residential Bill Impact at 860 kWh:
Option 1: As Proposed vs. Option 2: 3-Year Gradual
Includes proposed base rate increase
$140
$119.07
$120 $114.37 $112.01 $114.37 $112.01 $114.37
PSA
$100 Base Rates
Typical Monthly Bill
$84.56
Reg
$80
$60
$40
$20
$0
Bill with current base rates and Beginning Jan 2023 Beginning Nov 2023 Beginning Nov 2024
PSA
Option 1: As Proposed Full Recovery of $104M in 2023 Option 2: 3-Year Gradual with Full Recovery of $104M from 2023 to 2025
Bill totals reflect the assumption that no other bill components change from 2022 through 2024.
Proprietary & Confidential
14Option 2: 3-Year Gradual for Under-Recovery
Representative Impacts on Large Commercial & Industrial Customers:
Option 1: As Proposed vs. Option 2: 3-Year Gradual
2022 Total Billing Increase in
Option 1 Increase in PSA Estimated Billing % of Increase
(Oct 21 – Sep 22) Regulatory
PRI-2 Hospital $1,859,832 $568,051 $41,251 $2,469,304 32.8%
SEC-3 Bank $746,217 $166,925 $17,485 $930,627 24.7%
2022 Total Billing Increase in
Option 2 Increase in PSA Estimated Billing % of Increase
(Oct 21-Sep 22) Regulatory
PRI-2 Hospital $1,859,832 $415,716 $41,251 $2,316,969 24.6%
SEC-3 Bank $746,217 $122,248 $17,485 $885,950 18.7%
Proprietary & Confidential
15Option 2: 3-Year Gradual for Under-Recovery
Representative Impacts on Commercial Customers:
Option 1: As Proposed vs. Option 2: 3-Year Gradual
2022 Total Billing Increase in
Option 1 Increase in PSA Estimated Billing % of Increase
(Oct 21 – Sep 22) Regulatory
SEC-2 Large Retailer $53,060 $12,815 $1,102 $66,978 26.2%
SEC-2 Fast Food Restaurant $11,220 $2,451 $264 $13,934 24.2%
SEC-1 Retail Technology $2,771 $568 $79 $3,418 23.4%
2022 Total Billing Increase in
Option 2 Increase in PSA Estimated Billing % of Increase
(Oct 21 – Sep 22) Regulatory
SEC-2 Large Retailer $53,060 $9,385 $1,102 $63,548 19.8%
SEC-2 Fast Food Restaurant $11,220 $1,795 $264 $13,278 18.3%
SEC-1 Retail Technology $2,771 $416 $79 $3,266 17.9%
Proprietary & Confidential
162023 Power Supply Adjustment Discussion
Recommendation for the 2023 PSA and Future PSA Methodology
17Recommendations for the Power Supply Adjustment
Recommendation for the 2023 PSA
• Approve Option 2: 3-year Gradual PSA on October 13,
2022
• Effective date is November 1, 2022
• Recovers $34.73M per year, $104.2M over three years
• Delay after November 1st implementation contributes
$750,000 to $1,000,000 per day to the under-recovery
18Recommendations for the Power Supply Adjustment
Recommendation for the 2023 PSA
• Continue to monitor and regularly report to the Utility Oversight
Committee the power supply costs, revenues, load data, and
cash position
• Evaluate and recommend mid-cycle adjustments to the PSA rate
if there is a high probability of over/under collection during FY
2023
19Recommendations for the Power Supply Adjustment
Recommendations for the Evaluation of the Future PSA Methodology
• Evaluate the frequency at which we adjust the PSA rate
• Evaluate changing PSA rate during non-summer months
• Consider administrative authority within the PSA tariff to adjust
the rate within a defined range
• Evaluate using both historical and forward-looking power prices
to anticipate market movements
• Evaluate mandatory Time-of-Use PSA rates to send conservation
and efficiency signals to customers
20Confidential & Proprietary ©2018 Austin Energy. All rights reserved. Austin Energy and the Austin Energy logo and combinations thereof are trademarks of Austin Energy, the electric department of the City of Austin, Texas. Other names are for informational purposes only and may be trademarks of their respective owners.
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