July 27, 2009


Austin Energy will be submitting for City Council approval on the August 20 council agenda, a revised tariff for GreenChoice® Batch 6 of 5.7 cents per kilowatt-hour (kWh) for a five-year term.

The current Batch 6 price is 8 cents/kWh for a 5-year term or 9.5 cents/kWh for a 10-year term. These original Batch 6 prices, which include estimates on transmission congestion costs, were set in December 2008 based on what had been a year of significantly greater transmission congestion activity. Estimated congestion cost at the time assumed that the Hackberry wind plant (located near Abilene) which provides Batch 6 would be assigned to ERCOT’s “West Zone” for congestion purposes and would therefore have higher congestion costs. However, Hackberry was ultimately assigned to the North Zone, thereby reducing its exposure to transmission congestion costs. In addition, ERCOT implemented protocol and grid operational changes which have resulted in reduced transmission congestion statewide.

The revised price reflects the cost of the contracted wind energy, ERCOT support fees and charges associated with the energy and Austin Energy GreenChoice® administrative costs. Transmission congestion costs associated with Batch 6 wind energy would be recovered through the standard fuel charge.

Under the proposed new rate, the electric bill of a GreenChoice® Batch 6 subscriber using 1,000 kWh a month would be about 20 percent higher on average that that of a non-subscriber. Customers who have already subscribed to Batch 6 would be allowed to change to the revised rate. Some considerations regarding recovery of Batch 6 transmission congestion costs through the fuel charge:

· Estimating prospective transmission congestion over a number of years for inclusion in a fixed 5-year green power price is difficult, especially given that ERCOT is scheduled to implement a new nodal wholesale market design at the end of 2010.

· Even with prospective Batch 6 transmission congestion costs recovery through the fuel charge, subscribers to Batch 6 will be paying the vast majority of Batch 6 costs.

· If the Batch 6 energy supply did not exist, traditional generation would take its place, the full cost of which would be paid for by all customers.

· Austin Energy is likely the only utility-sponsored green power program in the nation (among 850) that has yet to spread the cost of its renewable energy program across its customer base. All previous batches of GreenChoice have been purchased by voluntary subscribers.

Austin Energy expects Batch 6 to sell well under the revised pricing. However, should Batch 6 not sell—recovery of its costs will do little to raise overall electric rates in Austin. Green power is purchased power and purchased power costs are recovered through the fuel charge to customers. Batch 6 began flowing in January 2009 but did not increase the Austin Energy fuel charge this year. Staff estimates that even if it were necessary to recover most of Batch 6 in the fuel charge long-term, its impact on the fuel charge would be about 1-2 percent. The fuel charge on average is about one-third of the average residential electric bill in Austin.

Austin Energy GreenChoice is number one in the nation for sales among 850 utility-sponsored green power programs-- seven years in a row. Austin Energy customers purchase about 750-million kWh of wind-generated power annually from the program. The utility replaces the fuel charge on the bill of a GreenChoice subscriber with the green power charge for the respective Batch. The green power (fuel) charge for previous batches of wind energy was fixed for 10 years.