AUSTIN (KXAN) — Austin Energy sent a memo to the city council Thursday informing them of a rate increase that will start in October.

Austin Energy said in the memo there will be a 5% increase to its Power Supply Adjustment, or PSA, effective Oct. 1. The bill impact will be “less than $2 per month” for the typical residential customer, according to the utility.

“This increase is due to further increases in wholesale power market costs, resulting in a lack of progress toward making up for the existing PSA under recovery,” the memo read in part.


According to Austin Energy, the PSA is a dollar-for-dollar cost pass-through to electric utility customers for the recovery and crediting of ERCOT settlements, fuel costs, and net purchased power costs, with an adjustment for the over- or under-recovery balance for the period preceding the adjustment of the PSA.

The PSA is assessed on all electric customers based on the actual number of kWh consumed, the memo said. Weather and ERCOT market prices impact the amount of revenue and, therefore, the collection/return of any over/under balance. There is no gain or general fund transfer on PSA charges.

When the PSA rate was approved in October of last year, city council delegated administrative authority to Austin Energy to adjust the PSA in increments not to exceed plus or minus 5%, which “seeks to manage the elimination of any over- or under-recovery more smoothly than could be achieved by an annual adjustment,” the memo said.

Adjustment of the PSA

When the current PSA rate went into effect on Nov. 1, 2022, the actual under-recovered balance was $102 million, according to the memo. The approved PSA rate was designed to recover the $102 million under-recovery in three years, seeking to recover approximately $34 million in the first 12 months and the remaining $68 million over the following 24 months, beginning Nov. 1, 2023.

There has not been progress made on correcting the under-recovery balance since Nov. 2022 due to the extreme heat Austin experienced this summer.

As of July 31, the balance was $55 million, but since then, wholesale power market prices “have continued to be extraordinarily high in Austin Energy’s load zone,” the memo said.

For the month of August, the utility expects an under-recovery of an additional $47 million because of “continued extreme heat resulting in upward pressure on market power costs as well as continued transmission congestion related to import limitations, renewable generation curtailments, and a lack of sufficient power generation capacity within the Austin Energy load zone.”

That puts the current under-recovered balance back at $102 million, which is the same as the balance was when the PSA went into effect Nov. 1, 2022.

“Therefore, having made no progress on correcting the under-recovery so far during the rate year, Austin Energy is exercising its administrative authority to increase the PSA rate at this time,” the memo said.

This administrative action from Austin Energy raises the PSA, but city council will still see the standard annual item for approval of all Austin Energy pass-through charges on Oct. 5. This is an action taken every year to set the Community Benefit Charge, Regulatory Charge, and PSA, to be effective Nov. 1.