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However, several Austin City Council members say there are parts of the proposal they don't favor.

Council Member Kathie Tovo suggests an across-the-board increase of two or three percent now, so Austin Energy can continue working on a final version that both sides can agree upon.

"We've heard from many different stakeholder groups that there are ways to cut back on that revenue requirement, which would decrease the need for a rate increase," Tovo said.

Austin Energy's Ed Clark says the utility company might entertain an interim plan.

"We want to try to answer the questions and suggestions from council, so I think you will see something along those lines--with the general manager working with the city manager," he said.

Clark said even an interim rate hike could be challenged. The city already gave the utility $250,000 to defend its case through an outside law firm. Now, the electric company is asking for another $1.2 million.

Clark said Austin Energy wants to be prepared if, and when, its rate hike is challenged and brought before the Public Utility Commission. Even before that, he said attorneys have been working alongside Austin Energy to make sure its case is solid.

While a decision hasn't been made, Tovo said the city will likely spend the money, one way or another.

"Whether we make that decision now or see whether or not it becomes an appeal and then authorize spending that money later, I think, is a legitimate question," she said.

Austin Energy wants the council to approve its rate hike by March 1, but the mayor says that might not happen.

There will be another public hearing on the rate increase this Thursday at 6 p.m. at Austin City Hall.