This article has been updated.
CPS Energy, San Antonio’s municipally owned electric utility, plans to go to City Council seeking a 4.25% base rate increase, which is lower than the 5.5% the utility had earlier predicted it would need heading into its next fiscal year.
If the new base rate is approved by both the utility’s board of trustees and City Council by the end of the calendar year, the average CPS Energy residential customer with a monthly bill of $181.10 would see their bill increase by about $4.45 per month starting in March 2024. CPS Energy’s fiscal year begins Jan. 31.
The 4.25% increase would help the utility raise an additional estimated $85 million per year.
CPS Energy’s Chief Financial Officer Cory Kuchinsky told reporters Wednesday the utility requires the base rate increase to combat inflation, replace aging infrastructure, manage the growth of San Antonio’s population and to continue growing its staff.
“This community continues to grow at a record pace,” Kuchinsky said. “The collective growth of this community needs to be supported.”
The utility’s board of trustees will discuss the new proposed increase for the first time Wednesday afternoon in a special board meeting prior to utility officials introducing the proposed rate hike to City Council later Wednesday.
CPS Energy’s last base rate increase, which was the first in eight years, went into effect in March 2022 following a two-year outreach process that included the formation of a Rate Advisory Committee.
When the utility sought the 3.85% base rate increase, CPS Energy officials noted regular rate increases would have to become the norm for the electric utility in order to address its growing needs. A multi-year plan unveiled by the utility showed CPS Energy would require at least two 5.5% rate increases — one approved in 2023 and one in 2025 — to keep up with growing costs. It showed the utility also would likely need rate increases every two years through at least 2030.
Summer revenue boost
Kuchinsky said the utility has been able to reduce the proposed rate increase from 5.5% to 4.25% due to the “successful summer” the utility saw this year, which he explained brought in increased revenue for CPS Energy from selling excess power on the wholesale market.
Because the utility was able to keep its plants running relatively smoothly despite the intense heat, CPS Energy gained an additional $130 million from wholesale revenue, Kuchinsky said, which it plans to use in several one-time investments.
About $70 million will go toward the utility’s regular needs, Kuchinsky said, such as improving the utility’s generation plants and tree trimming efforts, allowing it to make “reliability improvements” and enabling it to borrow less. Another $10 million will go into the utility’s Residential Energy Assistance Partnership program, which helps low-income customers pay their utility bills. The remaining $50 million will go toward complying with new regulatory market requirements, Kuchinsky said.
A look at the numbers
CPS Energy’s base rate increase would not apply to the entirety of a customer’s bill but would affect only the multiplier applied to energy charges for electricity and natural gas. Overall, residential customers would see a roughly 2.7% increase to their total utility bill from the new base rate, while commercial customers’ total bills would be roughly 3% higher, depending on the customer’s size, utility officials told the board Wednesday.
Of the $85 million from the proposed base rate increase, about $26 million will go towards reliability and resiliency efforts such as increased plant maintenance, replacing and upgrading aging infrastructure and installing new generation technologies.
Another $25 million is designated for the replacement of CPS Energy’s 20 year-old computer system, and $13 million would go towards installing new transformers and equipment to help address the city’s growth. The final $21 million is allocated for hiring and training new personnel.
Utility officials said they hope to go the CPS Energy board for approval on the proposed increase on Dec. 4 and seek City Council approval on Dec. 7.
“At the end of the day, the 4.25% is what we need in order to keep our business running,” said DeAnna Hardwick, CPS Energy’s chief customer strategy officer. “That’s just what it is. It’s a necessary investment.”
The utility still plans to seek an additional 5.5% base rate increase for its fiscal year 2027, which will also require approval from its board and City Council. CPS Energy officials will likely launch that process in 2025.
CPS Energy’s most vulnerable customers
To help protect its low-income customers from the effects of a rate increase, CPS Energy also plans to expand its affordability discount program with this rate request and to give customers on the program an additional discount.
The expanded program would extend eligibility to customers who experience a “severe energy burden” — defined as customers whose annual energy bill is more than 10% of their annual household income — and would offer customers on the program an additional set monthly discount of $2.22 on top of the $16.14 discount they receive now for a total discount of $18.36 per month.
In total, this protects low-income customers from about 50% of the new rate increase, Hardwick said. She also highlighted several special low-income programs the utility has for senior citizens, those living on a fixed income and/or living with a disability.
Rudy Garza, CPS Energy’s president and CEO, said the utility has to balance both caring for its most vulnerable customers and ensuring reliability, which takes dollars to do.
“As part of running our business, you’ve got to deal with the investment [aspects] to ensure that you’re making a reliable system and deal with the equity issues of how you can help the most vulnerable almost as a separate policy issue so that we can get the investment right,” Garza said.
Under the new rate, regular residential customers will be paying roughly 83 cents per month to fund the program — up from the 60 cents they currently pay per month.
Trustee and council response
Janie Gonzalez, chairwoman for CPS Energy’s Board of Trustees, said the utility is cognizant of its most vulnerable customers, noting the utility must balance affordability with reliability.
Trustee John Steen, who has regularly raised his concerns regarding the utility’s post-pandemic financial health, asked if the rate increase will mean putting more customers behind on their bills.
According to its latest figures, CPS Energy has about 201,000 customers with overdue due bills equating to about $179 million.
“I want to address what might be described as the elephant in the room,” he said. “How is management going to persuade council to add that additional monetary burden?”
CPS Energy officials pressed again they want to make it clear to their ratepayers this request is for needed funds, not desired funds.
Later, during a council briefing, council members said they appreciated the breakdown of the numbers from CPS Energy.
Over the course of the three-hour briefing, council members said they are most concerned about how this rate increase will affect their low-income residents.
“Some of us have recovered somewhat from the pandemic, and from this period of economic uncertainty, but many haven’t,” said Councilman Jalen McKee-Rodriguez (D2).
McKee-Rodriguez said he would feel more comfortable voting on a rate increase if there were a consumer advocate in place — someone who was hired or utilized by CPS Energy to advocate for and promote the welfare of its ratepayers.
He added he’d like to see CPS Energy institute a tiered rate system, a point echoed by Councilwoman Phyllis Viagran (D3).
Garza responded by saying a tiered system cannot occur until CPS Energy upgrades its computer system. He also added he’s resistant to a tiered system because it doesn’t just affect those who are using the most electricity because they have big fancy houses — but also those who are poor who have energy-inefficient homes that “leak like a sieve.”
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.
