CPS Energy customers won’t see a rate increase in 2023, but two substantial hikes loom on the horizon, utility officials reaffirmed Monday.
The discussion around rate increases came as the board of trustees voted Monday to approve a roughly $1.7 billion operating budget that will take effect Wednesday, the first day of the utility’s 2024 fiscal year.
John Steen, the sole trustee to vote against the new budget, once again raised concerns about CPS Energy’s financial health, and said he couldn’t vote for a budget that was going “in the wrong direction.”
The new budget predicts a net income loss of $21 million, which Chief Financial Officer Cory Kuchinsky said was “not unprecedented,” given the financial constraints the utility has been facing. The projected loss will not affect what CPS Energy pays its owner, the City of San Antonio, which uses that money to fund about a third of the city’s general fund budget.
“This upcoming year is a bridge year to additional funding for fiscal year 2025,” Kuchinsky told trustees Monday. “We spoke about our five-year view last year during the rate case as part of a multi-year plan of going in for rate increases and in that view, we shared that this upcoming [fiscal] year was always going to be our most financially stressed year out of the five; that remains consistent today.”
That multi-year plan unveiled last year relies on two future rate increases of about 5.5% each — one early next year, the other in early 2026. Utility officials said regular rate increases will likely become the norm for the utility in the future to keep up with inflation and other costs.
The utility raised its base rate by 3.85% last year, the first time in eight years. It also created a new monthly fee to help the utility recover costs from Winter Storm Uri.
Steen — an attorney, investor and former Texas secretary of state who represents the northeast quadrant of the utility’s service area — has been sounding the alarm on CPS Energy’s finances for at least the past year. He often points out that delinquent customers owe more than $200 million delinquent customers owe, and fully one-fifth of residential customers are at least 30 days past due.
Steen also raised concerns that the utility was trending below its typical averages in cash on hand, debt service coverage and debt-to-capital ratio earlier this year, possibly putting its credit ratings at risk. However, Kuchinsky said all three of those metrics are holding steady at predicted outcomes.
The three credit rating agencies that rate CPS Energy — Moody’s Investors Service, Fitch Ratings and S&P Global — are aware this is a bridge year for CPS Energy, Kuchinsky said.
The utility has been in a cash crunch since 2020 primarily due to customers who have fallen behind on paying their bills, first as a result of the pandemic, now made worse by inflation. At the end of the calendar year, roughly 213,000 delinquent accounts owed roughly $200 million, said DeAnna Hardwick, CPS Energy’s executive vice president of customer strategy.
But almost half the amount owed, or about $100 million, is accounted for via active installment plans, Hardwick said.
CPS Energy is continuing to ramp up disconnections, which it suspended for more than a year during the height of the pandemic. Since last February, it has performed about 23,000 disconnections. The utility does not disconnect customers during bouts of extreme cold or heat.
About 52,000 accounts are currently eligible for disconnection, Hardwick said on Monday. Enrolling in a payment plan avoids disconnection, “and we’re doing everything we can” to get more customers signed onto payment plans, she said.
Other ongoing issues that could change the size or timeline of the utility’s upcoming rate increases include the state’s energy market redesign plans, Winter Storm Uri fuel costs that remain in dispute and potential changes to the utility’s rate structure, Kuchinsky said.
CPS Energy’s rate advisory committee, which spent the last year studying various generation plans, was originally convened to make recommendations about the utility’s rate structure after activists sought more transparency, and have argued that the current structure places undue burden on residential users at the expense of large commercial customers.
The committee, which has been meeting since 2021, will now finally get the chance to study rate structure this year, and make recommendations to the board.
The costs of CPS Energy’s newly approved generation portfolio won’t need to be considered until the second rate case, Kuchinsky said.
Spending in the first three years of that plan “is pretty minimal in terms of the heavy investment,” Kuchinksy said. “It’s not until years four and beyond that you start seeing the heavy lifting of all those big dollars.”
Also Monday, the utility also voted to elect trustee Janie Gonzalez as its new board chair. The former vice chair and the president and CEO of local IT firm Webhead, Gonzalez will succeed Willis Mackey, a retired public school administrator.
Francine Romero, a UTSA department chair who joined the board in 2021, will serve as the new vice chair. This is the first time in the board’s history it has been led by two women.
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.