CPS Energy won’t ask for a rate increase yet, but that means the public utility is looking at a $50 million funding gap through the beginning of 2027 after its board of trustees approved its budget on March 30.
The electricity provider moved the budget forward after scrutiny from San Antonio City Council last month and will look at multiple strategies for addressing the $50 million funding gap. The current budget does not include a rate increase, officials said, but rate increases are still on the table in future years as the utility makes large infrastructure investments.
CPS Energy had proposed a budget earlier this year that ran between February 2026 and January 2027 with plans to discuss filling that $50 million shortfall by increasing rates for customers. But the utility was cautioned by city council members, who were concerned that, by approving such a budget, the utility intended to propose a rate increase without their approval.
The City of San Antonio owns CPS Energy and rate changes require a city council vote.
The utility met with council members on March 4 to discuss the budget and their rates. The budget hasn’t changed since then, but CPS Energy’s explanation satisfied Mayor Gina Ortiz Jones, who voted to approve it this week.
“When we had this briefing last month, the exact verbiage was this budget assumes a rate increase. With everything our neighbors are facing, the assumption that a rate increase was the only thing that would close the gap was jarring,” she said. “I certainly appreciate CPS Energy coming before the owners, city council, to explain that.”
Jones added that the budget now does not assume a rate increase. Instead, the utility will look at other ways of addressing the $50 million gap later this year.
“There is a gap of revenues relative to expenditures that we will work to close. There are many ways that you could go forward to doing that,” said Cory Kuchinsky, CPS Energy’s chief financial officer. “That is for a future discussion we’ll be more prepared to have once we get through the summer months and we see ultimately how that revenue picture will manifest.”
Wholesale energy sales — when CPS Energy sells off power it’s not using — could play a role in those discussions. Kuchinsky estimated CPS Energy earned $400 million to $500 million from such sales in the previous fiscal year.
A budget over $5 billion
CPS Energy plans to spend $5.26 billion, but brings in around $5.21 billion. The utility is spending around $800 million more than it did last year, when it budgeted $4.5 billion.
“The main drivers that are different on the expenditures primarily include the acquisition of the peakers that we just bought. There’s additional O&M and capital spend and fuel expenses,” Kuchinsky said. He added that insurance costs have also increased.
CPS Energy purchased four peaker plants, meant to cover energy needs during high demand or emergency periods, near Houston in 2025 for $1.4 billion.
In an email, CPS officials said buying those plants had added costs to the utility’s budget, but wholesale energy sales from those facilities are paying for their own maintenance. They added that buying the plants cost roughly half of what it would have been to build them.
“We have aging infrastructure and a city that is economically growing. We will require ongoing investments to keep our infrastructure reliable and resilient,” CPS spokesperson Milady Nazir wrote in an email.
Part of the $5.26 billion budget was not up for a vote March 30. The board did not look at money for fuel and regulatory compliance, about $2.4 billion, and its monthly payments to the City of San Antonio, which total around $567 million each year.
Kuchinsky said the board was looking at expenses for capital improvements and operation and maintenance, roughly $2.8 billion. That’s more than last year, when CPS Energy spent just under $2.5 billion on capital investments and operations.
Capital investments have increased as part of CPS Energy’s plans to upgrade its infrastructure. Around 70% of the $2.8 billion expenditure is to meet local, state and federal requirements, Kuchinsky said. That includes paying staff, operating power plants, connecting new customers and meeting regulations.
The other 30% is for meeting CPS Energy’s goals or metrics for customer service and reliability. Those expenditures were easiest to change, Kuchinsky said.
“These are all programs one could scale,” he said. “I don’t think these are programs we could do away with entirely, but the level of investment here for each of these categories, like pole replacement, tree trimming, etc., are consistent to meet those enterprise metrics.”
Kuchinsky added that CPS Energy is in a period of high investment as it works to replace old infrastructure and account for a growing population. In the past, high investment corresponded with rate increases. The utility raised rates in 2022 and 2024.
“When appropriate, we will continue to have discussions with our owner, the City of San Antonio, our Board of Trustees, and our community about the need for additional rate support,” Nazir wrote in an email. “CPS Energy remains committed to engaging with our community and the City Council as part of its efforts for any future rate request.”
Board member Janie Martinez Gonzalez said she wanted more attention on the utility’s increased borrowing and debt as it funded its investments.
She voted against the 2027 budget, which passed 4-1 with support from Jones, Board Chair Francine Romero and board members Willis Mackey and Erika Gonzalez.
