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After securing its first rate increase in eight years last week, the work is just beginning for San Antonio’s municipally-owned electric utility CPS Energy.
The San Antonio City Council approved a 3.85% rate increase and the creation of a new fee in split votes Thursday, which residents will see for the first time on their March bills. But while Mayor Ron Nirenberg called Thursday’s vote the culmination of “an exhaustive process,” the passage of CPS Energy’s new rate increase is just the beginning for the city’s electric utility.
The rate change and fee will help the utility generate about $73 million next year, and help recover funds from the $418 million in fuel costs CPS Energy has already paid for damages from February 2021’s severe winter storm.
CPS Energy plans to use the $73 million to address its growing workforce shortage, the impending retirement of its outdated computer system and to meet additional weatherization requirements from the state. The utility will spend $13 million, $15 million, and $31 million on these issues, respectively.
After the rate hike, next on CPS Energy’s to-do list is reviewing what civil advocates are calling its “inequitable” rate structure and looking at the utility’s generation portfolio as demand to phase out coal grows.
San Antonio’s growth will cause further challenges, as the utility must prepare for additional residents and businesses in the coming years. On top of those, interim CEO Rudy Garza made several assurances to council members Thursday that will allow a third-party investigation into the utility’s finances and work culture, and said that CPS will welcome increased oversight from the council.
For the past two months, members of CPS Energy’s Rate Advisory Committee and local civil advocates have called for changes to the utility’s rate structure, arguing that it benefits large businesses over individual users. The current rate structure charges heavy energy users such as industrial users less per kilowatt-hour than other types of users, said Aaron Arguello, MOVE Texas Bexar advocacy organizer.
CPS Energy Chief Financial Officer Cory Kuchinsky said while that is technically correct and appears to be the case, businesses actually pay more than their share of energy in San Antonio and residents pay less because of the differences in cost of service. Cost of service is higher for residential users since their use is more fluid from month to month, while businesses are set, he explained.
And with climate change becoming a major concern worldwide, San Antonio needs to move away from using coal as an energy source, said Dee Dee Belmares, a San Antonio-based climate organizer with Public Citizen and a member of the utility’s Rate Advisory Committee.
“We see how the crisis is fueling extreme weather events like Winter Storm Uri,” Belmares said. “Our city and the utility need to follow through with the Climate Action Plan commitments and demand that CPS Energy start immediately a community-driven resource plan to get us off of coal.”
Garza said he and CPS Energy staff will aim to have a timeline to the utility’s end of coal use by the end of this year.
For the last few months, City and CPS Energy staff have said once the rate hike passed, the utility would be able to more fully turn its attention to these issues. During a briefing given to the city council in December, Kuchinsky said that with this rate increase would come financial stability that would allow the utility’s Rate Advisory Committee to begin looking at what to fix next.
Following approval of the rate increase Thursday, Garza pushed back on a question about whether the utility had lost its “leverage” when it secured the rate increase, and added that he remains committed to pushing ahead on much-needed reforms.
“The term ‘leverage’ is unnecessary with an asset that you own,” Garza said. “I made commitments. There’s a lot of things I am, but going back on my words — not one of them.”
But with Garza’s tenure as the utility’s CEO not yet secured long-term, some are wondering how many of those promises he can keep. According to city lawyer Andy Segovia, none of the verbal assurances that Garza gave the council Thursday will affect the rate increase.
“I appreciate Rudy and the [CPS Energy trustees] here making commitments, but again, there are no conditions on which this council will vote on the rate increase, and as Councilwoman Castillo pointed out, they’re not legally binding,” Segovia said Thursday prior to the council’s votes. “I want to make that point very clear.”
Still, Garza assured reporters that no matter what role he has at CPS Energy in the future, the utility will work to regain public trust and to address the city’s energy needs.
With two years now planned before the utility will seek its next rate increase at an estimated 5.5%, CPS Energy will have time to show if it can deliver. Last month, Garza said more regular rate increases will likely become a new standard for the utility to help it combat inflation.
Now that the rate increase has passed, community advocates will demand with more fervor that the utility takes a look at its rate structure before any future increases, and phase out coal, Belmares said.
“I don’t know when the last time was that CPS Energy looked at making changes [to its rate structure]. It’s probably overdue,” Belmares said. “We need a rate structure that encourages efficiency and conservation, and we need to look at ways to help low-income customers.”