Three months ago, CPS Energy officials were primed to begin negotiations that would lock the utility into a contract to buy natural gas power for a decade.
Instead, leaders of the municipally owned electric and gas utility are now opening up a public bidding process to consider any source of energy that could meet the utility’s needs. Opening a public bidding process signals that while the utility could eventually go with adding natural gas power, it will consider other alternatives first.
“Whatever technology meets the requirements, we’re very much open to that,” said Cris Eugster, CPS Energy chief operating officer, at the utility’s Jan. 27 board meeting. The utility is expected to open bids within six to 12 months, according to CPS Energy leadership.
The decision to open up the process is a significant shift for CPS Energy over the past few months. Environmentalists have long pushed the utility to formally and publicly examine the kind of renewable resources the competitive market in Texas can deliver. Eugster told board members that executives decided to open up the bidding process in response to “community feedback.”
San Antonio Mayor Ron Nirenberg, a CPS Energy board member in his official capacity, has been the strongest voice pushing for the utility to formally consider alternatives to natural gas. Nirenberg spearheaded efforts to pass the City’s Climate Action and Adaptation Plan, which calls for CPS Energy and the city as a whole to draw down emissions of greenhouse gases to net zero by 2050.
At the meeting, Nirenberg said he was “beyond pleased” with CPS Energy’s new bidding process. He called the utility’s new approach a “marked evolution from where we were last year.”
“This is an open-minded approach, and as long as we are ensuring the foundation for the decision made at the end of this is reliability for our customers, we should all agree that more information is better,” Nirenberg told his fellow board members.
However, meeting the goals of the public bid will likely be a challenge for wind and solar power producers. Output from wind and solar sources varies significantly based on time of day and weather conditions, among other factors.
CPS Energy officials are seeking to find a source that operates in all hours, all weather, year-round, and offers relatively low emissions over a term of four to 10 years, said John Kosub, the utility’s senior director of energy portfolio analytics.
CPS Energy officials were last year considering the gas deal as part of an effort to replace two of its 1970s-era natural gas plants in South Bexar County – V.H. Braunig and O.W. Sommers. Both are set to end their useful lives by the mid-2020s.
Together, they add up to 1,700 megawatts in electric generating capacity. One megawatt can power around 200 Texas homes on a hot summer day.
To fill the gap left when Sommers and Braunig retire, CPS Energy officials have since July 2019 proposed adding up to 900 megawatts of solar energy and up to 50 megawatts of battery storage. The solar and battery component of the new power supplies, which CPS Energy calls its “FlexPower Bundle,” is unchanged in the current proposal.
But to ensure CPS Energy can generate enough electricity to meet San Antonio’s demand while dodging price spikes on the Texas power grid, CPS Energy officials had last year proposed leasing 500 megawatts of generating capacity from an existing Texas combined-cycle natural gas plant. Negotiations over that contract would likely have taken place behind closed doors with a handful of power providers.
Instead, Kosub said CPS Energy will allow bidders to propose projects for solar, battery, and gas power or another reliable equivalent. Companies can bid on one or multiple energy sources.
At the meeting, Eugster called it “exciting” that the utility will be investing in “physical, real assets that are going to serve San Antonio and Texas – ideally, clean energy sources.”
The public bid won’t answer the question of when CPS Energy closes its remaining coal units. Environmentalists have been calling for the utility to shut down those units, J.K. Spruce 1 and 2, by 2025.
In a phone interview Wednesday, Chrissy Mann, senior representative in Texas for the Sierra Club’s Beyond Coal campaign, said CPS Energy’s open call for bids is a good sign that the utility can open up its planning processes as it looks to replace other aging fossil-fuel plants.
“I hope [it] lays the foundation for more of these sort of transparent planning decisions,” Mann said. “We’ve never seen them do it before, and it’s the path to opening up these planning decisions in a way that’s at least understandable to the folks that would like to know more about it.”
Gold-Williams told board members that the utility could follow the same path it’s embarking on to replace Braunig and Sommers to eventually replace Spruce. Right now, CPS Energy is focused on filling the gap to be left by the two gas plants because they’re older and have a higher risk of breaking down, she said.
CPS Energy ratepayers will officially see their bills go up this March by 4.25%, or roughly $4.45 based on the average residential bill.
The San Antonio City Council on Thursday morning will decide on whether or not to raise CPS Energy’s base rate by 4.25%.
Officials say the cost for the state-mandated updates grew because of the rising costs of construction materials and the project’s complexity.