It was March 11, so long ago that a local restaurateur announced he would stage a music festival here for 2,000 after Austin’s South by Southwest event had been canceled, and the Tobin Center for the Performing Arts had announced its shows would go on. The only people in San Antonio diagnosed with coronavirus were a handful flown in by federal authorities to be quarantined at Joint Base San Antonio-Lackland.
City leaders were not so clueless. At an emergency City Council meeting that day, City Councilman Roberto Treviño (D1) suggested that CPS Energy and the San Antonio Water System (SAWS) cease cutting service for customers who could not pay their bills. Mayor Ron Nirenberg agreed, but there was no vote on the matter since it had not been on the agenda.
It would take CPS Energy officials all of about three hours to announce the policy done. (SAWS would announce the same the next day, but this is a column about CPS Energy.) Some investor-owned utilities adopted the policy fairly early, but some Texas companies didn’t until the Texas Public Utilities Commission required it late last week. The PUC order does not cover businesses, however, and the PUC put a surcharge on ratepayers for a fund to reimburse utilities for their losses.
It wasn’t the first time CPS Energy put a hiatus on shut-offs. Most recently it did it in 2018 for federal workers during the federal government shutdown. This nimbleness is just one example of the wide range of benefits we citizens derive from having the largest municipally owned energy utility in the nation.
The greatest benefit, of course, is the more than $7 billion the utility has poured into the City of San Antonio’s general fund since the city purchased the company in 1942. For some years, until recent rapid inflation of home values, CPS Energy’s annual payment surpassed both property taxes and sales taxes for the city. Last year’s contribution was about $373 million. A significant amount comes from customers in suburban cities who enjoy San Antonio’s amenities and economy but don’t pay city taxes.
As a result, CPS Energy has helped San Antonio keep its property tax rates among the lowest of major Texas cities. And it has done so while also keeping its electricity and gas rates the lowest among the nation’s 10 largest cities.
It helps that CPS doesn’t have to pay stock dividends or top executives millions of dollars annually, and it can finance construction with low-interest municipal bonds.
For this and other benefits, we owe thanks to Franklin Delano Roosevelt. FDR had started battling huge national and international trusts that owned most of the nation’s power companies when he was governor of New York. When he became president, he appointed a commission to investigate them in depth. It found that eight huge holding companies controlled three-quarters of the nation’s investor-owned utilities, and many were corrupt.
In 1935, Congress passed, despite a lobbying effort that cost nearly $100 million in today’s dollars and involved a good deal of fraud, the Wheeler-Rayburn Act (yes, Texas’ own Sam Rayburn was the lead House sponsor before he became House speaker). The law broke up the powerful trusts, and the Roosevelt administration encouraged cities to look at buying the companies.
It would take a few years before the distant owners of the San Antonio Public Service Company were required to sell, and it wasn’t clear at all that Mayor Charles Kennon Quin would succeed in his efforts to buy. The story is told by Catherine Nixon Cooke in her authorized history of CPS Energy published three years ago by Trinity University Press.
Quin faced opposition from the Chamber of Commerce and from the city’s newspapers. Much of the public wasn’t keen on the idea, either. But then it came out that the City was in a hard-fought battle with Seguin State Sen. Alvin Wirtz and the Guadalupe-Blanco River Authority (GBRA) for the company. Public opinion shifted. If the utility was going to be run by a government, at least it should be their own.
The San Antonio Express-News called public ownership “inevitable” and, according to Cooke, endorsed the purchase on three conditions: “a fair price, payment by the issuance of revenue bonds, and management of the properties by a nonpolitical, self-perpetuating board of highly qualified members without political patronage.”
The price was just under $34 million, only slightly more than GBRA had set in a proposal for San Antonio to buy a part of the operation from it. The bonds were sold at 2.85 percent interest. And the bond documents set up a self-perpetuating board that has, through the years, included savvy local business leaders who have largely kept politics out of the utility’s governance.
No utility entirely avoids controversy, and CPS has had its share. But over the decades it has had little scandal.
It has also stood as a quiet but eloquent statement that, counter to American corporate theology, the private sector does not always do it best.
Back in 2012, I moderated a debate that featured then-State Sen. Jeff Wentworth, former Railroad Commissioner Elizabeth Ames Jones, and Dr. Donna Campbell, an emergency room physician from New Braunfels who was running against Wentworth. The debate was sponsored by San Antonio’s major chambers of commerce, so one of the obvious questions regarded policies on economic development.
Campbell answered by saying she hadn’t had much time to develop a program, but she knew one thing: San Antonio needed to sell CPS Energy because “you’re paying more for electricity than they are in Dallas.” It’s not clear that she sensed the dead reaction in the room, filled with business leaders who know what the utility has meant to San Antonio.
Campbell hadn’t fact-checked her assertion, of course. She just knew it must be true.
I did check. Not only were Dallasites paying more for electricity, but their property tax rate also was 40 percent higher than San Antonio’s.
I doubt that Campbell’s ignorance makes her an outlier in the Texas Legislature. In fact, I’m confident that if any Texas city wanted to buy its local utility today, the Legislature would block it. It’s not pure conjecture. In 2005, the Legislature passed a bill effectively prohibiting Texas cities from offering broadband. In the years between the introduction of fiber optic cable and its delivery (still far from complete) by giant private companies, it might have made sense for CPS Energy to string fiber optic on the poles it already owns and add high-speed internet to its services.
Nearly a year ago one of the five CPS trustees, Ed Kelley, objected in a board meeting to efforts by the utility’s leadership to help customers reduce their energy use. The former president and CEO of USAA Real Estate, Kelley is a highly regarded figure in the business community.
“We’ve got to at some point recognize this is a business and not a social agency,” Kelley said. “If we’re a social agency, I don’t want to be on this board. I’m on enough charitable boards.”
Kelley had a point. CPS Energy is a business, and it has been well served by being run by and overseen by business men and women. But there is one major difference between it and other corporations. Its owners are its customers right here in San Antonio. Its owners are not a collection of New York hedge funds, pensions boards, and individual investors from around the country whose overwhelming interest is, to employ the hackneyed but useful expression, the bottom line.
CPS Energy is not only a business, but a governmental agency. Structuring it as a business and giving it business-oriented leadership does not make its overwhelming concern the bottom line. Its owners, through their elected leaders, have other concerns. They don’t want it to be a social agency, but they do very much want it to recognize its important role in our community.
That can mean helping its owners/customers reduce their energy use at a time when that means cutting back on the use of climate-altering fossil fuels. It can mean taking a leading role in developing alternative energy sources whose pay-off may not help the next quarterly report. And it certainly includes strong efforts to avoid exacerbating the devastating impact of a pandemic.
CPS Energy is a hybrid designed to provide an essential service with reliability and efficiency, which means it must be run like a business. But it is also designed to serve the broader interests of its owners who are here, not on Wall Street.
That, by the way, is not socialism. It’s the New Deal, and it’s been a good deal for San Antonio.
Disclosure: CPS Energy is a Rivard Report business member. For a full list of supporters, click here.