A member and former chair of CPS Energy’s board of trustees criticized the utility’s spending on efforts to reduce its customers’ energy use, sparking a discussion that got to the root of the challenges the utility faces over the coming decades.
At the municipally owned electric and natural gas utility’s April board meeting on Monday, board member Ed Kelley told the board that he began serving in 2011 with “the charge of running this like a business.”
“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 was commenting on efforts to cut San Antonio’s energy consumption as part of CPS Energy’s Save For Tomorrow Energy Plan, or STEP. First announced in 2009, the $849 million plan is aimed at reducing its customers’ energy demand by 771 megawatts by 2021, an amount roughly akin to what could be supplied by a new coal or natural gas plant.
On Tuesday, the board voted to spend another $34.3 million on top of an original $123.6 million over three years budgeted for energy efficiency and weatherization programs, both major components of STEP.
Saying that “we need to complete this cycle,” Kelley voted with other board members to approve the eight-month extension through Jan. 31, 2020, with two contractors, CLEAResult and Franklin Energy. But he framed the spending as akin to the work of a “social entity.”
“Tell me, what business would spend $850 million to run their customers off?” said Kelley, a retired president and CEO of USAA Real Estate. “Our plants generate revenue that provides cash flow to support the business. So if we keep doing this kind of stuff, we’ll be a great Santa Claus, and people are going to love us, but guess what, we’ll take ourselves out of business. And if you look at our financial numbers, we’re headed in the wrong direction.”
Janie Gonzalez, founder and CEO of WebHead and CPS Energy’s newest board member, called the utility a “social enterprise that generates profit as well as … community and compassion.”
“At the end of the day, really our opportunity to leverage the great capacity that we have is going to be the modernization of our products and services,” Gonzalez said. “We cannot continue to just rely only on our traditional, our successful ways of generating income.”
Rick Luna, CPS Energy’s interim director of technology and product innovation, said the STEP program will likely hit the 771-megawatt goal roughly a year early and under the $849 million budget.
The program accompanied CPS Energy’s decision to build a new coal-fired unit, Spruce 2, at a time when other energy companies were moving away from coal.
CPS Energy’s coal and natural gas plants are the largest stationary sources of air pollution in Bexar County, both for greenhouse gases and for emissions that contribute to asthma and other chronic lung conditions, according to state and federal data.
Asked whether he believes that the Earth’s climate is warming rapidly as a result of human activity, Kelley said in an interview after the meeting that he’s “read a lot of reports on both sides of it.”
“I don’t think there’s any question we’re getting warming,” Kelley said. “But is it because of human activity or normal activity?”
Kelley’s remarks came in the context of declining revenues from CPS Energy selling power onto the grid after the closure of its Deely coal-fired units at the end of December. The utility has also not raised its rates since 2013.
Last year, CPS Energy saw net income of $139 million. This year’s budget projection dropped that to a little more than $2 million in net income, though CPS Energy officials have recently revised that up to $12.5 million because of lower interest costs and better margins from selling power onto the state grid. Its executives are still hoping to find a way to generate an additional $15 million in net income this fiscal year.
After Deely’s closure, they’ll have fewer plants to help them do so. With all its plants running during a hot summer where statewide demand broke previous records, CPS Energy brought in an unusually high $304 million in wholesale revenue in its last fiscal year. CPS Energy President and CEO Paula Gold-Williams has said that the Deely units would have increasingly been down for maintenance and not performed as well in coming years.
During the meeting, Kelley also said that STEP could lead bond rating agencies to view CPS Energy more negatively. He also discussed the role of CPS Energy in the City’s budget, making up a projected $363 million of the City’s current $1.26 billion budget.
In response, Gold-Williams said that STEP and other initiatives have “given us flexibility in the future.”
“The rating agencies are paying attention the complexity of the issues that you have mentioned, but they are also looking at how we are solving the problems of the future,” Gold-Williams said.
San Antonio Mayor Ron Nirenberg, a board member in his official capacity, said that CPS Energy’s business is “not just about the bottom line.”
“If it was, we could be creating dividends,” he said. “While some could see the City payment as a dividend, that’s going to police and fire and paving streets. So there’s a balance that we have to strike, and we have to be guided as a publicly owned company by the priorities of the public citizen.”
The future of programs like STEP are relevant as CPS Energy grapples with conflicting visions for its future.
Last year, its officials announced its Flexible Path that involves generating 50 percent of its energy from renewable sources by 2042, with the remainder coming from natural gas, nuclear, coal, and future technologies they’re hoping will emerge over the coming decades.
But that’s incompatible with a vision put forward in San Antonio’s City-led Climate Action and Adaptation Plan, which calls for CPS Energy to abandon all greenhouse gas-emitting power sources by 2050.
Gold-Williams, Nirenberg, and Gonzalez did not specifically mention the climate or the effect of air pollution on public health in their remarks at the meeting.
Chrissy Mann, a senior campaign representative for environmental group Sierra Club’s Beyond Coal campaign, was listening to Kelley’s statements in the audience at the meeting. Afterward, she said in an email that CPS Energy must consider how its decisions affect its customers’ bills, public health, and the climate.
“To be clear, coal is a long-term loser and STEP was a very smart move,” she continued.
“If CPS Energy is a private company that is here just to make money on the backs of ratepayers, then they should just go ahead and enter the market like Luminant or NRG without the benefits of a service territory monopoly and guaranteed rate recovery on City Council approved rates.”
Kelley said he sees his role as primarily about keeping energy in San Antonio reliable and affordable.
“At the end of the day, we want the light to come on and we don’t want to have to pay exorbitant prices for it,” Kelley said in the interview. “That’s the way I see my job.”
This fellow needs to be removed from the board. He’s effectively a boat anchor when we really need to get going. I’m astounded that this narrow, self-interest only perspective has somehow gotten a soapbox on the board.
Agree. Climate change is real. That’s not the question. The issue is what to do about it and at what pace. I understand that business thoughts do come into play. But a smart business plan steers the ship to where it needs to go for the future. Not just swearing allegiance to making a profit.
I didn’t see any mention of the fact that Bexar County may end up having to do emission tests on our autos if we don’t improve our air quality. Cleaning up CPS is one aspect of that solution to avoid that cost….
While global climate change is real, and human causes are certainly a significant factor, in the U.S. the debate has been hijacked into a political realm that focuses exclusively on the human causes. The debate in the U.S. lacks any focus or attention on the additional contributing natural causes, which may equal or far exceed human causes. This political debate in the U.S. greatly inhibites a truly science based debate & it completely ignores the developing science around “space weather” and how the Sun’s solar flares, & electromagnetic waives that routinely bombard the Earth are an independent and large contributing factor to global & is causing more rapid magnetic pole migration than has occur in recorded human history. Some reputable scientists now predict a complete reversal of the magnetic poles w/in a century. That alone will result in global climate change even if there were no humans on the planet.
CPS is operated for the benefit of the people of San Antonio. This is a social enterprise, not a for profit business. If a CPS board member doesn’t like that fact, they should find somewhere else to spend their time.
Wait a minute. One of the CPS Energy trustees believes that CPS’ goal should be to sell more electricity by not helping people be more energy efficient? One of the CPS Energy trustees doesn’t buy into the idea that humans are the primary cause of climate change because he’s “read a lot of reports on both sides of it?” Our major concern should be about our families (now and in the future) – I expect a public utility and its trustees to be more concerned about the community than other businesses. CPS should accept Mr. Kelley’s offer to resign his trustee position.
Yep… Time for the Northwest Quadrant trustee to resign his chair. Let us find another BOD trustee who understands CPS provides affordable energy solutions to our local area; with no outside energy competitors.
The last paragraph of this article sums up what should be the focus of a trustee: making sure the lights come on without having to pay exorbitant prices.
Totally agree with Ed Kelley assertiveness, we the citizens should demand that our utility companies be run and operated in an efficient manner. At the same time, we should require both business and residential users to limit use to necessary activities. I still do not understand why at a time and era where we should be environmentally conscious, all buildings in downtown San Antonio leave their lights on at night when obviously no one is laboring. It is about time each user makes responsible consumption of electricity, water, gardening, rain water and everything else.
San Antonio is a poor city. People have DIED in their own homes because they could not afford to turn the AC on! We need to quit comparing SA to Dallas and Houston. We are a unique culturally diverse city, that has always CARED about it’s citizens. Yes, it’s a City owned facility and should be treated as such.
This guy really should resign.
I think new technology is a great thing. At one point in time the coal plants were new technology that provided power to communities. Now we live in an era where we want to advance with solar and wind technology. I read a lot of articles that show support for both sides of the topic but it seems not many facts are listed, so lets take a look at a few so we can allow folks to make an educated decision. It takes 4 acres of solar panels to produce 1 Megawatt of power at an approximate 20 percent efficiency rate. Being able to store solar via batteries and use it at night is a technology advancement we are awaiting results for. The sun is not always out and the wind does not always blow. Power plants are resposible for 1/3 of greenhouse gasses. Wind turbines on average are 1.5 Megawatt at 33 percent efficiency only when the wind is blowing. So it may only put out a third of its rating. I understand that coal is not a popular thing and it certainly does contribute to greenhouse gasses, however we cant blame global warming on power plants alone. We have to look at the big picture here thats only fair. The cost per Megawatt with burning coal is extremely inexpensive in comparison. However the cost to meet EPA regulations is very very expensive. For this reason alone companies are providing their communities with different strategies to provide cleaner power options. Look at the emissions numbers from a volcanic eruptions, and more so the cars we all drive everyday we all burn fossil fuels. So moving forward we must give new technology some time to catch up. We must be patient as we move forward in the future to allow power companies to invest in these new endeavors. There is no quick fix to “turn off the plant and no more fossil fuels”. solution as some have suggested. I think Mr Kelly is politely trying to say it takes money to run a power company and it must come from somewhere whether we like it or not its a business a very serious dangerous business. New technology will be invested in, theres no doubt about that , but it will take time to become what we want it to be. I think our society has become a bit impatient. In the future Im sure if coal is never popular to burn again we will be dealing with another bi product of an industrial process from batteries, silicon, metals and many other items, hopefully most of which will be recycled. We know this; nothing is free. Time will tell, we are living in some industrial history right now. One more thing that is important to mention; the “smoke stack” everyone refers to is not smoke at all it is water vapor from what is called a WET STACK used to reduce emissions. Im sure our electricity provider will do whats best for them and for us. Im sure it will fall somewhere in the middle. They have been taking care of us for a long long time now, they know what they are doing. Be patient, be kind, and most importantly be open minded and hear each other out.
Mr. Kelley may need to step aside. CPS Energy is not primarily established to make a corporation or its stakeholders rich by maximizing profits through sales to customers. It is a municipally-owned utility established to serve its stakeholders: the citizens of San Antonio, who are its customers. It really is here to serve us, not to serve to the benefit of anyone else.
It is disheartening to hear so many voices calling for Mr. Kelly’s resignation as a CPS board member. What happened to civil discourse, mutual respect and prudent debate between those with opposing views? Well, perhaps society has devolved to the lowly plain of ad hominem attacks and ramblings cries to “crucify him, crucify him” simply because others hold dissimilar positions on any given matter. No, Mr. Kelly should not resign, especially not for having a different perspective on this issue.
His perspective is wrong. It’s as simple as that. He’s not fit to run a social utility for 1.5 million people thinking the way he does. Not to single him out because there are others *cough, Ron Nirenberg