This story has been updated.
CPS Energy failed to meet roughly a third of its annual goals last year, trustees learned during the utility’s monthly board meeting Monday afternoon.
The utility did not meet six of 16 performance metrics during fiscal year 2023, said John Soltau, director of CPS Energy’s enterprise portfolio business planning and metrics program, including its goals for customer satisfaction, cash on hand and debt capitalization.
CPS Energy did meet goals around its capital and operating budgets, environmental compliance and its desired senior lien bond ratings.
Utility officials chalked up the failures to the rate increase it enacted last year, high fuel prices and extreme temperatures that resulted in higher-than-average bills.
But Trustee John Steen, who has raised concerns about CPS Energy’s financial standing for months, equated the missed goals to a bad report card, and said the utility is in dire need of a plan to course correct.
“CPS Energy needs to overcome significant challenges, financial and otherwise, to be considered strong or solid,” Steen said Monday. “I don’t like dwelling on bad news, but we must be realistic about this and not pretend things are rosy when they’re not. Management must be held accountable for this underperformance.”
Steen’s concerns, which echo those of former Trustee Ed Kelley, center around keeping the utility’s credit rating agencies content. Rating downgrades would increase the utility’s borrowing costs, which would ultimately be borne by customers.
Last year, just two weeks after securing its first rate increase in eight years, CPS Energy had its credit rating downgraded by Moody’s Investors Service, although it also changed CPS Energy’s outlook from negative to stable.
In November 2022, Moody’s wrote that it had a “negative outlook” for the entire regulated utility industry due to concerns about high natural gas prices, elevated inflation and interest rates.
On Jan. 31, the end of its fiscal year, CPS Energy had 166 days of cash on hand — four days below its end-of-year target of 170 days. Cash on hand is the amount of accessible cash a business has after paying all its costs.
The utility has been in a cash crunch since 2020 primarily due to customers who have fallen behind on paying their bills, first as a result of the pandemic, now made worse by persistent inflation.
During the meeting’s executive session, Chief Financial Officer Cory Kuchinsky told the San Antonio Report that the utility is in a “comfortable” financial position, and is continually working to optimize its finances.
That includes a board-approved proposal to buy back roughly $1.23 billion worth of debt the utility has issued since 2012 and to approve a commercial paper agreement. CPS Energy could save as much as $58 million in debt service doing so, Kuchinsky said.
Reiterating his concerns Monday, Steen stood in opposition to the board’s new chair, Janie Gonzalez, who has served on the board since 2019 and stepped into her new role in February. Gonzalez is the president and CEO of IT firm Webhead.
During last month’s meeting, her first as chair, Gonzalez shut down Steen’s attempts to express his concerns ahead of his vote against a resolution to approve a new short-term generation planning portfolio.
On Monday, Steen appeared to respond by reading from the Texas Government Code regarding his right to speak during meetings. He declined to elaborate to the San Antonio Report afterwards, saying his statements during board meetings are carefully considered and sufficient.
In an interview with the San Antonio Report last week, Gonzalez said that she has a lot of respect for Steen but wants to see the board focus on the future.
“There are times in history where you need the Mr. Steens and there are times in history where you need the Janies and that’s really what this is about,” she said. “Mr. Steen and his former colleagues did good, and I gotta give him credit for that, but to continue that path would be a detriment to where we’re at.”
On Monday, she described how she sees CPS Energy’s role.
“At the end of the day, we have to balance economics with social well-being,” she said. “The market conditions are changing the expectations, political aspects are changing, environmental events are changing, and so it’s important to look to the history, but it’s more important to look to the future.”
Board Vice Chair Francine Romero, Kuchinsky and Garza all pushed back on Steen’s characterization of a utility in financial turmoil.
“We’ve had significant headwinds that that you choose to always kind of look past,” Garza said to Steen at one point. “I’m looking forward this year to recasting what success looks like and how we measure ourselves.”
Gonzalez told the San Antonio Report she feels that some of the key metrics CPS Energy has used historically are no longer in line with the utility’s strategic objectives. While she did not name specific goals, Gonzalez said the board plans to discuss how it will measure success in the future in upcoming committee meetings and other closed discussions.
“The utility has to continue to move forward because 2023 will be an integral year for CPS Energy, which makes it imperative the board be fully engaged,” she said.
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.
