CPS Energy officials are projecting another fiscal year without raising customers’ electricity and gas bills, though they left the possibility of future increases open to keep the utility in good financial health.
At its March board meeting Monday, officials for the municipally owned energy utility unveiled a $2.66 billion projected budget for the 2019 fiscal year, which began in February and will end in January 2019.
“We want to continue to focus on operational efficiencies, diligent risk management, and ongoing cost-savings,” said Gary Gold, CPS Energy vice president of accounting. “But as we also look at fiscal ’19, we are seeing tightening financial metrics when we compare back to our previous fiscal year.”
CPS Energy’s board approved a roughly $2.72 billion budget in its 2018 fiscal year, though the actual budget came in at $2.62 billion, according to unaudited figures the utility provided Monday.
This year’s budget is the fifth without a rate increase, which must be approved by City Council. The last time this happened in 2013, Council approved a 4.25 percent hike on electric and gas rates.
CPS Energy President and CEO Paula Gold-Williams said a rate increase wasn’t necessary for this year’s budget, though she also addressed where the utility is headed long-term.
“We are so excited to have businesses flourishing, people moving to San Antonio,” she said. “That’s a great thing. But that also contributes to increasing costs to extend additional infrastructure, to upgrade the infrastructure.”
Like the city as a whole, CPS Energy has seen years of growth in its customer base. Since 2016, CPS Energy’s residential electric customers have risen from 687,431 to 719,838 last fiscal year. Its non-residential electric customers have gone from 90,664 to 92,753 in that same time frame.
The total number of natural gas customers has risen from 337,400 in fiscal year 2016 to 344,650 last fiscal year.
The utility expects those number to rise to 736,289 for its residential electric customers, 93,761 for its non-residential electric customers, and 348,584 for its gas customers this fiscal year.
CPS Energy’s customers have also become more efficient, at least on the residential side. The amount of power used per customer has trended slightly down over the past four years, from an average of 13.8 megawatt-hours per customer to an expected 13.3 megawatt-hours per customer this fiscal year.
Gold-Williams attributed this to the success of CPS Energy’s Save For Tomorrow Energy Plan, which includes incentives to cut power use, including rebates for buying energy-efficient appliances. Utility officials often say that the program has helped them avoid building another large fossil-fuel plant to meet the city’s needs.
However, that trend has not been as apparent in non-residential customers, which include businesses. They used an average of 130.1 megawatt-hours per customer in 2016, 132.6 in 2017, 137.6 in 2018, and are expected to use 136.7 this year.
CPS Energy operates both as a utility supplying electricity and gas to its customers and as a generator that sells power onto the grid via its fleet of power plants and solar and wind farms.
Gold-Williams said that as CPS Energy’s customer base grows, the utility’s revenues are not keeping pace with that growth over the long term.
“We keep our plants going and we reinvest in those all the time,” she said. “So the cost of maintaining these assets and building them out to accommodate growth continues to go up faster than the incremental revenues.”
As usual, the vast majority of CPS Energy’s revenue – 85 percent this year – will come from sales of power to the customers in its service area.
Another approximately 7 percent of its revenue is projected to come from wholesale power sales, with another 7 percent from gas sales. The remaining 1 percent comes from returns on its financial investments.
As for expenditures, approximately 61 percent – around $1.6 billion – will go to operating expenses. That’s roughly $38 million more than last year.
CPS Energy expects to spend a little more than half of that, nearly $830 million, on fuel for its plants, namely coal and natural gas. The closure of large coal-fired power plants elsewhere in Texas might have an effect on fuel costs, Gold-Williams said.
“With some of the impacts, like the closing of some of the coal plants, we actually think this is going to be a tough year in terms of fuel costs and that we could see some more volatility,” she said.
The utility expects to contribute nearly $346 million to the City of San Antonio’s budget this fiscal year, which accounts for 13 percent of CPS Energy’s expenditures.
Another 16 percent will be used for debt service payments. The remainder is budgeted for “repair and replacement” to help the utility maintain its plants, power lines, and other infrastructure.
That money will be part of CPS Energy’s “capital plan” of roughly $688 million. Of that, about half will be financed by debt.
CPS Energy board members are expected to vote on the budget at their April meeting.