CPS Energy struck a silent blow to climate activists’ reform-seeking petition drive when a judge issued a ruling favorable to the utility back in December.
Using the same legal strategy as its sister utility, San Antonio Water System, CPS Energy filed a request with the 353rd District Court in Travis County in November for a ruling on whether the utility’s existing governance structure is essential to its relationship with its bondholders.
The Recall CPS coalition wants to change that structure by replacing CPS Energy’s board with direct City Council oversight, along with closing the utility’s remaining coal plants by 2030. Petitioners hope to gather 20,000 signatures to place their charter amendment on the May ballot.
San Antonio utilities have sought to have the courts rule on these issues, rather than leaving them solely up to voters. In a Dec. 4 legal filing, CPS Energy attorneys argued, “the petition to amend the City’s Charter undermines the vested rights of the purchasers” of more than $6 billion in debt in the form of 26 bonds and commercial paper notes.
The case was over before the Recall CPS coalition even knew it existed. Core members of the Recall CPS group first learned of the ruling after being contacted by the San Antonio Report late Thursday for comment.
“Here we are trying to make improvement in our utilities, transparency of government, and public participation,” said Terry Burns, chair of the local chapter of the Sierra Club and a member of both the Recall CPS and SAWS Accountability Act petition groups. “What is so threatening about having citizen input into our boards?”
CPS Energy officials praised the outcome Thursday in a prepared statement.
“In addition to keeping bills low for customers, this gives debt investors assurance that their investment with us is sound, and it provides rating agencies the assurance that we are working to protect these investments,” the CPS Energy statement reads.
In their legal brief, CPS Energy lawyers cited ordinances dating back to 1942 that structured CPS Energy’s governance via independent board. They argued that “for decades, investors have relied on the ordinances and their contractual covenants, secure in the knowledge that the operation of the utilities was largely insulated from public whim.”
Bond rating agencies that review CPS Energy’s creditworthiness have taken notice of the petition campaign. In October, Fitch Ratings changed its outlook for CPS Energy from “stable” to “negative,” in part citing the petition drive.
On Dec. 7, Judge Tim Sulak ruled in CPS Energy’s favor, ordering that that CPS Energy’s existing structure is “legal, valid, enforceable, and binding on the City” as long as its debt remains outstanding. He specifically upheld CPS Energy’s five-member board, with members serving up to two five-year terms.
The legal proceedings took place under Chapter 1205 of the Texas Government Code, also known as the Expedited Declaratory Judgment Act. The statute allowed CPS Energy to disclose the proceeding via legal notices in local newspapers, which officials say they did on Nov. 18-20 and Nov. 25-27.
No party intervened in the case other than the Texas Attorney General’s office, which is required to be involved under state law.
Adrian Shelley, an attorney who leads the Texas office of Public Citizen, one of the groups included in the Recall CPS coalition, said in a statement Friday that the “decision seems to eliminate any right to petition against an entity with bonding authority.”
“That is a right granted to voters by state law,” Shelley said.
The strategy mirrors that used by the San Antonio Water System, which filed a similar request in 345th District Court in Travis County. SAWS made its first filing on Dec. 10, three days after CPS Energy received its ruling. SAWS officials are fighting off a separate petition from a separate group, the SAWS Accountability Act PAC.
Lawyers with Norton Rose Fulbright, a London-based international business law firm, and San Antonio public finance firm McCall, Parkhurst, and Horton represented both utilities.