Everyone’s had a rough 2020, and San Antonio’s municipal electric and gas utility is no exception. However, all signs are pointing to 2021 as the most politically fraught year for CPS Energy in a decade.
Not since a 2010 debate over a failed nuclear plant expansion has the utility faced such intense public scrutiny and political pressure. The previous saga ended with CPS Energy in 2017 writing off nearly $400 million expended on a plan to add two reactors to the South Texas Project nuclear plant that never came to fruition.
This time, multiple interlocking issues are at work that could affect the utility’s operations for years to come:
- Facing a decline in revenue from the pandemic and dip in wholesale revenue selling power onto the Texas grid, CPS Energy officials say they’ll likely need to go before San Antonio City Council in 2021 and ask for a rate increase. After securing a one-year extension in January, the utility could also bring a new generation of energy efficiency programs before council in 2021.
- Earlier this year, Mayor Ron Nirenberg and allies pushed the utility’s leaders to start creating a rate advisory committee to examine the structure of CPS Energy’s electric and gas rates. While the committee will have no real power, its existence likely will expose the utility’s business model and rate structure to public debate in an unprecedented way.
- Meanwhile, a coalition of environmental, social justice, and indigenous groups is gathering signatures for a charter amendment petition that if enacted would upend the utility’s long-running governance and business model. If petitioners collect 20,000 signatures, voters could see the amendment on the May 2021 ballot.
These upcoming controversies would serve as the proxy issues for a much larger question: How will CPS Energy manage the shift away from polluting but reliable fossil fuels in favor of cleaner but more intermittent energy sources? This question affects all of the utility industry, the largest sector for greenhouse gas emissions that climate scientists say are fueling a rise in extreme weather around the globe.
“A lot of conversations are happening right now, and we’re trying to be as thoughtful and collaborate about it [as much] as possible,” said Rudy Garza, CPS Energy’s interim chief customer engagement officer, in a Friday interview. “Just because we have folks that think we’re not moving fast enough and we’re not being aggressive enough, it’s not because we don’t agree with the end game. We all want a more sustainable future.
“But what impact does that have on our customers’ affordability?”
Financial pressure
CPS Energy officials began hinting at the need to raise rates more than two years ago, but the calls became more urgent as a result of the coronavirus pandemic. CPS Energy stopped shutting off customers’ accounts for nonpayment in March, and the number of those past-due enough to be technically eligible for shutoffs has ballooned to 67,000, twice what it was last year.
With the resulting reduction in revenue, CPS Energy expects to end its current fiscal year with a loss of $19.6 million. Officials plan to approach City Council seeking a rate increase in 2021. It would be the first such request since 2013, when City Council approved a 4.25-percent hike.
Next time probably won’t be as straightforward. CPS Energy officials seem interested in restructuring electric rates in a way that would increase the utility’s financial stability, especially as customers find more ways to conserve energy and generate their own power.
For residential customers, for example, 59 percent of the cost to serve them is fixed, and 41 percent is variable, according to CPS Energy staff. However, under the current rate structure, only 7 percent of the utility’s residential revenue comes from a monthly fixed charge, with 93 percent variable, based on usage. The disparity is similar for commercial accounts.
“We just try to make everything on a per-unit basis to make it easy, but it’s all about just spreading the cost over the number of hours of service that we provide,” Gold-Williams said in an interview Wednesday. “This is very traditional; this has been the design for decades.”
Activist groups are pushing back against any potential rate increase. In an Oct. 7 open letter to CPS Energy and City Council, the 23 groups involved in the Recall CPS petition effort called on City Council to “resist any attempt to raise utility rates until this [rate advisory committee] has formed and been able to restructure utility rates in a fair and just manner.”
“If San Antonio is going to avoid a return to the same inequitable economic structure of the pre-pandemic world, our elected leaders must insist on equitable rate reform before any additional rate hike,” the letter states.
Committee controversy
Mayor Ron Nirenberg began pushing for a rate advisory committee (RAC) in January, and the utility’s board approved the concept in March.
Since then, CPS Energy staff have been working on hiring consultants to run the meetings. They recently narrowed a list of consultants to study rates to five, CPS Energy Chief Legal Officer and General Counsel Carolyn Shellman told the board Monday, saying they plan to spend roughly $860,000 on the contract. A response period for a separate bid for a meeting “facilitator” closed on Oct. 31.
“We’re looking for someone who is experienced at working with moderating groups, facilitating conversations, moving the meeting along, making sure that everyone has an opportunity to talk, making sure that the issues that are on the agenda are addressed,” Shellman said.
CPS Energy wouldn’t be the first in San Antonio to create such committee. SAWS convenes a RAC every five years to examine its rate structures. In 2015, the SAWS committee recommended a rate structure that more severely penalized large residential water users.
The existence of a SAWS committee led some local business leaders to change their stance on a similar committee for CPS Energy. Earlier this year, San Antonio Chamber of Commerce President and CEO Richard Perez was among those speaking out against the advisory committee in several public forums but has changed his stance.
“We understand that SAWS has one,” Perez said at a chamber event Wednesday, saying his members had originally considered CPS Energy’s Citizens Advisory Committee, which meets in private, as the correct forum. But after discussions with CPS Energy officials, chamber members became more comfortable with the idea of a separate committee focused on rates, Perez said.
CPS Energy Trustee Ed Kelley, the only member of the utility’s board to vote against creating the RAC, has railed against the committee in multiple board meetings this year. On Monday, he called it “a totally useless, unnecessary, politically motivated committee” and “trojan horse” for activists and some City Council members to exert more control.
Nirenberg responded that San Antonio has “yet to have a process around rate design, rate structure” and that “it is important to get respective dialogue around that from the community, from the council, and from the board.”
“This RAC is intended to do that,” Nirenberg said. “It’s intended to also discuss how our generation and how our goals for renewables and affordability are impacted by and impact the rate-making process.”
Nirenberg stressed that there’s no plan to change anything about CPS Energy’s official decision-making structure.
“The governance and the autonomy has not been changed, has not been discussed, has not been proposed at all by anyone to be changed in this [RAC] process,” Nirenberg said.
But running parallel to the RAC process is the grassroots reform effort by the Recall CPS petitioners that would do exactly that.
Charter amendent
The coalition of groups such as the Sierra Club, Public Citizen, Southwest Workers Union, and Esperanza Peace and Justice Center is intent on forcing the utility to make good on a City of San Antonio pledge to shift entirely away from fossil fuels by 2050.
Among other reforms, the charter amendment pushed by the Recall CPS coalition would replace CPS Energy’s board of trustees with direct City Council oversight. It would also force the utility to divest from fossil fuels by 2040, and restructure its rates to an inclining scale, so the more electricity the customer uses, the higher the price.
Gold-Williams said this idea sounds good from an environmental standpoint, but all it would do is “penalize the community that we’re here to help.”
“In San Antonio relative to energy, we have done studies and we understand that high usage does not equate to high income,” Gold-Williams said. “And we’re trying to help everyone with their houses and weatherization and things like that.”
So far, the Recall CPS activists and volunteers seem unwilling to back down. In the Oct. 7 open letter, they issued a list of five “recommendations and demands.”
The groups want the utility to exempt residents making up to 200 percent of the poverty level from utility disconnects for nonpayment. They also call for CPS Energy to scale up its energy efficiency and conservation programs and “prioritize weatherization and home improvement programs, as well as dramatically increasing rooftop solar in historically neglected communities.”
The letter demands a shutdown of the Spruce coal plant in 2030. Doing so is essential for San Antonio to meet the climate plan goal of cutting greenhouse gas emissions 41 percent by 2030, the letter states. CPS Energy officials have said that the its Spruce 2 unit, completed in 2010, could run until the 2060s.
The groups also call for CPS Energy to conduct “community-driven resource planning,” criticizing the utility for the way its leaders plan and unveil new projects or programs.
“CPS Energy offers proposals in silos, without a clear path connecting the decisions to community needs,” the letter states. “For example, CPS Energy drops hints about the future of the largest carbon polluter in the county, San Antonio’s Spruce coal plant – but provides no analysis or concrete timeline.”
CPS Energy officials reject such criticism. They point to the utility’s status as the No. 1 adopter of wind and solar in Texas, its 2018 closure of is dirtiest Deely coal units, its wide array of solar programs, and its energy efficiency and conservation initiatives that helped make San Antonio a regional solar hub.
Most Texas residents get their power and natural gas from a private corporation, with CPS Energy by far the largest municipally owned utility of its kind in the state. The utility’s leaders consider CPS Energy to be a business owned by a community, though they’ve made moves to expand the type of public outreach more common to government entities. For example, officials have been allowing public comment periods during its board meetings, streaming meetings online, and posting slides from its meetings for the past couple years.
This year, the utility is working through a bidding process for a new clean energy project known as the FlexPower Bundle. CPS Energy is seeking up to 900 megawatts of new solar energy capacity, 50 megawatts of battery storage, and 500 megawatts of as-yet-undetermined power generation that can be counted on at all times.
The utility has managed all this while providing 14 percent of its revenue – more than $320 million per year – to the City and keeping its rates lower than other major Texas cities.
“What is it that [petitioners] have got to have today that we’re not going to do?” Gold-Williams said. “Maybe it’s not exactly when they want it. Maybe it’s not exactly for them to say, ‘I pick that date.'”
If all this weren’t enough, Jan. 31 marks the end of a first term for CPS Energy Board Chair John Steen, a former Texas Secretary of State that City Council confirmed to the utility’s board in 2016. The term limit could trigger a political fight over the position, as seen in recent nominations to the San Antonio Water System board, though no one has discussed it publicly yet.
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.
