CPS Energy board member Ed Kelley stepped down from the utility’s board of trustees Monday after 11 years.
The last two of those years have been especially tumultuous, given the coronavirus pandemic, last February’s winter freeze and the departure of most of the utility’s top executives.
On his last day as a trustee, the former president and CEO of USAA Real Estate Co. says he saw his role as bringing big-business insight to the board. At times, that role served to make him a target of environmental and social justice activists who often viewed him as someone who put business needs over people, health and the environment. Kelley told the San Antonio Report he is in favor of the utility doing what it can to be a steward of the community and the environment, but he called himself a pragmatic realist.
“People need to realize that CPS Energy is a massive part of the success of this economy,” Kelley said, “and the more successful this company can be, the more opportunities we will have for our citizens.”
The San Antonio Report spoke with Kelley before his final board meeting, during which CPS Energy and city officials thanked him for his service. His responses have been edited for length and clarity.
How do you want to be remembered for your time on the board?
Kelley: As a guy that fell in love with the 3,000 employees, and the daily work that they perform. I hope that any credit I might be accorded for my time might could not have been accomplished but for them. And so if there are any awards, or any congratulations or anything that goes to me, I want to reflect it onto the 3,000 employees that made it happen.
Is there anything that you wish you could have gotten done as a board member that you didn’t get a chance to do?
Kelley: I wish I could have slowed down the politicization of this company. Over the last three to four years, we have become highly politicized. That, to me is a huge danger for this company. … We have seen the first credit downgrade by Moody’s, we will see more, and as we see more, our cost of capital will go up. As our cost of capital goes up, our cost to our customers will go up. And also as we continue to get downgrades, at some point, the city will be downgraded, because roughly 30% of [the city’s] revenue. … comes from CPS Energy.
What advice did you give to your replacement on the board, Francine Romero?
Kelley: I’ve asked her to keep an open mind to the various crosswinds that are blowing across the company. The company is under a lot of pressure right now. It’s not in a good place. And I think most of that is because of misinformation related to [Winter Storm] Uri. People don’t realize that was an event of absolutely epic proportions that nobody could have planned for. I think that the community is severely overreacting to the impact of Uri, and so I’d ask for her to keep an open mind and not get caught up in that hysteria.
What do you feel is the public’s biggest misunderstanding about CPS Energy, and why?
Kelley: I think that the biggest misunderstanding is Uri. Again, every time somebody criticizes us for that, I’ve asked them, ‘What would you have done differently?’ or, ‘How would you have planned for this five or 10 years ago, when it has never happened in the history of this state?’ And I’ve never received any satisfactory answer to that.
Now, if it happens to us again, then we should be severely criticized, because it has happened last year. We are taking many, many curative steps to mitigate that happening again. And if those steps are inadequate, and we get hammered again, then we should be criticized. But what happened was an unprecedented act of God that had never happened in the history of the state before. I think we’re being unduly criticized for that, and that’s because I think people are just totally uninformed.
Speaking of which, what do you think CPS needs to do to regain the public trust?
Kelley: [CPS Energy] needs to set some very, very clear-cut goals for the next three to five years. Simple goals that can be understood by the public, and goals that have been enunciated over and over again, through our different surveys as to what our customers want us to do. [If we take those] specific goals for this company, and then track those goals on a quarterly basis [with] data, I think, number one, we would perform splendidly on those goals, and number two, if we communicated that adequately, we could start building public trust.
Do you believe that commercial customers should be paying more to reduce the rate burden on low-income San Antonians?
Kelley: There is this misconception that we are overcharging our residential customers [for] our commercial customers, and that again, it’s simply not true. People don’t like the esoteric word “cost accounting,” but if we were to do a cost accounting study on what we charge our commercial customers as to what we charge our residential customers, we would find that our commercial customers are overpaying.
People do not understand the concept of economies of scale. If I were to sell you one widget, I would have to charge more for that one than if I were to sell you 10,000 widgets. The unit price per widget will go down as the volume goes up, and that is exactly what happens. Yes, we have to charge some of our residential customers more on a unit basis, but on a total unit basis relative to the costs of the two entities, the commercial customers are subsidizing the residents to customers. So what can we do about that? Well, what we can do is try to raise the earnings potential and the economic opportunities of all of our customers.
You’ve prided yourself on being a voice for the business community. Are you worried the board will lose that voice as you step down?
Kelley: I am worried about that, yes. I think Dr. Romero is an outstanding lady. I have had several meetings with her and I’m very impressed with her, and I think she has great judgment and that she’s a fine person, so I am not critical of her at all. But if you look at the composition of the board, when I leave it, you have a $13 billion company with 3,000 employees [and] almost a million and a half customers, almost $3 billion a year in revenue and we pay the city over $360 million a year. That is a big business. There is not one business executive on that board.
What about Janie Gonzalez, founder and CEO of Webhead?
Kelley: [It’s a] very small business. This is not a small business. This is a large business and the dynamics are totally different.
Speaking of the future, what sources of generation should CPS Energy be considering in context of the environment?
Kelley: That’s another point that people certainly don’t understand. This company is among the environmental leaders of all energy companies in the country; 22% of our generation fleet is made up of renewables, which is almost unheard of. We continue to win every environmental steward award that comes along. We are among the largest producers of electricity from solar and wind of any utility in the country. So people think that we are backward — it is absolutely the opposite. … I have been criticized for being anti-environment and that type of thing — nothing could be further from the truth. I am an environmentalist, but I am a pragmatic environmentalist.
What is one thing you would like customers to know about CPS Energy?
Kelley: Number one, our customers have told us over and over and over again what they want is low-cost, dependable energy. We have among the lowest cost to our customers [of] any major utility in the country. And that will be true after the 3.85% rate increase kicks in next month.
Number two, we have consistently over the years ranked within the top quartile, if not the top decile, in terms of availability of our utilities in what we call uptime to our customers, and so we’re delivering exactly what our customers want. At the same time, this one company, by itself, funds approximately 30% of the general budget for the City of San Antonio. … It is an absolute miracle.
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.