Last fall the San Antonio City Council spent weeks debating how to spend higher-than-expected revenue from CPS Energy collected during the exceptionally hot summer. 

Six months later, the city’s decision to give some of the money back to ratepayers in a rebate on their December bills may ultimately help San Antonio combat legislation aimed at curbing cities’ ability to use utility revenue to fund their city budgets.

A bill introduced by state Sen. Charles Schwertner (R-Georgetown) would prohibit cities from transferring revenue from municipally owned utility companies to their general fund — a move City of San Antonio staff says was aimed at the City of Austin, which owns the electric company that provides service to Schwertner’s district.

“What we heard is that this started from the bill’s sponsor hearing an Austin council member saying that Austin Energy would not have raised their last energy rates if the city would have either reduced or forgone the general fund transfer,” said San Antonio Government Affairs Director Sally Basurto during a City Council Intergovernmental Relations Committee meeting Wednesday.

As written, the bill also would apply to the City of San Antonio, which gets roughly 14% of CPS Energy’s revenue because the city owns the utility. That money accounts for more than a quarter of the city’s general revenue fund, according to a presentation from the city’s Government Affairs Department. The bill’s changes also would apply to water utilities, including San Antonio Water System.

Austin Energy is a department of the City of Austin, while CPS Energy has its own corporate structure, including a board of trustees, separate from the City of San Antonio.

“As introduced, it would hit our general fund revenue percentages … requiring drastic cuts to city services, including public safety,” Basurto said of the proposed legislation. “It would also undo our municipal utility model.”

Schwertner’s office did not immediately respond to an email requesting comment.

City leaders were so troubled by the bill’s provisions that City Manager Erik Walsh and Chief Financial Officer Ben Gorzell traveled to Austin last Tuesday, the day after the city learned about it.

The two met with every member of San Antonio’s legislative delegation to tell them “this is the biggest, potentially most damaging piece of legislation we’ve ever seen,” Assistant City Manager Jeff Coyle told members of the City Council committee.

“The implications from it … I don’t think I’m being dramatic when I say it’d be crippling for us,” said Councilwoman Melissa Cabello Havrda (D6).

The bill hasn’t been referred yet to a committee, the next step for a bill to move forward in the Legislature.

Basurto said her team was asking local business groups to join efforts to fight the bill.

City lobbyists have talked to Schwertner’s staff about the potential effects of the proposed legislation.

“He knows this business and our hope is we can convey collectively how important this is to our community and how it really wouldn’t solve any problems for ratepayers,” Coyle said.

Schwertner chairs the powerful Senate Committee on Business and Commerce that the bill could be referred to, as well as the Texas Sunset Commission, which Lt. Gov. Dan Patrick tasked with addressing problems with the state’s Public Utilities Commission after Winter Storm Uri.

“The early conversations we’ve had with the senator were that he didn’t realize the broader implications of this … so our hope is that it doesn’t get that far and we don’t need to deploy all the resources to battle it,” Coyle said.

Among the points city leaders are stressing is the council’s decision to return $50 million in CPS Energy revenue to ratepayers last year, he said.

The utility raised its base rate by 3.85% in 2022, the first rate hike in eight years. It also created a new monthly fee to help the utility recover costs from Winter Storm Uri. Next year’s budget does not include a rate increase but CPS Energy said it plans increases in 2024 and 2026.

“If all of this went away and we had a private utility here, it’s not that that cost to the ratepayer would go away, they’d just be paying it to a private company where those revenues would go to shareholders or Wall Street instead,” Coyle said.

An earlier version of this article incorrectly said the bill had the support of the Texas Association of Business and the Texas Association of Builders.

CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.

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Andrea Drusch

Andrea Drusch writes about local government for the San Antonio Report. She's covered politics in Washington, D.C., and Texas for the Fort Worth Star-Telegram, National Journal and Politico.

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Lindsey Carnett

Lindsey Carnett covers the environment, science and utilities for the San Antonio Report.