As CPS Energy readies to launch a nationwide search for a permanent CEO, its next chief executive officer may already be in place.
That’s because, for the first time, the utility will not be able to offer the kind of bonus pay that helped make up for the relatively low executive pay municipally owned organizations like CPS Energy can offer.
But sticking with the status quo, and an interim CEO who is both well known and well-liked by many within the organization, may be exactly what CPS Energy needs right now, say some employees.
CPS Energy is coming off of two tumultuous years that saw several executives leave San Antonio’s energy utility, including President and CEO Paula Gold-Williams.
And because the board of trustees has done away with the utility’s at-risk compensation program — otherwise known as bonus pay for executives — it may be difficult to attract outside talent.
“You’re not gonna see a young up-and-comer who’s already making two or three times what he or she would make elsewhere [apply for the position],” said Ed Kelley, a former board member for the utility who headed its last CEO search. “Why would they come down here and do that?”
That puts Rudy Garza, CPS Energy’s former chief customer engagement officer who took on the role of interim CEO in November, in a strong position to keep the job — should he want it.
A diverse work history
Garza took up the mantle as interim CEO in November, tasked with stanching the exodus of executives leaving the utility while also dealing with the fallout from February 2021’s winter storm, securing City Council support for a rate increase and slowing the revenue loss from unpaid bills due to the coronavirus pandemic.
He is the first Hispanic to serve in the role and his résumé includes a breadth of leadership positions that give him a strong understanding of the inner workings of CPS Energy on several levels.
“It’s hard to find an engineer who also has the depth of understanding he does have of the market, the way it works, the governance, the communication needed,” said CPS Energy Chief Administrative Officer Lisa Lewis. “[Rudy has] run two aspects of our operation, both the poles and wires end and the business and customer operations.”
With an electrical engineering degree from the University of Texas in hand, Garza began his career as an engineer with TXU, one of the oldest electric companies in Texas. During this time, Garza also earned a master’s degree in management from the University of North Texas. He then moved into government affairs and climbed to head TXU’s office of legislative affairs.
In 2008, he accepted a position in his hometown of Corpus Christi as director of intergovernmental relations. He became assistant city manager in 2011 and served in that role for about a year.
Garza joined CPS Energy in 2012 as the company’s vice president of external relations, overseeing governmental affairs and stakeholder engagement. In 2016, he became senior vice president of distribution services and operations — the “poles and wires” part of the operation.
In 2020 he switched gears again, becoming the utility’s interim chief customer engagement officer, overseeing community engagement, customer operations, strategic military support and corporate communications.
In February 2021, Garza was named CPS Energy’s chief customer and stakeholder engagement officer. He was only officially in that role 10 months before becoming the interim president and CEO.
Banning the bonus
In March 2020, the coronavirus pandemic pushed the city into lockdown. The economic fallout that followed quickly became a crisis for many in the community.
In an effort to show solidarity with its struggling customers, CPS Energy suspended disconnections and canceled $13 million in bonuses that would have gone to 1,800 of the utility’s employees that May. That included nixing the at-risk compensation portion of Gold-Williams’ compensation package, which would have more than doubled her annual pay if certain annual benchmarks were met or exceeded.
While disconnections for delinquent customers resumed earlier this month, incentive bonuses at CPS Energy have not been brought back — not even for the CEO.
As interim president and CEO, Garza is earning a base pay of $415,000 per year, according to records from CPS Energy. In comparison, Gold-Williams left making $485,000 annually in base pay, although with her annual bonus, she typically made more than $1 million per year.
While that amount may seem high to customers who struggle to pay their electric bills each month, it pales in comparison to what top executives at investor-owned energy companies make.
According to a report by the Energy and Policy Institute, CEOs at investor-owned utilities across the country earned between $2.4 million and almost $28 million in compensation in 2019.
But CPS Energy is not owned by shareholders; it belongs to the City of San Antonio, and returns up to 14% of its gross revenues to the city every year. As such, it cannot pay its executives anything close to what for-profit energy companies can.
It is also the largest municipally owned electric and gas utility in the U.S., making it difficult to compare to other publicly owned utilities across the country, although not impossible. For example, in 2019, Sacramento’s public utility, which is about the same size as CPS Energy, paid its chief executive roughly $518,000, while the much smaller Austin Energy paid about $378,000 to its CEO.
As the trustee who led the national search that resulted in Gold-Williams’ hiring, Kelley said including an at-risk compensation program was vital if CPS Energy wants to compete with other utilities for “real talent.”
The utility’s trustees do not plan to bring the at-risk compensation program back. Vice-chair Janie Gonzalez and ex-officio board member Mayor Ron Nirenberg both told the San Antonio Report they believe the utility will be able to entice attractive contenders for the position without an incentive bonus.
“Who wouldn’t want to work for CPS [Energy]?” Gonzalez said. “Despite all the negative publicity we get, we are still one of the largest organizations out there. We’re so respected in our industry … and we are doing great things.”
In 2019, Nirenberg called for the end of bonuses at both city-owned utilities, a sentiment he still holds.
Nirenberg has said he would support a compensation package that mirrored the one the San Antonio Water System put into place for its CEO, Robert Puente, last year, which includes bonus pay but defers it for several years. This type of incentive program is more transparent, he said.
While Garza told the San Antonio Report he is still mulling whether to throw his hat into the ring for the permanent CEO position, he said the board will have to boost its base pay offer to attract top talent.
“I think a permanent CEO, if you’re not going to pay them incentive pay, their salary is going to have to be something more than what I’m making right now,” he said.
Support from the ranks
Should Garza decide to apply for the job, he appears to have the backing of both his fellow executives and rank-and-file employees.
Other executives, such as Chief Financial Officer Cory Kuchinsky and Vice President of Government Relations Kathy Garcia, also have expressed support for Garza, Lewis said. She added she thinks Garza would be great for the position.
Ron Ramsey, an electric service foreman and president of the local chapter of the International Brotherhood of Electrical Workers, said he and his colleagues would be pleased to see Garza drop “interim” from his title.
“I’ve had a lot of time with Rudy in the past. I’ve worked with him on several levels as he’s grown in the company and he, himself, is just a genuine person,” Ramsey said. “He’s straightforward, honest — seems to be a very good man. He’s had a lot of direct involvement with people on every level.”
Kelley, Gonzalez and Nirenberg also expressed support for Garza.
“I think that Rudy has strong skill sets, and one of the strongest is his ability to connect with the community,” Gonzalez said. “He understands the business since he has been in the business for quite some time. And frankly, his leadership style — I welcome his leadership style. It works with this board.”
Garza said at the end of the day he wants CPS Energy to have the best leader possible.
“If the board asked me to consider being a permanent CEO, I would absolutely have to consider it, but we’re not there yet,” he said. “I love this company, and I want it to be successful. But, you know, I’m OK if it’s not me.”
Garza did say he hopes the next CEO of the company is Hispanic.
In a city whose population is roughly 65% Hispanic, Garza said CPS Energy is past due for a permanent Hispanic CEO. While he said he’s honored to be the utility’s first Hispanic CEO in any capacity, he said he’s also astounded that is the case.
“It’s 2022,” he said. “I think it’s long past time.”
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.