CPS rate boost seen likely in 2021
Power utility’s chief cites increasing financial and political pressures
CPS Energy's chief executive said Friday that the utility is likely to seek a rate increase in 2021 as financial pressures from the COVID-19 recession mount and activists' drive to shake up its leadership raises questions about its future.
“We understand that keeping the bills as low as we can and affordable helps our customers,” said Paula Gold-Williams, CPS Energy's president and CEO. “This said, we've got more costs going in to support the community than we have revenue coming in.”
If city-owned CPS presses ahead with an increase, possibly next fall, she said it would be between 5 and 8 percent.
On average, CPS residential customers paid monthly bills — for electricity and natural gas — of just over $141 in the one-year period ending July 31.
“We cannot guarantee the timing of a rate case,” utility officials said in a statement. “However, when it does occur, the process will include detailed discussions with our greater San Antonio community, our board of trustees and the San Antonio City Council.
A credit ratings agency's report this week highlighted some of the challenges confronting CPS.
Fitch Ratings lowered its outlook for the utility Thursday from “stable” to “negative” over concerns that City Council members — who would have to vote to approve a rate boost — wouldn't have the stomach to increase CPS customers' monthly power bills during an economic downturn.
And the “Recall CPS” petition — which seeks to replace the utility's five-member governing board with a body made up of City Council members — could “result in additional political pressure on the utility, and could constrain the utility's rate-setting ability or operational decisions,” Fitch ana
lysts wrote.
The negative outlook reflected the analysts’ concerns that necessary rate increases “may not materialize.”
The agency, however, did not cut CPS Energy’s credit rating.
Fitch Ratings is owned by the Hearst Corp., the parent company of the San Antonio Express-News.
Fitch, Moody’s Investors Service and S&P Global Ratings recently re-affirmed the utility’s strong credit ratings.
CPS pays for major capital projects largely by selling bonds to investors and repaying the debt over time. A high credit rating indicates a business is likely to pay its debts, and borrowers with strong ratings usually receive lower interest rates on their bonds.
A negative outlook — such as Fitch’s take on CPS — means trouble may be on the horizon, signaling a potential credit rating cut in the future.
“As we were being rated … the tipping point was this petition that is out there now,” Gold-Williams said, adding that CPS can’t take a position for or against the petition. “The substance of that petition is it wants to — in their words, not mine — decapitate the board, make us a department of the city.
“We were designed not to be focused on politics. We were designed to be focused on value to this community. If the City Council cannot raise the rate and, in the process, it gets more political to run the business, that is where the pressure is coming from.”
Projections have the utility posting a loss this year of about $21 million. Last year, CPS generated a surplus of $161 million, and $168 million the year before.
The losses this year stem largely from a sharp drop in wholesale electricity sales. In a typical year, CPS sells about $150 million in excess power to the statewide electricity market — a major source of revenue for the utility.
This year, with the statewide economy in recession, CPS expects to sell just $40 million of power on the wholesale market, Gold-Williams said.
Without a rate increase, interim CFO Gary Gold said, CPS likely will face a 2021 loss of between $40 million and $50 million.
In addition to this year’s grim financial picture, the Recall CPS petition drive, which activists launched in September, seeks to accelerate the utility’s transition to more renewable energy sources, in addition to disband its board of trustees.
Environmental activists who back the petition say CPS’ board — made up of four appointees and Mayor Ron Nirenberg — isn’t responsive enough to voters’ concerns.
The utility, they say, is moving too slowly in addressing climate change, that it instead caters to large businesses by providing cheap power.
“I don’t think there’s any reason credit agencies should change the ratings by having (CPS) be a more accountable public utility,” said Terry Burns, president of the Alamo chapter of the Sierra Club. “The world is full of uncertainty. That is no reason to avoid or obstruct change that could be beneficial for more than a million people in San Antonio and the surrounding area.”
The petition calls on CPS to close its Spruce 1 and Spruce 2 coal-fired power-generation units by 2030. Spruce 2 went online in 2010.
Supporters of the petition long have said CPS hasn’t provided environmental groups with information on the cost to ratepayers of closing the coal plant early.
“We’ve been calling for three years for dialogue about how to (close the Spruce units) effectively, without hurting ratepayers, and they’ve totally ignored this effort,” Burns said.
If proponents gather 20,000 valid signatures by the end of this year, voters in May would decide whether to restructure CPS’ leadership and priorities.
“This petition, which wants to change our governance and introduce a lot more politics in the ability for us to make decisions, is very, very challenging.” Gold-Williams said.
Coal plants emit significantly more pollutants than natural gas plants and zero-emission renewables. But replacing the power the Spruce plant generates could result in “rate shock,” Gold-Williams said.
She touted CPS’ “Flexible Path” strategy, the aim of which is to improve energy efficiency and gradually adopt more renewable energy sources and battery storage to power San Antonio while trying to keep bills low.
“Everything people want to do (for) ideology costs money. We don’t print money,” Gold-Williams said.
She also said Friday that CPS would not resume disconnecting customers’ power for nonpayment until next year.
So far, 67,000 of CPS’ 860,000 residential and commercial customers haven’t paid their bills and, prepandemic, would have been subject to disconnection. That’s about twice as many customers as in a normal year, Gary Gold said.
The utility has contacted 30,000 of those customers, and about a third have worked out payment plans, CPS officials said.
Burns and other environmental activists said CPS should change its rate structure before seeking a rate increase.
To backers of the petition, that would mean shifting more of the cost of providing electricity to the biggest power users, such as large manufacturers, and ending disconnections for low-income people below 200 percent of the federal poverty line.
“Part of this is to get more equitable rates, and get rates that encourage efficiency instead of reward high-volume people that waste too much,” Burns said. “So the rate structure should have some public input, and of course (CPS) doesn’t want that.”
Putting CPS governance reforms on the May ballot would “provoke lively public discussion and discourse about our utilities,” Burns said. “Democracy thrives on transparency and public discussion, so we need more of that.”
If proponents gather 20,000 valid signatures by the end of this year, voters in May would decide whether to restructure CPS’ leadership and priorities.