‘Recall CPS’ campaign comes up short
Effort lacked required signatures, faced legal roadblock
Four months after launching a petition campaign seeking to make sweeping changes at CPS Energy, organizers said Wednesday they’d collected 14,000 signatures — 6,000 shy of what they needed to put the initiative on the city ballot in May.
But it may not have mattered if the organizers had reached the 20,000-signature threshold, anyway.
In a stealthy legal maneuver, lawyers for CPS Energy argued in court in November that the petition was invalid because it violated the covenants of bonds that CPS sold.
The “Recall CPS” reforms would change how CPS is governed. One would have abolished the city-owned utility’s board of trustees and replaced it with City Council members.
Such a move would violate the agreements investors made — which include CPS’ governance structure — when they purchased CPS bonds. Without investors’ approval, Judge Tim Sulak of Travis County agreed the petition’s reforms would violate the bond covenants.
Earlier this month, lawyers for the San Antonio Water System — which is facing its own petition challenge to how it’s managed — made the same argument in a Travis County court.
In a news conference Wednesday, organizers blasted CPS’ ef
fort to nullify the petition. They argued the reforms they proposed would not have affected CPS’ ability to generate revenue and pay its bond debt.
In addition to putting the City Council in charge of CPS’ board of trustees, the petition sought to replace CPS’ current CEO, Paula Gold-williams, as well as force the utility to restructure its rates and shut down the Spruce coal-fired plant by 2030.
“This ballot measure … would have brought much-needed reform to CPS Energy,” said Dee Dee Belmares, the lead organizer behind the petition. “It would bring more transparency, accountability and public participation, and finally put a pathway in place for CPS Energy to close the Spruce coal plant.”
“CPS Energy, through this action, has made it impossible for the thousands of San Antonio voters who signed the petition to have a democratic say in their utility,” she said.
Similar to CPS Energy, the city sells bonds to pay for things such as street repairs, new schools or new city buildings.
While the public can petition San Antonio to place a city charter amendment on the ballot for voters to decide on, petitioning to
reform a city-owned utility is different, public finance experts said.
San Antonio sells general obligation bonds to finance projects. To pay off the debt, the city can raise taxes on its residents. That makes general obligation bonds low-risk in the eyes of investors.
CPS Energy, however, sells revenue bonds, which it uses to finance construction of new power plants or other major investments.
Revenue bonds aren’t backed by a city’s ability to generate money from taxes. Instead, CPS pays
off its debt on revenue bonds using the money it makes from the project the bond financed — in this case, with the money CPS makes from selling electricity generated by the Spruce 2 coal plant.
With a lone stream of cash reserved to pay off revenue bonds, investors see the debt as riskier. To ensure investors they’ll pay off the debt, organizations that sell revenue bonds, such as CPS, create protective covenants — rules that guarantee investors the bond issuer won’t do anything that will jeopardize its ability to pay back the debt.
CPS officials argued that they went to court to validate the bonds to protect ratepayers in San Antonio.
Last October, credit ratings agency Fitch lowered its outlook for CPS’ credit from neutral to negative over concerns that the petition’s reforms could damage the utility’s ability to set and change rates as needed.
Fitch and other credit rating agencies warned of potential conflicts, such as elected officials sitting on the board who may be unwilling to raise their constituents’ electricity rates if it’s politically unpopular.
If the petition’s reforms had taken effect and the utility had been financially mismanaged, Fitch or other agencies could have reduced CPS’ credit rating. The utility has warned a lower credit rating could make paying off debt more expensive and likely cause CPS to raise its rates.
“In exchange for loaning us money at low rates, bondholders need assurance that our debt is not exposed inappropriately to ambiguity and/or uncertainty,” CPS said in a statement.
“Unfortunately, the charter petition directly contributed to a ‘Negative Outlook’ from national credit rating agency Fitch that required CPS Energy to take prompt action to remove uncertainty from the marketplace.”
But Recall CPS petition backers disputed that, and long have held that CPS dismisses or ignores the public’s concerns.
Austin Energy is also cityowned and is controlled by the Austin City Council, but still has posted profits in recent years.
“The petition, the charter amendment, if it were to get on the ballot, would not have changed anything about the city or CPS Energy’s bond obligations,” Belmares said. “We weren’t trying to change that.”
Organizers behind the effort all but admitted the formal Recall CPS petition campaign is over. But they said they plan to continue organizing and will mount another effort to reform the utility next year.
As the petitioners plan their next move, they said the 14,000 signatures shows a significant level of support within the public — even if the effort fell short.
“We’ve had this conversation with 14,000 people — folks who, if they were unaware of the issues surrounding CPS, they are now aware and brought into the fight,” said Aaron Arguello, an advocacy coordinator with MOVE Texas. “This conversation with folks has already gone a long way. We’re only going to be bringing more people into it.”