CPS efficiency programs may go dark
Majority of trustees willing to weigh whether plan should end
As CPS Energy executives look for ways to escape the city-owned utility’s financial bind, its trustees are taking aim at a program that provides home energy efficiency upgrades and conserves power citywide.
CPS’ Save for Tomorrow Energy Plan, or STEP, is a constellation of nearly three dozen programs designed to reduce the amount of electricity needed to power the city. When it launched in 2009, the goal was to make businesses and homes more efficient so CPS could avoid the need for a new power plant.
Now, three of the utility’s five trustees — Ed Kelley, John Steen and Willis Mackey — say they are willing to consider letting STEP expire next year. Though still a STEP supporter, Mayor Ron Nirenberg, a member of the CPS board, has said he’s willing to look at the program’s future, too. It’s funded through next July.
“With all the financial stress we’re experiencing as a company because of the pandemic, because of the winter storm, it’s difficult for me to think about continuing business as usual,” Steen said. “It makes me think about STEP ... and whether this enterprise could use that money to shore us up.”
Since 2009, CPS has spent about $800 million on STEP at an annual cost of $66 million.
The discussion is picking up steam as CPS is carrying about $120 million in customers’ pastdue bills after curtailing disconnections for nonpayment early in the pandemic. It’s also battling in court to reduce about $1 billion in unexpected charges for wholesale natural gas and electricity it bought during February’s winter storm.
Savings
Customers pay between $3.50 and $4 on their monthly bills to help fund the STEP program, which provides rebates to those
who purchase energy efficient appliances or install solar panels. Also through STEP, CPS pays customers who get a smart thermostat and allow the utility to remotely raise their home temperature a few degrees when energy demand is high.
For eligible low-income households, CPS pays to improve homes’ energy efficiency by adding new insulation, energy-saving light bulbs and low-flow shower heads, among other upgrades.
An average of about 3,500 ratepayers have had such home upgrades each year since STEP began.
Since 2009, STEP has reduced power demand in San Antonio by 926 megawatts, enough electricity to power 185,000 homes on a summer day, according to CPS.
In 2018, ratepayers avoided using 1.4 terawatt-hours of power because of STEP initiatives. If CPS had to generate that much power, it would have emitted 770,000 extra tons of carbon that year, according to a 2019 analysis of the program by energy consulting firm ICF.
Through the first 10 years STEP was in place, it saved CPS $553 million, ICF said.
“Our programs in their current form benefit a broad cross section of the community,” said Rudy Garza, the utility’s chief customer engagement officer. “When we’re growing at 2 percent in customer numbers but we’re only growing 1 percent in load, we’re slowing the decision point of having to maybe build another power plant.”
After STEP’S first 10 years, CPS extended the program from January 2020 through the start of this year. In January, it extended the program into next year as CPS staffers worked to craft a longerterm update. Garza said staff will probably present an analysis to board members early next year so they can decide STEP’S future.
STEP’S sharpest critic
Blasting STEP is nothing new for Kelley.
Over his decade-long tenure on the board, he has frequently criticized the program. In a July meeting, he called it “one of the most ridiculous programs I’ve ever seen.”
“We’re going to lever this company up to the point that it’s going to be irreversible,” he said of costs associated with the efficiency initiatives. “I’ve said it over and over: We’re not a charity. We’re not a social agency.”
Kelley, a longtime USAA Real Estate executive and former chairman of the San Antonio Chamber of Commerce, argues that CPS shouldn’t pay customers to buy less of its product.
Last month, he compared the utility’s program to an automaker that needs to build a factory to keep up with increasing sales but uses the cash to fix up customers’ old vehicles instead of selling them a new one.
“We need to go back and ask ourselves if something we did 12 years ago, do we now have to do it forever?” Kelley said. “That’s what happens to government programs. You get ’em started and they never stop. And that’s what’s happening here.”
Kelley’s second five-year term on the board ends Jan. 31. Trustees are in the process of selecting a nominee to replace him. Their selection is subject to approval by the City Council.
Climate focus
As the focus on preventing climate change has intensified, utilities nationwide have relied on efficiency and conservation programs like STEP to curb emissions and defer construction of new generating plants.
The 52 largest U.S. utilities — one of which is CPS — offered 900 efficiency programs in 2018, an increase of 300 from 2015, according to the Alliance for an Energy Efficient Economy.
The American Public Power Association, to which CPS belongs, urges its members “to deploy energy efficiency measures at their utilities.”
Nirenberg said he still staunchly supports STEP.
“The STEP program is a proven cost-saver,” the mayor said in a statement. “STEP reduces energy demand and emissions while benefiting lower-income residents in particular.”
But he called for the analysis of STEP to prove its value.
“We’re going to see, and our customers are going to tell us, that this is the kind of program that we want to continue to invest in,” Nirenberg said during CPS’ Aug. 30 board meeting. “I’m more than willing to go into this next period eyes wide open, and request, and demand, the data that supports this program if we extend it beyond that period.”
Though Kelley has usually been the only member opposing STEP, that changed last month. During the late-august meeting, Steen and Mackey sided with him in saying it may be time to end the program in 2022. Steen is a lawyer and former Texas secretary of state; Mackey is a retired public school administrator.
Financial squeeze
CPS expenses have risen sharply. As the utility’s executives recently previewed for trustees a rate increase request, they cited rising costs to attract and retain employees and rising costs of materials, such as copper and steel, required for keeping up with customer growth.
The proposed rate increase could raise bills from 9.6 percent to 10.6 percent. About 1.7 percent of that would be to fund STEP through July.
The rate increase, if approved by the City Council, would boost residential customers’ bills by between $10 and $15 per month.
Steen and Kelley suggested that ending STEP would allow CPS to offset at least part of the rate increase.
CEO Paula Gold-williams and other CPS executives have said STEP isn’t the reason for a rate increase.
“They’re two mutually exclusive issues,” Garza said.
Shifting dollars away from the energy efficiency and conservation program could intensify CPS’ need to invest in new power generation.
To Kelley, however, a power plant that increases revenue by selling electricity onto the statewide grid is a better asset than a collection of programs that reduce demand for power.
One of his complaints about STEP is that after spending hundreds of millions of dollars, CPS doesn’t have an asset on the utility’s balance sheet to show for it. If CPS had spent $800 million on a power plant, he said, it would have that asset to produce revenue.
“If you take $750 million, $800 million out of our balance sheet ... your liabilities didn’t change, you didn’t reduce debt. So what did change? Your net worth went down,” Kelley said during the July board meeting. “You could’ve built a power plant, or you could’ve done a huge solar plant, a huge wind plant . ... We just wrote checks to people and got zero on the balance sheet.”
The discussion led to a heated exchange between Gold-williams and Kelley.
She said STEP does produce assets — such as smart thermostats and more energy efficient housing stock — but the assets are owned by customers, not the utility.
CPS’ debt is increasing “because all the costs across the business are going up,” Gold-williams said, adding that the utility hasn’t had a rate increase since early 2014.
“So when you have that much pressure on your top line, and all your costs going up, that’s what primarily is causing the gap,” she said.