Capital projects, infrastructure upgrades drive rate increase request

By on July 31, 2013

The CPS Energy Board of Trustees on Wednesday heard a proposal to seek a 4.75 percent rate increase from the San Antonio City Council.

CPS Energy last raised rates in 2010.

If approved, the new increase would go into effect Feb. 1 of next year, and boost the average residential customer’s bill by $5.19.

Last year, CPS Energy was able to forego a previously planned rate increase by aggressively reducing costs, increasing efficiency and delaying certain infrastructure projects.

It was able to do so while remaining in the top two percent of of all credit-rated utilities in the country, a position that keeps borrowing costs low.

To maintain that strong position, however, CPS Energy must now increase revenue.

Because providing affordable, reliable power is CPS Energy’s main mission, the utility will continue to refine its business practices, root out waste and make decisions about its future power supply that hedge against risk and higher costs.

Even with the increase, CPS Energy rates will remain among the lowest in Texas, and the lowest among the top 20 largest cities in the country.

View the presentation to the Board of Trustees

San Antonio’s economy is growing, which means CPS Energy is growing. But those new customers don’t completely cover the costs of expansion, nor do they cover the costs of upgrading existing infrastructure.

As CPS Energy’s customer base grows, so to do the number of civic improvement projects the utility is asked to do by the City of San Antonio and Bexar County, such as relocating existing electric and gas facilities to support street and drainage improvement projects.

New technology and environmental regulations also require strategic investment to keep up with industry standards and customer expectations. Improvements to the electrical grid, scheduled to begin later this year, will increase efficiency, allowing CPS Energy to see and respond to power outages remotely.

Th upgrades will save money and increase reliability in the long run, but require substantial investment today.

Energy efficiency and conservation has been a crucial part of CPS Energy’s overall strategy to keep rates affordable, and it has exceeded those goals by 300 percent.

Those programs benefit customers in two ways – by reducing household utility bills and delaying the need to add more power plants to CPS Energy’s fleet.

To ease the burden on our lowest-income customers, CPS Energy is expanding its Affordability Discount program, which helps qualified customers by reducing their monthly bill by $12.30 monthly for gas and electric customers. That’s more than the amount of the rate increase.

CPS Energy has additional programs to help those in need as well. 

In the coming weeks, CPS Energy will communicate clearly and often with customers and elected officials about why a rate increase is needed. That will include lists of specific capital projects and upgrades.

Read the letter from CEO Doyle Beneby.

CPS Energy is hosting a series of Customer Care Fairs in neighborhoods around the city and county to answer questions and promote programs that can help customers save money on their bills.

This Post Has 2 Comments
  1. Turkeyleg on said:

    “It’s mainly system expansion and infrastructure upgrades. You can read more here — and feel free to post any questions you have on the blog, and we’ll get them answered.”

    @tracyidellhamilton….. So Ms. Hamilton, once these infrastructure upgrades and system expansion are completed with the proposed rate hikes, will there be assurances from CPS Energy that the rates will then come back down to current levels that they are now? If rates stay the same after the upgrades are completed, will the money be put into a interest yielding account to prepare for the next wave of upgrades and a new system expansion 10,20, or 30 years from now? Or if the rate increases stay the same after the funding of the upgrades will funds serve as bonuses for executives or pay increases for employees? Excuse me, if I’m coming off as pushy or rude, I am just worried that the proposal/s by CPS are not appreciating the extent that it will take on the customers budget.

  2. Tracy Idell Hamilton on said:

    hi Turkeyleg,

    Not pushy or rude at all. You own this utility, you deserve to have your questions answered.

    Like our CEO said, no one likes rate increases — and CPS Energy worked really hard over the past three years to avoid the rate increase that was planned for 2012. Since Doyle Beneby has been here, he’s been pushing the leadership hard to implement business processes that make the company more efficient. He comes from the private utility world, and I think CPSE (and so customers) has really benefited from this push to be more efficient.

    For example, CPSE is down to 3,389 employees from 3,700 in 2010, and 4,200 in 06/07.

    All that said, though, no, I don’t think it’s realistic to expect rates to go back down. System expansion likely isn’t 10-30 years out, but much closer — although the plan to save 771 MW by 2020 through our STEP program (I believe we’re at 350 or so now) should help push the need for a new plant off for several more years.

    And while the price of natural gas is at historic lows now, the price curve for energy over the coming 50+ years only goes one direction: up.

    That’s cold comfort when our customers’ paychecks aren’t keeping up with the rate of inflation, I know. But our rates have stayed below the CPI http://www.cpsenergy.com/files/CPSRate_vs_CPI.pdf

    Money for salaries, bonuses and raises are part of CPSE’s Operations and Maintenance budget, which has actually stayed flat and will remain so for at least the next two fiscal years: http://blog.cpsenergy.com/cps-energy-budget-holds-line-on-operating-costs-despite-growth/

    CPSE’s bonus system, which has been in place for 13 years, has come under a great deal of criticism, but for now, at least, the leadership believes that by making a portion of one’s salary at risk — that is, we don’t meet certain metrics, we don’t earn those bonuses — helps drive performance — and there’s no disputing that this is one of the best run public utilities in the country, with the highest credit rating save the Tennessee Valley Authority (which is federally backed). And unlike some Wall Street investment bankers, if employees don’t meet their goals, they don’t get their bonuses: http://blog.cpsenergy.com/saen-story-cps-energy-salaries/

    All that said, factoring in bonuses and benefits, a recent salary study found that most employees here are paid in the median of industry salaries. Our CEO is paid much less than most of his peers: http://blog.cpsenergy.com/study-finds-cps-energy-compensation-on-target/

    Hope all this helps. I appreciate the chance to engage with customers. It’s an incredibly complicated business, but it’s really fascinating (at least to me) and so I’m always happy to talk about it.

    Here to answer your next round,
    t

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