Potential charges from the recent winter storm and freezing weather event still preliminary; utility taking action to mitigate and protect against extreme costs from February 2021 weather disaster.
San Antonio– (March 2, 2021) – Last month’s extreme and historic Texas weather disaster has exposed a systemic market failure that has unfairly impacted communities and utilities across the Electric Reliability Council of Texas (ERCOT). While the February 2021 reliability crisis is over, CPS Energy will proactively protect customers to keep their bills affordable while continuing to pursue prudent business practices that keep the utility and San Antonio financially stable and strong.
“For those people who live here, please know that CPS Energy did not do anything to add to the problem. In my opinion, CPS Energy was well prepared and helped in the situation by doing what it had to do when ERCOT asked it to shed load,” said Texas State Senator José Menéndez, following the Monday, March 1, 2021, CPS Energy Special Board of Trustees meeting.
Relative to the February 2021 energy reliability crisis, the management team is also focused on improving communication and other important aspects of its systems. Formal reviews have been separately requested by the San Antonio City Council and CPS Energy’s Board of Trustees. The first review, from the City, will be starting soon. The community’s historic utility will fully cooperate with both requests.
Since February 15, 2021, CPS Energy’s President & CEO, Paula Gold-Williams, has often talked about a new financial tsunami in Texas that has been caused by gas suppliers who raised their prices by as much as 16,000 percent in anticipation of and during the storm and by ERCOT for allowing power prices to rise to and hold at the $9,000 per megawatt hour (MWh) market cap. On February 25, 2021, CPS Energy filed a voluntary event notice to the investor community that provided a general estimate of what is owed by the utility. The estimates of the components, which could change, are shown as follows:
- Natural gas fuel costs of approximately $675 to $850 million and
- Purchase power costs of approximately $175 to $250 million.
CPS Energy is fighting to protect its customers and is taking steps to mitigate future customers’ bills from the potential impacts of these costs. There are multiple mitigation options being considered and pursued, including:
- Federal and State financial assistance;
- Regulatory intervention;
- Policy help at the Federal & State level;
- Negotiation; and
- Appropriate legal actions as needed.
CPS Energy is also deploying multiple tools the utility has available to maintain cash and liquidity. These tools were outlined at the Monday, March 1, 2021 Special Board of Trustees meeting that began at 1:00 p.m.
In addition to a review of tools previously supported and approved by the Board and San Antonio City Council, there was a request to approve an additional line of credit to support operations in the interim. The credit line would only be accessed if necessary. At the end of the meeting, the Board approved this latest request from management to create additional borrowing capacity of approximately $500 million (which is the equivalent of an insurance policy necessary to protect the financial health of CPS Energy and its customers). This liquidity request will also be presented to the San Antonio City Council for its consideration, as soon as reasonably possible.
“Our first priority is to protect our San Antonio customers. We will absolutely pay justified and legitimate charges, as we always have. However, prudently, we must challenge all charges that we believe may be unlawful, unconscionable, or illegitimate,” said Gold-Williams. “This is a very complex situation, and we are focused on shielding our customers from outrageously high costs that are inappropriate. Currently, we are holding all costs on our balance sheet and not passing them through to customers. We understand we must be the advocate for our San Antonio customers to ensure a more fair and equitable end result for everyone.”
While CPS Energy believes its plan is thoughtful and prudent, it has not been fully presented to and assessed by the financial markets. In immediate reaction to the Texas crisis, Fitch and S&P initially put the utility on Negative Watch. Moody’s review is in process.
CPS Energy believes that its plan will provide comfort to the financial markets. These presentations and discussions, including investor and lender outreach, are happening now. CPS Energy’s multifaceted strategic approach has been designed to:
- Address & stabilize concerns that have developed across Texas;
- Lower costs for all San Antonio customers where possible;
- Minimize the potential bill impact to the community’s customers; and
- Maintain San Antonio’s and CPS Energy’s financial stability in the short, medium, and long term.
The public is invited to listen to a replay of Monday’s Special Board of Trustees meeting. It is an audio-only meeting; however, presentation materials are posted, and the recording of the meeting will be available on the CPS Energy website by the end of the day on Tuesday, March 2, 2021. CPS Energy is committed to providing additional updates as more information develops.