Rate increase request: Letter from the CEO

By on July 31, 2013

To our customers and our community,

 

Today we recommended to our Board of Trustees that we move forward with plans for a CPS Energy rate increase of 4.75% to go into effect Feb. 1, 2014.

The last rate increase was in 2010.

No one likes to think about paying more for a service they cannot live without, but a modest increase is needed to maintain the strong reliability and service our customers deserve.

Learn more about why CPS Energy needs a rate increase.

San Antonio is growing. Infrastructure needs updating. Poles, pipes, cable, substations and power plants all need upgrades. And we are modernizing our power grid to allow for new technologies that will help us and our customers be more efficient.

The purpose of a municipal utility is to serve our community with affordable, reliable energy. Affordability will continue to be our first priority. We make business decisions every day with an eye to maintaining our position of having the lowest bills of the 20 largest U.S. cities, and of all the major cities in Texas, with an average residential cost of 9.4 cents per kilowatt hour.

We will continue to provide assistance to those in need through various customer programs created to help reduce their energy bills. In 2012, 250,000 customers took advantage of affordability discounts, weatherization, and other programs that helped lower their energy costs.

And because this community is our home, our workforce will continue to give back, whether through almost $1 million in employee contributions to United Way or by providing 11,000 hours of volunteer service, as we did in 2012.

We look forward to upcoming community conversations over the next few months, and we welcome feedback.

View rate presentation to the Board of Trustees

This Post Has 21 Comments
  1. Mahoney on said:

    Unfortunately, household incomes do not have an increase of 4.75% every two years (not even 2%)… I can understand the reasoning for the increase but it is not fully justified…

  2. Tracy Idell Hamilton on said:

    hi Glynn,

    The rate increase is in no way going to pay for additional help for lower income families, which is a small fraction of one percent of the budget.

    The increase will mainly go for infrastructure upgrades and new construction, such as substations in growing areas.

    You can read more about where the money will be spent here: http://blog.cpsenergy.com/capital-projects-drive-rate-request/

    In that story is a link to the presentation CEO Doyle Beneby made to the Board of Trustees.

    Please let me know if you have any more questions.

    thanks,
    t

  3. keith desa on said:

    funny beneby got a big raise not to far back for a great job.. didn’t try rate raise during the oh beneby your the best lets give you a raise period…I wonder who did c.p.s. make donations or other this year.

    • Tracy Idell Hamilton on said:

      Hi Keith,

      Doyle Beneby did get a raise earlier this year, and it’s certainly a great deal of money to most San Antonians. Putting it into perspective, Beneby oversees a company with $10 billion in assets — the power plants, poles and wires and other infrastructure that keeps CPS Energy’s rates among the lowest in Texas, and fund a third of the city’s generatl fund budget, which helps keep your local taxes low.

      Here’s an Express-News story that explains why the Board of Trustees awarded him a raise: http://www.mysanantonio.com/news/energy/article/CPS-Beneby-may-get-a-sizable-raise-4240952.php

      And here’s a link to the salary study showing that Beneby makes about 70 percent less than those at similar utilities: http://blog.cpsenergy.com/study-finds-cps-energy-compensation-on-target/

      And you’re right, no one tried to raise rates during that time period. Beneby announced in October of last year that CPS Energy would not seek a rate increase that had been planned for 2012, thanks to increased efficiencies, cost cutting and other measures. You might recall that CPS Energy had previously said it would need a rate increase every other year for a decade. The last increase was in 2010; the utility was able to hold off in 2012, but will need an increase in 2014. Read more here: http://blog.cpsenergy.com/cps-energy-will-not-seek-2013-rate-increase/

      CPS Energy doesn’t make political donations, if that’s what you’re asking. Its roughly 3,400 employees, however, gave almost $1 million to the United Way last year.

      Take care,
      t

      • SA1 on said:

        The salary study is a joke. Compare CPS to other similar size munis and you’ll find CPS execs are overpaid for the area. Don’t compare it to Los Angeles California

        • Christine Patmon on said:

          SA1, we understand a study being questioned, even one by an unbiased third party. However, it’s rare that the media points out when a CEO is underpaid, which is exactly what the Houston Chronicle did in this January article. We don’t believe everything we read in the newspaper, but when a study is confirmed through a reporter’s own investigation, it may have some validity.

  4. C Gold on said:

    You can give all the politically correct statements you want as a reply to every posting but it doesn’t change the facts. CPS is NOT losing money and NOT struggling. You will keep raising prices no matter what the public says. San Antonio’s average income has never increased by this percentage and even if it should this hike would basically steal every dime . You can not justify the rate hikes! Your claim of increased cost on your side is still unfounded. Even if the rate stays the same ( which it won’t!) not one person would see a pay cut. Maybe its time your “profits” drop or stay the same. The CPS people this would effect wouldn’t notice the difference….it certainly won’t negatively effect their lifestyle. As for the rest of SA, not the case. Low income and fixed income persons and families struggle everyday for basic needs. I guess in your mind electricity isn’t a “basic need”. Refrigerators and AC in 100 degree plus temperatures and ‘summer weather” at least 6 months out of the year aren’t enough to justify being able to afford these ‘luxuries’.
    There is no “serving the public” in City public service, CPS.
    Don’t bother to reply….you only have a canned response that has been “approved” by your uppers.!

  5. Pingback: CPS Energy Rate Hike Hearing, Climate Change, & Keystone XL Protest | harman on earth

    • Tracy Idell Hamilton on said:

      hi Lucy,

      It’s true, the city of San Antonio decided more than a decade ago not to enter into the newly created competitive energy market — and since then, CPS Energy rates have remained among the lowest in Texas. Being owned by the city means instead of profits flowing into out-of-town shareholder pockets, a percentage of revenues goes into the city’s general fund, which pays for police, fire and street maintenance. It’s been a pretty great deal for taxpayers, because it means the city doesn’t have to jack up property taxes instead. Here’s a story about the city’s decision, in 1942, to buy the utility, and why it chose, in 1997, to hang on to it. http://blog.cpsenergy.com/citys-1942-gamble-to-buy-cps-energy-keeps-paying-dividends/ Thanks for reading. ~Tracy

  6. Jeff Dillingham, REALTOR® on said:

    I’m fine with a rate increase on the following basis:

    1) Rates are still equal too or better than existing providers in the state of Texas.
    2) Customer Service call wait time is improved (i.e., I’ve yet to get through on a customer service line under 30-45 minute wait).
    3) Mandatory freeze on pay raises for Executive Officials of CPS for 3 years. Basically, the provision would state that this rate increase and profits generated GO BACK TO INFRASTRUCTURE as lobbied for. Executive Officials cannot receive a pay raise until after 3 years of the rate increase. This will ensure that ALL profits are going to the actual need for CPS. Besides, it would be nice to see a good faith gesture by the board and it’s Executives. If a pay raise is warranted (surplus of funds, etc) within that 3 year time frame, CPS customer’s VOTE on the increase and/or where the possible surplus of funds could go.

    • Tracy Idell Hamilton on said:

      hi Jeff,

      Thanks for your comment. I’m passing it along to senior management.

      I do want to let you know that last year, senior execs voluntarily gave up (didn’t receive) merit raises.

      Hope you’ll also read about the latest changes to the bonus system, and CEO Doyle Beneby’s response to the City Council that he and the board, which put the bonus system in place 13 years ago, are quite open to greater changes. Here’s the latest on that: http://blog.cpsenergy.com/rate-answers-to-council/

      Thanks for reading. We really appreciate the feedback.

      ~Tracy

      • Jeff Dillingham, REALTOR® on said:

        Tracy…

        Thank you for your response. Merit Raises are performance based and ethically should not be something considered for a municipally owned energy company. How can you gauge performance in a utility company when it comes to revenue? “Yay, we had more 100 degree days, we made more money… thus, we get more bonuses” That’s not performance/merit… it’s an act of God. Merit Raises belong to Social Workers, Teachers, Sanitation workers, etc. Despite the 16 million paid out in bonuses last year as described in the article, the % of bonuses that went to Executive individuals vs the CPS labor force is not mentioned. The reality is, the justification for any increase in a municipality utility should be 100% towards upgrades, maintenance, and efficiency. Structured salaries & executive bonuses should never be funded by rate increases, but rather by performance review from CPS customers.

        To summarize, the main point is I don’t mind a rate increase if it benefits those who pay it. I do mind a rate increase because an Executive says they are working harder and deserve it. Also, was a study done to see comparative rates throughout the state? CPS has a monopoly anyway (which a lot of people would love to challenge in federal court) I would advise those in charge to tread lightly… too much of this and you upset the masses.

        • Tracy Idell Hamilton on said:

          Hi Jeff,

          Merit at CPS Energy obviously isn’t based on revenue, for exactly the reason you describe. It’s based on metrics such as safety, reliability and customer service. If you check out the post I wrote with answers to the City Council, you’ll see a link to the Jan. ’13 metrics that the entire company must meet to earn their at-risk, or bonus pay: http://blog.cpsenergy.com/rate-answers-to-council/

          We have also shared what percentage bonus goes to senior execs — about 35 percent — on down to the one percent the union negotiated for. Again, the idea is that if one-third of your pay is at risk, you will work like hell to meet company goals — and in 2009, executives didn’t meet those goals and so didn’t get their bonuses. The following two years have been the best in company history, and everyone earned bonuses: http://blog.cpsenergy.com/saen-story-cps-energy-salaries/

          You may have also read that the bonus system will be changed next year to add a higher level of personal accountability; those changes will decrease payout by roughly 25 percent or $4 million. That money will shift to low-income customer assistance programs. http://blog.cpsenergy.com/bonus-system/

          Mr. Beneby also told the CC that he believes the Board, which created the bonsus system 13 years ago, is willing to revisit it.

          None of the requested 4.75 percent base rate increase is going toward bonuses. It’s an incremental increase that will fund upgrades, as you suggest it should: http://blog.cpsenergy.com/capital-projects-drive-rate-request/

          We tout our low rates everywhere, I’m surprised you haven’t run across us crowing: CPS Energy customers pay among the lowest rates in Texas, and the lowest of the top 20 cities in the U.S. In addition, because CPS Energy is owned by the city, up to 14 percent of revenue flows into the city’s general fund — roughly $300 million annually, helping to pay for police, fire and streets. If the city were to break up and sell CPS Energy, as it considered doing when the state first deregulated, it would never sell it for enough to make up that revenue, and would likely have to raise your property taxes.

          Then, you’d pay higher taxes, CPS Energy would br investor-owned, meaning it would charge more to create profits for (out of town) shareholders, so you’d likely pay higher rates, and you wouldn’t have the local oversight through the CC you have now.

          I believe San Antonio is getting a pretty great deal by owning its own vertically integrated energy company. Absolutely CPS Energy should have to justify asking for a rate increase, and should be open to serious scrutiny about all of its policies, including the bonus system.

          We appreciate customers like you, willing to engage on a nuanced and thoughful level.

          have a great weekend!

          ~Tracy

          • Jim on said:

            Why doesn’t CPS decrease the money put in the City’s General Fund ($300 million annually) and move that to the infrastructure updates that are needed to avoid a rate increase?

          • Tracy Idell Hamilton on said:

            hi Jim,

            Thanks for reading. Unfortunately, we can’t decrease the money, because the amount of revenue that goes to the city is codified in our bond documents. The city of San Antonio owns CPS Energy, and the up to 14 percent of gross revenues it receives is analogous to its return on investment.

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