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Lower debt, higher wholesale sales allows CPS Energy to eliminate planned rate increase
By Tracy Idell Hamilton on November 17, 2014
CPS Energy will once again be able to eliminate a rate increase request initially planned to take effect in February 2016.
This is the second time the company has been able to extend the time between rate increase requests, thanks to continued diligent streamlining of our business processes, lower debt costs and increased sales of wholesale electricity.
When CPS Energy came before the community seeking a rate adjustment for 2008, we shared plans which showed the need to seek rate increases every other year for the next decade, to pay for additional growth, environmental compliance and system maintenance.
As our regulator, the San Antonio City Council approved the next planned rate increase, which went into effect in 2010. In 2011, CPS Energy was able to delay our next planned request until 2013. In October of that year, the council approved a 4.25 percent rate adjustment, which went into effect this February.
At that time, we outlined to the council the anticipated need to ask for a 5.25 percent adjustment next year, to take effect in February 2016.
But as in 2012, we now do not need to make that request. Barring unlikely circumstances, we will not need to seek an increase until late 2017, which would go into effect February of 2018.
Several factors allowed for the delay.
“One of those factors is lower debt costs,” said Group Vice President and Chief Financial Officer Paula Gold-Williams. “Thanks to our strong credit rating and the work of our financial team to refinance debt, CPS Energy is expected to save nearly $36 million over the next six years.”
The company also experienced stronger than expected sales. Strong performance by our power generation team to ensure plants were running well during summer months which allowed us to sell some additional generation to neighboring utilities, which helps drive down costs here in Greater San Antonio.
Operational and process improvements now being implemented at the South Texas Project nuclear power station also are expected to result in significant savings over the next few years.
From 1991 to 2008, CPS Energy was able to operate without a base rate increase. But as that period of slow infrastructure growth has given way to greater investments in capital and technology, increased regulatory costs and more robust system maintenance, we have had, and will continue to need, additional revenue.
Even with the most recent increase to base rates in early 2014, CPS Energy continues to offer the lowest rates among the largest utilities in Texas, and the lowest rates among the 20 largest cities across the country.
Serving our community with affordable, reliable power remains our primary goal even as we work within a rapidly changing business and regulatory environment to offer customers the services they expect. We remain committed to making wise investments and operational improvements that will continue to benefit our customers and our community.