Correction appended, 10/10/13
CPS Energy Board of Trustees approved a new, lower rate increase request today, from 4.75 percent to 4.25 percent.
The change would reduce the average residential gas and electric bill increase from $5.19 to $4.68 each month. The San Antonio City Council is expected to vote on the new request on Nov. 7. If approved, it would go into effect on Feb. 1, 2014.
Mayor Julian Castro, who sits on the board, praised CEO Doyle Beneby and the utility for responding to the council and community’s concerns.
Board member Ed Kelley said he supported the reduction, but raised concerns that CPS Energy still bring in the revenue necessary to retain its strong financial standing and credit rating.
“We’ve got to keep an eye on that, very closely,” he said.
Beneby assured the board that CPS Energy could still maintain it’s position with the reduced request.
The reduction comes in response to concerns from the council and community over CPS Energy’s Employee Incentive Program (EIP), also known as the bonus system, which was put into place by the board 13 years ago as a way to drive performance as the Texas energy market became more complex and competitive. Even though CPS Energy does not compete with retail providers, it does compete in the wholesale power market and provides bills that remain among the lowest in Texas.
All employees are eligible under the current program. Those with greater responsibility have more of their pay at risk. Payments are made only if company-wide goals are met each year.
Last month, CEO Doyle Beneby announced that he would add an additional layer of accountability to the program and reduce the potential payout by 25 percent or about $4 million, with that savings going to low-income assistance programs.
Beneby went further last week when he told the council he would recommend to the board to reduce the program even more, and use the additional savings to lower the rate increase request.
He recommended to the board Tuesday that the budget for EIP be cut by 50 percent in 2015 and 2016, putting the additional savings into operations to reduce the rate increase request.
Because EIP only makes up one-half of one cent of every revenue dollar, that reduction alone would not be enough to reduce the rate request, so Beneby also recommended deferring some upgrades to CPS Energy service centers and company facilities.
Improvements to service centers, from which crews deploy to respond to customer needs, will be deferred
, and plans to relocate servers to a new data center also have been delayed.
(Editor’s note, 10/10/13: Plans to relocate servers to a new data center will not be delayed.)
Those capital projects must be completed at some point, but Beneby told the board he is sensitive to the community’s concerns about rising costs.
“That matters to us,” he told the board. “We listen to the community, and what we heard was lots of concern and angst over our incentive program.”
The reduced request would raise almost $118 million over two years rather than $132 million. That additional revenue supports CPS Energy’s two-year, $1 billion capital improvements plan.