Investing in San Antonio’s Future: Why Water and Energy Rates Are on the Rise

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City Attorney Michael Bernard addresses City Council during a session in September. Photo by Iris Dimmick.

City Attorney Michael Bernard addresses City Council during a session in September. Photo by Iris Dimmick.

Robert RivardRatepayers and officeholders alike are focused on requested rate increases by SAWS and CPS Energy that are under review and coming up for a vote by City Council. The simultaneous requests merit serious consideration, debate and community understanding.

Interested citizens have the opportunity this week to listen as leaders at both utilities make their cases to City Council. The City Council B Session Wednesday, starting at 2 p.m., will include a presentation by SAWS President and CEO Robert Puente. Thursday’s regular City Council session that begins at 9 a.m. will include a morning presentation by CPS Energy President and CEO Doyle Beneby.

City Attorney Michael Bernard addresses City Council during a session in September. Photo by Iris Dimmick.

City Attorney Michael Bernard addresses City Council during a session in September. Photo by Iris Dimmick.

Both rate increases are related to more complex, long-term decisions about energy and water/wastewater management that elected leaders and the utilities’ leadership face in the coming years. Today’s article focuses on the pending rate requests. I’ll write later about some of the more strategic decisions looming on the horizon.

The Big Picture will be the focus of the San Antonio Clean Technology Forum program, Energy/Water Nexus, at the Pearl Stable on Oct. 15. I will moderate a panel that includes Mayor Julián Castro, County Judge Nelson Wolff, State Rep. Lyle Larson, CPS Energy’s Beneby, and SAWS’ Puente.

san antonio water energy forum clean tech

[Full disclosure: Monika Maeckle, my wife, is the Director of Integrated Communications for CPS Energy, and in 2012, before her hire there, we were paid to do a one-time, four-month long communications consulting project for CPS Energy.]

The Clean Tech panel will be quite timely for a number of reasons. City Council will vote on the two requested rate increases next month. The CPS Energy rate request is tentatively set for a Nov. 7 vote, and the vote on the SAWS request should take place by the end of November.

Scott Storment, Mission Verde Alliance interim executive director.

Scott Storment, Mission Verde Alliance interim executive director

I’ve invited Scott Storment, executive director of Mission Verde Alliance, which hosts the Clean Tech Forums, to give Rivard Report readers an overview of the Forum’s history, its mission, and its founding by former energy executive and current chairman Michael Burke. That article will appear on our site Thursday.

Texas voters, at least the small percentage who vote in off-year elections, go to the polls on Nov. 5 to vote on a number of constitutional amendments, including Proposition Six and a new Texas Water Plan that would establish a $2 billion State Water Implementation Fund for Texas (SWIFT) drawn from the state’s Economic Stabilization Fund, or so-called Rainy Day Fund.  The SWIFT is meant to serve for the next 50 years as a revolving line of credit that will help water utilities, districts and other public entities finance and complete some of the 4,500 water projects now listed by the Water Development Board.

Click image to download PDF.

Click image to download PDF.

The initiative was passed by the Texas Legislature earlier this year, following the historic 2011 drought that cost the state billions of dollars in lost economic activity. Cyclical water scarcity is expected to become an even more pressing issue as the state’s population doubles over the next 40 years. State leaders finally seemed to acknowledge that years of inaction and inadequate funding mechanisms have left Texas economically vulnerable to the least predictable variable in the equation: climate trends.

The leadership at both SAWS and CPS Energy have signaled that current rate increase requests are likely to be followed in the coming years by additional rate hikes. Both utilities have their reasoning behind those predictions, but we can simplify them here and say they fall into several categories:

  1. Meeting increased demand in one of the nation’s fastest growing metro areas.
  2. Maintenance, repair and replacement of aging infrastructure, such as thousands of miles of buried sewer lines in the case of SAWS, and in the case of CPS Energy, everything from power plant upgrades to costs associated with the state’s electrical grid.
  3. Diversifying our sources of water and finding ways to improve a record of conservation that already has won national recognition.
  4. Investing in renewable energy sources and production while moving to reduce carbon emissions and our dependence on energy produced by burning coal.
  5. Well-managed utilities with balanced books that keep systems maintained and operational enjoy greater investor confidence and thus pay lower interest rates on debt. Ratepayers might care more about their own monthly bill than how Wall Street bond rating agencies view San Antonio, but lower interest rates do mean lower utility rates. It’s ironic that periodic rate increases for residential and commercial customers can contribute to longer term financial and rate stability, but it’s true.

You can read more about the requested rate increases by visiting the respective websites of SAWS and CPS Energy and reviewing their reasoning for the rate increases.

SAWS President and CEO Robert Puente

SAWS President and CEO Robert Puente

Here is a recent posting on the SAWS website that details how the water utility reduced an initial request for a 13.5% rate increase down to the current 5.1% increase. Another recommended read is the related agreement reached by SAWS and the U.S. Environmental Protection Agency calling for a 10-year, $492 million investment in improved wastewater lines that you can read about here.

Here are two postings on CPS Energy’s proposed 4.75% rate increase, one by Tracy Hamilton, who writes the CPS Energized blog, and one by CEO Doyle Beneby.

I am purposefully writing about the nexus of energy and water in a single article and both are on the agenda at the Oct. 15 Clean Tech Forum. I’m one of a growing number of San Antonians who believe the community, our elected leaders, and the leadership at the two utilities will increasingly come to see their missions as closely intertwined, requiring more joint strategic planning and even combined operations where practical.

CPS Energy CEO Doyle Beneby

CPS Energy CEO Doyle Beneby

It makes sense then, in my mind, for Council and citizens to be examining the two request rate increases side by side.

What will be the outcome? No one wants to pay more for services, even essential services, but San Antonio is, in some ways, a victim of its own success. Utility rates here are the lowest among the state’s big cities, and among the lowest nationally for a metro area of our size. CPS Energy hasn’t had a rate increase since 2010. SAWS won a rate increase of 8.4% in March for 2013 that factored out to be a net 7% rate increase. Still, with the aquifer our main source of water historically, we’ve had it very good for a long time.

Price is not the only measure of value.

For SAWS, keeping the water supply and environment safe, particularly over the Edwards Aquifer Recharge Zone, is a critically important consideration and challenge, as is diversifying our water sources while other sources of water are still available.

Edwards Aquifer Region, map by Braun&Gresham

Edwards Aquifer Region, map courtesy of Braun & Gresham.

SAWS’ current construction of a desalination plant in south Bexar County and its pending decision about a long-term purchase contract of water piped here from private sellers will require it to value water at a significantly higher price than the water it has pumped from the Edwards Aquifer.

For CPS Energy, building a 21st century energy economy that keeps the city on the path to burning less fossil fuels and reducing carbon emissions are long-term goals that speak to our community’s health and shared national and international priorities. Renewables, however, are still a small part of the energy portfolio. Our ability to see out over the horizon and ensure a reliable and diverse supply of peak energy in a fast-growing city and state will require investment.

An arial view of the Hipolito F. Garcia Federal Building and U.S. Courthouse. Its LEED renovation projects included a green (landscaped) roof, a 50 KW solar array, and energy efficient AC mechanisms. Photo by Mark Menjivar, courtesy of Ford, Powell & Carson architects.

An arial view of the Hipolito F. Garcia Federal Building and U.S. Courthouse. Its LEED renovation projects included a green (landscaped) roof, a 50 KW solar array, and energy efficient AC mechanisms. Photo by Mark Menjivar, courtesy of Ford, Powell & Carson Architects.

I’d rather live in a city that invests in itself and its future than a city known for having the lowest rates anywhere, but I also am sensitive to the fact that San Antonio, for all its progress in recent years, remains a city with a very large population of working families who live below the poverty line.

Elected officials sensitive to ratepayer concerns will ask some tough questions Wednesday and Thursday, and in the coming weeks before the final votes. If you’ve never attended a City Council meeting or a Wednesday B session that precedes the Thursday meeting, this would be a good time to come downtown and experience your local government  in action.

 

Follow Robert Rivard on Twitter @rivardreport or on Facebook.

 

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2 thoughts on “Investing in San Antonio’s Future: Why Water and Energy Rates Are on the Rise

  1. My arguments: 1.
    “Meeting increased demand in one of the nation’s fastest growing metro areas.” — Why not let the folks who are increasing the demand pay for the increase?
    2.
    “Maintenance, repair and replacement of aging infrastructure…” — I own my own home and I have to budget for my ‘aging infrastructure.’ It is unfair that the utilities doe not budget for their own responsibilities.
    3.
    “Diversifying our sources of water and finding ways to improve a record of conservation…” — Household use accounts for less than 10 percent of total water consumption. If one is serious about conversation, one should be looking at the 90%ers!
    4.
    “Investing in renewable energy sources and production while moving to reduce carbon emissions and our dependence on energy produced by burning coal.” — We should stop investing in old technology and use that money to invest in renewable energy sources. Doing it this way would entail no additional expense.
    5.
    “Well-managed utilities with balanced books that keep systems maintained and operational enjoy greater investor confidence and thus pay lower interest rates on debt…” — If this is true, I contend that “Well-managed utilities with balanced books” should precede an increase in utility rates.

  2. I like to know why my electric bill was so high this month. It was $270 for the month of July. That was the straw that broke the camel’s back. Where can I complain about this?

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