City Council voted 8-2 in favor of CPS Energy's 4.25% electric and gas rate increase Thursday morning – save for a vote from the now-vacant District 9 seat after Elisa Chan's departure. The average residential customer will see a $4.68 increase to their monthly electricity and gas bill starting in February 2014.
While CPS customers will continue to pay some the lowest rates in Texas, Council members unanimously expressed concern over the disproportionate impact the rate increase will have on the city's poorest residents, many of whom already struggle to pay their electric and gas bill each month.
"It seems in significant, but ($4.68) is actually just an average,” said District 5 Council Member Shirley Gonzales. "Some (bills will increase) much more than that."
After a presentation recommending approval of the rate increase from Ben Gorzell, supervisor of Public Utilities, Mayor Julián Castro captured the reasoning behind the yes votes as a necessary investment in future energy needs for a growing San Antonio.
“Nobody ever likes a rate increase,” Castro said. “But one of the basic things that a city needs to get right is the provision of electricity … this is a reasonable rate request that benefits the entire community. Even though it’s not a popular thing all the time, (the rate increase) is a necessary and prudent thing.”
The utility plans on expanding its ten affordability programs by 25% and improving its outreach and awareness efforts.
Castro and the council members that voted yes cited this commitment as critical to their support of this and future year's rate increase requests.
The publicly-owned utility initially requested a 4.75% increase earlier this year, but after several City Council presentations and further discussions with stakeholders, CPS Energy was able to reduce the request by reducing the Corporate Employee Incentive Program (EIP). CPS Energy has plans to reduce its EIP budget by 50% over the next two years. The 2014 rate reflects a 16% reduction of the EIP.
CPS Energy expects to come before City Council next year for a 5.25 % increase for 2016-2017 and 4.50% for 2018-2019.
During Thursday's and previous presentations to City Council, CPS Energy President and CEO Doyle Beneby cited internal restructuring and a commitment to money-saving technology as ways the utility has lowered its rate increase requests.
City Council commended CPS Energy for taking in most stakeholder and council member concerns into the dialogue including the EIP/bonus levels, perceived commercial and residential rate discrepancies, community awareness of affordability programs, and customer service issues.
The need for a 2012 rate adjustment was eliminated and the proposed increase for 2014-2015 was lowered from 5.25%, Beneby said in October, by limiting operating expenses with new technologies, improved administrative and operating processes, and by eliminating redundant staff positions.
“We’re finding ways to be competitive in terms of cost,” Beneby said in October. “(CPS) has found tremendous savings … through inside baseball things that we’re doing on a daily basis.”
Beneby said the money generated by the rate increase over the next two years will help fund several “big ticket” projects, including grid optimizations and updates, continued installation of energy and cost-efficient smart meters, and power plant upgrades. Continuing operations, maintenance, and environmental regulation compliance also will require more funding.
City Council's approval of the rate increase doesn't mean "pencils down," for CPS efforts to minimize costs and reach out to the community, Beneby said Thursday morning.
On another note, Beneby also assured city council that – while a headline on the Express-News alluded to CPS having a favored plan to build either a $1 billion natural gas plant or a nuclear plant in the next decade – CPS has not yet begun to have formal talks about what the next big generation source or purchase will be.
There is a constant dialogue about future energy sources, Beneby said. "We don't know yet what that is, but I assure you it will be a low carbon source."
Any claim that CPS is looking only at natural gas and nuclear energy "is somewhat ridiculous," he said.
Lisa Lewis, director of corporate communications, explained during a phone interview this afternoon that while CPS is "long on generation right now, we don't project needing another power plant until 2020 or a little after."
But those conversations would start until next year or 2016.
"A decision is not imminent .... all options are on the table," Lewis said. "It could be a brownfield project where we already have something built, repurposing an existing facility, new construction, purchase, (etc)."
Full disclosure: The Arsenal Group conducted a four-month review of CPS Energy communications for the utility starting in June 2012. Monika Maeckle, a former member of the The Arsenal Group and wife of Robert Rivard, now works at CPS as its Director of Integrated Communications.