A CPS Energy rate increase slightly less than the proposed 4.75% seems to be all but certain for next year, but ratepayers also should note that CPS Energy announced it's studying a major reduction in its much-debated employee bonus program.
The balancing act between a fully-invested municipal utility able to meet the energy demands of fast-growing San Antonio, even as it maintain affordability in a city with a significant working poor population was on display Thursday as City Council met for the second time with CPS Energy President and CEO Doyle Beneby on the requested rate increase.
During his presentation to San Antonio City Council, Beneby told council members that further reductions in the publicly-owned utility company's Corporate Employee Incentive Program (EIP) are being discussed internally to help build greater public support for the proposed rate increase. City Council and community members have expressed concern over the $33.6 million in bonuses awarded over the past two years.
“We at CPS had heard and factored in (City Council input) with respect to the bonus program,” Beneby said. "We can reduce it even more ... we'll discuss with (CPS Board of Trustees) mid next week."
Beneby said he was confident a compromise could be reached between the CPS' leadership and City Council. He suggested the overall reduction in bonus payments will be significant. According to the utility's blog, CPS has plans to reduce its EIP budget by 50 percent over the next two years.
"We can perhaps accelerate that," he said. "I don't want to get ahead of our board," he said. "When we go back and look at (the EIP) we believe (the reduction in payoffs) will be significant enough to actually impact (reduce) the rate request."
District 7 Councilman Cris Medina's office released an official statement Thursday afternoon expressing Medina's satisfaction with Beneby's effort.
"I am pleased with the progress we are making with CPS Energy," Medina stated. "Today's presentation makes it clear that the leadership of CPS Energy has gotten the message that the executive bonus program needs to be reformed. This is a huge victory for ratepayers."
The proposed 4.75% rate increase would add $5.19 to the average residential energy bill -- including electricity and gas -- of $136.79 for 1,500 kwh per month. Commercial customers averaging 5,000 kwh per month would see an increase of $17.83. CPS expects to come before City Council next year for a 5.25 % increase for 2016-2017 and 4.50% for 2018-2019, for a total of 14.50% increase over the next five years, for an annualized average increase of 2.9%, starting Feb. 1, 2014.
Beneby stressed that these increases still allow San Antonio to offer some of the lowest rates in Texas.
The need for a 2012 rate adjustment was eliminated and the proposed increase for 2014-2015 was lowered from 5.25%, Beneby said, 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. "(CPS) has found tremendous savings ... through inside baseball things that we're doing on a daily basis."
Beneby said the $132 million 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.
"In terms of generation capacity, we are well positioned (currently)," Beneby said, citing 800 MW of excess capacity that allows for flexibility and relief on power sources and, at times, to sell power for revenue.
"But the second piece of that is the capacity of the distribution system," he said.
There is less of a cushion to accommodate new growth or "organic growth," increased demand from established communities, Beneby said in response to District 8 Councilman Ron Nirenberg's question regarding current energy capacity.
"Capacity on the distribution side has to stay ahead of (demand)," Beneby said
[Read more about CPS' long-term plans here: "Investing in San Antonio’s Future: Why Water and Energy Rates Are on the Rise."]
This was Beneby's second briefing to City Council on the CPS rate request. Beyond the discussion of reductions in the utility's bonus program, council members seem to be more amenable to supporting the rate increase once a final number is on the table.
"What would be the impact of stretching (4.75% increase) over the next two years?" asked Medina.
"Greater operational risk ... That doesn't mean we'd have poles falling and a brownout tomorrow," Beneby added, "But when you don't maintain power plants, especially, you can have bad things happen" and there is a safety risk for employees and the community. While splitting the increase is technically possible and there could be a re-prioritization of maintenance, Beneby advised against it.
Environmental sustainability was also on the table for discussion as CPS plans to continue to diversify its energy portfolio with renewable energy, as outlined in its Vision 2020 and Save For Tomorrow Energy Plan(s), and continue to invest in clean energy research and development through its partnership with UTSA's Texas Sustainable Energy Research Institute.
District 6 Councilman Ray Lopez echoed Mayor Julián Castro and Nirenberg's concern with air quality and the role wind and solar will play in complying with federal regulations.
"There are many aspects of air quality that we have no control over," Lopez said. "(Electricity generation) is an aspect we can control ... we can make strategic decisions."
Closing the coal-fired Deely Power Plant by 2018 instead of retrofitting the plant with potentially $550 million worth of pollution control mechanisms is one of those strategic decisions, Beneby said, so is investing in low carbon-emitting fuels like natural gas.
"Also, renewables don't use water," Beneby said in agreement. "There is an incredible value to our community to shift to renewables."
For some, however, these policies are not enough. Two members of the local chapter of the Sierra Club, Margaret Day and Meredith McGuire, also spoke to the dais. Both called for a tiered rate structure that encourages conservation – one that rewards customers that use less energy by charging exponentially more for excess energy consumption above a certain baseline. Such rate structures are in use in Los Angeles and Fort Collins, Colo. with mixed reviews.
Day and McGuire also provided City Council with a list of questions that Beneby said he and his staff would address in the coming days.
Beneby's presentation also outlined an expansion of CPS' 10 "customer assistance programs," including a payment installment plan, affordability discount, energy efficiency assistance, and billing and assistance for some of the community's most vulnerable citizens (disabled, in critical care, burned veterans, and senior citizens). While more than 250,000 customers received some form of assistance from CPS during the 2013 fiscal year, Beneby hopes to continue expansion and outreach of these programs to assist more.
District 4 Councilman Rey Saldaña stressed that the success of such programs depends on CPS community outreach efforts.
"It's surprising that citizens still don't know what's available," Saldaña said, referencing calls he's received from constituents in need of help.
"You know where (customers that can't pay their bills) are, you have their address," he said. With that knowledge, Saldaña hopes a more targeted effort can be made to get assistance to those who qualify. "Most people that call in (concerned about the rate increase) aren't the ones having a problem paying bills ... it's the ones that don't call."
Beneby admitted that "there may be a chance for us to be more proactive."
"You bring up a good point," he said to Saldaña. "Maybe there's a way that we can look at (customers) that are consistently late" and connect them with programs. "We, generally, have been reactive."
Also on the customer service front, District 3 Councilwoman Rebecca Viagran emphasized the need for CPS to communicate to the public the difference in commercial and residential rates and programs – in both English and Spanish. There are bilingual customer service and outreach representatives available by phone and in the field, but the CPS website and blog, "Energized," is English only.
West San Antonio Chamber of Commerce President Gabe Farias also spoke during the Citizens to be Heard session in support of the rate increase.
The CPS rate increase is expected to appear before council for a vote on Nov. 7. The vote on a rate increase for SAWS is expected in late November.
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. This disclosure was published Sept. 26, 2013 in response to an Express-News inquiry.