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    City Council approves CPS Energy rate increase


    January 14, 2022 - Megan Stringer, Diego Mendoza-Moyers, San Antonio Express-News

     

      Jan. 13—After a sometimes tempestuous, three-hour debate, a divided City Council on Thursday approved CPS Energy's first rate hike in eight years.

      CPS customers' monthly bills will go up by 3.85 percent, or about $5.10 on average, beginning in March.

      Council members voted 8-3 in favor of the increase.

      District 4 Councilwoman Adriana Rocha Garcia said she'd concluded CPS — which says it needs to fill 400 jobs and replace its 22-year-old software platform — had gone too long without a rate increase.

      "For years, others on this council have passed the buck," she said. "That's the reality."

      Nevertheless, council members criticized CPS' timing. The utility secured the rate hike as prices for most goods and services continue to spiral. Thousands of CPS customers are at least 30 days past-due on bills and owe the utility tens of millions of dollars.

      Council members said the increase will come with greater scrutiny of CPS.

      "Utility rate adjustments are never pleasant, but few would deny that on occasion they are necessary," Mayor Ron Nirenberg said. "Through the city's partnership with CPS, we are ushering in a new era of accountability."

      District 2 Councilman Jalen McKee-Rodriguez, District 5 Councilwoman Teri Castillo and District 10 Councilman Clayton Perry voted against the rate increase.

      Castillo chided CPS for seeking the increase, and she moved to delay the vote by a year — until the city has a completed a third-party audit of the utility's finances.

      Most council members shot Castillo's proposal down, however, and said the rate increase must come now to stabilize CPS Energy's finances.

      The utility is missing millions in revenue after it stopped disconnecting customers' for nonpayment in spring 2020. CPS resumed disconnections last fall, but customers' past-due accounts ballooned to more $140 million owed to the utility.

      "We need to provide this financial shot in the arm so CPS will continue to meet our energy expectations," said District 9 Councilman John Courage, who represents north-central San Antonio.

      Since last summer, CPS has said it has several pressing needs that it needs more cash to address.

      The rate increase will bring in an extra $73 million annually for CPS. The utility plans to use the money to keep up with San Antonio's population growth by increasing spending on substations and other power-distribution infrastructure to meet higher demand for electricity and natural gas.

      CPS also is looking to hire workers and raise wages. Utility officials say they've lost workers during the pandemic to better-paying companies.

      CPS is estimating it will spend $200 million though 2026 to better protect its power plants against extreme weather. District 8 Councilman Manny Pelaez, representing the Northwest Side, said the utility must have the revenue to be prepared for another deep freeze.

      "We're gong to be blamed for piling onto their already stressful economic reality," Pelaez said of residents who've balked at raising rates during a pandemic. "But I'm casting this vote today because after everything I've heard, I'm convinced CPS has made the business case."

      Council members also cited the hazard of rating agencies downgrading CPS' credit rating if the council shot down the increase. Bond rating cuts appeared likely if CPS didn't secure a rate hike, which likely would have resulted in higher interest rates on CPS' debt and millions more per year in interest payments to investors.

      Still, Pelaez said he anticipated a public backlash against council members for approving the increase.

      "I'm also absolutely certain we'll have a lot of constituents who are unhappy with (this) decision," he said. "And many, if not most, are not going to understand why we voted (this) way."

      The resistance

      McKee-Rodriguez, who represents the East Side, said he didn't want to ignore the many District 2 constituents who spoke out against the rate increase. He said a $5 per month increase in utility bills would push many of his constituents over the edge.

      Environmental and community groups rallied before Thursday's council meeting to protest the rate hike.

      "Families of my students are already having to choose between paying the utilities and paying the grocery bill," said Lillian White, a former teacher at Great Hearts charter schools and a member of the climate group Sunrise Movement. "Increasing their rates now ensures that many, many more families will fall prey to disconnections."

      Perry, representing the far Northeast Side and the lone conservative voice on the council, agreed with Mckee-Rodriguez and Castillo that the timing for a rate hike is wrong and will burden low-income households.

      "We are one of the poorest large cities in the U.S.," Perry said. "And yet we keep piling on these increases on people who really can't afford it."

      CPS has increased its monthly discount for low-income customers from $12 currently to over $16. It's also boosting enrollment in the program to 65,000, up from 51,000.

      Councilwoman Melissa Cabello Havrda, who represents District 6 on the far West Side, voted for the rate increase but noted her call last week for an outside audit of the utility's finances and management.

      Interim CEO Rudy Garza has sent the right signal to ratepayers by agreeing to the audit, Cabello Havrda said.

      "It is a first step though," she said. "We have a long way to go to earn that trust."

      Councilwoman Ana Sandoval, representing District 7, and others asked Garza to commit CPS to shutting down the coal-fired Spruce power plant. Garza said the utility over the next year will develop a plan for the coal plant.

      "For me, today's vote is on where we want this agency to go and whether we have the confidence that's where it's going right now," Sandoval said. "This council will be much more active with you."

      But by approving the rate hike, City Council lost its leverage to make changes at CPS, said Castillo, who represents the West Side and voted against the increase.

      Castillo said CPS should have changed its rate structure — the way it bills customers — instead of seeking a rate hike.

      Community organizers have long called on CPS to change its prices to charge business customers more and households less, and most on council agreed the utility should adjust how it sets rates.

      Garza said the utility will examine changing its rate structure in the coming year.

      Castillo supported a third-party audit of the utility, but said it should have been completed before a rate-hike vote.

      "To suggest that folks, the working people of San Antonio, don't understand the nuances and the implication of this rate increase is extremely insulting," Castillo said.

      Council on Thursday also approved the creation of a so-called regulatory asset. That's an accounting mechanism that will allow CPS to spread over 25 years the costs it incurred buying wholesale power and gas at sky-high prices during the winter storm nearly a year ago.

      The charge will add $1.26 to monthly bills while the rate hike will add around $3.84. Together, households' monthly bills will go up by $5.10 on average.

      District 1 Councilman Mario Bravo said an organizational review of the utility could create a road map for Garza or whoever becomes the utility's full-time chief executive.

      "I see this as positioning new leadership — who have made commitments to work with us and be more accountable — to stabilize this organization," he said.

      diego.mendoza-moyers@express-news.net

      megan.stringer@express-news.net

      ___

      (c)2022 the San Antonio Express-News

      Visit the San Antonio Express-News at www.mysanantonio.com

      Distributed by Tribune Content Agency, LLC.

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