CPS Energy rate hike coming amid ‘trust crisis,’ council warns utility

Utility’s proposal would bump average homeowner’s bill up $5.10 per month

San Antonio – As CPS Energy officials made their pitch for a rate hike to city council Wednesday, council members warned it likely wouldn’t be well-received.

“You’re in the grips of a trust crisis right now, right?” District 8 Councilman Manny Pelaez said. “The public right now, whether you agree with them or not, has a delicate relationship with you guys. It’s a little brittle.”

The utility needs council’s support to institute a two-pronged approach to raising customers’ bills: a 3.85% increase to the base rates and a bump in the fuel adjustment charge. Combined, CPS officials say those changes would raise the average residential customer’s bill by about 3.3% -- or $5.10 per month.

Slide from CPS Energy Dec. 1 presentation to city council. The utility's rate hike proposal includes both a 3.85% increase in the base rate and a bump in your fuel adjustment charge, which is meant to cover the costs from the February Freeze. (CPS Energy)
Slide from CPS Energy Dec. 1 presentation to city council. While the average homeowner will see a 3.3 percent impact to their bill, CPS says that will vary based on usage. (CPS Energy)
Slide from CPS Energy Dec. 1 presentation to city council. CPS Energy's commercial customers would see a larger increase in their monthly bills than the 3.3 percent impact of the average residential customer. (CPS Energy)

While the increase in the base rate would go towards CPS Energy’s normal operations, the bump in the fuel adjustment charge would cover -- over 25 years -- the $418 million that the utility has already paid out fuel costs incurred during the winter freeze.

CPS is still fighting another $587 million worth of costs from the freeze, which are not included in the calculations for the rate adjustment.

The hike is much smaller than what it originally proposed in a draft rate request back in September, said the city’s chief financial officer and public utilities supervisor, Ben Gorzell.

The original plan would have raised the average residential customer’s bill by 11.1%, Gorzell told council, but city staff recommended a different approach and worked “collaboratively” with the utility to develop the new proposal.

“It’s focused on financial stability for CPS Energy. It’s focused on ‘what do we know today?’ It isn’t trying to solve everything, and it isn’t trying to solve areas where there’s still a great amount of uncertainty related to certain things like pandemic bad debt or the disputed charges that still remain related to winter storm Uri,” Gorzell said.

But an increase is still an increase, and Pelaez and other council members mentioned the burden even a few extra dollars could place on some of the poorer residents.

“What this pay rate increase can mean is more residents putting, you know, groceries on credit cards, taking out payday loans to pay their utilities. You know, $5 is two school lunches,” said District 5 Councilwoman Teri Castillo.

CPS Energy Interim CEO Rudy Garza acknowledged that a rate increase was bound to be unpopular.

“If we put this to vote with a public vote for a rate increase, I don’t know anybody - I wouldn’t vote for a rate increase, right?” Garza said. “But if you ask me, ‘Rudy, do you want, you know, reliable, you know, utility service?’ I’d say, ‘Heck, yeah, I want reliable utility service.’ And that’s our job to figure out how to do that in a manner that that is affordable.”

As part of its rate requests, Chief Financial Officer and Treasurer Cory Kuchinsky said CPS Energy was proposing to both expand its affordability program by another 14,000 customers - up to 65,000 customers total - and increase the discount customers receive enough to offset - on average - the base rate portion of the tax hike.

The rate proposal doesn’t take into account the costs of any changes to its power generation plans - such as closing or converting the Spruce coal power plan, nor does it make any changes to the rate structure.

CPS Energy officials say the utility’s Rate Advisory Committee, made of 21 CPS Board of Trustees and city council appointees, will have more time to consider those issues later.

District 1 Councilman Mario Bravo said the council needed some commitments from the utility before approving a rate increase.

“So this is a hard time to be coming to us asking for a rate increase, making promises of the things that you’re going to do in the future. Right? I think what we’re ready to see is we need to show to our constituents that there are changes in behavior,” Bravo said, noting that he has previously called for an independent study of CPS’s corporate culture.

Council is scheduled to vote on the rate hike January 13, but Councilman Clayton Perry says that’s much too soon.

“I just think that we’re rushing this through the system,” Perry said. “I know you need to get this done very quickly. But again, I just don’t think that’s enough time.”

If council does approve the increase, it would begin taking effect on March 1.

CPS Energy officials also said they plan to come back more often for rate increases than in the past - roughly every two years, instead of the eight years since the previous one.

“We need to come in more frequently,” Garza said after the meeting. “Even if in two years, if the financial picture changes and maybe we don’t need a rate increase, you know, we need to come in and tell them that that’s the case and why and what the projection is going forward.”

About the Authors:

Garrett Brnger is a reporter with KSAT 12.