SAN ANTONIO – In a pair of split votes, the San Antonio City Council approved the first CPS Energy rate increase in eight years on Thursday, which will raise the average homeowner’s monthly bill by about $5.10.
The rate increase is a two-parter: a 3.85% increase to the gas and electric base rates, and the establishment of a “regulatory asset” that will show up as an increase to customers’ fuel adjustment charge. Combined, they will raise the average residential bill by about 3.3%, though customers who use more electricity or gas will see larger increases.
Commercial customers will see a larger impact on their bills, too. Depending on their size, it will be between 3.6 and 3.8% for electric customers and between 4.8 and 5.4% for gas customers.
The increase will take effect on March 1, though customers likely won’t start seeing the change in their bills until near the end of the month.
The two components of the increase were taken up as separate votes.
Council voted 9-2 to approve the increase to the fuel charge, and 8-3 on the base rate increase.
District 5 Councilwoman Teri Castillo and District 2 Councilman Jalen McKee-Rodriguez voted no on both, and District 10 Councilman Clayton Perry joined them in voting no for the base rate.
The trio had also tried unsuccessfully to delay the base rate portion of the rate hike by one year.
Though they acknowledged the general lack of trust in the utility and unpopularity of the rate increase over the course of a three-and-a-half-hour discussion Thursday, most of the council members decided the rate increase was necessary.
“This moment in time may be a very, very bad time. But when is it ever a good time for a rate increase?” said District 4 Councilwoman Adriana Rocha Garcia.
WHAT’S IT FOR?
The 3.85% rate increase will bring in roughly $73 million more each year, which the utility says will help it keep up with the city’s growth, make its infrastructure more resilient, plan for new technology upgrades, and to hire on and retain staff.
Interim CEO and President Rudy Garza said circumstances have changed “pretty drastically” in the eight years since the last rate increase.
“We’ve got, you know, a peanut butter sandwich with the same amount of peanut butter, but the bread is getting bigger and that, that really is an analogy that explains what’s happening to us,” Garza said.
The regulatory asset allows the utility to borrow money to cover the fuel and other costs from the February 2021 freeze and pay down the debt over time through the extra money it would get from higher fuel charges.
Though the utility received more than $1 billion worth of bills tied to the freeze, as energy and fuel costs sky-rocketed, Thursday’s vote only covers the $418 million worth of bills the utility has already paid. If it pays more of the bills, the utility would have to come back to council for approval.
District 8 Councilman Manny Pelaez said he believed the utility had made the “business case” for the increase’s necessity. He also said the city could not afford for CPS Energy’s credit rating to be downgraded as a result of not passing the increase -- something Garza suggested as a possibility.
However, McKee-Rodriguez said he had asked residents what the utility could do to earn their support for a rate increase.
“In the end, it comes down to this - change will move at the speed of trust. And right now, we must admit the CPS energy and the city, for that matter, have a long way to go to earn the trust of our community,” McKee-Rodriguez said.
Cognizant of the record-low trust in the utility, some council members pressed for assurances that the utility would be making changes -- whether to its rate structures, its continuing use of coal power, or in agreeing to a third-party audit.
During the council’s discussion, Garza said he was committed to the community having a conversation about rate reform and presenting it to the CPS Energy Board of Trustees. He also committed to updating the council’s Municipal Utilities Committee on how conversations on the utility’s future power generation plans were progressing.
District 6 Councilwoman Melissa Cabello Havrda also pointed to her request for a third-party audit, which she said the CPS Board of Trustees had already taken action on and directed Garza to issue a request for proposals (RFP).
Garza told KSAT after the meeting an RFP was in the works, but with council wanting input, it might take longer than the 30 days to which he said he had committed.
Despite the various commitments council members tried to get on the record, City Attorney Andy Segovia noted the rate votes were not tied to any of them, and that they wouldn’t be legally binding.
Castillo called it “bad negotiation” to give CPS Energy its rate increase without getting commitments secured in writing to be codified.
“With approval, we as council are totally losing our leverage to make critical improvements to the rate structure as well as the organizational culture at CPS,” Castillo said.
Garza, though, told reporters after the rate votes that he would follow through.
“The term ‘leverage’ is unnecessary with an asset that you own. That’s, quite frankly, that’s ridiculous. I’ve made commitments. You know, there’s a lot of things I am, but going back on my word is not one of them,” Garza said.
MORE RATE HIKES COMING
CPS Energy rates were last raised in November 2013, and the utility has said it does not plan to go that long again.
Originally, the utility had originally proposed a much larger, double-digit rate increase, but city staff worked with them to take an approach focused on more immediate, financial needs. That means some of the longer-ranged items included in the first proposal still need funding and would need to show up in future rate requests.
CPS Energy tentatively plans to bring forward two further rate increases in the next five years, though Garza said the 5.5% increases included in the utility’s presentations are just “placeholders.”