San Antonio City Council OKs 4.25% CPS Energy rate hike (2024)

This article has been updated.

The San Antonio City Council approved a 4.25% rate hike for CPS Energy — the second rate increase for the municipally owned utility in two years — in a split vote Thursday.

The 8-3 vote came after three hours of discussion, during which most council members voiced concerns about whether their constituents would be able to afford an increase of roughly $4.45 a month on the average residential power bill of $181.10.

Councilmen Jalen McKee-Rodriguez (D2) and Marc Whyte (D10) and Councilwoman Teri Castillo (D5) voted against the increase. All three had previously signaled their opposition.

“Nobody ever delights — contrary to what might be out there — in raising rates,” said Nirenberg, who sits on CPS Energy’s board in his official capacity. “But to keep up with demand, and to also bring on and meet the demands of capacity increases sustainably, efficiently and affordably, we must help our utility galvanize against future cyber threats and bring all of its infrastructure into the 21st century.”

Prior to passing the 4.25% rate increase, the council voted 6-5 against an amendment introduced by Whyte that would have cut the rate increase by about half. McKee-Rodriguez, Castillo and Councilwomen Phyllis Viagran (D3) and Melissa Cabello Havrda (D6) joined Whyte in voting for the amendment.

“I always carefully consider every proposed CPS Energy rate adjustment and it’s been significantly demonstrated to me that the current rate increase is immediately needed to ensure the continued adequate, efficient and reliable energy delivery to every household and every business is the CPS Energy system,” said Councilman John Courage (D9), who supported the 4.25% rate increase.

The increase will take effect in March and will generate an additional estimated $85 million in revenue per year — money CPS Energy says it will require to keep pace with San Antonio’s growing power needs.

The City Council last approved a rate increase in January 2022. That 3.85% hike was the utility’s first in eight years.

At that time, CPS Energy officials noted regular rate increases would have to become the norm for the electric utility. CPS Energy’s multiyear plan showed it would require at least two 5.5% rate increases — one approved in 2023 and one in 2025 — to keep up with growth costs. It showed the utility also would likely need rate increases every two years through at least 2030.

CPS Energy officials reduced the fiscal year 2024 rate increase from 5.5% to 4.25% due to increased revenue from selling excess power on the wholesale market this summer. The utility’s board of trustees unanimously approved the 4.25% rate increase Monday.

CPS Energy’s case for an increase

The additional estimated $85 million raised by the rate hike is set to go toward several immediate needs for CPS Energy: improving and building new electricity and gas infrastructure, hiring employees and replacing its 25-year-old computer system.

CPS Energy is not only trying to keep up with San Antonio’s exponential growth, but it is also trying to shift to a greener energy portfolio, said Rudy Garza, CPS Energy’s president and CEO.

“In our business, you’re never standing still,” Garza said, addressing the City Council on Thursday. “You’re either moving forward or you’re falling behind.”

The utility’s board approved a new generation portfolio earlier this year that will see the utility phase out coal use by 2028. The plan will add roughly 4,928 megawatts of generation capacity to the utility’s portfolio over the next seven years, including 1,380 megawatts from combined cycle natural gas and about 800 from reciprocating internal combustion engines that run on natural gas or diesel. Another 500 megawatts will come from wind, 1,180 from solar and 1,060 from lithium battery storage.

CPS Energy also has set out to upgrade its entire computer system. The utility is currently using a 20-year-old program that is set to retire in 2027. Over the next five years, it will roll out a new system, which will provide better security against cyberattacks.

The utility also needs to replace staff members, 30% of whom are set to retire over the next five years, as well as further grow its workforce to serve a growing population, CPS Energy officials have said. Hiring and training staff costs money, CPS Energy’s Chief Financial Officer Cory Kuchinsky told the council.

“Folks don’t just show up at CPS Energy, get in a bucket truck, and get up and work on power lines in extreme conditions,” Kuchinsky said. “It’s a dangerous job. It takes time and a lot of training.”

Past-due bills

Roughly $4.5 million generated by the rate hike also will go toward the utility’s Affordability Discount Program. The additional funding will allow for the expansion of eligibility to those struggling to pay their power bills, CPS Energy officials have said.

There are currently about 65,000 customers enrolled in CPS Energy’s affordability program. The utility is targeting to enroll 15,000 additional customers. Councilwoman Marina Alderete Gavito said she’d like to see CPS Energy stretch that goal to 35,000 to 40,000 more customers.

CPS Energy customers who are on the affordability program with an average bill of $168 will pay roughly $2.42 per month as a result of the higher base rate.

CPS Energy currently has roughly 200,000 customers who are past due on their bills, owing a total of about $175.5 million as of Oct. 31. Of those, nearly 193,000 are residential customers.

A last-minute amendment

Whyte’s last-minute amendment to reduce the rate increase to 2.125% prompted an extended discussion on the council dais.

McKee-Rodriguez, Castillo, Viagran and Cabello Havrda questioned CPS Energy staff about the feasibility of the amendment.Garza said it was a short-term solution to a long-term problem.

“We asked for not a penny more than we think we need to make long-term investments,” Garza said. “Our proposal is a long-term, long-view proposal — not a short-term proposal.”

Countered Courage: “It appears to me to be a solution without a real solution. We’re looking at $4.45 on average. Let me just remind you again, that is 15 cents a day to try and guarantee we’re going to have efficient energy to continue to grow.”

The mayor said he understands San Antonio is a cost-burdened city, but stressed the importance of having a utility that is able to keep the lights on.

“We have been severely underinvesting in CPS Energy, and we’ve got to catch up,” he said. “I’m not going to make any assumptions about what this rate increase means for a particular family —but I can tell you the answer to that problem is not to continue to underfund the utility.”

CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.