CPS Energy will not seek 2013 rate increase

By Tracy Idell Hamilton

For the second time, CPS Energy has deferred any plans to request a rate increase.

Last fall, CEO Doyle Beneby announced that, thanks to controlling costs and managing the business more efficiently, the utility had pushed off the need for additional revenue until February 2013.

He advised the Board of Trustees that CPS Energy is nearing the end of its budget planning process for the year that begins February 1, and thanks to streamlined business practices and improved efficiency, the company will not seek a rate increase for the 2013-14 fiscal year (calendar year 2013).

“We have challenged our leadership and our employees to manage differently, and they have met that challenge. Even as we have reduced and deferred hundreds of millions in expenses, simultaneously we have improved safety, reliability, service and customer satisfaction,” said Beneby.

CPS Energy last raised rates in February 2010, and bills remain among the lowest in the nation, and the lowest of the top ten largest cities in the country.

“We don’t expect to continue this trend indefinitely,” Beneby explained, “But we do continue to put measures in place that help us to reduce costs. Before we ask our customers to pay more for services, we must assure them and other key stakeholders that we have taken every reasonable step to operate as efficiently as possible.”

Before Beneby arrived at the utility in the summer of 2010, CPS Energy officials had prepared the City Council and ratepayers to expect increases of about 5 percent every other year, after going for 17 years without raising rates.

At that time, investment in the expansion of the South Texas Project nuclear plant was one reason the utility needed more revenue; an aging power plant fleet and years of deferred maintenance was another.

So, too, was the necessity to invest in new technology, such as meters that allow the utility to instantly see and remotely respond to power outages.

Except for the nuclear plant expansion, those pressures remain, and are the part of the reason CPS Energy ultimately expects to ask for a rate increase.

But since his arrival, Beneby has made major strategic decisions and pushed for streamlined business practices that have saved millions of dollars to date.

Those decisions include first deferring a $600 million dollar investment in pollution control technology for CPS Energy’s oldest coal plant, Deely, then planning to shutter the plant 15 years earlier than originally expected. To date, that decision has saved ratepayers $283 million.

Replacing those megawatts by purchasing a natural gas plant, at a time when prices are historically low, has compounded those future savings.

CPS Energy bought the Rio Nogales combined-cycle gas plant in Seguin for less than it would have spent on scrubbers for Deely, its oldest coal plant. Owning Rio Nogales now also means being able to sell excess power on the wholesale market; that additional income offsets expenses to the utility¿s retail customers.

Also in 2011, CPS Energy implemented business planning processes under which department’s have been asked to work smarter, identifying and implementing best practices. This ongoing effort has already seen results, allowing CPS Energy to avoid filling some job vacancies, even while it has added 15,000 new residential and business customers. Examples include:

Employing the latest technology: In the past, when a circuit would trip, it required an employee in a truck, manually inspecting the line to find and close the circuit. Today, CPS Energy is often able to rely on automated circuit reclosers to do the job, freeing employees to complete other work.

Shifting staffing resources: CPS Energy has added more customer service representatives during peak periods, and limited staff during evening and weekend hours to handle outages and emergencies only.

Contracting some seasonal work: CPS Energy used to have employees locate buried lines ahead of construction projects. But because that work is cyclical, having contract employees available only when they’re needed allows the utility to focus resources on construction, maintenance and other work.

Replaced steel infrastructure with polyethylene in CPS Energy¿s gas unit: the switch has not only reduced costs, it has improved safety and reliability.

Improved communication between Customer Service and technical teams regarding power outages: more accurate and timely information has resulted in reduced outage and reconnection times.

Consolidated operations in fleet, warehousing, sales, communications and other areas to improve efficiency and reduce costs.

Following the best operating year in CPS Energy history, employees received the maximum incentive pay in 2011. The utility’s Board has committed to assess the utility’s current compensation structure, and a third-party review is expected later this year.

Beneby concluded, “As we become a leader in the New Energy Economy, new skills and opportunities will be needed to make San Antonio a hub of this new market. Preparing our work force, gaining the technology, and creating the processes to change will require additional costs in the future. But before we ask for the funds, we will clearly articulate the benefits and discuss them with our community.”