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First round answers to City Council questions on rate increase
By Tracy Idell Hamilton on September 23, 2013
Several San Antonio City Council members had questions after CEO Doyle Beneby presented them with the first in-depth look at the rationale behind the 4.75 percent rate increase request last Wednesday.
Many of those questions were about the utility’ bonus system and the way rates are structured among residential and commercial customers. For greater transparency to customers and stakeholders, CPS Energy has posted answers to questions on its web site, and will continue to update information about the rate request.
The presentation marked the beginning of discussions with the council, which is tentatively scheduled to vote on the increase Nov. 7. Staff is also working with each council member individually to answer any questions he or she might have.
CPS Energy has been communicating about the rate request with customers since July, hosting a series of Customer Care Fairs in neighborhoods around the city. CPS Energy’s volunteer Board of Trustees, each representing a quadrant of the company’s service territory, hosted a public information session Sept. 9.
The utility has also reached out through social media, pledging to answer every question customers have either in the comment sections of stories on this blog, on Facebook or through Twitter, using the hashtag #cpsenergyrates.
Wednesday’s presentation included historical context of previous rate increases from 1975 to the present, and illustrated how the 2010 increase was used, how CPS Energy avoided a rate hike in 2012, and how the 4.75 percent, if approved, would be spent.
This rate increase will raise an additional $132 million over the next two years, with nearly all of the funds going to capital projects and upgrades, such as building and updating substations, replacing thousands of wooden poles nearing the end of their functional lives, power plant equipment replacements, smart grid and related infrastructure installation and transmission upgrades.
Beneby also offered a thorough review of CPS Energy’s bonus program, explaining the rationale behind its inception, how it’s evolved, and how the recently announced changes would reduce the pool of budget dollars by up to 25 percent, with that money being shifted to low-income assistance programs.
Currently the bonus plan, which paid out roughly $16 million last year, makes up less than 1 percent of the company’s operating budget, and represents about half a penny of each dollar CPS Energy spends. By comparison, all labor is 11 cents, payment to the City is 14 cents and debt is 17 cents.
The recently announced change would overlay a more rigorous employee assessment program over existing company-wide goals, which must be met to earn bonuses. Beneby also said that he and the Board are open to reviewing the entire program.
“We are supportive of further discussions (with the Board of Trustees, which put the bonus program in place 13 years ago) looking at that,” he said.
In another cost-cutting move, the Board of Trustees soon will examine a plan recommended by management to eliminate the defined benefit/pension plan for new hires beginning in 2015, Beneby told the council. This change would not affect the pension of current employees or retirees.
“The important thing is, we just need to vet this request thoroughly,” said District 7 Councilman Cris Medina. He said he was pleased to see that CPS Energy had shared a detailed list of capital projects, divided up by council district, so each member can share with constituents what the utility will be doing with the rate increase.
District 8 Councilman Ron Nirenberg lauded CPS Energy’s reports from credit agencies like Moody’s and Fitch, which emphasized its financial strength and overall low rates.
District 10 Councilman Carlton Soules asked for more information on rate classes and revenue.
He also sought a detailed breakdown of fuel expenses in the future, and what percentage the OCI Solar Power deal, which will provide 400 MW of emissions-free power, is of that total.
Several council members, including Medina, asked for a historic overview of EIP, or bonus payouts, since the program’s inception. Detailed data is available back to 2003. Others asked about the specific metrics the company must meet in order to earn incentive pay; this chart shows the goals to be met in the January 2013 Corporate Performance Report.
CPS Energy will return to council on Oct. 3 for a second presentation, and will continue to answer questions from the council and the community in the meantime. If approved, the increase would go into effect on Feb. 1, 2014, and would impact the average customer bill by $5.19 a month.