4 min read September 2023 — In an interview with Invest: Rudy Garza, president & CEO of CPS Energy, discussed how they are seeking to diversify their revenue base, how their communication strategies, especially during crises, have evolved, and how as a public utility company they reinvest their revenue within the community they serve.
How has CPS Energy’s crisis management strategies evolved over the past few years?
I recently had a discussion with my leadership team and we acknowledged that our communication during Winter Storm Uri received critical feedback. In response, we have been actively working on enhancing our communication and outreach strategies over the past two years.
One notable improvement is the implementation of a color-coded energy conservation system during extreme weather events, such as the summer and winter months when there is high energy demand. This system helps convey the severity of the situation to our customers and community. A green day indicates normal conditions, yellow suggests voluntary conservation actions, orange signifies an energy grid reliability risk identified by our grid operator, the Electric Reliability Council of Texas (ERCOT), and red signifies the need for controlled outages as directed by ERCOT for power stability. Our consistent use of this color-coded system has earned us multiple energy and communication industry recognitions.
How is CPS Energy seeking to diversify its resource base and secure new revenue sources to expand capacity?
In the ERCOT region, which accounts for approximately 90% of Texas’ load, we are experiencing significant growth that will surpass our available resources. Power plant construction is not keeping pace with this growth, prompting us to rely more heavily on renewable energy sources than ever before. Our renewable energy portfolio is crucial for ensuring reliable power supply, particularly during the summer months. This shift benefits our customers by helping to maintain affordable rates.
In addition, we recognize the need to diversify our revenue sources, as managing our debt and equity balance is essential to ensuring our financial stability. Currently, we primarily obtain revenue from a few limited sources, including our customers through their bills and the financial markets. To address this challenge, we are actively pursuing new revenue sources like grants, both at the federal and state levels. This allows us to leverage innovation and lower costs for our customers. We are particularly focused on grants in the innovation space to support our ongoing efforts to explore renewable technologies and sustainable solutions.
Further, we are also exploring partnerships and seeking revenue-sharing opportunities with entities that have access to different sources of capital. By collaborating with these partners, we can share the cost of necessary investments and provide more affordable services to our customers. The State of Texas has introduced a zero-interest loan program, which will be put to a vote in November 2023. If approved, this program could significantly reduce costs for building new generation resources.
How is the effort to educate the community to get involved in programs and initiatives and encourage stewardship progressing?
San Antonio has demonstrated exceptional commitment to energy stewardship. We boast one of the most robust energy efficiency and demand response programs in Texas, if not the entire country. Our Sustainable for Tomorrow Energy Plan (STEP) focuses on doubling down on energy conservation efforts over the next five years. We originally launched STEP in 2009 to reduce energy demand by 771 megawatts by 2020, roughly the equivalent of a large power plant. Thanks to our community participation, we exceeded our STEP goal one year ahead of time and under budget.
We believe the most affordable megawatt is the one that is not used and our customers have embraced this concept. Through small energy conservation tips and best practices, such as optimizing the timing of household tasks like laundry or running dishwashers and pool pumps, our customers have made a significant impact on energy demand. By avoiding the use of the next kilowatt hour, they contribute to energy savings, reduce fuel consumption, and enjoy cost savings.
Our customers are highly engaged. Approximately 80% of our customers manage their accounts online. This level of engagement allows us to reach almost 800,000 customers through various channels, including emails, text messages, and phone calls. We provide regular communications tailored to their delivery preferences, offering energy-saving tips and updates.
The active participation and positive response from our customers have been truly remarkable. We appreciate their commitment to energy conservation and their willingness to embrace new technologies and approaches to conservation. Together, we are making a substantial impact on energy consumption and creating a more sustainable future.
What new areas is CPS Energy devoting resources to ensure that you are future ready?
We find ourselves at a pivotal moment in our industry, as significant changes are expected to occur in the next decade. It is crucial for us to focus on investing in the future of generation technology. We recognize and understand that traditional methods such as coal are gradually being phased out due to sustainability concerns. Therefore, we are exploring new avenues, such as geothermal and hydro storage, as we move beyond technologies that may face limitations in large-scale implementation. Our goal is to identify the next breakthrough technology that will shape the future of energy generation.
In addition to investing in generation resources, we understand the importance of upgrading our infrastructure. Our current Enterprise Resource Planning (ERP) system, which serves as the backbone of our operations, is over two decades old. We recognize the need for a modernized and efficient system that can support innovative billing methods, offer new products and services, and accommodate distributed generation resources like rooftop solar and battery storage. To achieve this, we will need to invest in a multi-million dollar strategic plan over the next five years to upgrade our computer systems, initiating a comprehensive business process and technology transformation.
What are some examples of how CPS Energy reinvests the revenue it generates back into the community?
It is important to highlight that CPS Energy is not just an energy provider, but a community-owned asset. We take our responsibility to the community very seriously. As a publicly owned utility, we prioritize the well-being and prosperity of our city. One significant way we contribute is through the revenue we generate, 14% is reinvested back into the community, through payment to our owner, the City of San Antonio which exceeds $400 million annually. These funds enable the city to invest in vital infrastructure, such as parks, roads, and public safety services, which sets us apart from privately owned utilities.
We are deeply intertwined with the community in every aspect. Our commitment goes beyond delivering energy; it extends to actively participating in the growth and success of our city. We strive to ensure that our city grows and prospers for years to come. Our team at CPS Energy are passionate about serving their community and providing essential services. This deep connection to the community is what makes CPS Energy truly special.
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