SAN ANTONIO – Five months after they agreed to a policy meant to soften the blow of future CPS Energy rate hikes, some members of the San Antonio City Council want to consider bypassing it.
The city has received unexpected windfalls of CPS Energy revenue over the past two years, resulting in the council arguing how to spend it.
It is a process Councilman Manny Pelaez (D8) compared to the board game, Hungry Hungry Hippos, last year.
Around the same time, the utility has raised its rates twice in as many years. CPS Energy is planning on a third rate hike that could take effect in early 2026.
A POLICY DRAWN UP
As the owner of CPS Energy, the city gets a 14% cut of most of the utility’s revenues through a “payment in lieu of taxes,” also known as “PILOT.” It’s the city’s second-biggest revenue source, but it’s also one of the most difficult to project.
In April, the council appeared to be on board with an idea to both blunt the effect of future rate hikes and take the guesswork out of how to deal with unanticipated windfalls.
The plan revolves around sending money back to CPS Energy when it passes certain thresholds, especially related to selling energy wholesale on the state grid in “off-system sales.”
The money would be used for resiliency and reliability projects at the utility, which city staff said could help shrink the size of future CPS rate hikes. It is not clear, though, how much those rates would shrink.
With an extra $21 million expected to land in city coffers this year because of off-system sales, the policy should come into play this year.
But that’s only if the city follows through.
A POLICY THROWN OUT?
Several council members are now saying conditions have changed. They are talking about dipping into the CPS Energy revenue rather than sending it back to the utility.
This month, the Bexar County Appraisal Board approved a change that will allow a property’s value to automatically roll forward if the appraisal was successfully protested the year before. City financial staff believe that could lead to more people protesting their appraisals and less growth on the city’s property tax collections.
The city was already dealing with a deficit born from its expenses outpacing its revenue. In the proposed budget, staff suggested shifting or cutting tens of millions of dollars worth of spending.
Councilwoman Teri Castillo (D5) said Wednesday she didn’t believe council members or city staff had expected the change in the property appraisal process.
“And when we talk about the deficit, I think we need to acknowledge that we are returning money to CPS Energy,” Castillo said. “So, it’s somewhat of a manufactured deficit because we’re returning money that typically would go to the city coffers.”
While there were only about $4 million worth of budget amendments on a list at the start of Wednesday’s discussion, council members had originally asked for more than $23 million worth of changes.
Most of those requests — including bigger raises for civilian employees, additional funding to the San Antonio Philharmonic, and money for home repair programs — didn’t make the cut.
Councilwoman Phyllis Viagran (D3) suggested dipping into the CPS Energy money to pay for the employee raises, saying, “I don’t think that that is unreasonable” to use the money to cover the $6.1 million cost for, at least, the 2025 fiscal year.
“Right now, we need to retain the employees we have. And I think this would be a good move for it,” Viagran said.
PUSHBACK
Mayor Ron Nirenberg and Councilman Marc Whyte (D10) were the loudest opponents to backtracking on the policy.
“We knew this was going to happen earlier this year when we talked about this new policy. And here we are, at the first available opportunity, saying, ‘Oh, let’s scrap it, and let’s just spend the money.’” Whyte said. “I mean...It’s, like, a lack of discipline. A lack of self-control.”
Nirenberg, who sits on CPS Energy’s Board of Trustees, said utility bills hit lower-income households the hardest. The infrastructure needs, which drive the rate increases, aren’t going away.
“(The policy) will help mitigate rates. It won’t make rate increases go away, but it will help slow them down even just a little bit because it contributes to that capital that’s needed to do all those things,” Nirenberg said.
NEXT STEPS
The city council will vote Thursday morning on its budget for the 2025 fiscal year.
It is possible San Antonio City Council could move to use the CPS Energy money, but that move appears unlikely.
Instead, the council is expected to discuss what to do with the money in November, once all of the CPS Energy money for the current budget year has been collected.