CPS Energy, which serves San Antonio and surrounding areas, as one observer said, “has gotten out in front of its problems.”
So much so that the utility, the nation’s largest gas and electric municipal power company, with nearly 400,000 gas customers and over 970,000 electric customers, has become something of a model for other utilities. Not problem-free but buoyant, and with low rates.
CPS Energy, like many utilities across the country, has been dealing with the rapid growth in demand, both from residential customers and from increased industrial activity around the San Antonio region, to say nothing of the long line of data centers and other commercial and industrial businesses queued up for power.
According to Elaina Ball, chief strategy officer, CPS Energy has been able to keep ahead of demand by buying gas-fired generating facilities as part of their community-led and board- approved generation plan, aligned with their Vision 2027 strategy.
This strategy has provided opportunities for the utility to avoid the stress of building new plants with attendant supply chain problems, and the cost of new infrastructure.
Ball told me their latest purchase was 34 gas turbines at four sites in the Houston area. These were bought from a private equity company, but are well-sited for incorporation into CPS Energy. Mostly, they are quick start-peaking units, she said.
A collateral gain from this purchase has been that the units can burn hydrogen in a mixture, as two of the turbine facilities are located near a hydrogen supply pipeline in the Houston area.
The nearly $1.4 billion purchase was debt-financed. Cory Kuchinsky, chief financial officer and treasurer, said he was very satisfied with the financing arrangement, and that it had been oversubscribed.
“We’re pleased with the purchases because they’re all fairly young units,” Ball said of the Houston area units. A year earlier, CPS Energy was able to do another favorable, big deal when it bought 1,710 megawatts of gas-fired turbines from Talen Energy for $785 million.
CPS Energy is a diversified utility and ranks first in solar and second in wind power in Texas. It was an early supporter of nuclear power and owns 40 percent of the South Texas Project, a two-unit nuclear power plant southwest of Houston. They also announced plans to purchase an additional 2-percent stake, which is expected to close in the near future.
CPS Energy is closely watching the development of small modular reactors and is also open to being a partner in large nuclear plants, Ball said.
It has a long coal history and is contemplating retiring one of its units, Spruce 1, and keeping Spruce 2, which is only 15 years old. Ball said of the older unit, “It is ready for an AARP card and a move to the Caribbean.” The utility has plans to convert Spruce 2 to natural gas.
When I asked Rudy D. Garza, CPS Energy president and CEO, about the Trump administration’s antipathy to renewables and its desire to keep every coal plant burning coal, he said he needed “every electron from any place I can get it and without discrimination.”
Garza said, “There are a lot of things I can’t control that impact my business. An administration coming in and arbitrarily telling us they don’t like renewables …. that makes it harder for me to do my job.”
The utility is proud of its investments in wind, solar and batteries, and it plans to add to all three.
“We excel in a lot of areas. We’re one of the most reliable utilities in the state of Texas,” Garza said.
He added, “CPS Energy has the lowest electric rates in Texas and that, together with the effects of being city-owned, keeps us in good shape with our customers.”
Senior executives like Garza, Ball and Kuchinsky are proud of the culture of the utility.
“Everyone I hire has to be grounded in how electricity is generated and transmitted …. whether you are an attorney, or an accountant, or a call center rep, you have to understand the utility business, and you have to learn the utility business,” Garza said.
As for management, Garza believes he can’t run CPS Energy in a top-down way. His philosophy: If you can’t keep the lights on today, there is no use in worrying about what you are going to do in five years.
Garza, an engineer with political and lobbying experience, oversees day-to-day operations and long-term strategy, and partakes in the social obligations, like the United Way, which CEOs are called on to do in the community.
CPS Energy is sticking with its plans to continue to add solar, wind and storage to its mix. Its current record peak generation is 5,860 megawatts and demand is growing at 2% to 4% annually over the medium term.
Here is how CPS Energy’s generation mix breaks down approximately: Gas, 57 percent; Coal, 12 percent; Nuclear, 9 percent; Renewables, 20 percent; and other purchased power (not generation specific) make up the rest.
Kuchinsky adds, “We have thousands of megawatts of large load wanting to connect with us.” He said these were industrial customers as well as data centers.
San Antonio is a magnet for visitors who want to enjoy its colonial-era architecture, visit the Alamo, sit and dine along its River Walk, and listen to Tejano music.
But it is also a magnet for power-hungry, high-tech companies which are flooding into the area it serves, a common theme across the state.
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