CPS is in a tough spot. Its shareholder is the city of San Antonio, whose leadership is dependent on the 14% royalty AND, at the same time, generally resists rate hikes that tend to irk constituents. Unreliable energy also irks constituents. Reliability is not costless. No one talks about CPS's AA-/Aa2 credit ratings on growing debt. This matters a great deal in the context of the cost of reliability (from adequately staffing crews to purchasing new peakers, as CPS did last year from Proenergy), pressure for affordability, and the 14% royalty. The ratings are "Stable" for now, but I would think a downgrade would cost about 20bp - do the math on $10+ bil of debt on top of higher interest rates - not insignificant. Inflation is real, especially in power equipment, from gas turbines to copper, and Trump's tariffs have exacerbated the problem. I believe CPS's management understands this, but educating the city's leadership and the public depends on their willingness to invest the time to understand them. Tradeoffs will inevitably have to be made.
One week before our Operation Suri fiasco, former CPS Chair Ed Kelley published a self-congratulatory piece, stating that CPS ranked fourth in the nation in affordability, productivity, and reliability. No one since has ever asked him the basis for his assertion, given what we know today.
CPS is in a tough spot. Its shareholder is the city of San Antonio, whose leadership is dependent on the 14% royalty AND, at the same time, generally resists rate hikes that tend to irk constituents. Unreliable energy also irks constituents. Reliability is not costless. No one talks about CPS's AA-/Aa2 credit ratings on growing debt. This matters a great deal in the context of the cost of reliability (from adequately staffing crews to purchasing new peakers, as CPS did last year from Proenergy), pressure for affordability, and the 14% royalty. The ratings are "Stable" for now, but I would think a downgrade would cost about 20bp - do the math on $10+ bil of debt on top of higher interest rates - not insignificant. Inflation is real, especially in power equipment, from gas turbines to copper, and Trump's tariffs have exacerbated the problem. I believe CPS's management understands this, but educating the city's leadership and the public depends on their willingness to invest the time to understand them. Tradeoffs will inevitably have to be made.
Well said
“Why would CPS struggle so much in these categories?” — This is a good question that merits further investigation and analysis.
One week before our Operation Suri fiasco, former CPS Chair Ed Kelley published a self-congratulatory piece, stating that CPS ranked fourth in the nation in affordability, productivity, and reliability. No one since has ever asked him the basis for his assertion, given what we know today.