2 min read November 2022 — Cory Kuchinsky, CFO of CPS Energy, caught up with Invest: San Antonio to discuss the recent highlights of the organization and how the utilities sector has changed in the last year. Kuchinsky talked about how CPS Energy reinvests in their community, the challenges that come with inflation and supply chain demands and what his outlook is for the company and sector for the near term.
What are some of the highlights for CPS Energy over the past year?
We’ve gone through a lot of milestones. We passed our first rate increase in close to 10 years for the types of investments that we needed to make in the community, like infrastructure and technology. We followed that up with the approval to relaunch our energy efficiency program. Our customers have access to different programs to allow them to manage their energy needs. We took that program to our city council earlier this year, and now we are in the process of another five-year term of the program. From a financial health perspective, we are often in the bond market issuing debt to help fund all the capital expenditures that we have. We stabilized our credit rating earlier this year, and we had three transactions in 2022. All of this was received by the financial community very favorably. It’s a real plus for the community, having a financially strong utility, because we are able to lower our borrowing costs. Right now, we are moving into a conversation with our Rate Advisory Committee to discuss what the future of power generation is going to look like and how to potentially add new technologies like battery storage into our portfolio of generating options. There are a couple of other pilots that we are doing, the coolest one is a geothermal pilot. That is something that has promising technology. It might not be something that is commercially scaled up in the next five years, but if you work the pilots out in the next several years, that can be a next level generation resource opportunity for us.
What type of impact does CPS Energy have on the San Antonio region?
Our business model is unique. It is special and different in San Antonio. We are owned by the City of San Antonio and they get 14% of our gross revenue. That turns out to be $360 million to $380 million a year for the city, which is 25-30% of their budget. The City of San Antonio doesn’t have to raise that money from citizens. In the state of Texas, between San Antonio and Austin, we have some of the lowest combined electric and natural gas bills in the country. The circular nature of it is so beneficial. The other part is there is no profit motive here at CPS Energy — we are a cost recovery business. Another thing is that because we’re based in San Antonio, our employees are here in San Antonio. So, every dollar that you spend on your bill is also getting reinvested somehow into the community through our employees who are spending their money here or through the local investment of infrastructure.
How is CPS Energy taking action to satisfy growing demand for services?
We are continuing to see growth in San Antonio. That is a strength, and we are fortunate because there are some U.S. cities that are seeing declining populations. Over the last two years, we have seen over 20,000 new customers connected. Even if it slows down a little bit with the economy, it is still strong growth. Close to 30% of our capital budget is directed towards growth. That ensures things like our distribution infrastructure can handle the load that is moving in. A challenge we are facing, like utilities across the country, is with supply chain constraints on critical parts. That will be an ongoing challenge as we go into next year as well.
What are the challenges facing CPS Energy?
Many of the items you likely have seen in the media: future power generation decisions, revised rate design conversations with our community, managing through the inflationary pressures and supply chain constraints. We want to be as efficient with every dollar as possible. However, cost management is always a challenge that we’ve always taken on regardless of what is going on in the macroeconomic space, but more so now with inflationary pressures. There are dozens of inputs where costs have gone up 10 to 20% for us. Right now, we’re absorbing those costs through our financial strength. Whenever we come back for our next rate increase, we will address the price increases that we just can’t absorb anymore and will need to put in our next rate increase.
How do you leverage digital technology to give better customer service?
There is a ton of new technology and we are adapting to those changes. One of the big hurdles for us is changing the Enterprise Resource Planning (ERP) infrastructure that has been around for 25 years. We have a five-year window that our ERP team is going to be working through and put out new infrastructure that will allow our systems to use more modern tools. We have a great team, but we are looking for a frictionless experience for our customers, so that’s an investment that we are going to be making in the next five years.
What is your outlook for San Antonio and the Energy sector in the near term?
I still think San Antonio is going to fare better than most cities in the United States. We are an attractive city from an affordability, growth, and business perspective. However, I think in the near term, we are still going to face challenges from an inflation, supply chain and natural gas cost perspective. The war in Russia and Ukraine impacts all of us in San Antonio. While we don’t do transactions with Russia, Europe needs to get gas somewhere. In Texas, we have natural gas and we’re going to ship that to our allies. But it creates supply pressure locally which will raise the price of natural gas. The community is going to feel high interest rates when they go to borrow. We are struggling with labor like most businesses. We have hired approximately 400 people this year and are churning as fast as we possibly can to continue to get new people in the door. Even though we are bringing in people, we are probably going to finish with 100 people less from what we have targeted from a staffing perspective. There is a lot of change coming and we’ve taken feedback over the years. We are improving our customer engagement. We are working on how customers can interact with us. There has been significant discussion about what the future generation plan should look like. What does the transition off of fossil fuels look like? That is a discussion we are open to have. We are having it now with the community. What I want people to know is that CPS Energy wants to engage in conversation. We want to share. We want to learn from our customers. We are community owned.
For more information, visit:
