Editor
San Antonio Express-News
P. O. Box 2171
San Antonio, Texas 78297

Dear Editor:

“What’s the bottom line?”

That’s what most people want to know when it comes to something affecting them or their families.  That’s why we at CPS Energy have taken this approach to explain to customers the effect of a proposed expansion of the South Texas Project nuclear power on their monthly electric bills.  However, Scott Stroud questioned our approach in his column of October 9, 2009.  

Throughout a summer-long public awareness effort, we underscored the importance of energy affordability for our customers, realizing we have to pay for a new, reliable source of electricity along with other improvements to upgrade and improve our growing system, e.g., substations, power lines, smart meters, emissions-control equipment, etc.  Thus, we have attempted to communicate the need for bill increases of approximately 5 percent every other year for the next 10 years.
 
Admittedly, the terms “bill increase” and “rate increase” can be confusing.  Many people who receive a higher bill from one month to the next sometimes assume they’ve experienced a rate increase.  Usually that’s not the case.  A higher bill has a lot to do with the effect of weather on a customer’s energy use, and then there’s the fluctuating cost of fuel used to produce electricity plus variable regulatory fees imposed by the state.  These fluctuating and variable items account for about 30 to 35 percent on an average customer’s electric bill.

Base electric rates, which comprise the other major portion of a typical customer’s bill, are designed to recover CPS Energy’s costs of operation, e.g., labor, interest payments on borrowed money, equipment and supplies, return on investment to the City of San Antonio (which owns CPS Energy), etc.  Base rates also include an amount for fuel.

(When the actual cost of fuel paid by CPS Energy exceeds the amount allocated for fuel in the base rate, then we recover that extra expense through a fuel adjustment charge.  Conversely, if the cost of fuel falls below the amount of fuel in the base rate, then the fuel adjustment appears as a credit on customer bills.  Incidentally, CPS Energy does not profit from fuel adjustments.)

The point is that an increase on base rates of a certain percentage is not the same percentage of increase on the total bill because the base rate is just one component of a customer’s total bill.

For example, to achieve a bill increase of approximately 5 percent next year, we will have to request a rate increase of approximately twice that amount.  Money from a base rate increase will help pay for our new coal-fired power plant that will use a less-expensive fuel and produce savings in fuel costs on the total bill.

The bottom line is that we have to take in enough revenue (through the base rates and adjustments) so CPS Energy can continue achieving its mission – provide reliable energy for a growing Greater San Antonio and keep customer bills among the lowest in the nation.  We regret if our attempts to explain the complexities of utility ratemaking haven’t been completely successful, yet we will continue to do our best to answer questions about this complicated topic in the simplest manner possible.

Sincerely,

Steve Bartley
Interim General Manager