The San Antonio City Council has approved allowing CPS Energy to seek up to $500 million in loans in order to offset the cost of high-priced electricity and natural gas during the winter storm last month.
The loans would be used for CPS Energy’s day-to-day operations as it faces a bill of nearly $1 billion for purchased power and fuel at inflated prices for several days. The loan would allow for liquidity in current obligations, but the utility is not likely to seek all of what it’s allotted, CPS Energy officials said Thursday.
The costs of purchasing extra power during the storm has broken some utilities as they file for bankruptcy, CPS Energy’s president and CEO Paula Gold-Williams told council members.
“There are entities in Texas that are failing because of this event, there are entities that are going bankrupt, there are customers that are being abandoned and … given huge $6,000, $10,000 bills … and then those companies are going bankrupt,” she said.
District 8 Councilman Manny Pelaez asked Gold-Williams if the loan was necessary to prevent CPS Energy, which is owned by the city of San Antonio from experiencing a similar fate.
“I’m hearing you say, and you’ve got to correct me if I’m wrong, that if we don’t extend this capacity to you guys ... very bad things, up to and including bankruptcy, are on the table,” the councilman said.
Gold-Williams responded, saying access to the line of credit is crucial for the utility.
“We are facing a disaster right now, but if we don’t come through with this financing tool, yes sir, we will face other related implications,” Gold-Williams said. “If we can’t have access to the financial markets and come through with a plan that works, then we can’t maintain operations.”
The utility often uses short-term and long-term loans for various projects like its solar farms and power plants. Along with the credit access approved by council, CPS Energy plans to negotiate with the Electric Reliability Council of Texas and energy companies and to seek the influence of state and federal lawmakers to adjust the cost.
CPS Energy has filed suit against ERCOT with claims that the prices during the storm were excessive and unlawful. The utility has said it will pay what it considered legitimate costs.
District 10 Councilman Clayton Perry asked Gold-Williams what CPS Energy considers legitimate costs to be.
Gold-Williams said there are typical costs for buying external electricity from power generators in the ERCOT market, but those costs increased to the maximum possible pricing during the storm.
“The normal price of power is only $30 a megawatt hour, so when the prices are allowed to get up to $9,000 that’s almost a 30,000% increase. So while there is a cap, it was extremely high,” she said, adding that those prices are only meant to last a few hours during summer peak demand but instead stayed at that level for several days during the storm.
CPS Energy owes ERCOT about $300 million in purchased electricity and several hundred million dollars to natural gas providers, which also increased prices by 16,000% during the storm. CPS uses natural gas to provide fuel for its power plants.
Over 400,000 homes and businessesin the CPS Energy service area lost power during the storm — many for several days — as the utility responded to ERCOT’s rolling blackout mandates. CPS Energy’s own plants went down as well, but Gold-Williams said the utility’s power generation was up for about 85% of the time.
During Thursday’s meeting the City Council also approved a resolution affirming that it was backing CPS Energy’s efforts to reduce the costs of the storm and committing to ratepayers from “bearing the burden of the systematic failure caused by ERCOT.”
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