CPS Energy says it won’t seek a rate increase for customers this year, while it prepares to refinance old debt and borrow as much as $5.7 billion to continue funding its massive modernization and sustainability efforts.
The public utility is currently in the midst of an expansive effort to phase out its aging coal plants and grow its natural gas and renewable portfolio. It’s also making big investments to ramp up energy generation capacity to keep pace with one of the fastest-growing regions in the country.
After seeking raising rates in 2021 and again in 2023 for the company’s upcoming fiscal years, CPS Energy projected it would need another rate hike every other year until 2030 to help fund its long list of capital projects.
But at Tuesday’s Municipal Utility Committee meeting, CPS Energy’s Chief Financial Officer and Treasurer Cory Kuchinsky said the company’s 2026 fiscal year budget doesn’t include a rate increase — in part because it’s been able to take advantage of other financing tools that shift some of the burden away from ratepayers.
That effort includes refinancing some existing debt and taking advantage of a new tax-exempt debt option the company received access to.
On Thursday the City Council gave the utility permission to issue as much $5.7 billion in debt — approved without discussion on the consent agenda.
City Manager Erik Walsh said after the meeting that the change will allow the utility to move quickly if market conditions make sense.
“They want to be in a position where they have the authority [to issue debt] if interest rates are in a position where it’s beneficial to them … because their capital program is pretty intense,” Walsh said.
Politics of a municipally owned utility
The deferred rate increase comes as CPS Energy’s leaders face growing political pressure from elected officials who’ve had to approve them.
The 2021 rate increase was the utility’s first in almost 10 years — a result of the need to invest in a changing energy landscape, hire more employees, update its computer system and fund debt it racked up during Winter Storm Uri, the company said at the time.
In more recent years, the company has been ahead of schedule on its capacity expansion efforts — allowing it to sell energy onto the Texas grid for a hefty profit during the last few brutal summers.
But the company’s leaders have said they need steady revenue streams — not windfalls — to be able to budget for their massive schedule of capital projects.
Rate increases during times of high profit have perplexed both customers and city leaders alike, and even came under scrutiny during the 2023 state legislative session.
Against that backdrop, last year the City Council agreed to reinvest some of the city’s CPS Energy revenue into the utility’s capital projects, with a goal of helping mitigate future rate increases.
Kuchinsky told council members Tuesday that the roughly $26 million the company received from the first year of that agreement will be spent replacing a boiler at the company’s coal power plants — part of a conversion to natural gas plants that will begin this year.
Some of the money is also going toward technology to protect electrical circuits from temporary faults.
An election year reprieve
While the council’s reinvestment plan has been helpful, Kuchinsky said he won’t have a sense of how it’s impacting future rate increases until he sees how much money the agreement directs back to the utility in its second year.
“The budget that we have for fiscal year 2026 does not anticipate a rate increase,” Kuchinsky said. “As far as fiscal year 2027 goes, we’re going to wait until we get through our summer months of this year, like we have in years past, to refresh our forecast to see what that wholesale performance ultimately looks like.”
With that schedule, CPS Energy and the City Council will avert a contentious year-long discussion in the middle of a major city election.
All 10 City Council seats are on the ballot this May. Once elected, the incoming council members won’t face a reelection campaign until 2029.
At the same time, the Texas Legislature is back to work this year in Austin, where CPS Energy is again closely monitoring bills that could target municipally-owned utilities.
“I don’t think they’re connected,” Kuchinsky said of the punted rate hike. “We’ll go for rate increases when our forward models tell us if we need to, and that’s kind of been the ongoing conversation.”
