San Antonio City Council Considers Revisions to CPS Energy Revenue Policy Amid Budget Challenges

San Antonio City Council Debates Changes to CPS Energy Revenue Policy

San Antonio is buzzing with discussions among city council members over how to handle unexpected cash from CPS Energy. After embracing a policy meant to cushion the impact of future rate hikes just five months ago, some council members are now considering a different approach.

A Case of Windfall vs. Budgets

It turns out that CPS Energy has generated some surprising revenue over the last couple of years. This has left the City Council grappling with how to best utilize these funds. Councilman Manny Pelaez (D8) likened the situation to the board game Hungry Hungry Hippos, with everyone eager to jump into the fray. However, while everyone was focused on the cash flow, CPS Energy has raised its rates twice recently, and a third increase is anticipated to hit by early 2026.

As the owner of CPS Energy, the city of San Antonio gets a nice slice of the action—specifically, a 14% cut of the utility’s revenues through something called a “payment in lieu of taxes”, or PILOT. Though this is the city’s second-largest revenue source, predicting how much money will actually come in can be a bit like guessing the number of jellybeans in a jar—challenging at best!

The Initial Plan

Back in April, there was a sense of agreement in the air when council members endorsed a plan to mitigate the effects of potential rate hikes. The idea was to return excess revenue back to CPS Energy once certain revenue thresholds were met, particularly when it comes from off-system sales—basically when the utility sells energy on the wider state grid. This surplus was thought to be funneled into projects aimed at reliability and resilience, ultimately helping to keep those rate increases at bay.

This year, the city anticipates an extra $21 million in revenue due to off-system sales, so it looked like the policy would come into play—if, of course, they stick to it.

Changing Course?

However, some council members are now saying that circumstances have shifted. Instead of sending that money back to CPS Energy, there’s chatter about using it to plug existing financial gaps, primarily due to a recent change approved by the Bexar County Appraisal Board. If residents protest their property appraisals successfully in one year—voila!—the property value automatically rolls forward the next year, possibly leading to bumps in the number of protests and less growth in property tax revenue for the city. Yikes!

This has exacerbated an already tricky budget situation where expenses are outpacing revenue. During discussions about the proposed budget, city financial staff suggested some hefty cuts, hoping to make ends meet.

Proposals and Opposition

Councilwoman Teri Castillo (D5) voiced concerns that council members might not have fully grasped the implications of this appraisal change earlier. “By choosing to return this money to CPS Energy, we’re creating a bit of a manufactured deficit,” she pointed out. As discussions unfolded this week, the council initially eyed over $23 million in amendments, but only managed to pencil in about $4 million worth at the start of the conversation.

Among the ideas proposed were more funding for city employees who have been waiting for raises, additional cash for the San Antonio Philharmonic, and even support for home repair programs. Councilwoman Phyllis Viagran (D3) suggested dipping into CPS Energy funds to cover employee raises, mentioning, “I don’t think that is unreasonable” considering the circumstances.

Rethinking the Policy

Distributed among the council, Mayor Ron Nirenberg and Councilman Marc Whyte (D10) stood firm against undermining the original policy. Whyte voiced frustration, stating, “We knew this was going to happen when we talked about this new policy. We should stick to our word.”

Nirenberg emphasized that utility bills impact lower-income households the hardest, stressing that funding infrastructure projects helps keep future rate increases in check, even if it means some funds have to be sent back to the utility.

The Final Decision

As the San Antonio City Council gears up to vote on their budget for the 2025 fiscal year, it’s still up in the air whether they will stick to their original policy regarding CPS Energy funds. A decision might not be reached until November, permitting discussions to unfold more once the complete revenue picture for CPS Energy has materialized.

Whatever the outcome, it’s clear that the relationship between local governance and energy revenue is a delicate dance, one that will keep San Antonio’s leaders busy as they strive to manage both the budget and the community’s needs.