Bad business compounds bad politics at CPS

January 8, 2010

Scott Stroud
San Antonio-Express News

Through much of last year, it was easy to think CPS Energy officials were terrible at politics but good at business.

Turns out they weren’t so hot at that, either.

That’s the upshot of the latest batch of information to emerge in the fight over San Antonio’s energy future. At the end of the day, we may discover basic business sense has been lacking at the city-owned utility for quite some time.

New leadership is in place now, and acting General Manager Jelynne LeBlanc-Burley deserves a chance to sort things out. Her initial tactics appear to come from the good-offense-is-good-defense school of battle.

Under the circumstances, that kind of smoke screen might be the best strategy. But what you learn from the legal missiles fired back and forth between CPS and its nuclear-expansion partners – NINA Texas, NRG and Toshiba – is truly astonishing.

Think of it this way: If you were putting $300 million of your own money up to keep a project viable while you decided whether to invest in it more deeply, wouldn’t you want to know how much you’d get back if you opted out? And wouldn’t you try to get that in writing?

Not CPS.

According to the city and CPS’ own legal briefs, 1997 and 2007 agreements between the utility and its partners in the plan to build two new nuclear plants at the South Texas Project "are either silent or ambiguous with respect to ownership rights" if one of the partners withdraws.

CPS’ partners beg to differ, by the way. They think the agreements are clear and that CPS loses the money if it withdraws.

All of this might explain why CPS officials have been hazy about whether the $300 million would be lost if they walked away. Less clear is why CPS officials have said for months there would be "offramps" available if Mayor Julián Castro and the City Council chose not to pursue the expansion.

Knowing what we know now, it’s plausible to think CPS officials had no interest in off-ramps, but they probably shouldn’t have been talking about them.

Castro, who wasn’t a party to the original agreements, is doing the right thing in pushing for a settlement. The leverage CPS has is the ability to drag out the legal fight for so long that the whole deal falls apart. So the other side has a reason to negotiate.

But unless there’s a settlement in negotiations, which are scheduled to begin Monday, the utility’s best hope will be for a sympathetic jury to buy its portrayal of itself as the victim of a conspiracy to shove it out of the deal altogether.

Any attempt to sell a CPS-as-victim scenario to a jury of local ratepayers would be fun to watch, but let’s not rule it out just yet. The disputed agreements haven’t been made public, and CPS claims it can prove its partners sabotaged the project.

So there’s a lot we don’t know here, but that extends to CPS’ financial situation as well. Officials still haven’t released basic information such as the salaries of the utility’s top 20 employees or recent audits of its books, which means we don’t have a good handle on how viable it is.

And given what we’ve learned about CPS’ business skills so far, that’s alarming in its own right.


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