December 10, 2009

By Anton Caputo and Tracy Idell Hamilton
San Antonio- Express-News

Outgoing CPS Energy Chairwoman Aurora Geis said Wednesday she doesn’t think the public grasps the utility’s financial straits, which could result in rate increases totaling 40 percent over the next decade.

With that in mind, she said the experience of a top-notch, seasoned business leader will be critical to help steer the city-owned utility through its financial difficulties.

She said she’s willing to step down quickly if such a person can be tapped as her replacement.

Geis, who announced her resignation Tuesday, spoke as speculation mounted about who would take her place on the five-member board. A discussion of the replacement will take place at Monday’s board meeting, she said.

In a closed-door session Wednesday, the City Council bandied about the names of three potential replacements.

They’re former state Sen. John Montford, a senior vice president at AT&T executive; USAA Executive Vice President Wayne Peacock; and Wayne Alexander, also a former AT&T executive, now chairman of the board at Port San Antonio.

Another possibility, Valero CEO Bill Klesse, already was approached but apparently has declined, several sources said.

Geis said she’s heard all three names, as well as Ed Kelley, a development consultant and retired CEO of USAA Real Estate Co.; Joe Krier, former Greater San Antonio Chamber of Commerce president; and Nancy Kudla, a graduate of the U.S. Air Force Academy who launched a technology company, dNovus RDI, in 1989 and sold it a year ago to KForce Government Holdings Inc. for $38 million.

Mayor Julián Castro, who also sits on the utility’s board, wouldn’t confirm any of the names, saying only that he and the board were considering "several well-qualified men and women for the position."

Geis’ replacement must come from the northwest quadrant of the city. Councilmen Justin Rodriguez and Reed Williams, whose districts are in that area, are helping vet the candidates.

All vacancies on the board, excluding the mayor, are filled by majority vote of the remaining members, according to the utility’s governing documents. The nominee then is submitted to the City Council for ratification.

Rodriguez said he understood that a special council meeting will be called for Tuesday, the day after the CPS Energy board meets and potentially agrees on a nominee.

Geis wouldn’t divulge her preference but said the list contained people of the caliber the utility needs.

"With these particular individuals, the public record of their service in the community speaks for itself," she said.

Crisis ahead

She warned of a crisis at the utility if the City Council isn’t willing to raise rates and approve large amounts of borrowing.

"The tsunami that’s coming is the capital crisis," she said.

Geis’ sobering words weren’t a surprise to Councilman John Clamp, who said he thinks the city needs to go over the utility’s capital plan line by line.

"We’ve got some major issues coming down to council that quite frankly overshadow nuclear energy," he said. "That’s part of a discussion that we have to have in major way quickly."

The impending financial problems could put the utility’s stellar credit rating at risk, which could add millions more to the cost of future debt.

CPS Energy’s capital plan calls for about $8 billion in investment in the next decade. The nuclear project would account for $2.6 billion.

That figure has been thrown into doubt by high cost estimates, the revelation of which touched off a controversy that enveloped the utility’s board and staff.

The balance of the capital plan includes finishing a coal plant scheduled to open next year, building four natural gas peaking nits, making environmental upgrades to existing coal plants and work on the transmission and distribution grid.

But even if CPS drops the nuclear project, Geis pointed out, something has to be done to replace aging natural gas plants in the next couple of decades.

CPS Energy had planned on asking the council for permission to borrow $400 million in January to continue the proposed nuclear project it might build with NRG Energy. But with San Antonio’s participation in the project now up in the air, that bond issue may not occur.

Either way, Geis said CPS will ask the council early next year for an additional debt issuance as large as $550 million for non-nuclear projects.

Geis, who’s leaving after a tumultuous couple months because of the uproar over nuclear cost estimates, challenged council members to make energy issues a priority and spend the time to understand them as the difficult political battles over rate increases unfold.

"City Council must support CPS Energy and the bond issuances and rate increases so that the financial stability of the utility does not deteriorate," she said.

As originally published, this story contained an error.