Archive for the ‘CPS’ Category

December 24, 2009

By Anton Caputo
San Antonio Express-News

CPS Energy and its partner traded high-dollar blows Wednesday in the growing legal battle over the nuclear project.

Nuclear Innovation North America, CPS Energy’s partner, claimed San Antonio’s utility was in breach of contract and should lose the hundreds of millions it invested if it didn’t agree soon to keep funding the deal.

NINA, which is a nuclear development joint venture between NRG Energy and Toshiba Inc., made the accusations in a response late Wednesday afternoon to a lawsuit CPS filed earlier this month.

Hours later, CPS shot back with new allegations against NINA, NRG and Toshiba, the project contractor.

In court documents, CPS claimed the companies engaged in "fraudulent, defamatory and illegal conduct" to "manipulate project costs for their collective benefit."

CPS asked the court to award it at least $32 billion in damages.

"The message I want to send NRG and NINA is that we are not suckers," CPS Acting General Manager Jelynne LeBlanc-Burley said Wednesday night. "A business solution will benefit both, the sooner we get out of the courts the better. But make no mistake, I am not afraid of having this issue resolved in the courts."

NRG spokesman David Knox said the company hadn’t had enough time Wednesday night to comment on CPS’ allegations.

NINA President Steve Winn said earlier in the day that his company also preferred to settle the lawsuit quickly out of court so it could continue with the development of two proposed reactors at the South Texas Project.

"I think there are probably 20 different ways where there might be a solution that allows the project to go forward and the appropriate long-term decisions to be made by CPS," Winn said. "Our goal right now is to get to a negotiated outcome as quickly as we can."

CPS’ new allegations included the charge that NRG and Toshiba formed their partnership without disclosing their full financial relationship.

The city-owned utility also accused NINA, NRG and Toshiba of a "conspiracy" by luring CPS into the project to help finance it and then "engaging in a coordinated public effort to disseminate false information about CPS Energy for the purpose of ousting CPS Energy."

"His (Winn’s) history has been spent on Wall Street, and I don’t want him to get the impression he can come to San Antonio, Texas, come to Commerce Street, and sell this community a bill of goods," LeBlanc-Burley said.

In its lawsuit, CPS asked the court to clarify its rights if it pulls out of the project.

Winn said the agreements between the companies are clear and "that they (CPS) lose everything." NINA claims CPS has "blocked the approval of several pending purchase orders" that are critical of the project and taken other steps to stall the project.

NINA also contended San Antonio’s indecision on whether it will stay in the project put it in jeopardy. It asked the court to declare CPS actually has withdrawn from the project, which CPS denied, and no longer had any ownership or the ability to recover the approximately $300 million it spent.

NINA also charged that CPS’ "ongoing vacillation" put the project’s federal loan guarantees at risk. Such loan guarantees are thought to be crucial for nuclear projects because of the billions of dollars needed and the fact that the federal government hasn’t issued a permit to build a nuclear plant since the 1970s.

The federal government approved $18.5 billion in loan guarantees, and, according to recent statements from Vice President Joe Biden’s office, planned to issue those guarantees to two projects.

The South Texas Project is on a short list of four that could receive the guarantees. But Winn said it had fallen from first to second because of the delays, and soon could fall to third.

That move, he said, could prove fatal.

"If we don’t resolve this soon, we may not need to resolve it at all," Winn said.

LeBlanc-Burley said that CPS was in contact with the Energy Department’s loan guarantee office multiple times since Dec. 15 and informed it of CPS’ timetable, which called for making a decision by mid-January.

"Understanding that schedule, they have not indicated that we have placed any consideration at risk," she said.

CPS spent or approved spending about $375 million on the project so far. If it stays in, that number would jump to $1.2 billion before the scheduled 2012 construction begins. The ultimate cost of the project was still unknown and won’t be set until then.

Toshiba was expected to deliver an official cost estimate next week. LeBlanc-Burley said her staff would vet the estimate and present it to the public in mid-January when it makes a recommendation about San Antonio’s role in the nuclear expansion.

CPS’ board and the City Council would have the final say.

A preliminary cost update recently obtained by the San Antonio Express-News put the total cost of the project at $18.2 billion. That was about $5 billion more than the utility said the project would cost at community meetings this summer.

LeBlanc-Burley said that the number was an informal estimate provided to the board for planning purposes and not the official number.

She also said she believed the nuclear project is a valuable asset, but it might not be right for San Antonio.

"This particular deal remains to be seen," she said. "This particular project will be evaluated on its merits, and it may not be the best opportunity for this community."

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.

December 16, 2009

By Anton Caputo
San Antonio Express-News

CPS Energy needs to make a decision about its nuclear plans in a matter of weeks or risk putting the project in jeopardy, an NRG Energy executive said Tuesday.

Steve Winn, head of NRG’s nuclear development joint venture with Toshiba Inc., said a lawsuit filed by CPS Energy last week over the nuclear project, coupled with San Antonio’s indecision, could risk federal loan guarantees needed to build two reactors.

While the proposed expansion of the South Texas Project has topped the Energy Department’s list for loan guarantees, the delays on San Antonio’s part have put it "squarely in second place," Winn told the San Antonio Express-News Editorial Board after he met with the city-owned utility.

CPS Energy and NRG are partners in the project. The Energy Department is considering backing a total of four nuclear projects.

A fall to third place could put the proposed deal out of the running altogether. That’s because the top two projects might use most or all of the $18.5 billion in loan guarantees, he said.

"The time frame for it to become critical is measured in weeks," Winn said. "The difference between second and third is potentially the difference between the project being valuable and zero."

Winn’s comments come as CPS Energy and the City Council mull the fate of the nuclear deal and prepare to make a decision in mid-January.

Locally, faith in the project has been shaken by the revelation in October that CPS Energy kept an estimate under wraps from contractor Toshiba that is as much as $4 billion higher than CPS had told the public.

Toshiba is supposed to present its latest cost estimate to CPS Energy by the end of the year. The utility will use that number to calculate its own cost estimate, which it will reveal to the public. The difference between the two estimates involves owner costs that include licensing fees and contingency plans.

CPS sued Nuclear Innovation North America – NRG’s joint venture with Toshiba – last week to position itself to pull out of the deal if the cost estimate is too high.

Utility executives told the public this summer that the project could be built for $10 billion, or $13 billion after financing, and that it could be done with bill increases of no more than 5 percent every other year.

Because of the ways bills are calculated, that would equate to base-rate increases of about 9.5 percent a year, utility officials said.

To meet that pledge, Toshiba’s portion of the project needs to cost $8 billion. That’s much lower than the $12 billion estimate from Toshiba that CPS executives had kept from its board and the City Council. That estimate became public when it was leaked to the mayor’s office and the Express-News.

The ensuing scandal led to the resignations of two high-level executives and the recent announcement that board Chairwoman Aurora Geis will step down.

In its lawsuit, CPS Energy asked the court to clarify its rights if it decides to pull out of the project. It already has spent about $375 million on planning and engineering.

Acting CPS General Manager Jelynne LeBlanc-Burley wouldn’t comment on Tuesday’s settlement discussion with Winn.

"Our indecision is related to the project estimate," she said. "If I were Steve Winn, I’d be talking to his partner (Toshiba) a little bit about sharpening its pencil."

The nuclear project’s timeline calls for construction to begin in 2012, assuming the federal government grants a permit.

Winn said it will take about $800 million to keep the project on track in 2010. Half of the money is supposed to come from CPS. And if either partner quits making payments for 90 days, "they lose their share in the project," he said.

LeBlanc-Burley said CPS Energy still is making its payments.

Ultimately, Winn said NRG doesn’t want to take over CPS’ share and never has.

"Even if we had an interest, we don’t have the money for that," he said. "Our approach has always been, let’s find partners, because this is big."

Winn said he’d like CPS Energy to "keep funding the project in the short term" while it decides what to do with its half.

LeBlanc-Burley said the utility was looking at all of its options.

"I think both parties agree that a business solution is beneficial to both," she said.

Staff Writer Tracy Idell Hamilton contributed to this report.

January 4, 2010

CPS Energy and Nuclear Innovation North America will meet Monday in an attempt to settle the $32 billion lawsuit over their proposed nuclear project.

The negotiation session was brokered by Mayor Julián Castro, who requested via letter that they meet "around the clock, if need be" at the Westin River Walk Hotel before the suit goes to trial Jan. 25.

"I think it’s better to try to get in the room and settle the differences," Castro said.

Castro, who sits on the CPS board, sent the letter Monday to NRG Energy, NINA, Toshiba Corp. and CPS.

"We’ll be there," said CPS acting General Manager Jelynne LeBlanc-Burley. "We look forward to sitting down at the table."

An NRG spokesman said that a high-level NINA executive would attend. NINA is a partnership between NRG and Toshiba, the main construction contractor.

"From NRG and NINA’s perspective, we always have favored negotiation to litigation," said NRG President David Crane in a statement.

CPS and NRG have been working for several years on a proposal to build two more nuclear reactors at the South Texas Project outside of Bay City.

The expansion, particularly San Antonio’s part, has become more tenuous in recent months as news of high cost estimates have shaken the public’s and City Council’s faith in the project and the utility.

CPS filed suit Dec. 6, originally asking the court to clarify its rights if it pulled out of the deal.

The suit became nasty Dec. 23 when NINA responded that CPS was in breach of contract and should lose the hundreds of millions of dollars it has invested. CPS shot back hours later with the $32 billion claim, charging that NRG and Toshiba had lured CPS into the project through "fraudulent, defamatory and illegal conduct" and had then tried to push CPS out.

January 04, 2010

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

The CPS Energy board of trustees will interview four finalists Monday to replace Chairwoman Aurora Geis, who agreed to resign after a communications breakdown between the utility’s nuclear team and the board that has left the proposed project in shambles.

The finalists were culled from 15 applicants to represent the northwestern quadrant of the utility’s service area. The four were announced at Monday afternoon’s board meeting:

— Nancy R. Kudla, retired from dNovus RDI

— Charles E. Foster, retired from AT&T

— Gary Cram, president of CRAM Roofing

— Brian Herman, vice president for research at the University of Texas Health Science Center.

The board hopes to pick the new member next Monday or Tuesday. If so, the City Council could ratify the selection two days later.

Mayor Julián Castro pushed for Geis to resign last month after it was revealed that a nuclear expansion project’s cost estimate billions of dollars more than what the utility’s management had told the public was kept from the board.

Two high-level executives of the nuclear development team also resigned, and one was reassigned.

"I am very impressed with the group," Geis said about the applicants.

Kudla, a former Air Force officer, was part of the first female class of graduates from the U.S. Air Force Academy. She launched dNovus RDI, a technology company, in 1989 and sold it in 2008 for $38 million.

In the past year, she and her husband started a charitable foundation, and Kudla said she has the time to devote to CPS.

Calling herself "an average citizen" on energy issues, Kudla said she’s been studying the topic in the weeks since a handful of community members asked her to consider applying for the position.

In addition to her 19 years as an entrepreneur, Kudla said she’s always taken a keen interest in governance issues when she’s served on boards, including a presidential appointment to the one that oversees the Air Force Academy.

"I’m a big-time governance gal," she said. "A public entity has a different kind of nature than a traditional business, and I suspect somewhere along the way CPS may have strayed from there."

Foster is a former group president at AT&T. He comes recommended by former AT&T CEO Ed Whitacre and John Montford, who expressed an interest in the CPS position before taking a job under his former boss, Whitacre, who is now chairman and CEO of General Motors.

Foster couldn’t be immediately reached for comment.

He and Kudla were the two finalists on every current board members’ list of top choices.

Cram founded his roofing company 23 years ago and still oversees its daily operations. A former board member of the Greater San Antonio Chamber of Commerce, Cram said he believed in public service. Acknowledging the time commitment required, he said he was up to the task.

"I think that people need to be involved in our community," he said. "I think CPS is a great organization and someone needs to step up and deal with the issues at hand."

Herman, who moved to San Antonio in 1998, said he, too, was interested in making the city a better place. While he runs his own research lab and oversees and coordinates all research at UTHSC and its partners, Herman is also a San Antonio Housing Authority board member.

"Energy and water are critical to the success of this community," he said, adding he’d bring a scientific and business background to the position.