Archive for the ‘CPS’ Category

December 27, 2009

Jan Jarboe Russell
San Antonio Express-News

In 2009, the local political sleeper was – drumroll, please –District 8 Councilman Reed Williams.

Williams was anything but a brand name when he was elected. He’d worked 35 years in the oil industry but wasn’t part of the small clique of local business leaders who regularly influence City Hall.

At 62, Williams has an unassuming demeanor and zero political ambitions. Yet when it came to the debate over expansion of the South Texas Project, he played a critical behind-the-scenes role. He offered expertise and common sense that has made him a key voice in charting the city’s energy future.

He started out inclined to support the nuclear expansion. When he had an interview with the Sierra Club during the campaign, one of the leaders asked where he and the organization would differ.

Since he isn’t a politician by nature, Williams didn’t obfuscate but told the plain truth: "We’ll probably part ways on the nuclear project."
Once elected, he set aside his bias and began to look at the project in a disciplined manner. He and a friend locked themselves away and methodically worked through CPS Energy’s numbers. Williams did not like what he found: The model was too complex, the project was loaded with risks, and NRG, the utility’s partner, had what Williams considered a home-team advantage.

Normally, City Council members depend on briefing sessions from experts to educate them on issues. In other words, they are passive. Williams got active, treating the nuclear deal as if it were his own business deal.

He asked questions that helped define the debate at City Hall and CPS Energy, and he constructed his own financial model for the nuclear expansion, complete with risk analysis. When the estimates for the expansion were at $10 billion, Williams said it made economic sense – barely.

Given the risks, he emerged as Mayor Julián Castro’s most effective ally in urging CPS Energy to sell down its share of the expansion from 40 percent to 20 percent or lower.

Once it became public that CPS Energy withheld a $4 billion increase in the cost estimate – and that number continues to go up – Williams no longer believed the expansion made economic sense. As a speculator, he believes natural gas is a better fix.

After all, a major part of the rationale for the nuclear expansion, that San Antonio would need more generating capacity by 2016, no longer exists. Now, CPS Energy says it won’t need extra capacity until 2023.

"We don’t have to get in a big hurry to find another source," drawled Williams, who is given to folksy talk. "We can just sit on our rear ends awhile."

Beyond his influence on the most important local issue of 2009, Williams offers a new model of leadership. He’s proof that you don’t have to be a household name, have a long track record in politics or have a fixed agenda to change things.

Too often in San Antonio, the tendency is to rely on the same cast of characters – seasoned politicians and activists, well-connected business people, paid lobbyists – to solve problems.

Maybe we need more rookies.

December 15, 2009

Greg Harman
San Antonio Current QueBlog

Over the past few weeks, CPS Energy staffers have been finalizing some new figures on how much energy San Antonio will need and when. And, for anyone who has even casually been following the recent scandals at the City-owned utility, it comes as no surprise that they are significantly different from those trotted out again and again over the summer to support a nuclear solution.

Recently departed General Manager Steve Bartley and other staff members had been warning the community of a power shortfall coming in 2020, one that required the rapid expansion of the South Texas Project nuclear project outside Bay City. The expansion was to take a decade to license and build, and would gobble up, at a 40-percent ownership stake, $5.2 billion of our dollars.

However, in the first redraft of CPS’ Strategic Energy Plan since the spring, Chief Sustainability Officer Chris Eugster told the CPS Board of Trustees on Monday that a new source of power generation wouldn’t be needed until 2023 – that the amount of energy needed has dropped roughly by half.

"It’s really has given us another three years to make that decision," said Eugster. "We are going to seriously have to rethink our generation capacity over the long run."

Also, the power needed in the 2020s won’t be "baseload" power that runs all the time, like nuclear or coal. Instead, gas-fired peaking units that can be cut on and off quickly better suit the need of 2023. Natural gas is a great complement to renewables like wind and solar, as a current cover story in Solar Today, "Texas: The Next Solar Superpower?" points out.

Because of solar’s variability, many grid managers and utility operators expect that new solar installations will need auxiliary natural gas-fired capacity to function as backup firming power, with estimates varying anywhere from 0.5 to 1 MW of natural gas required for every 1 MW of solar power. In this regard, Texas is well ahead of the rest of the country. Over recent decades, Texas has installed a significant capacity of natural gas generators for baseload and peaking power.

…

Much of the natural gas capacity in Texas is underutilized, making it available to provide firming power when solar and wind resources are not available. Developers can then concentrate on building solar farms without also having to build natural gas plants.

However, in a strange twist of data, the reassessment also suggests nuclear expansion is still a better investment than natural gas, by a hair. Eugster said the City would still be able to afford the STP expansion if the ovenight costs were as high as $13.9 billion. That’s without financing. Previous estimates have suggested financing would tack another $3 billion on the total figure.

[In a conversation today, Eugster said natural gas would likely cost in the "upper eights" or around 8.8-cents per kilowatt hour, while nuclear power would be in the "lower eights," 8.2, 8.3-cents per kilowatt hour. "So it’s pretty close," he said, while stressing again that placing a price target on nuclear and natural gas is extremely challenging.]

But the heart of the message was decidedly not pro-nuclear.

"There are issues with the nuclear expansion that we had a hard time modeling," Eugster said. "One is the uncertainty of cost and the future escalation. I mean, what will the final cost of the nuclear plant be? There’s no way for us to model that.

"The expansion timeline is also not well aligned with when this city really needs this additional power. The plant comes online before our projected need. And increasingly, it looks like the lock-in to the long lead-time for the nuclear expansion may prevent capitalizing on new technology or pricing breakthroughs in renewables or energy storage."

CPS has been selling the city the nuclear expansion suggesting it would cost $13 billion with financing, a figure the local environmental community has dismissed from the get-go, placing the figure closer to $17 billion, and later suggesting it could climb to $23 billion.

A new cost estimate from Toshiba, which had been operating by a figure $4 billion higher than the city’s mantra of $10 billion, is due by year’s end. CPS is expected to present the City Council two paths forward – one nuclear, one non-nuclear – in January.

One of the key points of Eugster’s presentation was the value of the time the city has gained before any expensive, involved decision must be made.

"The fact that we can wait five-plus years before a next generation plant is required would allow us to evaluate developments of the renewables, the energy storage, and evaluate the performance of [efficiency]. And the gas option, it’s not a decision we have to make today, it would be a good back-up if renewables or energy efficiency or energy storage don’t play out as quickly as people are saying."

Or, as he told the Current this afternoon: "With nuclear, we’ve got to go now, we’ve got to spend this huge amount of capital which there’s some unknowns about right now. Whereas with the gas option, we’ve got time to wait, and the value of that time to wait is hard to quantify. It’s like you got an option value on a house. There’s some value there to that. You can check it out, you can see if you like it, and you can go ahead and purchase it, and you can walk away."

So it feels an awful lot like the happy ending where we walk away together and follow the decentralized energy strategies CPS officials had been considering putting on ice to make way for nuclear’s cost.

Beyond nuclear, we can gussy up our "smart" grid and advanced metering systems, get our weatherization and renewable energy rebates on steroids, and keep those solar and wind pitches coming from a rapidly developing, pollution-free, low-carbon industry.

Is it too terribly unjournalistic to say "yippee"?

—

Oh, and someone requested we post the CPS investigation report to the Board of Trustees: Here’s the leaked draft version; here’s the sanitized version.

Happy reading!

December 6, 2009

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

CPS Energy’s partner in the nuclear deal quietly tipped off Mayor Julián Castro in late October that the project could be significantly more expensive than the utility’s public pronouncements.

NRG Energy said last week it did so to try to limit the damage it feared could occur to the nuclear project when a higher estimate came out at an analysts’ meeting in November.

By then, the City Council already would have voted to spend $400 million on a deal that could cost billions more than it was told.

The leak, the source of which has remained secret until now, touched off a cascade of events that damaged the credibility of the utility, led to high-level executive resignations at CPS Energy and heavy pressure on two trustees to resign and put the nuclear deal on life support.

Details of the debacle are said to be spelled out in the report of an internal investigation into why the higher cost estimate was kept from the CPS Energy board and the City Council. The final version of that report will be turned over to the board Monday, but it’s unclear when the public will see it.

In the report’s absence, rumors have cropped up – and even were alluded to in the CPS Energy board room – that NRG was trying to scare San Antonio out of the deal by making the higher cost estimate public and that Castro, who sits on the five-member CPS board, aided in the effort by meeting with NRG privately.

How the report will portray the mayor’s actions is unknown, but Castro said the persistent whispers prompted him to address the matter Friday by divulging the source of his information and his contacts with NRG.

"Rumors that … my office has done something untoward are completely inaccurate," Castro said, adding that if the report isn’t released publicly Monday, he will release the section that addressed his role himself.

At issue is why NRG tipped off the mayor’s office while CPS executives were keeping knowledge of contractor Toshiba Inc.’s higher cost estimates from their own board.

"We wanted to make sure the mayor’s office knew what was happening before the analysts," NRG spokesman David Knox said Friday.

Not telling the board

NRG did that through Frank Burney, a longtime City Hall lobbyist and attorney who represents NRG in San Antonio. Burney, who supported Castro in his mayoral bid this year, alerted Castro’s office in late October that CPS Energy’s cost estimate was significantly lower than Toshiba’s.

Knox said NRG officials already had told the CPS nuclear team that Toshiba’s number would be shared at the upcoming analysts’ meeting Nov. 19, which would be reported by the media.

At that meeting, NRG officials said Toshiba’s latest estimated price was $12.3 billion, which put it $4 billion above what CPS had figured in its estimate.

Castro confirmed Knox’s account, saying the internal investigation report includes e-mail from NRG that suggests CPS Energy should share the higher figure with its board since it likely would be made public.

Burney urged Castro’s chief of staff, Robbie Greenblum, to ask CPS interim General Manager Steve Bartley about the higher cost estimate. Later that evening, at the Oct. 26 board meeting, Greenblum did so.

Bartley acknowledged a significant gap between Toshiba and CPS’ estimates, but still he didn’t share it with the board.

The next day, the San Antonio Express-News received a tip from a different source that Toshiba’s cost estimate was as much as $4 billion more than the number CPS had been using publicly. Within hours, the mayor announced the City Council would delay its vote, scheduled just two days later, on borrowing $400 million.

Bartley never publicly acknowledged a specific estimate amount.

Since the summer, CPS had been telling the public that the nuclear project would cost $13 billion, making it the most cost-effective way to meet San Antonio’s future energy needs.

Bartley, who resigned Nov. 25, contended the higher estimate just was a negotiating ploy by Toshiba and didn’t need to be shared with the board, a view the mayor’s office disputes.

"It was material information," Greenblum said Friday. "Whether they thought they could get the number down or not, this was material."

Board member Stephen Hennigan, one of two trustees Castro wants off the board, has said he’s suspicious of NRG’s motives, noting that the for-profit energy giant’s interests may not align with CPS’.

Last month, Hennigan grilled CPS executives at a board meeting over how they could trust their partners in the nuclear deal.

The complicated web of corporate interests, he said, puts CPS in the position of cooperating with NRG to persuade Toshiba to bring its price down, while, at the same time, NRG and Toshiba are partners in a company called Nuclear Innovation North America, which technically owns NRG’s stake in the nuclear project.

"As a board member, is it my job to be skeptical of the actions of a so-called partner," Hennigan said Saturday. "And I am skeptical of their intentions."

Hennigan, who has declined to step down, wants the report made public as soon as possible. His comments, coupled with Castro’s attempts to push him and board Chairwoman Aurora Geis out, have fueled speculation that the mayor had inappropriate meetings with NRG — and the report apparently says as much.

Castro, who says CPS needs fresh board leadership to foster a new era of transparency at the utility, dismissed the notion.

He said that as mayor, it was his job to meet CPS’ partner, which he did twice. Castro, who took office in June, described them as meet-and-greet-type meetings, not negotiations. Cost estimates weren’t discussed, he said.

He also acknowledged a phone call to NRG CEO David Crane after the higher figure had been made public.

Too big to ignore

When he finally did learn of Toshiba’s cost estimate, Castro said the $4 billion gap was too much for a public official to ignore.

"However you come around to it, this was information we needed to know to make a policy decision," he said.

Hennigan said he agrees with the mayor’s reaction to NRG’s tip, but wouldn’t comment on the meetings between the mayor and NRG.

"It makes complete sense," he said, "how the mayor had to deal with the situation because of a failure of CPS management team to communicate with the board."

Castro said that had the board gotten the information in the summer, when Toshiba first gave it to CPS, or even in mid-October, when an e-mail with the higher figure was sent to executives, "we could have perhaps managed it in a way to continue going forward."

Knox, too, dismissed the idea that NRG leaked the figure to Castro to get CPS Energy out of the deal.

"If this was going to have a bad impact on the deal, (having San Antonio learn about the higher costs from the analysts’ meeting) was going to be worse," he said.

Knox did acknowledge NRG made an effort to cultivate a relationship with the mayor’s office. It was clear, he said, that Castro’s support would be pivotal to the success of the nuclear deal.

NRG long has said it can build the two nuclear reactors at the South Texas Project in Bay City with or without CPS, though it prefers to remain partners.

More than CPS Energy’s participation, though, Knox said, what NRG really needs is stability, "and this is not something that is helping the stability of the project."

Whether NRG will have to pursue its nuclear ambitions without CPS’ help won’t be known until January. That’s when CPS is supposed to take the latest estimate from Toshiba, add its own costs and come out with a new public cost estimate for San Antonio’s participation.

At that time, the utility’s board and the City Council will decide whether San Antonio stays in the deal. If not, it will likely have to find buyers for its half of the ownership.

December 6, 2009

San Antonio Express-News

CPS Energy’s longest-serving board trustee, Steve Hennigan, hasn’t actually given me a copy of his nine-page "not so far-fetched theory document," but we spoke at length Friday night and Saturday afternoon about what’s in it as he fights to keep his board seat and remain a major player at the municipal utility.

"I’m not a conspiracy theorist," said Hennigan, a credit union executive by day and an unmistakably nice man.

Conspiracy theory, nevertheless, is making the rounds these days in one of those "truth stranger than fiction" scenarios as business and civic leaders ask what went wrong with a multibillion-dollar plan to expand the South Texas Project nuclear facility, the source of 30 percent of the city’s current energy usage.

The finger-pointing has now turned outward. Hennigan and others say CPS’ merchant power partner, NRG Energy, engineered a complex sequence of events that undermined years of CPS work to convince the City Council and ratepayers of San Antonio that nuclear expansion was the best path to energy security.

Others think the plotline is simpler: CPS executives were caught in their own web of deceit after withholding information from elected officials, the media and the public that showed nuclear expansion could cost $4 billion more than advertised by the utility.

Hennigan has watched this deal unfold from the very beginning, so give him his due: Maybe his "theory document" will prove convincing in time and even become a big-screen thriller.

Someone call Oliver Stone. George Clooney, too. We’ll need a paranoid Hollywood director and a great actor: a shrewd, well-connected lawyer who convinces us that NRG undermined its own partner, the one with the coveted bond rating and the guaranteed ratepayer base and cash flow.

I might wait for Netflix. If you think of the weekend as a bathroom break, the next big scenes unfold Monday, when the CPS board meets. CPS board meetings, of course, are top secret, and you and I lack proper clearance. But this one could include the forced resignation of board Chairwoman Aurora Geis (Julia Roberts?), and the board will receive the much-anticipated investigative report into CPS executives who covered up the troubling $4 billion differential.

The real-life character in this drama is Frank Burney, a familiar and well-regarded San Antonio lawyer and lobbyist, a strong supporter of Mayor Julián Castro hired by NRG to represent it before the city. Burney, acting on authority from NRG, tipped Castro’s staff to Toshiba’s real price tag for nuclear expansion after his client grew perplexed with CPS’ continued failure to come clean.

Far from conspiring to undermine CPS, the NRG team worried that a "keep going" $400 million bond vote by the City Council, followed by tardy disclosure of the real cost, would send the project into a political tailspin.

That’s happened anyway. And that’s where the conspiracy theorists come in.

Whodunits are always entertaining. You can choose to watch the movie, or you can opt for reality, which is simple: Burney acted in the interest of the mayor he supports and ratepayers who simply can’t afford nuclear expansion a la Toshiba.

It’s a reality that’s far less intriguing than the fictionalized treatment, but that’s life, isn’t it? And that’s why we have the movies, to distract us from our real-world burdens.

Robert Rivard is the editor of the Express-News. E-mail him at rrivard(at)express-news.net. Or follow him on Twitter at @editorrivard.

December 8, 2009

San Antonio Express-News Editorial Board

E-mails between Toshiba Inc. and CPS Energy and also among CPS executives make clear that the utility knowingly understated the costs of nuclear expansion to the public. Over a period of months during which CPS officials were telling the public the price for expansion at the South Texas Project was $13 billion, executives knew Toshiba was projecting the cost to be at least $4 billion higher.

The same e-mails demonstrate anxiety among CPS officials that NRG Energy – a publicly held corporation that is CPS’s partner in the project – intended to reveal the inflated cost estimates. "I think your discussion of incomplete cost estimates in public in November is a major problem," the CPS vice president of power plant construction wrote to an NRG official.

That e-mail was sent on Oct. 22. City Council was set to vote on $400 million in additional financing for the project on Oct. 29. Yet according to an investigation led by the CPS internal auditor, a longtime employee, no one at CPS – not even the vice president of nuclear development who also served as secretary for the board of trustees – acted with malicious intent.

Incomprehensibly, the CPS board last week passed a resolution that endorsed this finding.

The determination by an insider investigation that there was no malicious intent may strain some legal definition designed to avert criminal prosecution. But it is completely unacceptable for a municipally owned utility that is struggling to retain – let alone regain – credibility.

CPS Energy is in crisis. That crisis is not going unnoticed by the investment services that rate CPS bond issues.

Unclipped, its impact will be felt by ratepayers.

The only way to resolve this crisis and put CPS back on a path to credibility is for an independent external arbiter to conduct a complete investigation of CPS organization and practices. That includes the size and composition of the board of trustees, a review of the technical procedures used to produce cost estimates for nuclear and non-nuclear sources of energy, and an audit of the annual payment of 14 percent of revenues that CPS is supposed to make to the City of San Antonio.

The time for hedging and secrecy has passed. A thorough accounting at CPS is urgently required. Mayor Julián Castro, the only member of the CPS board of trustees who is accountable to the public, and Jelynne LeBlanc-Burley, who was elevated by the board to lead the troubled utility, should accept no less.