CITY PUBLIC SERVICE History

Address:

Navarro & Villita Streets
P.0. Box 1771
San Antonio, Texas 78296-1771
U.S.A.

Telephone: (512) 978-2000
Fax: (512) 224-0658

Municipally Owned Company
Incorporated: 1942
Employees: 3,500
Sales: $815 million

Company History:

City Public Service is San Antonio's municipally owned natural gas and electric utility, one of approximately 2,000 public non-profit power systems owned by a municipality or other government body in the United States. Ten percent of gas and electric power in the United States comes from such utility companies, which serve communities as large as Los Angeles and as small as Osage, Iowa. As a municipally owned company, City Public Service passes its savings on to users, and its rates are among the lowest in the nation. The company distributes gas in the San Antonio metropolitan area of 1.3 million people, and generates and distributes electricity in Bexar County and small parts of seven surrounding counties. It also owns 28 percent of the South Texas Project, the first operating nuclear plant in Texas and one of the largest in the United States. In 1991 City Public Service ranked fourth in size in the country among publicly owned electric utilities, with 476,000 customers; fifth in revenues, with $672 million; and seventh in sales, with 12.6 billion kilowatt-hours sold. CPS also has more than 285,000 gas customers.

City Public Service was formed from the San Antonio Public Service Company (SAPSCo), an investor-owned gas, electric, and transit utility, when SAPSCo was purchased by the city of San Antonio in 1942. San Antonio had first used gas commercially in 1860, when it supplied fuel for downtown street lights. This was manufactured gas, made by burning resin--and later oil--in a plant in the city. The city first used electricity commercially in 1881, and by 1890 electric trolleys had taken the place of mule cars. One of the early electricity providers was a street railway company that connected some houses to the trolley lines, but this caused house lights to dim every time a trolley rolled by. A more reliable source of electricity was needed, and so SAPSCo was chartered in 1917.

Five years into SAPSCo's existence, natural gas was discovered near San Antonio. With twice the heat value of manufactured gas, it quickly became the fuel of choice. By 1928, San Antonio, a city of 250,000, had 42,000 gas meters. But SAPSCo's years of service to the area came to an end in 1942, when its parent company, United Power & Light (UP&L), was forced by the Securities and Exchange Commission to sell the utility as part of an initiative to break up electric holding companies throughout the nation. The city of San Antonio bought the gas and electric operations of SAPSCo for $33.9 million, winning out against a state river authority that the city commissioners feared would not represent the city's best interests. The acquisition was financed by revenue bonds that would be paid off through earnings.

The new company, City Public Service, was governed, as it is now, by a board of trustees earning annual salaries of $2,000, except for the mayor, who serves ex officio. The first board consisted of a steel company president, two bankers, a former SAPSCo general manager, and Mayor C. K. Quinn. The company was to make an annual tax-equivalent payment to the city of $210,000, an amount later judged inadequate, and a similar payment to the school system, a practice later judged illegal because it amounted to one public body being taxed by another. The company was to serve Bexar County, in which San Antonio was situated, and small parts of seven other counties.

City Public Service had no money, only equipment and property, and had to pay its way entirely from operating revenues. One day's receipts covered the next day's payroll and other expenses. This proved to be a challenge from the beginning because World War II had just begun and expenditures were frozen due to the war. Thus, City Public Service spent little on improvements or expansion of service and focused on building financial reserves instead. A new general manager, W. B. Tuttle, took over in November 1942, a month after the purchase by the city. Tuttle was a trustee, former vice president-general manager, and chairman of SAPSCo.

The war years were a boom time for San Antonio, during which the city's population grew from 100,000 to 412,000. City Public Service had to contend with the soaring demand for power. Another difficulty for the company was its loss of workers: one of every four City Public Service employees entered military service, including some veterans of World War I.

A second former SAPSCo general manager, E. H. Kifer, became general manager of City Public Service in August 1944. He had headed SAPSCo from 1918 to 1932, during which time he had replaced manufactured gas with natural gas. Under Kifer, the company's service was extended to a dozen new subdivisions being built in postwar San Antonio. Another sign of postwar spending was the installation of new streetlights in 1947 and introduction of air conditioning to the city in 1949. San Antonio led the way in modernizing many of its buildings: the city's Frost National Bank was the first bank in the United States to install air conditioning, the St. Anthony Hotel was the first wholly air-conditioned hotel in the world, and the Milan Building the first major office building to be air-conditioned. V. H. Braunig, who became general manager in 1949, expanded streetlighting in San Antonio and installed a new traffic signal system for the city. Through it all, San Antonio-area gas customers were paying less: 83 cents per 1,000 cubic feet, compared to 94 cents in Houston and $1.25 in Dallas.

A change in financial arrangements between City Public Service and the city was made in 1951. New lower interest bonds were issued, and the operating indenture by which City Public Service functioned was changed to allow issuance of improvement bonds, which were previously not provided for. The new indenture also provided for larger payments to the city in lieu of taxes.

Braunig was succeeded by O. W. Sommers in 1958; he built two new power plants, one named by the trustees after Braunig and the other after himself. In 1960, another change in the indenture again increased the potential annual payment to the city, this time to a cap of 14 percent of gross revenues. In the 1970s and 1980s, the city reduced the city payment from gas sales because of rising energy costs. Even so, the annual city benefit reached as high as $100 million during the 1980s, and in 1987 the city council elected to again take the full 14 percent.

The 1970s were very difficult times for energy suppliers--'the toughest 10 years in City Public Service history,' according to general manager J. K. Spruce in the Broadcaster. The decade began with expectations of high usage that never materialized. Before the energy crisis, City Public Service replaced cast iron pipes with steel gas mains and laid a 94-mile high-voltage electric transmission loop around the city, which helped develop the city's outer areas. In November 1972 a gas supplier reneged on commitments to City Public Service, cutting back 20 percent on power plant gas. City Public Service burned oil instead, but that ran short.

This period of energy shortages, rate increases, and diversification in fuel use became general manager J. T. (Tom) Deely's headache from 1971 to 1976. To help manage the crisis, he oversaw the automation and computerizing of the Gas and Electric Operations System (GEO) and built a coal plant as part of fuel diversification. The GEO System became operational in 1972. A computer-operated control system that was six years in the planning, it was one of the first such systems in the world for the control of gas and electric operations. The purpose of GEO was to report service interruptions caused by such problems as thunderstorms, allowing operators to close down gas and/or electric flow as needed. Costing $4.4 million, the system was housed in a disaster-proof building with its own backup power supply to insure its continued operation.

Faced with rising costs and a shortage of natural gas in the early 1970s, City Public Service began a fuels diversification program. Plans for one generating station were switched to coal from gas, and plans were announced to use nuclear energy. The move to nuclear energy was initiated in 1973, when City Public Service joined the Houston and Corpus Christi power companies and the city of Austin to start building the South Texas Project (STP), a nuclear plant that suffered considerable delays. The original architect/engineer, Brown & Root of Houston, was released in 1980, and Bechtel Power Corporation was brought in to continue the work.

Deely was succeeded in 1976 by J. K. (Jack) Spruce. (Arthur von Rosenberg replaced Spruce in turn in 1988.) It was a time of rising fuel costs and added emphasis on conservation; the conservation efforts of City Public Service were commended by President Jimmy Carter in 1981. During the 1980s Spruce continued fuels diversification, completing the Deely coal station, named after his predecessor, and starting the nuclear program. City Public Service also settled major lawsuits over the cost and hauling of coal and the construction of STP.

Coal had returned to general use 70 years after it gave way to gas and oil. Low-sulphur coal from Wyoming had been used to fire boilers at City Public Service's Mission Road Plant until natural gas was available. The company bought 800 rail cars to carry coal from the mine and installed a rail car maintenance shop. In the ten years from 1977 to 1987, coal saved City Public Service almost $800 million over natural gas costs.

By 1987 City Public Service had 3,500 employees, about 1,000 of whom had 25 or more years of service. The utility continued to make its regular monthly payments to the city, totalling $109 million in fiscal 1991-92, which was the largest single source of funds in the city's budget. In its 50 years, City Public Service has provided the city with more than 1.5 billion in cash and services, while the city's equity ownership has grown to over $1.8 billion.

'Municipal ownership can be excellent when the political climate is healthy,' commented Harold Tynan, former Director of operations for City Public Service. 'Public systems can keep rates low because they are not bound by the profit motive,' said Scott Ridley in Progressive Review. They also give communities democratic control over the kinds of growth they will have and the technologies they will use.

Increasingly, City Public Service made use of nuclear energy. In August 1988, Unit 1 of the South Texas Project nuclear plant began commercial operations; Unit 2 began operating in June 1989. These two power units supplied 34 percent of City Public Service's electric generation for fiscal 1991-92. Meanwhile, the GEO tracking system was covering more than 8,400 miles of electric lines and more than 3,800 miles of gas lines. Electricity rates for City Public Service customers were generally in the lowest quartile among 25 of the largest United States cities, combining gas and electric rates at the lowest price among the top ten United States cities--just under $88 a month compared to New York City's rate of over $172, for example. This was typical of the municipal systems, whose rates average 25 percent lower than rates of investor-owned companies.

The community that City Public Service serves is continuing to grow. San Antonio is part of the Austin-San Antonio corridor--an eight-county region 90 miles long, and in 1990 ninety percent of the state's population lived within a 300-mile radius. The corridor attracted 'clean' industries, from microelectronics to tourism, and was the state's third major regional market, after Houston and Dallas-Fort Worth.

As growth slowed into the 1990s, City Public Service limited construction to one new large generating unit. The 500 megawatt coal-fired J. K. Spruce plant was dedicated in October 1992 and is expected to produce approximately a quarter of the electricity required annually by City Public Service customers. The STP nuclear plant is expected to supply 36 percent of City Public Service's electric power in fiscal 1992-93. Of increasing concern to City Public Service's customers, the environment became an important priority in the 1990s. To address this issue, the company supported laws regulating the output of pollutants, maintaining its assertion that a utility can provide a reliable source of energy while still remaining a responsible citizen of the community it serves.

CITY PUBLIC SERVICE History

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