FY2021 COVID-19 · Informational Update July 2020 Board Meeting - UPDATE ON CHAIR’S PRIORITIES 3. 2 DISCLAIMER national, financial preliminary his ns financial in houghtfully s

FY2021 COVID-19 FINANCIAL IMPACTS AS OF JUNE 30, 2020

PRESENTED BY:Gary Gold

VP Corporate ServicesJuly 27, 2020

In fo rmat iona l Upda te

July 2020 Board Meeting - UPDATE ON CHAIR’S PRIORITIES

3

2

DISCLAIMERWe continue to work through the unprecedented global, national,state, and local implications of COVID-19. Our current financialprojections were prepared in-light of COVID-19 for preliminaryinformational discussion purposes only. We are all early in thisperiod of COVID-19 implications, and as such, these financialprojections are preliminary and subject to change at any time inthe future. Please be assured that we worked hard to thoughtfullythink through our financial analysis. This said, since there istremendous uncertainty across the current economic and financiallandscapes, the actual results for this fiscal year could be lower,comparable, or higher than what we are projecting at this time.


4

3

OBJECTIVES & TAKEAWAYS

• FINANCIAL RESULTS FORECAST• HIGHLIGHT FINANCIAL PERFORMANCE &

METRICS


5

4

AGENDA

• NET INCOME YTD• ELECTRIC SALES• NET INCOME FORECAST• FLOW OF FUNDS• KEY FINANCIAL METRICS• ACTIONS & NEXT STEPS


6

5

NET INCOME JUNE 2020 YTD ACTUAL PERFORMANCE

Highlights: Net operating revenue – Driven

by lower retail sales due to COVID-19 offset partially by higher wholesale net revenues.

City Payment –Higher actual expense recorded as a result of favorable O&M and interest; variance expected to decrease in July.

O&M – Favorable due to hiring freeze and achieved budget mitigations.

Interest & debt-related –Reflects actuals from refinancing transactions and delay of GASB implementation regarding capitalized interest.

($ in millions)

Description

Revenue available for nonfuel expensesElectric $ 979.3 $ 920.1 $ (59.2) Gas 63.2 58.5 (4.7) Total operating revenue 1,042.5 978.6 (63.9)

Less:Electric fuel, distribution gas & regulatory 405.6 336.7 68.9 Payments to the City of San Antonio 69.7 84.4 (14.7) Net operating revenue 567.2 557.5 (9.7)

Nonoperating revenue 8.9 12.3 3.4 Total revenue available for nonfuel expenses 576.1 569.8 (6.3)

Nonfuel expensesOperation & maintenance 299.3 286.0 13.3 Depreciation, amortization & decommissioning 183.0 178.7 4.3 Interest & debt-related 97.0 79.3 17.7 Total nonfuel expenses 579.3 544.0 35.3

Net Income (Loss) $ (3.2) $ 25.8 $ 29.0

FY2021

Budget ActualsVariance:Favorable

(Unfavorable)


7

Customer Sector Usage% of

Total Load% Impact onTotal Usage

Residential 5.8% 43.9% 2.5%

Churches & Services ‐13.6% 8.2% ‐1.1%

Manufacturing ‐4.5% 4.8% ‐0.2%

Retail ‐8.4% 5.5% ‐0.5%

Educational Services ‐28.4% 5.1% ‐1.4%

Hotel & Food Services ‐17.6% 5.0% ‐0.9%

Other** ‐7.7% 27.5% ‐2.1%

Total System 100.0% ‐3.7%

ELECTRIC SALES BY CUSTOMER SEGMENT- JUNE 2020*

6

**Other sector includes other commercial sectors, food & wood product manufacturing, municipals, lighting, etc.

*Billed June actual performance to budget.


8

7

NET INCOME POTENTIAL EFFECTS OF COVID-19

Assumptions: Operating Revenue - Retail Electric Sales estimated to be

5.4% lower. Assumes $28M of Bad Debt; $20M

higher than budget; 50% greater than the recession level of 2008.

Wholesale Revenue Net Fuel reduced from budget to $48M for the Medium Impact scenario. Lower market prices driven by assumed reduced ERCOT-wide demand.

Reflects actuals through June.

Interest & debt-related – Reflects actuals from refinancing savings and delay of GASB implementation regarding capitalized interest.

O&M – Reflects identified cost savings; BU cost mitigations and reduction to labor associated with unfilled positions.

($ in millions)

Revenue available for nonfuel expensesElectric $ 2,522.1 $ 2,303.2 $ (218.9) $ 2,256.0 $ (266.1) Gas 183.0 158.0 (25.0) 158.0 (25.0) Total operating revenue 2,705.1 2,461.2 (243.9) 2,414.0 (291.1)

Less:Electric fuel, distribution gas & regulatory 995.1 895.9 99.2 885.2 109.9 Payments to the City of San Antonio 365.3 335.6 29.7 328.2 37.1 Net operating revenue 1,344.7 1,229.7 (115.0) 1,200.6 (144.1)

Nonoperating revenue 71.2 71.5 0.3 71.4 0.2 Total net revenue available for nonfuel expenses 1,415.9 1,301.2 (114.7) 1,272.0 (143.9)

Nonfuel expensesOperation & maintenance 712.8 664.8 48.0 664.8 48.0 Depreciation, amortization & decommissioning 457.1 455.0 2.1 455.0 2.1 Interest & debt-related 242.1 215.4 26.7 215.4 26.7 Total nonfuel expenses 1,412.0 1,335.2 76.8 1,335.2 76.8

Net Income (Loss) $ 3.9 $ (34.0) $ (37.9) $ (63.2) $ (67.1)

COVID-19Medium Impact

Budget

FY2021

COVID-19High

Impact

Variance:Favorable

(Unfavorable)

Variance:Favorable

(Unfavorable)


9

-$38.3

-$34.0

+$0.5 +$0.9 +$3.5

-$0.6

-$60.0

-$50.0

-$40.0

-$30.0

-$20.0

-$10.0

$0.0

PreviousForecast

Net RetailRevenue

Operations &Maintenance

Depreciation &Amortization

Debt‐Related Expenses COVID‐19MediumImpact

($ in millions)

NET INCOMEPOTENTIAL EFFECTS OF COVID-19MEDIUM IMPACT: PREVIOUS TO CURRENT FORECAST

8

Updated for

actuals thru June

Delay of GASB implementation

regarding capitalized

interest & Finance Plan savings


10

9

FLOW OF FUNDSPOTENTIAL EFFECTS OF COVID-19

Assumptions: Operating Revenue - Retail Electric Sales estimated to be

5.4% lower. Assumes $28M of Bad Debt; $20M

higher than budget; 50% greater than the recession level of 2008.

Wholesale Revenue Net Fuel reduced from budget to $48M for the Medium Impact scenario. Lower market prices driven by assumed reduced ERCOT-wide demand.

Reflects actuals through June.

Interest & debt-related – Reflectsactuals from refinancing savings.

O&M – Reflects identified cost savings; BU cost mitigations and reduction to labor associated with unfilled positions.

Capital – Reflects identified cost mitigations.

($ in millions)

Revenues, net of unbilled $ 2,758.2 $ 2,508.8 $ (249.4) $ 2,460.1 $ (298.1) Less: city payment (CP) per flow of funds 365.3 335.6 29.7 328.2 37.1

Revenues, net of unbilled & CP 2,392.9 2,173.2 (219.7) 2,131.9 (261.0) Less: fuel & regulatory expense 995.1 895.9 99.2 885.2 109.9 Revenues, net fuel & regulatory 1,397.8 1,277.3 (120.5) 1,246.7 (151.1)

Operation & maintenance 714.4 669.0 45.4 669.0 45.4 Debt service 425.9 407.2 18.7 407.2 18.7 Total expenses 1,140.3 1,076.2 64.1 1,076.2 64.1

6% Gross Revenue to R&R 165.5 150.5 (15.0) 147.6 (17.9) Remaining to R&R 92.0 50.6 (41.4) 22.9 (69.1) Total R&R fund additions $ 257.5 $ 201.1 (56.4) $ 170.5 (87.0)

Total capital expenditures $ 625.8 $ 581.1 44.7 $ 581.1 44.7

FY2021

BudgetCOVID-19Medium Impact

COVID-19High

Impact

Variance:Favorable

(Unfavorable)

Variance:Favorable

(Unfavorable)


11

KEY FINANCIAL METRICS, PART 1POTENTIAL EFFECTS OF COVID-19

1 Aligned to Credit Ratings Agency Guidance

ADSC & DCOH degraded resulting from COVID-19 Could signal a monitor from Credit Ratings AgencyLegend

Outside of Credit Ratings Agency GuidanceOn Target with Credit Ratings Agency Guidance

10

Metric FY2020Actuals Budget

Accountability Plans

Threshold

COVID-19 Medium Impact

COVID-19 High

Impact

Adjusted Debt Service Coverage (ADSC)

1.94 1.60 1.501 1.49 1.42

Days Cash on Hand (DCOH) 225 161 1501 166 161

• Management will work to implement additional mitigations to improve financial performance


12

Metric FY2020Actuals Budget

Accountability Plans

Threshold

COVID-19 Medium Impact

COVID-19 High

Impact

Debt Capitalization (DC)

59.9% 61.7% 61.7%1 60.5% 60.7%

KEY FINANCIAL METRICS, PART 2POTENTIAL EFFECTS OF COVID-19

1 Aligned to the Financial Gate Protocol Set by the Board of Trustees11

LegendOn Target with Credit Ratings Agency Guidance

• Management will work to implement additional mitigations to improve financial performance


13

12

ACTIONS & NEXT STEPS• Continue to monitor COVID-19 landscape• Analyze actual sales results to better understand

demand patterns• Monitor accounts receivable & bad debt, providing

customers with information on assistance programs• Focus on cash flows to ensure liquidity• Prioritize ongoing spend to identify additional cost

reductions & cash savings• Scan for emerging risks• Continue to provide monthly updates


14

Thank You


15

PRESENTED BY:

Dr. Cris EugsterChief Operating Officer (COO)

July 27, 2020

In fo rmat iona l Update

MOVING FORWARD WITH THE FLEXPOWER BUNDLE


16

• PROVIDE OVERVIEW OF OUR ALL-SOURCE REQUEST FOR INFORMATION TO IDENTIFY TRANSFORMATIVE & INNOVATIVE SOLUTIONS TO POWER OUR COMMUNITY.

OBJECTIVE & TAKEAWAY

2


17

Aug

AGENDA

Dec Jan Feb

• TRANSFORMATION & INNOVATION PATH• GUIDING PILLARS• THE FLEXPOWER BUNDLE JOURNEY• TRANSITIONING OUR AGING PLANTS• OUR NEXT STEP IN OUR FLEXIBLE PATH• GLOBAL ALL-SOURCE RFI APPROACH

3


18

Past Present Future

Power Plants

Flexible Path:Traditional + Renewables

+ Energy Storage + Smart Grid + Energy Efficiency

Technology Drives Timing Transitioning to Innovation

4

Transformation & Innovation:FlexPOWER Bundle our next step

in our Flexible Path

FLEXIBLE PATH STRATEGYTRANSFORMATION & INNOVATION


19

5

STRATEGY GROUNDED IN THE PILLARSOUR THOUGHTFUL APPROACH

The FlexPOWER Bundle focuses on Environmental Responsibility & will support all of our Strategic Pillars.

SecurityCustomer

AffordabilityReliability

EnvironmentalResponsibility Resiliency Safety

FINANCIALLYRESPONSIBLE


20

6

FLEXPOWER BUNDLE JOURNEY

2017

2018 2019

20202021

Launched Flexible Path

Deely Retirement

AnnouncedFlexPOWER Bundle

& Public Input

FlexPOWER Bundle Consultant RFP

FlexPOWER BundleRequest for Information

(RFI)

FlexPOWER Bundle Request for Proposal

(RFP)

We are here


21

THE NEED TO TRANSITION OUR AGING PLANTS

5715

976

1454

560

1036

1242

447

0

1000

2000

3000

4000

5000

6000

0 - 9 10- 19 20 - 29 30 - 39 40 - 49 50+ All Years (Total

Capacity)MBL 5-8Spruce 2

MBL 1-4Rio NogalesAvR

Spruce 1 STP 1STP 2

Sommers 1Sommers 2Braunig 3

Braunig 1 Braunig 2

New low-to-zero emission technologies sought to transition our aging power plants.

Almost 30% of our capacity comes from plants that are

40+ years old

7

MW

Cap

acit

y

Age of Power Plant


22

8

MEANINGFUL STEP TOWARD CAAPCLIMATE ACTION & ADAPTATION PLAN

Our All-Source FlexPOWER Bundle envisions adding Solar, Storage & Firming Capacity which aligns with Board of Trustees’ Resolution supporting lower emissions.

900MW Solar

50MW Storage

All-Source Firming Capacity

Aug. 2019 Board of Trustees Resolution of Support for CAAP


23

9

THINK GLOBAL, APPLY LOCALFLEXPOWER BUNDLE ALL-SOURCE RFI

9

Our innovative approach will:

The all-source RFI process will raise global awareness to provide us with valuable & innovative solutions for our customers.

• Raise global visibility

• Find innovative solutions

• Discover global & local players

• Reveal market conditions

• Understand COVID-19 impacts


24

Mayor Ron Nirenberg

Video Announcement10

FLEXPOWER BUNDLE ALL-SOURCE RFI ANNOUNCEMENT


25

Thank You


26

Draft for review and approval at the July 27, 2020 meeting

CPS ENERGY

MINUTES OF REGULAR MEETING OF THE BOARD OF TRUSTEES HELD ON JUNE 29, 2020

The Regular Meeting of the Board of Trustees of CPS Energy for the month of June was held on Monday, June 29, 2020, by telephone conference in order to advance the public health goal of limiting face-to-face meetings (also called “social distancing”) to slow the spread of the Coronavirus (COVID-19). There was no in-person public access to the meeting. Chair John Steen called the meeting to order at 1:00 p.m. Present via phone were Board members: Mr. John Steen, Chair Dr. Willis Mackey, Vice Chair Mr. Ed Kelley Ms. Janie Gonzalez Mayor Ron Nirenberg Also present via phone were: Ms. Paula Gold-Williams, President & CEO Dr. Cris Eugster, Chief Operating Officer Ms. Carolyn Shellman, Chief Legal Officer & General Counsel and Board Secretary Mr. Fred Bonewell, Chief Security, Safety & Gas Solutions Officer Ms. Vivian Bouet, Chief Information Officer Mr. Frank Almaraz, Chief Administrative & Business Development Officer Mr. Rudy Garza, Interim Chief Customer Engagement Officer CPS Energy Staff Members City of San Antonio officials Interested Citizens I. ROLL CALL OF BOARD MEMBERS Ms. Shellman called the roll. A quorum was present. II. SAFETY MESSAGE In response to the Chair’s request, Mayor Nirenberg provided an update on COVID-19 health statistics and the recent surge of cases. He explained the various measures being implemented to curb the number of infections and decrease the increasing pressure on hospitals, including plans for limiting the reopening of businesses. The Mayor noted that he and Bexar County Judge Nelson Wolff have resumed nightly briefings on the pandemic. He reminded residents to stay home and, when out in public, wear masks and practice social distancing. Chair Steen thanked the Mayor for his leadership.

July 2020 Board Meeting - CONSENT AGENDA

27


On behalf of CPS Energy employees, Ms. Gold-Williams thanked the Mayor and Judge Wolff for their leadership. Ms. Gold-Williams reported that more than three dozen employees have tested positive for COVID-19. The virus continues to spread rapidly, but we must do our part to slow the spread. CPS Energy will continue to support our communities, customers and staff while providing reliable service and maintaining safety in these challenging times. On behalf of the Board, Chair Steen thanked Ms. Gold-Williams for her leadership during this period of unprecedented challenges. III. INVOCATION An invocation was delivered by Mr. LeeRoy Perez, Interim Senior Director, Substation & Transmission. IV. PUBLIC COMMENT Chair Steen announced that public comments would be taken and outlined the guidelines for making public comment. The following people made comments:

1. Mr. Rafael Garcia, Sierra Club, explained that because of his personal health condition, clean air and sustainable, reliable power are very important to him.

2. Ms. Alice Canestaro-Garcia, Energía Mia, expressed her concerns with climate change and energy costs. She encouraged CPS Energy to replace coal with renewable and clean energy.

3. Ms. DeeDee Belmares, Public Citizen, noted her recent correspondence to CPS Energy. She spoke in favor of the Rate Advisory Committee (RAC) and the closure of the Spruce coal plant.

4. Mr. Greg Harman, Sierra Club, informed the Board that a summary of recommendations prepared for the Sierra Club by Optimal Energy, an energy efficiency consultant, would be circulated to them. He also expressed his support of the STEP Bridge.

5. Mr. Jim Collins, Director of Energy Markets, Microsoft, expressed Microsoft’s appreciation to CPS Energy for creating the Green Tariff. He noted that Microsoft utilizes 100% renewable energy in its operations and expressed Microsoft’s support of continued future collaboration efforts in furtherance of the City’s Climate Action and Adaptation Plan (CAAP).

6. Mr. John Beaubouef, Environment Texas, spoke generally about his concerns regarding the future of energy. He advocated for the closure of the Spruce coal plant and a move to 100% clean energy.

7. Ms. Kate Moffatt, Environment Texas, spoke generally about her concerns regarding global warming and climate change across Texas. She expressed her support of the RAC, the CAAP, and advocated for the closure of the Spruce coal plant.

8. Ms. Claudia Diaz commented positively about the effectiveness of the Citizens Advisory Committee (CAC) and her concerns with the formation of another committee, such as the RAC.

9. Mr. John Agather spoke against the formation of the RAC and advocated for the full entrustment of the CAC.


28


10. Ms. Angela Pardo, spoke about the needs of the underprivileged residents of San Antonio. She

encouraged the continuation of CPS Energy’s weatherization program and urged CPS Energy to consider collaborating with CoSA’s home repair and remediation programs.

11. Ms. Samantha Flores, Texas Organizing Project, expressed her support of the RAC, noting that it would increase transparency and public engagement.

12. Ms. Celia Valles, Texas Organizing Project, urged the creation of the RAC, noting that it would address the needs of customers impacted by COVID-19.

13. Ms. Carol Mendoza, Climate Action Coalition, encouraged CPS Energy to continue adding renewable energy resources.

14. Ms. Maria Ann Vargas, Texas Organizing Project, urged transparency by CPS Energy and the creation of the RAC.

V. CEO REPORT Ms. Gold-Williams began by providing context around and highlights of certain items on the meeting agenda. She previewed item 6A, FY2021 COVID-19 Financial Impacts. These are actual financial results through April 30, 2020. She indicated that the financial schedules have been updated to include the year-to-date net income as requested by Dr. Mackey. CPS Energy continues to be financially responsible by controlling costs and maintaining community assets while providing essential services safely. Ms. Gold-Williams summarized the STEP Bridge Procurement Preview (item 6B). The procurement will address the need for additional funding for weatherization and energy efficiency contracts with vendors to achieve STEP Bridge goals. Regarding the Winter Assistance Relief Mobilization (WARM) Fund (item 6B), Ms. Gold-Williams highlighted that the Residential Energy Assistance Program (REAP) fund and WARM funds have been utilized to provide utility bill assistance to customers in need. Given the unprecedented effects of the COVID-19 pandemic, transfer of WARM funds to REAP is being proposed to ensure more funds are available to the public. Ms. Gold-Williams also previewed the appointment of a new Citizens Advisory Committee (CAC) member, (item 8), the New Products: Green Tariff & Resiliency Service (item 10), and an update on the Scenic Loop Routing & Siting process (item 11). She reported that construction of the new headquarters is on time and on budget. Ms. Gold-Williams provided a brief update on the RAC, noting that Ms. Shellman and her team are making progress on the development of the RAC. However, our focus continues to be on COVID. Ms. Gold-Williams noted that 245 employees are currently quarantined due to exposure, or possible exposure, to COVID. She described the preventative measures CPS Energy has implemented to minimize the risk of exposure and transmission of the virus. She concluded her report by stating that CPS Energy remains committed to ensuring the safety and health of its employees and that of the community.


29


VI. ADDITIONAL UPDATES FY2021 COVID-19 Financial Impact, Cont. Mr. Gary Gold, Vice President, Corporate Services & Assistant Treasurer, presented the FY2021 Preliminary COVID-19 Financial Impact as of May 31, 2020. Because of the uncertainty related to the full impact of COVID-19, these projections were noted to be preliminary and subject to change. Mr. Gold explained that the budget net income year-to-date was initially budgeted to be negative $20.6 million. However, the actual net income amount year-to-date is $20.9 million, a favorable variance of $41.5 million. The favorability is driven by lower operations and maintenance (O&M) expense, as well as lower interest and debt-related expenses, which reflect the delay of the implementation of a Governmental Accounting Standards Board (GASB) rule eliminating capitalized interest. The rule is expected to be implemented in 2022. Turning to May electric sales by customer segment, factories, shops, churches, hotels, restaurants, bars and schools- some of them still closed, some only partially reopened- all used less power than projected. Residential customers, on the other hand, increased their usage by 16.8 percent. Overall, total system sales are approximately 1.7 percent below budget. Regarding the potential effects of COVID-19 on net income for FY2021, a net loss of $38.3 million is projected, assuming the Medium Impact scenario, improved from last month’s projection of negative $54 million. This improvement is due to slightly higher wholesale and retail revenues and lower debt-related expenses. A High Impact scenario is projected to result in a net loss of $69.3 million. Turning to the Flow of Funds, the Total Repair and Replacement (R&R) fund additions in the Medium Impact scenario are projected to be $204.9 million, improved from last month’s projections due to higher wholesale and retail revenues. Turning to the key financial metrics, the forecasted Adjusted Debt Service Coverage (ADSC) is 1.50x for the Medium Impact scenario, higher than the May projection of 1.48x, and on track with the Accountability Plan Threshold of 1.50x. Days Cash on Hand for the Medium Impact scenario is projected at 165, higher than the May projection of 161, and better than the Accountability Plan’s Threshold of 150. The Debt Capitalization ratio is projected to be 60.5 percent for the Medium Impact scenario and 60.7 percent for the High Impact scenario, both favorable to the Accountability Plan Threshold of 61.7 percent. Management will work to implement additional mitigations to improve financial performance. We are still in the early part of the current fiscal year, having completed only the first quarter, and expect additional changes as we continue to monitor the pandemic and take the following proactive steps to minimize its impact:

- Analyze actual sales results to better understand demand patterns - Monitor accounts receivable and bad debt, providing customers with information on assistance

programs - Focus on cash flows to ensure liquidity - Prioritize ongoing spend to identify additional cost reductions & cash savings - Scan for emerging risks - Continue to provide monthly updates


30


Trustee Kelley complimented Financial Services for their progress during this crisis. He was particularly pleased with the substantial cash flow and the additions to the R&R funds. Chair Steen echoed Trustee Kelley’s comments. At Chair Steen’s request, Ms. Gold-Williams provided her perspective to the financial landscape, noting that our objective is to assist customers while maintaining financial stability. A cross-functional team continues to look for cost-savings through planning and deferring work, as appropriate, while keeping our Guiding Pillars in mind. Dr. Mackey also complimented the team, commenting that CPS Energy has prevailed during this crisis. STEP Bridge Procurement Preview Mr. Rick Luna, Interim Director, Technology & Product Innovation, provided context related to the professional services procurement item on the Consent Agenda. The Save for Tomorrow Energy Plan (STEP) was completed early and under budget, achieving a demand reduction of 845 MW versus the original goal of 771 MW. In January, the Board and City Council approved $70 million for the one-year STEP Bridge to continue providing services under the STEP portfolio of programs aimed at helping customers save energy, including: Weatherization; Residential and Commercial Energy Efficiency; Demand Response; and Solar Rebates. CPS Energy is now seeking Board approval to spend $31 million, included in the approved $70 million, to fully fund the purchase orders with vendors that implement CPS Energy’s residential and commercial Weatherization and Energy Efficiency programs. Mr. Luna reviewed STEP Bridge funding and provided information about Franklin Energy and CLEAResult, the vendors selected to provide the program’s services on CPS Energy’s behalf. For customers with average monthly usage of 1,000 kWh, STEP Bridge funding results in a bill impact of $3.43 per month, a decrease from the bill impact in FY2019. Mr. Luna described STEP Bridge program changes made because of COVID-19, such as pausing on-site services and transitioning to digital processes, where possible. We continue taking customer calls, providing energy efficiency tips and accepting rebate applications. COVID-19 impacts to STEP Bridge goal attainment are being monitored and assessed. Mr. Luna concluded by summarizing the request for approval of procurement items and associated funding to continue the STEP Bridge programs, such request being part of the Consent Agenda. In response to an inquiry by Trustee Gonzalez, Mr. Luna responded that quality assurance (QA) inspections are performed to audit the weatherization work performed by contractors, and certain performance indicators must be achieved before they are fully paid. Additionally, customers are asked to complete satisfaction surveys, which currently indicate a 90 percent satisfaction level. Trustee Gonzalez noted her support for the STEP Bridge program but encouraged robust monitoring and confirmation that the contracted vendors perform good quality work. She described a personal experience regarding the quality of weatherization work.


31


Mr. Luna clarified for Trustee Kelley that the bill impact related on a linear scale to energy usage, both for residential and commercial customers. Trustee Kelley and Trustee Gonzalez commented on the nature of complimentary STEP programs and any resulting impacts on customer satisfaction levels. Mr. Luna noted that satisfaction with the entire experience is measured and even though the services are complimentary, recipients still raise concerns. In response to comments about whether customers are aware that they pay for STEP programs, Ms. Gold-Williams committed to provide the Board with the most recent customer survey results that include that information. VII. WARM FUND CONVERSION TO REAP Mr. Rudy Garza, Interim Chief Customer Engagement Officer, began the presentation by providing a brief background of Project Weatherization Assistance Relief Mobilization (WARM) and the Residential Energy Assistance Partnership (REAP). WARM was established by CoSA in 1983 and funded by private donations to provide utility bill assistance to needy citizens. A 1985 memorandum of understanding between COSA and CPS Energy restricts the use of WARM funds to only the interest earnings from an endowment given in 1984. Notably, interest rates at that time were significantly higher than they are today. The WARM corpus is approximately $7.5 million. CoSA and Bexar County conduct intake activities and CPS Energy administers WARM funds and reporting. Customers may receive up to $150 in annual assistance and may also receive REAP assistance, provided that cumulative WARM and REAP assistance does not exceed $400 per year. REAP is a partnership formed in 2002 between CoSA, Bexar County and CPS Energy to create a pool of money to help local economically disadvantaged families needing utility assistance. REAP is funded by an annual CPS Energy contribution of $1 million, private contributions, and proceeds from fundraisers that CPS Energy organizes. Customers may apply for REAP assistance twice per year. The income qualifications for WARM and REAP are identical. Mr. Garza noted that there is an increasing need for a customer assistance in San Antonio due to COVID-19. We expect the need to further increase in late summer when unemployment and other federal programs expire. While CPS Energy continues to make its annual contribution and promote community contributions, REAP fund utilization outpaces those funds. On June 25, 2020, City Council approved the termination of WARM and the transfer of WARM funds from CPS Energy to REAP to be used to assist economically disadvantaged customers. The program consolidation into a single program will result in the availability of WARM funds, including the corpus, to address the increasing need, a streamlined customer experience in seeking assistance and improved efficiencies in program administration and reporting. Mr. Garza respectfully requested Board approval to execute the required steps and activities to convert WARM funds to REAP.


32


Trustee Kelley and Trustee Gonzalez asked about the amount of contributions CPS Energy makes to REAP. Ms. Gold-Williams noted that that the requested change does not contemplate additional CPS Energy funding to REAP. Any substantial increase requires approval by the Board and City Council as part of a rate case, which is not planned at this time. Currently, there is $7.5 million in the WARM fund and under $5 million in REAP. Ms. Gold-Williams stated that CoSA contributes funds to REAP from time to time. Proceeds from fundraising events and settlement funds from past litigation have been placed in REAP. Bexar County provides assistance through LIHEAP. Trustee Kelley stressed financial controls on CPS Energy contributions to REAP. Ms. Gold-Williams committed to providing the Board with a financial analysis of the REAP proceeds for their input but emphasized the importance of moving the $7.5 million WARM corpus to REAP, the essence of the request for Board approval. Trustee Kelley noted that he is in favor of moving the WARM funds but reiterated his interest in monitoring and keeping in check CPS Energy’s financial contributions to REAP. Trustee Gonzalez agreed with Trustee Kelley. Ms. Shellman read the following resolution for Board approval:

RESOLUTION AUTHORIZING THE CONVERSION OF PROJECT WARM FUNDS TO REAP WHEREAS, on January 13, 1983, Project Winter Assistance Relief Mobilization (WARM) was established by the City of San Antonio (CoSA) to be funded by private donations, and provide utility bill assistance to needy citizens; and WHEREAS, on December 28, 1984, Wagner & Brown partnerships assigned to CPS Energy an overriding royalty interest (Interest) in certain natural gas reserves in Sterling and Crockett Counties with the request that the net proceeds of the Interest be used to benefit WARM; and WHEREAS, on January 31, 1985, CoSA and CPS Energy entered into a Memorandum of Understanding providing that, in order to perpetuate the availability of funds to WARM, the net proceeds of the Interest be maintained as corpus and invested for the benefit of WARM, and the income derived therefrom be used to provide assistance to needy citizens through WARM; and WHEREAS, WARM is jointly administered by CPS Energy and CoSA; and WHEREAS, approximately $7.5 million currently comprises the WARM corpus and approximately $120,000.00 of income is made available annually as assistance; and WHEREAS, the funds available for assistance through WARM each year have been limited to the income earned from the Interests plus additional private donations received; and WHEREAS, the Residential Energy Assistance Partnership, Inc. (REAP) was formed in 2002 by CoSA, Bexar County and CPS Energy to help local economically disadvantaged families needing utility assistance; and


33


WHEREAS, REAP is funded by an annual contribution from CPS Energy of $1 million, private donations and investment income and provides direct utility bill credits to income qualifying CPS Energy customers living within the City limits and Bexar County; and WHEREAS, given the substantially similar purpose and operations of WARM and REAP and the unprecedented effects of the COVID-19 pandemic, particularly on the economically disadvantaged population, CoSA and CPS Energy desire to streamline the provision of utility assistance credits to economically disadvantaged residents by utilizing the current WARM corpus, related interest, and any other funds received related to the WARM account (royalty receipts, miscellaneous contributions, etc.) (collectively, WARM Funds) for REAP purposes; and WHEREAS, on June 25, 2020, CoSA approved Ordinance No. 2020-06-25-0452, authorizing actions including (1) the transfer of WARM Funds from CPS Energy to REAP, and (2) the termination of WARM upon completion of pending administrative transactions, and other related actions necessary for proper administration and management. NOW, THERFORE, BE IT RESOLVED, that the CPS Energy Board of Trustees authorizes all actions necessary to convert WARM funds to REAP, now and in the future, and terminate WARM for the purpose of achieving efficiencies through the administration of a single utility assistance program, optimizing the WARM funds to address the increasing need in our community, and streamlining our customers’ experience by consolidating available funding under a single program. Dr. Mackey moved and Trustee Gonzalez seconded a motion approving the Resolution Authorizing the Conversion of Project WARM Funds to REAP. Responding to Trustee Kelley, Ms. Gold-Williams committed to provide a financial analysis of CPS Energy’s contributions to REAP to the Board for their information and input. Chair Steen called for a vote and upon affirmative vote by all members present, the resolution was unanimously approved. VIII. APPOINTMENT TO THE CITIZENS ADVISORY COMMITTEE Mr. John Leal, Director, Local Government Relations, provided a brief description of the Citizens Advisory Committee (CAC) members, including the most recent appointments. He noted that the CAC continues to meet, albeit virtually, during the COVID-19 pandemic. Mr. Leal requested the appointment of Dr. Adelita G. Cantu, Associate Professor, School of Nursing, UT Health San Antonio. She is a Board member of the National Association of Hispanic Nurses and participates in many other community activities. Dr. Cantu has been nominated by Councilmember Ana Sandoval to represent District 7 on the CAC. Trustee Gonzalez commented that she is pleased that all CAC vacancies are now filled. She noted that the CAC plays a crucial part in transparency and community participation. Trustee Kelley commented positively about Dr. Cantu and others comprising the CAC.


34


On motion duly made by Trustee Kelley, seconded by Dr. Mackey, and upon affirmative vote by all members present, the Board unanimously approved the appointment of Dr. Adelita G. Cantu to the CAC. In conclusion, Mr. Leal read Dr. Cantu’s statement of appreciation and desire to serve to the Board. IX. APPROVAL OF CONSENT ITEMS: On motion duly made by Dr. Mackey, seconded by Mayor Nirenberg, and upon affirmative vote by all members present, the following items on the Consent Agenda were unanimously approved. Approval of Minutes Minutes of the Special Board Meeting held on May 20, 2020, and the Minutes of the Regular Board Meeting held on May 27, 2020, were approved as submitted.

Approval of Payment to the City of San Antonio for April 2020 The New Series Bond Ordinance that took effect February 1, 1997, provides for a total cash payment to the City of San Antonio (City) in an amount not to exceed 14% of gross revenue as calculated pursuant to such Ordinance, less the value of other services provided to the City, with the percentage (within the 14% limitation) to be determined by the governing body of the City. The cash transfer to the City for the month of May 2020 is based on actual gross revenue per the New Series Bond Ordinance of $166,536,342.50, less applicable exclusions. In accordance with the New Series Bond Ordinance, current month revenue was insufficient to meet the City Payment by $16,416,210.88. Under the previously approved agreement with the City, CPS Energy will advance to the City $16,416,210.88 against future months’ revenues for fiscal year 2021. The revenue for the month of May 2020 is calculated as follows: Gross revenue per CPS Energy financial statements

Electric revenue $204,548,890.52 Gas revenue 10,414,193.08 Interest and other income 2,403,018.43 Gross revenue per CPS Energy financial statements 217,366,102.03 Excluded revenue

School and hospital revenue per City Ordinance 55022 (4,300,823.18) LVG revenue per City Ordinance 100709 0.00 Fuel cost component of off-system nonfirm

energy sales per City Ordinance 61794

and revenue for wholesale special contracts (8,649,072.78) Noncash and other income, GASB 31

investment market value change, miscellaneous

Interest income, gas billing adjustment and unbilled

revenue (37,879,863.57) Total excluded revenue (50,829,759.53) Gross revenue per New Series Bond Ordinance subject to


35


14% payment to the City $166,536,342.50

City payment per Bond Ordinance for May 2020

based upon May 2020 revenue $23,315,087.95 City payment per memorandum of understanding (MOU) regarding wholesale special contracts 638,720.51 Wholesale Special Contract Annual True Up 0.00 City Payment reduction per gas customer billing adjustment MOU (12,500.00) City payment per Bond Ordinance plus adjustments for

memorandums of understanding 23,941,308.46 A Utility services provided to the City for May 2020 (2,223,252.18) Net amount to be paid from May 2020 revenue to

the City in June 2020 $21,718,056.28 Comparison of City payment per Bond Ordinance (plus adjustments for memorandums of understanding) vs. Budget before deduction for utility services provided to the City: (Dollars in thousands) May 2020 Actual Budget Variance

Current Month* A $23,941 $24,906 ($965) -3.9% Year-to-Date* $93,528 $99,615 ($6,087) -6.1%

* This amount does not include any additional funding authorized by the Board of Trustees.

Approval of the following resolution is requested: "BE IT RESOLVED by the CPS Energy Board of Trustees that payment to the City of San Antonio in the amount of $21,718,056.28, representing 14% of applicable system gross revenues for the month of May 2020, such payment being net of City utility services ($2,223,252.18), and including the current month’s deficiency, is hereby approved.” The total amount to be recovered from future months’ revenues for fiscal year 2021 is $58,588,296.38. Approval of Procurement Items – June One (1) Non-Competitively Sensitive Item

Purchase Category: Professional Services Supplier: CLEAResult Consulting, Inc. (Commercial Energy Efficiency) Franklin Energy Services, LLC (Residential Energy Efficiency) Franklin Energy Services, LLC (Weatherization) *The listed Procurement Item to be attached as Attachment “A”.


36


X. NEW PRODUCTS: GREEN TARIFF & RESILIENCY SERVICE Mr. Rudy Garza, Interim CCEO, explained that we are continuously listening to our customers and the two new products being presented to the Board today are innovative solutions to address customer objectives while still maintaining financial responsibility. The Board’s approval is being requested for two new tariffs. Mr. Chad Hoopingarner, Senior Director Strategic Pricing & Cost Recovery, reviewed the definition of a tariff and noted that several tariff recommendations will be presented to the Board this year to stay current with customer trends and interests. A roadmap outlining the proposed timing of recommended tariffs, including their alignment to our Guiding Pillars, was presented. Mr. Hoopingarner noted that the tariffs being proposed today generally benefit large commercial customers, but that CPS Energy has a number of successful programs, such as our residential distributed solar program, that benefit smaller, residential customers. The first tariff being proposed, the Green Tariff, was created to facilitate large customers’ goals of accelerating their access to renewable energy. Under this tariff, customers are able to designate a specific renewable energy source for their energy needs. The second tariff, the Resiliency Service Tariff, seeks to enhance medium and large customers’ service reliability by providing assurance of uninterrupted power. Mr. Hoopingarner noted that both tariffs provide significant community value by promoting grid resiliency, aligning with our community objectives. Notably, they protect our community’s investment by ensuring the cost of our electric infrastructure is fully covered in the prices that are offered. The Green Tariff has three components: a grid share charge of $2,550/month; a demand charge of $19.08/kW during summer months and $16.22/kW during non-summer months; and energy charges based on a renewable energy supply agreement (RESA). The first two components are intended to recover the costs of providing this service to customers. Energy charges in our standard tariffs recover the average cost of generating a kilowatt from our diverse generation fleet. However, the Green Tariff’s energy charges are based on a RESA between CPS Energy and the customer and developed after the customer, working with us, selects a renewable energy source that meets their needs. Mr. Hoopingarner explained that the Green Tariff improves fixed cost recovery by better aligning its fees to the cost to serve, approximately 44% of which reflects fixed costs and 56% of which reflects variable costs. He noted that City payment remains the same under the Green Tariff and that access to economic incentives (as approved by CoSA) is preserved for large customers who choose the Green Tariff. The Resiliency Service (RS) Tariff provides access to onsite generation for a monthly fee. It was developed in response to commercial customers desiring a solution for more dependable power during critical weather events. A successful pilot offering this service was launched in mid-2019 and enabled participating customers to avoid the possibility of long outages and continue offering their services during severe weather events. Focusing on the mechanics of the RS Tariff, Mr. Hoopingarner explained that CPS Energy has partnered with a third-party who builds and maintains natural gas generators at customers’ sites. CPS Energy builds and maintains facilities to interconnect the generators to our gas and electric infrastructure. We recover our cost through a monthly Resiliency Service fee of $1.04/kW paid by the customer.


37


Ms. Melissa Sorola, Interim Senior Director, Corporate Communications & Marketing, described the marketing and customer outreach plans for the proposed tariffs, including engaging with economic development partners to highlight the new offerings. At the conclusion of his presentation, Mr. Hoopingarner requested Board approval of the two new products, the Green Tariff and the Resiliency Service Tariff. Mayor Nirenberg complimented CPS Energy staff on its persistence in pursuing these tariffs and stated he was pleased with the progress. Trustee Kelley noted that he has not been approached by any large customers about the need for the new tariffs and asked which customers are asking for them. Mr. Hoopingarner replied that Microsoft had expressed interest, as heard during the Public Comment portion of the meeting, but that other large commercial customers had also inquired and will be able to benefit from the Green Tariff. Trustee Kelley stated that he is learning of this program for the first time and, given its magnitude, will not vote on them during this meeting. He requested more information, including an analysis of the effects the new tariffs will have, including any unintended consequences relative to cost shifting, cascading effects on energy costs on other customer classes, and impacts on our total demand going forward. He also asked what the San Antonio Economic Development Foundation, Toyota, Valero and other large and mid-size commercial customers think about the tariffs. Ms. Gold-Williams responded that we have been working on this for about two years and that updates have been provided to the Board. She offered to provide additional context to the Board to refresh their recollection. She emphasized that the tariffs have been specifically structured to recover our fixed costs of service and are likely the most progressive rate designs we have since all of our other rates are volumetric, relying on an increase in usage in order to recover our fixed costs. The feedback from multiple customers is that they want more products and services. We have had a residential solar rate for many years, but now we are able to work with large commercial customers with the resources to put these systems on their premises. She again highlighted that the design of the Green Tariff allows us to recover our fixed costs instead of leaving them exposed. Ms. Gold-Williams noted that there have not been any recent communications about this matter with the Board due to the COVID pandemic. Trustee Gonzalez noted that this matter has been discussed with the Board multiple times and, although it has been some time since the last discussion, the program supports many of our initiatives and she would not be in favor of delaying a vote on this item. Trustee Kelley requested an independent third-party review and analysis of the tariffs, expressing his concern about unintended consequences on the company. He and Trustee Gonzalez discussed his request and concerns. In response to Chair Steen, Trustee Kelley confirmed that, if a vote were taken today, he would not vote to approve the tariffs. The Board discussed the occurrence of previous discussions about this matter and whether a vote today should occur. Ms. Gold-Williams stated that previous discussions and written communications have been in connection with addressing our recovery of fixed costs in existing and future tariffs. She acknowledged that it may have been unclear that those discussions were leading to the specific tariffs being proposed.


38


In response to Chair Steen’s request that Ms. Gold-Williams comment about delaying the item and respond to Mr. Kelley’s requests, she stated that it would be difficult to engage and complete a third-party analysis within thirty days. She reminded the Board that the industry and customers’ expectations continue to change. We try to establish an objective way forward based on rational approaches that correlate with industry trends, but there is always risk in the business model because of the changing landscape. Our current tariff structure has risk because whether rates recover all our fixed costs is dependent on our customers’ demand for energy. Regarding the delay, Ms. Gold-Williams noted that we have customers who are interested at present in the new tariffs, but we can do our best to provide the Board with the information Trustee Kelley requested so that this item can be considered in July. Trustee Gonzalez stated that she supports the Board receiving more information about the matter, but she does not support a third-party analysis because of the delay it would cause. Chair Steen indicated his inclination to delay this item until July, which would allow time for the Board to receive additional information about it. He noted that a third-party analysis in that time frame was unlikely. Dr. Mackey stated that he recalls prior discussions about this issue and that he is in support of the proposed tariffs. Trustee Kelley reiterated his desire to hear from commercial customers about this matter and to analyze the tariffs’ effects on our demand and revenues. Ms. Gold-Williams committed to providing the additional information to the entire Board to enhance their understanding of this matter. Given that commitment, Chair Steen instructed that Board deliberation on this matter would continue in July. Mayor Nirenberg noted that CPS Energy has worked for about two years on ways to recoup its fixed costs through rate structures. Meanwhile, customers and the public have become increasingly interested in the use of renewable energy sources and there has been an increasing number of large commercial customers who desire more control of their assets. Throughout this process, CPS Energy has kept the Board and City Council informed about the difficulty of doing this in a way that does not benefit only one customer. Mayor Nirenberg noted that he is supportive of the proposed tariffs but understands Trustee Kelley’s concerns and he is willing to give Trustee Kelley the courtesy to receive more information. However, Mayor Nirenberg noted that he does not support a third-party analysis because it will take us back several steps. In summary, Mayor Nirenberg recommended that staff provide more information to Trustees who desire it and that the matter be presented for a vote in July. Trustee Gonzalez moved that a vote on this item be delayed for 30 days to allow Trustees to refresh their recollection and receive additional information about the proposed tariffs. Mayor Nirenberg seconded the motion. Dr. Mackey proposed to modify the motion to state that the vote would be postponed, rather than delayed. Trustee Gonzalez accepted Dr. Mackey’s amendment to the motion. Mayor Nirenberg seconded the motion as modified. Chair Steen clarified that the reference to “30 days” in the motion item meant that the matter would be considered at the July 27, 2020 Board meeting. Upon affirmative vote by all members present, the motion was unanimously approved.


39


XI. SCENIC LOOP ROUTING & SITING Mr. LeeRoy Perez, Interim Senior Director, Substation & Transmission Engineering, presented an informational update on the Scenic Loop Routing & Siting project (Project). He noted that the Project is aligned to our Guiding Pillar, Reliability, and is necessary to meet the considerable load growth in the northwest corner of our service area (the Study Area). Mr. Perez reviewed Senate Bill 776 (2015) which established a new approval process, effective September 1, 2021, for the construction of municipally-owned transmission lines that are located outside the city boundaries of the municipality that owns the utility. The new process requires that the Public Utility Commission of Texas (PUCT) approve the need and route of covered transmission lines. Following a workshop held on May 2, 2019, with PUCT staff, it was determined that the Project would proceed under the new approval process. Customers and interested landowners may provide input on the Project directly to the PUCT as part of the process. Mr. Perez described the need for the Project. Specifically, the Project is needed to improve reliability to the Study Area, which experiences outages at a greater frequency and longer duration than our system average. The Study Area comprises approximately 29 square miles and is located west of I-10, north of Loop 1604, in the vicinity of Boerne Stage Road, Scenic Loop Road, and Toutant Beauregard Road. Improving reliability in this rapidly growing area supports residential and commercial development along the I-10 corridor and the University of Texas at San Antonio (UTSA) regional center identified in CoSA’s “SA Tomorrow Comprehensive Plan”. The Project’s target in-service date is June 2024. The transmission line to be constructed is projected to be approximately 5.5 miles long. The Project team has initially identified five potential substation sites. In an effort to minimize impacts of the Project, the team and our environmental consultants have also begun to identify major land constraints, such as habitable structures, federal conservation easements, schools, churches and cemeteries. Mr. Perez reviewed the public engagement in the Project to date, noting that the open house held on October 3, 2019, was the best-attended open house in his 18-year tenure. Attendees were informed of the Project and educated on the PUCT approval process. We have received 186 completed questionnaires to date providing feedback on the Project. He noted that new alternative substation locations have been identified based on landowner input. The team continues to engage with the public on the Project. Mr. Perez explained the various components of the PUCT approval process, which is expected to take about 12 months from the date the application is filed. He noted the factors that the PUCT will consider in approving the Project, including cost, number of habitable structures in proximity to the route, and landowner input. He also explained the role of the CPS Energy Board, the Board’s Operations Oversight Committee, and the Citizens Advisory Committee. Following PUCT approval, the Board will be asked to approve a resolution authorizing land acquisition and construction for the Project. Immediate next steps include submitting the application to the PUCT on or about July 15, 2020, issuing required notices to certain landowners, agencies and elected officials, and updating our website with relevant information. Trustee Gonzalez asked about Board participation in public input sessions. Mr. Perez clarified that Board participation would occur at public input sessions only for projects to be constructed within CoSA city limits.


40


Responding to Trustee Kelley, Mr. Perez confirmed that projects located entirely within CoSA city limits are approved by the Board and projects located entirely outside CoSA city limits, including projects in CoSA’s extraterritorial jurisdiction (ETJ) are approved by the PUCT. According to information received from PUCT during the May workshop, it is not yet known who will approve projects located both within and outside city limits. More discussions about that issue will have to occur prior to such a project commencing. He also confirmed that the PUCT is the final decision maker on the Project. XII. ENTERPRISE INFORMATION TECHNOLOGY (EIT) SUMMER 2020 READINESS

Chair Steen noted that the Board meeting was running behind schedule. In order to get back on schedule, he asked Ms. Gold-Williams to comment on the necessity of agenda items 12 and 13. She explained that those items are informational presentations highlighting summer readiness activities undertaken by Enterprise Information Technology and Customer Engagement. Both complement the summer readiness presentations provided by various operational areas during the Regular Monthly Meeting held on May 27, 2020. In lieu of presenting items 12 and 13, Ms. Gold-Williams offered to send the information as written reports to the Board. Hearing no objection from the Trustees, Chair Steen accepted Ms. Gold-Williams’ suggestion and thanked the staff for their work in preparing the presentations. XIII. CUSTOMER ENGAGEMENT SUMMER 2020 READINESS In the interest of time, this item was not taken up. The material contained in the presentation will be sent as a report to the Board. XIV. COMMITTEE REPORTS Operations Oversight Committee (OOC) Meeting Dr. Mackey stated that a report of the OOC meeting which took place on May 14, 2020, was posted with the public notice of this meeting and will be attached (as Attachment “B”) to the meeting minutes. Technology & Innovation (T&I) Committee Meeting Trustee Gonzalez stated that a report of the T&I Committee meeting which took place on May 14, 2020, was posted with the public notice of this meeting and will be attached (as Attachment “C”) to the meeting minutes. OOC & T&I Aligned Risk Sub-Committee Meeting Trustee Gonzalez stated that a report of the OOC & T&I Aligned Risk Sub-Committee meeting which took place on May 14, 2020, was posted with the public notice of this meeting and will be attached (as Attachment “D”) to the meeting minutes. Mayor Nirenberg left the meeting at this time.


41


XV. EXECUTIVE SESSION At approximately 4:02 p.m., Chair Steen announced that the required notice had been posted and that the Trustees, with only necessary parties in attendance, would convene into Executive Session, pursuant to the provisions of Chapter 551 of the Texas Government Code, for discussion of the following posted items:

Attorney-Client Matters (§551.071) Real Property (§551.072) Competitive Matters (§551.086) Personnel Matters (§551.074)

The Board reconvened in open session at 5:20 p.m. Ms. Shellman reported that only Attorney-Client Matters, Real Property and Competitive Matters, and no others, were discussed and no votes were taken in Executive Session. XVI. ADJOURNMENT There being no further business to come before the Board and upon a motion duly made by Trustee Kelley, seconded by Trustee Gonzalez, and upon an affirmative vote by all members present, the meeting was unanimously adjourned at 5:21 p.m. by Chair Steen. _____________________________ Carolyn E. Shellman Secretary of the Board


42

CPS Energy Board of Trustees Meeting July 27, 2020

Approval of Payment to the City of San Antonio for June 2020 The New Series Bond Ordinance that took effect February 1, 1997 provides for a total cash payment to the City of San Antonio (City) in an amount not to exceed 14% of gross revenue as calculated pursuant to such Ordinance, less the value of other services provided to the City, with the percentage (within the 14% limitation) to be determined by the governing body of the City. The cash transfer to the City for the month of June 2020 is based on actual gross revenue per the New Series Bond Ordinance of $215,516,163.02, less applicable exclusions. The revenue for the month of June 2020 is calculated as follows:

Gross revenue per CPS Energy financial statements

Electric revenue $227,156,673.67 Gas revenue 9,101,499.16 Interest and other income 2,578,470.44

Gross revenue per CPS Energy financial statements 238,836,643.27

Excluded revenue

School and hospital revenue per City Ordinance 55022 (5,780,309.52) LVG revenue per City Ordinance 100709 0.00 Fuel cost component of off-system nonfirm

energy sales per City Ordinance 61794

and revenue for wholesale special contracts (7,653,485.23)

Noncash and other income, GASB 31

investment market value change, miscellaneous

Interest income, gas billing adjustment and unbilled

revenue (9,886,685.50)

Total excluded revenue (23,320,480.25)

Gross revenue per New Series Bond Ordinance subject to

14% payment to the City $215,516,163.02

City payment per Bond Ordinance for June 2020

based upon June 2020 revenue $30,172,262.82

City payment per memorandum of understanding (MOU) regarding wholesale special contracts 519,011.68

Wholesale Special Contract Annual True Up 751,228.87

City Payment reduction per gas customer billing adjustment MOU (12,500.00)

City payment per Bond Ordinance plus adjustments for

memorandums of understanding 31,430,003.37 A Utility services provided to the City for June 2020 (2,400,721.98)

Net amount to be paid from June 2020 revenue to

the City in July 2020 $29,029,281.39


43

CPS Energy Board of Trustees Meeting July 27, 2020

Comparison of City payment per Bond Ordinance (plus adjustments for memorandums of understanding) vs.

Budget before deduction for utility services provided to the City:

(Dollars in thousands) June 2020 Actual Budget Variance

Current Month* A $31,430 $32,921 ($1,491) -4.5%

Year-to-Date* $124,959 $132,536 ($7,577) -5.7% * This amount does not include any additional funding authorized by the Board of Trustees.

Approval of the following resolution is requested:

"BE IT RESOLVED by the CPS Energy Board of Trustees that payment to the City of San Antonio in the amount of $29,029,281.39 representing 14% of applicable system gross revenues for the month of June 2020, such payment being net of City utility services ($2,400,721.98), is hereby approved.” The Board ratifies that June 2020 revenue was sufficient to recover $18,046,652.38 in funds that were advanced to the City in prior fiscal months. The remaining amount to be recovered from future month’s revenues for fiscal year 2021 is $40,541,644.00.


44

Page 1 of 1 Last Update: 7/16/2020 2020.07.08 Audit & Finance Committee Executive Summary and Chair Report v2 Prepared by: Audit Services

AUDIT & FINANCE COMMITTEE (A&F)

EXECUTIVE SUMMARY AND CHAIR REPORT FROM THE JULY 8, 2020 MEETING

PREPARED FOR COMMITTEE MEMBER, DR. WILLIS MACKEY

FOR REPORT AT THE JULY 27, 2020 BOARD OF TRUSTEES MEETING

The Audit & Finance Committee met on July 8, 2020. As part of the Audit & Finance Committee agenda, the Committee:

A. Approved meeting minutes from the prior meeting, held on April 21, 2020.

B. Received an update on Enterprise Compliance:

a. Provided overview of regulatory agency responses to COVID-19 and summary of the status of our environmental compliance.

b. North American Electric Reliability Corporation (NERC) audit was conducted in May 2020, and working on finalizing the results of the audit and addressing findings.

c. Due to COVID-19, NERC has delayed the implementation the Supply Chain Risk Management standard. However, CPS Energy implemented the standard on June 29,2020, as planned. The new effective date of the standard is October 1, 2020.

C. Received an update on the Ethics Program, including a summary of cases that were opened and closed through June 24, 2020, and a trend analysis for FY2020 versus FY2021 -1st Quarter.

D. Received an update on New Products:

a. Management will bring forward several tariff recommendations as part of a series of presentations and requests to stay current with customer trends and interests.

b. Proposed Green Tariff for large customers offers the option to designate a renewable energy source and the proposed Resiliency Tariff for medium and large customers offers assurance of uninterrupted power.

c. Overview of our marketing and customer outreach approach.

E. Received Audit Services Update:

a. Received update on the status of projects for FY2021, including internal controls and fraud training.

b. Received an overview of the process followed to develop the FY2021 audit plan and a presentation of the proposed audit projects for the remainder of FY2021.

The next meeting of the Audit & Finance Committee will be held in October 19, 2020.

July 2020 Board Meeting - COMMITTEE REPORTS

45

Page 1 of 1 2020.07.08 EBOC Meeting Chair Report v2 Prepared by: EBOC Liaison

EMPLOYEE BENEFITS COMMITTEE OVERSIGHT COMMITTEE (EBOC)




The EBOC met on July 8, 2020. As part of the EBOC agenda, the Committee:

A. Approved meeting minutes from the prior meeting held on April 21, 2020

B. Reviewed an Action Item list from the April 21, 2020 Meeting

C. Received a presentation regarding a Benefits Plans Administrative & Financial Update, which included items related to governance items, Texas pension-related law requirements, an investment performance update related to the Plans, and an action plan related to future Investment Policy enhancements

D. Received a presentation regarding a 2021 Health Plan Design & Premiums Update which discussed next year’s health plan changes, as well as a wellness update; the plan design changes and health care premiums were approved by the EBOC.

The next meeting of the EBOC is scheduled, subject to change, for October 19, 2020.


46

Page 1 of 1 Last Update: 07/22/2020 2020.07.08 AFEBOC Aligned Risk Sub-Committee Meeting Executive Summary Chair Report v4 Prepared by: ERMS

AUDIT & FINANCE & EMPLOYEE BENEFITS OVERSIGHT COMMITTEE (EBOC) ALIGNED RISK SUB-COMMITTEE




The Audit & Finance & EBOC Aligned Risk Sub-Committee met on July 8, 2020. As part of the Audit & Finance & EBOC Aligned Risk Sub-Committee (Sub-Committee) agenda, the Sub-Committee:

A. Approved meeting minutes from the previous meeting held on April 21, 2020

B. Reviewed & discussed the action item from the previous meeting

C. Reviewed the dimensions of the risk program and the COVID-19 risk universe

D. Heard from risk owners on the risk mitigation steps being taken to address the resurgence of COVID-19, as well as the eventual reinstatement of Open Meetings Laws.

The next meeting of the Sub-Committee is to be determined.


47

NEW PRODUCT: GREEN TARIFF

PRESENTED BY :

Chad HoopingarnerSr. Director, Strategic Pricing & Cost Recovery

July 27, 2020

App ro va l Reques t ed

July 2020 Board Meeting - REGULAR AGENDA

48


2

• DISCUSS THE STRATEGIC BENEFITS OF THE GREEN TARIFF

• SUMMARIZE HOW THE GREEN TARIFF’S DESIGN IS OPTIMIZED FOR OUR COMMUNITY

• REQUEST FOR APPROVAL


49

AGENDA

3

• STRATEGIC BENEFITS• GREEN TARIFF DESIGN TRENDS• OPTIMIZING GENERATION FLEET• FINANCIAL ASSESSMENT• ADDITIONAL IMPROVEMENTS• REQUEST FOR APPROVAL


50

4

STRATEGIC BENEFITS OF GREEN TARIFF

• Meets customer needs by providing flexible options available in other markets

• Creates optionality for our Flexible Path while contributing to the fixed cost of our existing generation fleet

• Maintains revenue & improves fixed cost recovery


51

5

GREEN TARIFF TRENDSOur journey to improve renewable energy access for large

commercial customers began three years ago with an extensive market research effort.

Source: World Resources Institute - March 2019

Green Tariffs ExecutedGreen Tariffs AvailableGreen Energy Contracts AvailableGreen Energy Available Through Retail Choice

• Green Tariffs have become quite common

• Historical volumetric pricing structures will not fully recover the cost of infrastructure if customers reduce their usage

• Our Green Tariff research was focused on how other utilities mitigate this “volume risk”

Study Take Input

Design Options

Propose Solution

2017 Present


52

6

A BETTER GREEN TARIFFOur Objective: Design a pricing structure that fairly recovers the cost of infrastructure through fixed charges (not volumetric charges) while also improving renewable energy access.

Our proposal improves upon common Green Tariff designs & is optimized for our community.

• Green Tariffs in other regulated markets are imperfect:o Customer often required to pay “exit fees”

o Rate only recovers a portion of generation fixed costs

o Customer left on their own to procure renewable energy

• Our approach fully recovers fixed costs, does not require “exit fees” & provides valuable renewable energy procurement expertise


53

OPTIMIZING GENERATION FLEET

7

As the community grows over time, assets are added to meet new demand. YoungerOlder

~50% of our conventional capacity is now 30+ years old…

The evolution of our generation solutions will require a multi-faceted approach including, but not limited to the following:

• New exciting opportunities that will emerge through our FlexPOWER Bundle & Flexible Path strategies;

• Continuation of our energy efficiency & conservation offerings, currently branded as STEP Bridge; &

• Expected steady & growing interest in the Green Tariff.


54

• Improved fixed cost recovery is a strategic objective & the Green Tariff accomplishes this

• Protects us from supply risk while allowing customer to designate their renewable choice

• City Payment remains the same

8

FINANCIAL ASSESSMENT

The Green Tariff produces the same revenue as existing rates but better aligns with the fixed cost of serving our customers.

Eligible Commercial Customers: Fixed Cost Recovery Comparison

~56%Variable

~72%Variable ~56%

Variable

~44%Fixed

~28%Fixed ~44%

Fixed

Cost to Serve Current Revenue Green TariffRevenue

Note: Values based on FY 2017 Cost of Service study; LLP, LPT, ELP & SLP reflected


55

9

ADDITIONAL IMPROVEMENTS• For the first 3 years of the Green Tariff, we

will conduct analysis to search for & evaluate unintended consequences

• Findings will be shared throughout the year in committee meetings, with official reports to our Board of Trustees each Summer

• Added a provision that clarifies our ability to make modifications in the future if needed

Monitor & Evaluate:

Future Availability:

We will engage with the Board of Trustees as new product offerings are developed.

Today

July 2021 Trustee Briefing




56

10

RECAP

• Meets customer needs by providing flexible options.

• This new product is part of a multi-faceted approach to evolving our generation solutions.

• The proposed tariff better aligns with the cost of serving customers.


57

11

We respectfully request the Board of Trustees’ approval of the Green Tariff.

REQUEST FOR APPROVAL


58

Thank You


59

Effective Date: TBD DRAFT — FOR DISCUSSION PURPOSES ONLY Page 1 of 3

LCP-GRN

CPS Energy __________________________

LARGE COMMERCIAL POWER SERVICE – GREEN ELECTRIC RATE

LCP-GRN

APPLICATION

This rate is applicable to alternating current service to any Customer whose entire requirements on the premises are supplied at one point of delivery through one meter (with the exception of Customer-owned solar PV behind the meter) and: (1) who wishes to take service under this optional renewable energy (Green) rate; (2) whose renewable energy is contractually defined with CPS Energy; (3) who qualifies for service under CPS Energy’s SLP, ELP, LPT or LLP rate with an established demand of 100 kW or more; and (4) either (A) has at least one location with an established demand of 5,000 kW or greater or (B) has annual consumption exceeding 75M kWh. This rate does not allow for aggregation or summing of demands across individual delivery points. Availability of this tariff may be determined or modified by CPS Energy, which may consider generation resource planning, generation integration & system operations, or other impacts to the electric system. In this tariff, the term “renewable energy technology” means a generation facility that produces power exclusively relying on fuel sources which are naturally regenerated, such as power derived from the use of the sun (directly or indirectly), moving water (waves and tides), wind, geothermal sources, hydroelectric facilities, or biomass or biomass-based waste products, including landfill gas. A generation facility that relies on power derived from the use of fossil fuels, fossil fuel waste products, or inorganic waste products is not considered a renewable energy technology for purposes of this tariff. Power produced by a renewable energy technology may be supplemented by the use of energy storage facilities incorporated into the design of the generation facility. The power associated with the Renewable Energy Supply Agreement referenced in this tariff must be generated by a renewable energy technology.

This rate is not applicable (a) when another source of electric energy is used by the Customer (with the exception of Customer-owned solar PV behind the meter) or (b) when another source of energy (other than electric) is used for the same purpose or an equivalent purpose as the electric energy furnished directly by CPS Energy, except that such other source of energy as mentioned in (a) and (b) may be used during temporary failure of the CPS Energy electric service. This rate is not applicable to resale service, emergency, temporary, or shared service. For purposes of this rate transmission voltage is defined as 138 kV or higher, distribution primary voltage is 13.2 kV up to 69 kV and distribution secondary voltage is less than 13.2 kV. TYPE OF SERVICE

The types of service available under this rate are described in CPS Energy Electric Service Standards. When facilities of adequate capacity and suitable phase and voltage are not adjacent to the premises served or to be served, the required service may be provided pursuant to CPS Energy Customer Terms and Conditions Applying to Retail Utility Service and the CPS Energy Policy for Electric Line Extensions and Service Installations. CPS Energy will furnish sufficient transformer capacity and other facilities in order to allow maintenance of CPS Energy equipment at the least possible inconvenience to the customer consistent with other system priorities.

APPLICATION FEE

An application fee shall be assessed based on the specific requirements of the corresponding contract.


60


LCP-GRN

MONTHLY BILL

Rate Grid Share Fee $ 2,550.00 For accounts 5,000 kW or more $ 1,250.00 For accounts 1,000 to 4,999 kW $ 300.00 For accounts 100 to 999 kW Demand Charge Summer Billing (June - September) $ 18.13 Per kW for all kW of Billing Demand at Transmission Voltage $ 18.63 Per kW for all kW of Billing Demand at Distribution Primary Voltage* $ 19.08 Per kW for all kW of Billing Demand at Distribution Secondary Voltage Non-Summer Billing (October - May) $ 15.27 Per kW for all kW of Billing Demand at Transmission Voltage $ 15.77 Per kW for all kW of Billing Demand at Distribution Primary Voltage* $ 16.22 Per kW for all kW of Billing Demand at Distribution Secondary Voltage Billed at Distribution Secondary Voltage rate for service requiring more than one (1) step down transformation from transmission voltage. Energy-Related Charges Per contract Customer price for energy determined in Renewable Energy Supply Agreement (RESA) See right Transfer to City (Renewable Energy Supply Agreement Charge + Market Index Energy Charge + Market Management Fee)/0.86 x 0.14 Additional Charges Affordability Discount Program (ADP) $0.000234 Per kWh (delivered by CPS Energy) See Adjust. Save for Tomorrow Energy Plan (STEP) Section (a) See Adjust. Regulatory Charges Section (b) See right Administrative or other Fee Assessed based on the specific requirements of the corresponding contract. Minimum Bill The Minimum Bill shall be equal to the sum of: 1) the Grid Share Fees, 2) the applicable Demand Charge, 3) the RESA Charge, 4) the Market Management Fee, and 5) the Administrative Fee, or such higher Minimum Bill as may be specified in the contract associated with the LCP-GRN rate. The Minimum Bill is not subject to reduction by credits allowed under the adjustments below. Adjustments

(a) Plus or minus an adjustment, as necessary, which may be derived and applied for recovery of dollars spent for the verifiable kW reductions for energy efficiency and conservation programs. Recovery of such costs would be allowed once an independent third- party reviews and confirms the incremental kW reductions.

(b) Plus or minus the proportionate part of the increase or decrease in taxes, required payments to governmental entities or for

governmental or municipal purposes which may be hereafter assessed, imposed, or otherwise required and which are payable out of or are based upon revenues of the electric system.

Monthly Demand The Monthly Demand will be the kW as determined from reading the CPS Energy demand meter for the 15-minute period of the Customer's greatest Demand reading during the month.


61


LCP-GRN

Billing Demand For the period June through September, the Billing Demand is equal to the greatest of the following:

(a) The Monthly Demand as defined above (b) 5,000 kW, 1,000 kW and 100 kW for service applicable under SLP, ELP/LPT and LLP, respectively (c) Such higher kW as may be specified in the Customer's Application and Agreement for Electric Service.

For the period October through May, the Billing Demand is equal to the greatest of the following:

(a) The Monthly Demand as defined above (b) 5,000 kW, 1,000 kW and 100 kW for service applicable under SLP, ELP/LPT and LLP, respectively (c) Such higher kW as may be specified in the Customer's Application and Agreement for Electric Service (d) 80% of the highest measured peak Demand established during the previous summer period months (June through September).

Prior to the establishment of a previous summer peak Demand, (d) above will not apply. Power Factor When, based on a test of the Customer's power factor, the power factor is below 85% lagging, the Billing Demand may be increased by adding 1% of the Actual Demand for each 1% that the power factor is below 85%. LATE PAYMENT CHARGE

The Monthly Bill will be charged if payment is made within the period indicated on the bill. Bills not paid within this period will be charged an additional 2% times the Monthly Bill excluding garbage fees and sales taxes. TERM OF SERVICE

Service shall be supplied for an initial term of not less than ten (10) years and may be extended for additional periods as provided in the contract associated with the LCP-GRN rate. Should a Customer’s service requirement exceed the standard of service normally provided under this rate, a longer contract term may be required. Any request by the Customer to be supplied with energy from another source during any portion of the service agreement, either for under-supply or total load requirement, must be submitted to CPS Energy in writing in advance for evaluation and possible implementation, at a mutually agreed upon time, and will be subject to regulatory approval. QUALIFIED SCHEDULING ENTITY

CPS Energy shall be the Qualified Scheduling Entity (QSE) for all energy supply transactions used to serve CPS Energy customers related to service under this rate and the RESA. Charges for QSE services shall be included in the monthly Administrative Fee. TERMS AND CONDITIONS

Service is subject to CPS Energy Customer Terms and Conditions Applying to Retail Utility Service which are incorporated herein by this reference. BACKUP GENERATION

Any source of energy used during temporary failure of the CPS Energy electric service (i.e., backup generation) installed after December 31, 2021 must be from low- or non-emitting sources. The following are considered low- or non-emitting: 1) natural gas-fired generators, 2) batteries, and 3) other emerging clean technology. For any source of backup generation that is installed prior to December 31, 2021, Customer must enter into a sub-agreement with CPS Energy to replace non-conforming backup generation with low- or non-emitting sources (or remove altogether) by an agreed upon time, or a penalty will apply. CURTAILMENT

CPS Energy shall have the right at any and all times to immediately adjust in whole or in part, the supply of electricity to Customers, in order to adjust to fuel supplies for generation of electricity or to adjust to other factors affecting delivery capability.


62

OUR BRAND JOURNEY

PRESENTED BY :

Rudy GarzaInterim Chief Customer Engagement Officer

(CCEO)

July 27, 2020

Informational Update


63


• COMPARE BRAND VS LOGO CONCEPTS• EXPLAIN OUR LOGO EVOLUTION• SEPARATE LOGO DECISION FROM BRAND• PROVIDE MARKET INSIGHT OVERVIEW• INTRODUCE RESEARCH FIRM SEPARATE PRESENTATION

• DISCUSS LOGO

2


64

AGENDA

3

• BRAND VS LOGO• LOGO EVOLUTION• SEPARATE LOGO DECISION• MARKET INSIGHT OVERVIEW• EPHIPHANY – MARKET RESEARCH FIRM• DISCUSS LOGO


65

BRAND VS LOGODEFINITION

4

“A brand is a way a company … is perceived by those who experience it. More than simply a name, term, design, or symbol, a brand is a recognizable feeling a … business evokes.”

Brian Lisher, “What is a Brand?”www.ignytebrands.com


66

BRAND VS LOGOCONCEPTS

5

“A brand is the foundation of a company & the logois the visual shortcut to the brand. A logo is the signature of the company brand…., it can be purely symbolic.”www.brandfolder.comwww.smashbrand.com


67

BRAND VS LOGOCONNECTION

6

Aligned correctly, a logo should fit on top of a well designed brand!


68

BRAND VS LOGODIS-CONNECTION

7

While often times we can feel quite comfortable with an existing logo-brand match, it is good to at least consider the timing of a refresh!


69

BRANDIS CURRENTLY STRONG!

8


70

LOGO EVOLUTION

Image duration

has varied

over the years

9

1313 55 66 1919

77 2626 1515

YEARS / DURATION

YEARS / DURATION


71

10

BRAND HOW WE CONTINUE TO GATHER CUSTOMER FEEDBACK?

Multi-Mode Surveys

(Quantitative)conducted internally by

CPS Energy & externally through 3rd

parties (e.g. Escalent) Focus Groups(Qualitative)

e.g. 2019 Brand Focus Groups

User Testing(Qualitative) e.g. 2019 CSI Web Portal User Tests


72

• Customer research topics from 2014 – 2019 have included evaluation of:

• Brand sentiment• Perception • Rebates• Small to medium-sized business insights• STEP feedback

• Third-party research benchmarks our services with utilities across the nation.

• From 2016 to present, we have:• Strengthened our brand (Brand Trust Index improved by 5%

or 33 points)• Improved satisfaction with our service (Service Satisfaction

Index improved by 3% or 26 points)

MARKET RESEARCH HISTORY

Customer insights inform us of how to meet their evolving needs.

11


73

BRANDCOGENT/ESCALENT AWARDS

Award Type 2020 2019 2018 2017 2016 2015 2014

Most Trusted Brand-Residential

Most Trusted Brand –Business

Customer Champion –Residential

Top Product Experience ProviderEnvironmental Champion

Easiest Utilities To Do Business With – Residential

12


74

BRANDCOGENT/ESCALENT AWARDS

13


75

EPHIPHANYMARKET RESEARCH FIRM

14

The next presentation is from an experienced firm we have been working with for years.


76

LOGO DISCUSSION

15

Is the Board ready for us to change the logo this year?


77

Thank You


78

The insight behind inspiration.


79

Brand SentimentFocus Group Research

October 2019

In Partnership With


80

Objectives & Methodology

• Gather reaction to the company’s visual and verbal brand identity, including: name, logo, logo symbol, brand colors and visual imagery

• Explore the strength of the CPS Energy brand

• Determine attributes and perceptions of the persona that customers associate with the brand personality

• Gain understanding of perceived consistency of selected communication efforts, content relevance and delivery effectiveness

Six in-person focus groups, held at Galloway Research, Sept 4, 5 and 9 at 5:30 and 7:30 pm

Two Spanish-dominant and three English-speaking residential groups, recruited from Galloway’s panel and CPSE’s customer list

One small/medium business group, recruited from CPS Energy’s customer list

Methodology


81

Group Composition

• Qualified participants were responsible or jointly responsible for paying bills in residential groups; small to medium-sized business group included owners or managers

• Mix of gender, household incomes, educational attainment, race/ethnicity, residential zip codes, homeowners and renters

• Spanish-dominant participants spoke mostly/only Spanish at home and mostly/only consumed Spanish language media

• Participants were not told who was the sponsor of the research during the recruitment process

• Had not participated in CPS Energy-sponsored focus group within the last 12 months

• Paid $85 incentive for residential customers; $150 for business

GROUP ONE: Spanish-dominant adults with HHI <$50K

GROUP TWO: Spanish-dominant adults (any HHI)

GROUP THREE: Adults 50+

GROUP FOUR: 18-49

GROUP FIVE: HHI < $50K

GROUP SIX: Small to Medium Businesses


82

Visual & Verbal Brand Identity

• The logo icon was quickly recognized as belonging to CPS Energy by most participants; Spanish-dominant were slightly less aware‣ Reminded participants of the sun, an atom or nucleus

with energy radiating out from center

‣ Also saw star surrounded by hearts (communicated community and love); some said it reminded them of a flower or asterisk

Participants were asked to identify companies they associate with each color/color combination

Participants were shown the logo icon by itself; at this point in the discussion participants did not know CPSE was

the sponsor of the research

Participants clearly understand the CPS Energy verbal and visual brand identity with no noise and generally have positive feelings toward both

• While virtually no one associated orange and blue with the CPS Energy brand in the color exercise, the colors were perceived to be appealing and a good fit ‣ Associate orange with the sun, energy and warmth

‣ Blue is more professional, cool, calm, clean and serious


83

Visual & Verbal Brand Identity

• Most English speaking groups correctly identified the acronym CPS as City Public Service; only one Spanish-dominant participant knew what the letters stood for, but most knew it represented the electric company

• While some reported limited confusion between Child Protective Services and City Public Service, only three participants said the letters stood for Child Protective Services, and most said it is quickly cleared up by the context of the conversation‣ The use of Energy in the logo helps differentiate it graphically; some

suggested changing the acronym to CPSE

• The vast majority of participants refer to the company as CPS; Spanish-dominant use the colloquial term “la luz,” which in Spanish has a dual meaning of light and electricity

Participants were asked to identify what the initials stand for in the Alphabet Soup.

The full logo with icon was shown after the other exercises were completed, revealing CPS Energy as the

sponsor of the research for the first time.

Both the acronym and name enjoy strong recognition; most participants said a name change would be too costly and saw no need to change it, especially given that the company is a monopoly.


84

Brand Perceptions

• External brand image is driven mostly by the linemen, and to a lesser extent, the interaction people have with customer service representatives‣ View them as professional, hard-working, well-trained, courteous, polite, and

willing to help; contributes to perception of company as reliable, dependable and responsive

• The company’s actions speak volumes about the brand’s values: ‣ Provide education, incentives and tools to help customers manage energy

consumption and lower cost; participants said this, along with evolution to more sustainable energy sources like solar and wind, makes the company innovative

‣ See employees at events; believe company generously gives back to the community

‣ Think the company values and cares about its customers; most see it as trustworthy

• Business group was the least positive; have no awareness of programs or incentives for small to medium-sized businesses ‣ This, coupled with fact that customers don’t have a choice, translates into

distrust for some

Many participants were more knowledgeable and positive about the brand than in past groups.

Often mentioned text messages, emails or phone calls received regarding “Reduce Your Use”, Casa Verde, rebates, and smart thermostats; indicates perhaps this messaging is resonating with customers, helping to reshape public perception and strengthen the brand relationship.


85

Innovative & Trustworthy

Innovative

Not Innovative

Trustworthy Not Trustworthy

Not Innovative, Not Trustworthy

Innovative and Trustworthy

Innovative, But Not Trustworthy

Not Innovative, But Trustworthy

HEBCPS Energy SAWS VIA USAAPlease place the appropriate colored star for each brand within one of the four squares, according to where you believe it belongs.

“They are branching out all the

time. Using solar power. They are on top of the

game as an energy company.”

“I just kind of compare them to SAWS

and I feel like they’re making a lot more changes than SAWS has. SAWS has had the same programs

forever…with CPS, they’re always trying to come up

with something new.”

“Lots of times when I’m not home and the lights go

out, they’ll send me a message by email or sometimes they'll call me and they’ll tell me, ‘Your lights will be back on in a certain amount of time, and if they don't come back on, please call us,’ so that's very

trustworthy.”

Most participants viewed CPS Energy as both innovative and trustworthy.


86

Innovative & Trustworthy

Innovative

Not Innovative







Innovative

Not Innovative







Innovative

Not Innovative







While there was not enough time in the groups to discuss the reasons why participants ranked the other companies the way they did, it is interesting to note that most participants view CPS Energy and HEB as innovative and trustworthy, while SAWS was mostly perceived to be less innovative and also appears to have some issues with trustworthiness.


87

Brand Perceptions

• Participants had almost no understanding of why the company exists beyond providing electrical services and making a profit; no awareness of CPS Energy’s contribution to the greater good of our community

• Most consider CPS Energy an acquaintance; relationship is rooted in more rational and transactional interactions, makes it harder to cultivate brand loyalty

• Participants were clamoring for more information and insight into what the company stands for, its vision and plans for the future‣ Want to feel a part of CPS Energy, take pride in and share in the company’s successes; want company to be more

proactive in communicating with customers

“I think CPS should say, ‘Thank you for the savings that we've had this year and helping us to be more energy efficient.’ To be part of that, to include us in that…if you feel more a part

of the company, you don’t feel so bad paying the bill.”

“I want to feel more secure and I want to feel

more a part of CPS Energy. Then I’m going to trust them more and want to talk about them because they’ll be like

part of my family.”

“Maybe they should have more media…I came in the

door uptight about our rate hike. But now that we’ve discussed

everything and you see the innovations, it makes it a little

more palatable.”

“You’ve got to connect with us. Stay in touch with us. Even a

quick commercial would help.”

While the CPS Energy brand is positively viewed, it does not have a distinct personality and identity and its strength is limited by customers lack of critical information about the role of the company in our community.


88

Visual Imagery & Brand Personality

• Participants had trouble conjuring up symbols or unique imagery associated with the CPS Energy brand as well as a visual reference for the “face” of the company ‣ Linemen were mentioned most often, along with other generic

industry symbols (i.e. light bulbs, electrical lines, etc.)

‣ Linemen were also chosen most often as the persona that best represents the brand’s personality, although participants had trouble articulating why – beyond the fact that they are the ones they see in their neighborhoods

‣ Since customers mostly observe the linemen from afar, it is currently an arms-length relationship at best, with little emotional connection to the brand

“Once you see a lineman with

his hard hat and stuff, then you realize, well that's an energy company, CPS or somebody…you trust

the hard hats.”

Participants identify most with the linemen – and while they have positive perceptions of them as hardworking, responsive, professional, and knowledgeable, these feelings do not always transfer to the brand itself; strengthening this bond would help strengthen the brand.

“That’s what I associate with CPS, is the

trucks and people like that…friendly, smiling, patient,

capable.”

“They’re the ones you see when something happens.

When there’s an outage, they’re the ones that

are at your house.”


89

Communication Efforts

• Most were surprised to learn that Paula Gold-Williams is the president and CEO ‣ Participants were overwhelming impressed with her demeanor and found her to be confident, likable and believable

‣ Saw CPS Energy as more progressive for hiring a black woman to lead the company; many expected an older man

“I know more about CPS now

than I did before I saw the commercial. What their

corporate philosophy is, what they're planning to do. What

they have on the drawing board. Where they

want to go.“

“She’s someone you would listen to. She seems

sincere. She seemed confident. She gave the impression she knew

what she was talking about. Believable. Sincere.”

Paula Gold-Williams is the living embodiment of a progressive, innovative company and is a powerful asset for CPS Energy.

“I had never seen a CPS commercial. That's like a connection. It’s like, ‘Wow, somebody exists behind CPS.’”

“I appreciate that she’s a different

ethnicity and that she’s female. That give me a better impression of

the company.” Participants were shown TV vignettes from KENS 5 featuring Paula-Gold Williams discussing the Flexible Path.


90

Best Way To Reach Customers

• TV commercials, streaming online on platforms like Hulu, Amazon Prime, YouTube or live feeds on social media like Instagram, Twitter or Facebook were most often mentioned among residential customers as the best ways to tell the CPS Energy brand story

• Business customers said the best way to reach them would be to assign them an account manager; could really benefit from someone helping them analyze their energy needs and offer suggestions to reduce consumption

‣ Online chat with knowledgeable customer service representative could help scale outreach; might be willing to pay for follow-up visit if warranted and ROI seems promising

• Participants also said they want to be able to specify how they are communicated with (phone, text or email), especially with respect to the Reduce Your Use notifications, which can be frequent

“People do live Instagrams or Twitter messages on social media. Maybe they can have a presence

there…answer people’s questions on social media. That would be more more

direct and personal. Then it makes us feel that they’re being receptive to

our needs.”

“I think it’s important for the people

that are 50 and 60 and older that the messages be on

television…Like a commercial, ‘CPS is working for you. CPS is looking out for you.’ Television

is really, really important.”

“If there was a competitor out there, there would be more

community outreach with individuals. There would be account managers out there helping us. And there would be somebody in my face saying, ‘You need

to stay with us versus go with the competition. Because there is none of

that, there is nobody.”

Participants asked for increased communication from the brand, including specifically asking for advertisements and streaming content on social media.


91

Documents

FY2021 COVID-19 · Informational Update July 2020 Board Meeting - UPDATE ON CHAIR’S PRIORITIES 3. 2 DISCLAIMER national, financial preliminary his ns financial in houghtfully s