This week, the San Antonio Chamber of Commerce Infrastructure Committee hosted a meeting to understand the financial impact of COVID-19 and oil and gas deficits on infrastructure projects locally and statewide. To help understand the impact, the committee heard from the following speakers:
- Sen. Leticia Van de Putte, Andrade Van de Putte and Associates
- Robert Puente, President and CEO, San Antonio Water System (SAWS)
- Frank Almaraz, Chief Administrative & Business Development Officer, CPS Energy
- Roderick Sanchez, Assistant City Manager, City of San Antonio
Sen. Van de Putte opened her presentation by discussing Texas’ revenue dependence on oil and gas. The West Texas Intermediate (WTI) was just under $58 in January, then it hit rock bottom $-40.32 on April 20, the lowest level ever recorded. During the meeting, she highlighted that WTI was at $25.51. The Texas biennium budget was written with a WTI at $53.00. While consumers are enjoying the low retail fuel prices, the energy companies and State of Texas are taking a big financial hit. Given the decrease in oil and gas revenues, Comptroller Hegar has warned that lawmakers will need to quickly pass a supplemental appropriations bill upon their return in January 2021.
SAWS President and CEO Robert Puente kicked off his presentation by thanking the Chamber for their efforts and support to get the Vista Ridge Pipeline project online. He followed by informing committee members that SAWS is expecting COVID-19 to have a significant negative financial impact, but it will be manageable. SAWS expects a reduction in operating revenue due to the decline in commercial usage, reduced late free revenue, and increased bad debt write-offs. Water usage for the month of April was 8% less than what was budgeted. SAWS anticipates a $34 to $67 million drop in revenue from water and sewer service from April through December. On the flip side, SAWS projects operation and maintenance costs to decrease, which will help offset the dip in revenue. Puente was pleased to announce that SAWS is continuing with its 2020 Capital Improvement Plan (CIP) key projects totaling $609 million, of which $300 million are mandated by the EPA consent decree.
Similar to SAWS, CPS Energy also anticipates a financial hit from COVID-19. The utility has taken steps to support the community by providing late fee waivers, payment deferral programs and a commitment to not cut off service during the pandemic. Frank Almaraz, Chief Administrative & Business Development Officer informed committee members that CPS Energy could experience losses of $65 to $100 million, increase in bad debt by $20 million and 6% drop in overall retail electric sales. CPS Energy also projects wholesale new revenue from sales in the Electric Reliability Council of Texas (ERCOT) market to drop from $90 million to $40 million. Almaraz mentioned that CPS Energy has already taken steps to decrease costs to help offset the loss in revenue.
Rod Sanchez, Assistant City Manager for the City of San Antonio, provided some good news regarding infrastructure projects. The pandemic has had no impact on the 2017 Bond Program, which consists of 880 projects. To date, 24 projects totaling $60 million dollars have been completed, 52 are under construction and 99 are under design. Sanchez mentioned that the pandemic is helping to speed up the design process to get projects under construction. On the Capital improvements side, the City just cut $50 million for street and maintenance projects. The city has saved $6.9 million in completed projects, which has help offset the $50 million cut in spending. While the funding was cut this year, projects are being deferred until next year. Projects that were cut this year will be prioritized and allocated funding in the FY2021 year. 282 projects are currently on hold.
The meeting helped lay the groundwork for reevaluating the committee’s focus and strategic plan for 2020 in the wake of COVID-19 and allowed us to develop an effective advocacy approach for the next federal Coronavirus Recovery/Relief Package.
The Infrastructure Committee works to identify thoughtful policy and strategic infrastructure investments focused on everything from mobility and online connectivity to energy and our natural resources. The committee seeks to identify solutions and financing mechanisms for critical infrastructure projects essential to San Antonio businesses. The committee meets monthly and makes recommendations to the Public Policy Council.
If you have any questions about the financial impact of COVID-19 and Oil & Gas deficits on infrastructure projects locally and statewide please contact Vice President of Public Policy, Stephanie Reyes by email at email@example.com or by phone at 210-229-2162.