AUSTIN - The largest municipal utility in Texas will pursue several options to finance the infrastructure needed to serve a rapidly growing customer base, said Paula Gold-Williams, chief financial officer of San Antonio's CPS Energy.

"Liquidity is king," Gold-Williams told participants at Friday's session of The Bond Buyer's 13th Annual Texas Finance Conference. "As we prepare for the future, our major focus will be on liquidity and flexibility."

The city-owned utility has spent $397 million in its program to meet the growth in demand in San Antonio, and expects to spend $3.7 billion by 2018 under its current 10-year capital plan. Another $1.7 billion of spending through 2020 is projected in its longer-range projections.

"In the past, we have relied on revenue bonds to meet our financial needs," Gold-Williams said. "But now we are looking at other things to keep our options open. We will go for the best option at the time."

Options will include refundings of outstanding debt, a long-term commercial paper program, and increased reliance on lines of credit.

"We've done several refundings over the last several years, and so there is not a great deal of opportunity to extract more value from that option," she said. "But even with these options, there will still be a need for new money."

In some cases, Gold-Williams said, it may be more cost-effective to buy power from suppliers rather than invest in new generating facilities to meet the city's growing appetite for electricity.

The utility is still experiencing growth in demand from new customers as well as increased consumption by existing customers. A major effort to cut capital costs will focus on reducing the anticipated growth in demand.

It is cheaper to cut costs than acquire new supply, Gold-Williams said, but it is still expensive. The conservation program, which she said is strongly supported by Austin's political leaders, will cost $849 million over the next decade, but it should shave the expected growth in demand by 771 megawatts.

The utility expects demand growth of 2,544 megawatts by 2020, she said, including 1,617 megawatts in increased consumption, 175 megawatts from the loss of generation from plants that will be retired by then, and a 202 megawatt reserve.

Like all utilities in the country, CPS Energy is looking at renewable energy resources and reducing emissions, according to Gold-Williams.

"Renewable is great, but it is not the only aspect we're focusing on," she said. "We want a balance of energy sources to protect our customers."

In 1970, she said, CPS generated 100% of its power at plants that burned natural gas. By 2007, the power mix included 38% from nuclear facilities and 40% from coal-burning plants.

"Nuclear seems to be the lowest-cost option for the future," Gold-Williams said. "The initial capital costs are huge, but over the long term it provides the most power at the lowest cost."

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