ER Exchange Newsletter March 2017

March 2017 THE FEDERAL REPORTSpecial points of As we close in on the end of March, the Trump Administration continues to face transition challengesinterest: not only in staffing up key federal agencies, but also in securing agreement within the Republican par- ty on major policy initiatives promoted by the President. Federal Update— 115th Congress Health care reform looms large among the areas of disagreement. The House has made the first Tax Policy move towards repealing the Affordable Care Act, though the outlook for the House approach is in Infrastructure doubt. Not only did the initial effort by the House Republican Leadership fail to secure a majority in Nominations the House, it also failed despite direct lobbying by President Trump. Further, Senate leaders have Energy Policy made clear that even if the House approach is ultimately passed, it cannot pass the Senate. The cur- rent impasse in the House and the lack of a unified approach among Republicans leaves the outcome State of Texas— of repeal of the Affordable Care Act in doubt. 85th Legislative Session Update Tax Policy RRC Sunset Similar difficulties face President Trump on another key priority, tax reform. House and Senate Re- City of San Antonio— publicans have not coalesced around a single approach and major policy divisions exist on how to Local Update fund the tax reform initiative. Additionally, Republicans were counting on repeal of the Affordable Care Act’s tax provisions to free up budgetary room to partially pay for tax reform. Without repeal of Spotlight— the health law, the outlook for comprehensive tax reform is increasingly grim. CAC Goes to Austin Infrastructure In the Community— Converse Goes GreenIn this issue: A third agenda item for the President, infrastructure investment, seems to be stalled before even getting started. The President had promised a $1 trillion investment in new infrastructure as part ofThe Federal Report 1-2 his campaign, committing to paying for the new investment by enticing private entities to engage more substantively in funding infrastructure through tax incentives and public-private partnerships.The State Report 2 Congressional leaders are less enthusiastic about these alternative funding mechanisms and even more reticent to proceed with a major spending package that does not have a funding mechanism.San Antonio—The Local 3-4 The conflict in priorities has temporarily stalled progress in developing an infrastructure package.Report NominationsExternal Relations 4Contacts At virtually all of the agencies, the Trump Administration has so far been unable to nominate senior level staff. Of the approximately 1200 positions in the federal government that require Senate confir- mation, roughly half are deemed \"critical\" to agency/government functionality. The President has only nominated individuals for 58 of those positions and only 20 have been confirmed. This delay isn't overly abnormal but it is a hindrance on attaining policy objectives. 1

Energy PolicyWithin the electric utility sector, a subject of much discussion is the anticipated release of an Executive Order directing theEnvironmental Protection Agency to withdraw President Obama's signature climate initiative, the Clean Power Plan. Based onauthorities in the Clean Air Act, President Obama had set ambitious national goals to reduce greenhouse gas emissions fromthe electric sector. Challenged in court and ultimately put on hold by the Supreme Court, the Administration appears ready torelease the Executive Order this week. All indications suggest this order will direct EPA Administrator Scott Pruitt to seek tohave the litigation on the Rule placed in abeyance while the EPA revisits the Rule and reconsiders whether it was appropriate. - Rob Talley, CPS Energy Federal Consultant, contributed to this report THE STATE REPORT—85th LEGISLATIVE SESSIONThe 140-day legislative session reached its half-way mark last week, but the glass is certainly not half empty as the mostsubstantive activity is just now starting. Work in both chambers has escalated as members seek to get committee hearings ontheir bills before hearing deadlines kick in later this spring. Meanwhile, both Chambers are taking up daily Calendars of bills,which will ultimately get longer as the session progresses before its adjournment on May 29th.The focus will now shift towards passing a budget and both the House and Senate continue to be far apart on what they deemto be a viable spending plan for the next biennium. Members of the Senate Finance Committee last week unanimouslyapproved using $106 billion of state money to fund its more than $217 billion budget. The full Senate is expected to vote on itearly this week. House budget writers have already called the Senate’s budget “inadequate” and ongoing disagreementsbetween the two chambers are expected over differing spending priorities. The budget is the only item the Legislature isconstitutionally required to pass.The initial budget in the House, which is still in the House Appropriations Committee, proposes $108.9 billion of state money.House budget writers have indicated their preference in tapping into the state’s $10.2 billion “Rainy Day Fund” for as much as$2.5 billion to avoid cuts to state programs. The Senate’s budget does not tap into the Rainy Day Fund.CPS Energy remains engaged in a variety of additional legislative policy discussions. Examples include proposals impactingutility pole attachments, open meetings and open records, the operation of pension systems, cybersecurity, and preserving themunicipal utility business model. Legislation sponsored by Senator José Menéndez (D-San Antonio) and Rep. Justin Rodriguez(D-San Antonio) – SB 758 and HB 1633 - which addresses CPS Energy’s bill payment assistance, is a key local initiative. Thelegislation seeks to remove from statute a requirement that a low income customer receive a disconnection notice in order tobe enrolled in our affordability discount program. SB 758 received unanimous approval from the Senate IntergovernmentalRelations Committee last week, and HB 1633 will be heard by the House State Affairs Committee this Wednesday.RRC SunsetTomorrow, the full House is expected to take up its first major bill of specific interest to our industry when it debates HB 1818by Rep. Larry Gonzalez (R-Round Rock), which is the Railroad Commission sunset bill. This session marks the third attempt infour sessions to continue the Railroad Commission for another 12 years. Previous RRC sunset bills have failed passage and theagency had to be “safety netted,” where the agency was briefly extended and put into a new sunset review cycle. HB 1818focusses on agency efficiencies and has a strong emphasis on pipeline safety with the creation of a pipeline permit fee thatwould help the Railroad Commission fill a budget shortfall in its pipeline safety program. 2

SAN ANTONIO—THE LOCAL REPORTThe San Antonio City Council took action on several annexation-related items this month. On March 2nd, the Council approveda 16-year non-annexation agreement for the US 281N residential area. This agreement will expire in 2033, along with similaragreements for the adjacent areas of Timberwood Park and the Lumbermen’s tract (Cibolo Canyons area). It is anticipated theCity of San Antonio will annex these three areas in north Bexar County in the 2033 or 2034 timeframe when the agreementsexpire.The City Council also approved an historic interlocal agreement with the City of Converse on March 9th. This multifacetedagreement enables Converse to triple the size of its municipal footprint through a series of municipal boundary adjustmentsand annexations over the next 17 years. This would make Converse the largest suburban city in Bexar County. Residents in theaffected area will benefit from increased city services, such as fire, police and solid waste collection which Converse canprovide in the most cost effective manner. The Converse City Council also approved the agreement on March 21st as part oftheir governance process.The City of San Antonio’s Governance committee also deliberated on a resolution to oppose the transportation of high-levelradioactive waste through San Antonio on March 22nd. Although CPS Energy does not currently transport high-level radioactivewaste from STP to any off-site locations, Chief Operating Office Cris Eugster, along with Larry Blaylock, Sr. Director of NuclearOversight & Development, and John Leal, were in attendance to answer questions.Spotlight: Citizens Advisory Committee Goes to AustinMembers of the Citizens Advisory Committee joined CPS Energy’s government relations team on March 7th for a day at theState Capitol. The committee received a storm restoration update from Chief Customer Engagement Officer Felecia Etheridge,followed by afternoon visits with Bexar County state delegation members Senator Jose Menendez and Representatives InaMinjarez, Diana Arevalo and Justin Rodriguez. House Parliamentarian Chris Griesel also joined the group to provide insightsinto the procedural aspects of the state legislative process.Pictured above is the CAC Vice Chair Klaus Weiswurm, CPS Energy CEO Pictured left to right are CPSE employees with CAC Members. Kara Hill,Paula Gold-Williams, Rep. Justin Rodriguez, CAC Chair Al Rodriguez and Phillip Guillen, Francis Flores, Robert Nathan, Robert Romero (CAC), AllieJonathan Tijerina CPS Energy, Chief of Staff. Watters (CAC), Lynda Rodriguez, William Johnson (CAC), Priscilla Robledo (CRU), Ronnie Guest (CRU), and David Walter (CAC), Lulu Avitua (CAC), DeAnna Hardwick, and Marie Stoner. 3

In the Community: Converse Goes GreenThe City of Converse held its 6th Annual Converse Goes Green Day event on Saturday, March 18th. The event affords anopportunity for multiple agencies and community businesses to provide information on their respective Green Initiatives,materials and Energy Conservation programs. CPS Energy’s Community Engagement team and Franklin Energy provided energyconservation and community programs information.Additionally, CPS Energy’s Local Government Relations team handed out maintenance drought tolerant plants. The grand prizedrawing was a 15 gallon tree donated by the CPS Energy Environmental & Sustainability Department. Approximately 250people attended the event that was held at the Judson ISD Rutledge Stadium Parking Lot. Pictured below are Roland Hinojosa,CPS Energy Local Government Relations, and City of Converse Mayor Al Suarez. Federal & State Relations Kathy Garcia, Vice President Energy Market Policy Government Relations, Regulatory Affairs & Public PolicyKari Torres, Manager, External Relations Adrianne Brandt, Director, Energy Market Policy 512.542.7593 512.542.7597 512.542.7594 [email protected] [email protected] [email protected] Local Government RelationsRobert Nathan, Federal & State Relations David Kee, Energy Market Policy Manager 512.542.7596 John Leal, Director, Local Government Relations 210.353.6912 210.353.3072 [email protected] [email protected] [email protected] Marie Stoner, Federal & State Relations 512.542.7599 Kara Hill, Manager, External Relations 210.353.3706 [email protected] [email protected] Roland Hinojosa, Suburban City Relations 210.353.2747 [email protected] Lynda Rodriguez, Suburban City Relations 210.353.4779 [email protected] Velma Corona, Local Government Relations 210.353.5952 [email protected] 4