HomeMy WebLinkAboutIR 7975 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7975
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To the Mayor and Members of the City Councii January 30, 1996
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X Subject: Review of Lone Star Gas Company' s Gate Rate
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Lone Star Gas Company' s rates are comprised of two major elements -
the distribution system rates and the city gate rate. The City
Counsel set the rates for Lone Star's Fort Worth Distribution System
on August 15, 1995. The gate rate was set by the Railroad Commission
on November 22, 1982 .
The base residential rate in Fort Worth is $5 . 39 per mcf. $4 . 02 of
this amount is the gate rate. The gate rate is supposed to be the
cost to deliver the gas to the city limits. It is comprised of the
field cost of the gas plus a transportation charge of approximately
590 per mcf. A gas cost adjustment is applied each month to reflect
the actual cost of gas. In 1995 the adjusted gate rate ranged from
$3. 68 to $4 .83 per mcf.
Lone Star officials assert that the high cost of gas is due to "take
or pay" contracts which the company entered into to guarantee their
supply of gas. As these contracts expire, the cost of gas declines.
Lone Star estimates that their average cost of gas will decrease 12%
in 1996 and 3,1% by the year 2000 from 1995 levels.
The City of Fort Worth has a fiduciary responsibility to ensure that
the rates of Lone Star Gas Company are fair and accurate. Normally,
the components of the gate rate would be reviewed in a gate rate
proceeding before the Railroad Commission; but Lone Star has not filed
a gate rate case in thirteen years.
Mr. Bill McMorries, P.E. is the gas rate consultant who analyzed Lone
Star Gas Company' s last three requests for a rate increase before the
City Council . His recommendations have been considered fair and
reasonable by both city staff and Lone Star Gas Company. Staff has
requested Mr. McMorries to provide an overview of Lone Star' s gate
rate.
Mr. McMorries will compare Lone Star's gas and transportation costs
with those of other gas companies. He will review the effect of "take
or pay" gas contracts, affiliate transactions and other related
issues. When Mr. McMorries completes his study the City should be in
a position to determine whether or not a gate rate case should be
initiated.
Lone Star Gas Company has assured complete cooperation with Mr.
McMorries .
The cost of the gate rate review will not exceed $6, 000 . Since this
study will be conducted outside the bounds of a rate case, the City's
expenses will not be reimbursed by Lone Star Gas Company.
OFF ICIAL RECORD
TARY
Bob Terrell CI 1Y "EE
City Manager �F F. Won't ToL
ISSUED BY THE CITY MANAGER FORT WORTH,TEXAS