HomeMy WebLinkAboutIR 8612 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8612
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OATS* Date: June 20, 2004
r _ To the Mayor and Members of the City Council
Page 1 of 2
la SUBJECT: GUD No.9400, TXU Gas Company Statement of Intent to Change Rates in the Company's
Statewide Gas Utility system
On May 23, 2003, TXU Gas Company ('TXU Gas") filed with the City of Fort Worth a Statement of
Intent to Change Rates in the Company's "Statewide Natural Gas System" comprised of 437 towns
and cities ("Statement"). The proposed rates were approximately 7.2% higher than the aggregate of
the rates in the individual cities and were expected to increase revenue to TXU Gas by $69.5
million. From Fort Worth, the proposed rates would have generated approximately 5.54% more
revenue than the then current rates with residential rates increasing by 9.58°/x. The rate filing was
projected to produce $4.2 million per year in additional revenue for TXU Gas from Fort Worth
customers.
On June 17, 2003, the City Council adopted Ordinance No. 15590 suspending implementation of
the proposed rate schedule until the later of September 25, 2003, or the date on which the City
,,Qouncil adopted a rate order in response to the Statement. On the same day, the City Council
approved Resolution No. 2954 authorizing the City to participate in a consortium of municipalities
that was also analyzing similar rate filings in their jurisdictions ("Consortium").
Review of the Statement by City staff and counsel for the Consortium showed that the rates
requested by TXU Gas in the Statement were based on the costs associated with operating
distribution systems in all 437 municipalities, as well as TXU Gas's pipeline system, over which the
City has no jurisdiction. As a result, it was City staffs position that TXU Gas did not provide the City
with sufficient information for the City Council to make a reasonable determination of TXU Gas's
rate base, expenses, investment and rate of return in the City, all of which are necessary in order
for the City Council to make a finding as to whether the rates requested by TXU Gas in its
Statement are reasonable or unreasonable. Therefore, City staff recommended that the City
Council deny the rate adjustments proposed by TXU Gas.
On August 19, 2003, The City Council adopted Ordinance No. 15644 denying TXU Gas' request for
increased rates. TXU Gas promptly appealed the City's action to the Texas Railroad Commission,
where it was combined with TXU's appeals of each of the other 436 cities' actions in Docket No.
9400 - TXU Gas Company Statement of Intent to Change Rates in the Company's Statewide Gas
Utility System.
On May 25, 2004 the Texas Railroad Commission signed an order that grants TXU Gas an
increase in annual revenues of approximately $11 Million and consolidates the Distribution Rates in
all of the Cities. Attachment "A" is a letter from Geoffrey Gay, the attorney representing the Allied
oalition of Cities before the Railroad Commission, describing the Commission's decision.
A bill comparison showing current, requested and approved residential and commercial rates is
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
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INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8612
Date: June 29, 2004
To the Mayor and Members of the City Council
Page 2 of 2
COX SUBJECT: GUD No.9400, TXV Gas Company Statement of Intent to Change Rates in the Company's
attached (Attachment 13). The base customer charge for residential customers was increased from
$8.00 to $9.00 per month. The delivery charge for the first 3 Mcf of natural gas consumed was
increased 15%; the delivery charge for amounts greater than 3 Mcf was decreased 8%. The
average residential bill based on 6 Mcf increased $1.30 or 2.7%.
For commercial customers the base customer charge increased from $14.00 to $15.50 per month.
The delivery charge decreased from 41% to 68% depending on the volume. A commercial bill
based on 50 Mcf decreased $17.42 or 5.2%.
4 c
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
Attachment A
LLOYD, GOSSELINK, BLEVINS, ROCHELLE,
BALDWIN & TOWNSEND, P.C.
ATTORNEYS AT LAW
Mr.Gay's Direct Line: (512)322-5875
111 CONGRESS AVENUE Email: ggay@lglawfirm.com TELEPHONE (512) 322-5800
SUITE 1800 TELECOPIER (512)472-0532
AUSTIN,TEXAS 78701 www.Iglawfirm.com
MEMORANDUM
TO: Allied Coalition of Cities--Participating Cities in TXU Gas Rate Case
FROM: Geoffrey M. Gay
DATE: May 25,2004
RE: GU_D No. 9400, TXV Gas Company Statement of Intent to Change Rates in the
Company's Statewide Gas Utility System—Rate Case Update
The Railroad Commission's jurisdiction ceases today, and this morning Commissioners
Carrillo and Matthews agreed to sign an order that grants TXU an increase in annual revenues of
around $11 million, consolidates all distribution rates and denies recovery of and on
approximately$131 million in costs associated with Poly I pipe remedial efforts.
Despite two commissioners deciding to do the right thing regarding Poly I pipe, the
Commission managed to turn the examiners' recommended $19 million rate reduction into an
$11 million rate increase. Swinging $30 million in the Company's favor was entirely
insufficient for Commissioner Williams who tried on numerous occasions to intimidate
examiners into conceding mistakes and bias that would result in TXU getting more.
We can expect Poly I issues to be a focal point in Motions for Rehearing, and under other
circumstances I would expect TXU to request a re-opening of the record to allow the Company
to put on additional evidence. However, the new CEO of TXU is true to his name and these are
jinusual, if not wild, times at TXU. I anticipate that Mr. Wilder will announce the sale of the gas
system before Motions for Rehearing are filed. I expect that the purchase price will substantially
exceed book value, and that should moot any serious attempt to add to TXU's rate base through a
re-opened record. But then,who can anticipate how greed will control an individual, much less a
corporation?
Last Friday, a number of cities served by TXU met at Love Field, in conjunction with and
as part of the monthly TCCFTA Board meeting, to discuss the possibilities of Cities acquiring
TXU Gas Distribution system assets. Before Monday, Mr. Wilder announced that bids for the
gas system were closed. One TXU Executive indicated to me yesterday that most of the leading
C:\Documents and SettingsVeeddNLocal SettingsNTemporary Internet Fi1es\0LK33EV=o040525gmg Memo to client cities - rate case
update.doc
Participating Cities
May 25, 2004
Page 2 of 2
bidders were out of state gas companies that were looking to double their size by acquiring the
old Lone Star system from TXU. Cities may have a shot at municipalization of some gas assets,
but such discussions will likely have to occur as the ultimate buyer has some remorse about the
price Mr. Wilder extracted. Communication will follow in the next day or two regarding how
Cities can become involved in the investigation of prospects for municipalization of the natural
gas delivery system.
CADowments and SetturgsVeedd\Local SettmgsUemporary Internet Files\0LK33EVnmoO40525grng Memo to client cities - rate case
update.doc
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