HomeMy WebLinkAboutOrdinance 14216ORDINANCE NO. ~ ~'~~
AN ORDINANCE SUSPENDING, UNTIL THE EARLIER OF
SEPTEMBER 28, 2000 OR THE EFFECTIVENESS OF A RATE ORDER
ADOPTED BY THE CITY COUNCIL, IMPLEMENTATION OF THE
RATE SCHEDULE PROPOSED BY TXU GAS DISTRIBUTION, AS
REFLECTED IN THE "STATEMENT OF INTENT TO CHANGE
RATES" FILED BY TXU GAS DISTRIBUTION ON MAY 26, 2000;
ESTABLISHING RATES TO BE CHARGED BY TXU GAS
DISTRIBUTION DURING THE PERIOD OF SUSPENSION; ADOPTING
DECLARATIONS AND FINDINGS IN PREAMBLE; PROVIDING A
SEVERABILITY CLAUSE; AND PROVIDING FOR AN EFFECTIVE
DATE.
WHEREAS, on May 26, 2000, TXU Gas Distribution ("TXU Gas"), a division of TXU
Gas Company (formerly Lone Star Gas Company), filed with the City Secretary a "Statement of
Intent to Change Rates" ("Rate Filing") under which higher rates charged by TXU Gas would go
into effect m the City on July 3, 2000; and
WHEREAS, the rates proposed m TXU Gas's Rate Filing with the City would result m
approximately an 8 8% increase m gas rates imposed by TXU Gas m the City of Fort Worth and
approximately $5,116,916 00 in additional revenue for TXU Gas from ratepayers in the City; and
WHEREAS, pursuant to Chapters 103 and 104 of the Texas Utilities Code, the City is
required to (i) analyze TXU Gas's Rate Filing; (ii) conduct a public hearing m order to determine
the propriety of the proposed rate increase; and (iii) make a reasonable determination of TXU
Gas's rate base, expenses, investment and rate of return m the Crty; and
WHEREAS, in order to have time to analyze the Rate Filing thoroughly prior to the
public hearing on this matter, rt is necessary that the Crty suspend implementation of TXU Gas's
proposed rate schedule from July 3, 2000 until September 28, 2000, as specifically allowed by
and m accordance with Section 104 107 of the Texas Utilities Code;
NOW, THEREFORE BE IT ORDAINED BY THE CITY COUNCIL OF THE
CITY OF FORT WORTH, TEXAS THAT:
SF(''TTnN 1 _
Implementation of the rate schedule outlined in TXU Gas's May 26, 2000 Rate Filing
with the City is hereby suspended until September 28, 2000 pending a public hearing on the
meets, a determination by the City Council as to the propriety of the Rate Filing and the
adoption of a rate order by the City Council that establishes the rates that TXU Gas may charge
in the City Until September 28, 2000 or the date that a rate order adopted by the City Council is
served on TXU Gas, whichever is earlier, TXLJ Gas shall charge the same rates m the City as
those that were in effect on May 26, 2000
SECTION 2.
All of the declarations and findings contained m the preamble of this Ordinance are made
apart hereof and shall be fully effective as part of the ordained subject matter of this Ordinance.
SECTION 3.
If any portion, section or part of a section of this Ordinance is subsequently declared
invalid, inoperative or void for any reason by a court of competent ~unsdiction, the remaining
portions, sections or parts of sections of this Ordinance shall be and remain in full force and
effect and shall not m any way be impaired or affected by such decision, opinion or~udgment.
2
SF.(".TTnN 4
This Ordinance shall take effect and be in full force and effect from and after the date of
its adoption. The City Secretary is hereby directed to deliver a certified copy of this Ordinance
to TXL7 Gas.
AND IT IS SO ORDAINED.
ADOPTED AND EFFECTIVE f~ - ~3-~ 6'
APPROVED AS TO FORM AND LEGALITY:
By•
Assistant Crty Att ey
Date 6-/,$=Q?~
DUCI DIVERSIFIED UTILITY
CONSULTANTS, INC.
' ' ) 12113 RO%IE DRIVE. SUITE 110, AUSTIN, T% 78728
' I I I~It:~ TELEPHONE 1512) 457.2800 FA% 1512) 557-2243
June 1, 2000 Sent Via Fax (817) 871-8359
Danny Reed
Public Utility Supervisor
1000 Throckmorton
Fort Worth, Texas 76102
RE. Pr4po~al Relatin~tczTXiT_(;as_Ds_tribution ~~mp~ny's Proposal to Incre~e
Rate.
Dear Mr Reed
Diversified Utility Consultants, Inc. ("DUCI") is pleased to submit this letter proposal to the
Crty of Fort Worth ("City") for professional services relating to TXU Gas Distribution Company's
("TXU-G" or "Company") request for a rate increase in the City of Fort Worth. DUCI believes it
is the most qualified firm to provide assistance to the City for the various reasons set forth below
DUCI is a Texas Corporation located in Austin, Texas, with a local as well as an international
client base The principals of DUCI, Messrs. Pous and Lawton, have over forty-five (45) years of
utility rate and regulation experience. In particular, Messrs. Pous and Lawton have testified and/or
made formal presentations before federal, state, provincial, and municipal, regulatory bodies, REA
Cooperative boards and U S Environmental Protection Agency review boards on all aspects of
utility cost of service and rate design.
DUCI is qualified to perform the vanous services necessary to complete a thorough analysis
of TXU-G's requested base rate increase on a timely basis. DUCI's personnel have the extensive,
current and relevant Texas gas utility rate regulation experience necessary to review the accounting,
engineering and economic issues reflected m the Company's request. DUCI's relevant experience
specific to this assignment includes
review of TXU-Lone Star Pipeline's rate increase in Docket No 8664 and Docket
No 8976 at the Railroad Commission of Texas ("RCT" or "Commission"),
ii. review of TXU-G's rate increase for the City of Denton m January 1999,
iii. review of TXU-G's rate increase for the City- of Dallas in November 1999 and the
subsequent appeal at the RCT in Docket No 9145,
iv review of gas rates of the four other mayor gas distribution companies in Texas for
the cities of El Paso, Dallas, Austin, Arlington, Amarillo, Laredo, Lubbock, Midland,
Odessa, as well as more than 60 other cities in Texas, and
iii. testimony before the RCT in almost every mayor gas case dunng the past 10 years.
Regarding the analysis of base cost of service within the city gate, DUCI has extensive
experience in this area. Currently, DUCI is representing the City of Dallas in TXU-G's appeal of
that city's action to deny a requested rate increase. DUCI is also representing over 60 cities in West
Texas in Energas Company's appeal of the cities' actions to deny any rate increase associated with
a recent rate request. Moreover, when the City of El Paso undertook the first city initiated rate
reduction investigation of a mayor distribution gas utility in the state in 1997, rt retained DUCI to
perform the cost of service analysis. A rate reduction was recommended and approved at the city
level, but was ultimately appealed to the RCT by Southern Union Gas Company After a fully
litigated case, the RCT did order a roll back m base rates. When the Commission initiated a rate
investigation against TXU-Lone Star Pipeline (not a local distribution company), DUCI was one of
the key consulting groups representing cities in that fully litigated proceeding. Again, a rate
reduction was ultimately ordered by the RCT As can be seen m the listing of cases in which
Messrs. Pous and Lawton have submitted testimony (attached), there are numerous examples of
testifying before the Commission in fully litigated cases which stretch back to the early 1980's.
These cases represent most if not all of the mayor litigated cases before the RCT dunng the past 10
to 15 years. Finally, given the similarities between electric and gas proceedings, it must be noted
that DUCI has been involved in almost all of the electnc rate reductions initiated by cities and/or the
Public Utility Commission of Texas ("PUCT") dunng the past 10 years. in all instances a rate
reduction was either agreed to or ultimately ordered m each of the electnc rate proceedings.
Turning to the personnel who will actually be involved m this process also support our belief
that DUCI is the best qualified firm to provide services to the City DUCI is not a large firm. This
means that the key individuals performing the work on behalf of the City will be Messrs. Pous and/or
Lawton as well as Ms. Coleman and Ms. Wenzel. Mr Pous is an engineer with a masters degree in
management. Mr Lawton is an economist with both an undergraduate and graduate degree in
economics as well as a law degree. Ms. Coleman and Ms. Wenzel are Certified Public Accountants.
Resumes along with cases in which each has submitted testimony is attached. The efforts
undertaken by DUCI on behalf of the City will be performed by these individuals. This assures the
City of receiving highly experienced assistance at all levels of review and negotiations. In order for
the City to verify the quality of the individuals who will be providing services to the Crty, I have
attached a list of references relating to recent applicable cases. Additional references are available
upon request.
Messrs. Pous and Lawton will be co-project leaders. Depending on the particular issue
and/or time frame, either or both individuals will take the lead. This practice has worked very well
in the past. Ms. Coleman and Ms. Wenzel will support both Messrs. Pous and Lawton. The hourly
fee for principals (Pous and Lawton) is $150 per hour The fee for senior consultants (Coleman and
Wenzel) is $100 per hour Secretarial costs are not charged. In addition to professional fees, all out-
of-pocket expenses, including 10¢ a copy for in-house copying and $10 per hour for in-house
computer use is charged.
Based on our understanding of the Company's prior rate setting practices, DUCI has set forth
an estimated not to exceed puce of $35,000. This puce includes all out-of-pocket expenses, but does
not include the charges associated with any services or expenses for the defense of any appeal by
TXU-G to the RCT or any other additional services.
As can be seen from the resumes included in this proposal, the personnel who will be
available to the City for the analyses, negotiations, and RCT proceedings (should it be necessary)
have substantial expenence in the areas of cost of service for gas and other types of utilities. These
staff members also have expenence in rate design analyses, cost allocations, corporate auditing, as
well as substantial expenence with regard to estimating return on investment for a utility DUCI
personnel have testified before various regulatory commissions and are very well experienced in
working with electric and gas utilities and tariffs.
We would like to thank you for allowing DUCI to submit this Proposal. We are prepared
to commence work on this project immediately upon selection, and would complete the project in
a timely and efficient manner Should you have any questions with regard to this proposal or other
matters, please feel free to contact either Jack Pous or Dan Lawton at (512)257-2600
Si cerely,
~ G~ ,.~~,
Diversifie Utility Consul nts, Inc.
City of Fort Worth, Texas
~1-~A~~r And C,ounc~l C,a1r11r1un1cAtlan
DATE REFERENCE NUMBER LOG NAME PAGE
6/13/00 G-12933 02SUSPEND 1 of 2
SUBJECT SUSPENSION OF RATE SCHEDULE FILED BY TXU GAS DISTRIBUTION AND
RETENTION OF CONSULTANT TO STUDY PROPRIETY OF RATES REQUESTED BY
TXU GAS DISTRIBUTION
RECOMMENDATION
It is recommended that the City Council
Adopt the attached ordinance suspending the implementation of a rate schedule filed with the City
by TXU Gas Distribution on May 26, 2000 until September 28, 2000 or the effectiveness of a rate
order adopted by the City Council, whichever is earlier; and
2. Authorize the City Manager to engage Diversified Utility Consultants, Inc. to assist the City in its
analysis and review of TXU Gas Distribution's proposed rate schedule and to execute a
Professional Services Agreement relating to this service
DISCUSSION
On May 26, 2000, TXU Gas Distribution (TXU Gas), a division of TXU Gas Company (formerly Lone
Star Gas Company), filed with the City of Fort Worth a Statement of Intent to Change Rates in the City
and the twenty-two other area municipalities which comprise what TXU Gas calls its "Fort Worth
Distribution System" The proposed rates are approximately 8 8% higher than the rates that are
currently in effect and would produce approximately $7 million per year in additional revenue for TXU
Gas TXU Gas has proposed to implement the new rates on July 3, 2000 Background information
pertaining to the TXU Gas's proposed rate schedule was provided to the City Council in Informal Report
No 8253 on June 6, 2000
Under state law, the City has exclusive original jurisdiction over the rates, operations and services of
any gas utility operating in the City When such a gas utility requests a rate increase that constitutes a
major change over the rates currently in effect, the City is required to conduct a public hearing in order
to determine the propriety of the proposed rates In order to have sufficient time to analyze the rate
filing, the City is allowed to suspend the proposed rate schedule for not longer than ninety (90) days
from the date proposed by the gas utility for implementation of the new rates During this suspension
period, the gas utility's current rates will continue in effect. Following the public hearing on this matter,
the City Council will be asked to adopt an order that establishes the rates that TXU Gas may charge in
the City This order must, of course, comply with and be based on rate computation standards that are
established .by-state laws and regulations
City of Fort Worth, Texas
~11~A~ar And Caunc~il a~»~rtun~~At~an
C
DATE REFERENCE NUMBER LOG NAME PAGE
6/13/00 G-12933 02SUSPEND 2 of 2
SUBJECT SUSPENSION OF RATE SCHEDULE FILED BY TXU GAS DISTRIBUTION AND
RETENTION OF CONSULTANT TO STUDY PROPRIETY OF RATES REQUESTED BY
TXU GAS DISTRIBUTION
City staff recommends that the City retain Diversified Utilities Consultants, Inc. (DUCT) to assist the staff
in its review of TXU Gas's rate filing and to advise the City Council with regard to the rate order that it
eventually will have to adopt. DUCT has served as the City's consultant in several previous gas
distribution rate cases and is willing to serve in that capacity in this case DUCT estimates that the total
fee for its services in this case will be $35,000 00 or less Pursuant to state law, the City, as a
regulatory authority, may retain consultants and other professionals to advise and represent the City
and to assist the City in any litigation or ratemaking proceeding, and any gas utility in a ratemaking
proceeding must reimburse the City for the reasonable costs of these services
-FISCAL INFORMATION/CERTIFICATION
The Finance Director certifies that funds for this expenditure are available in the current operating
budget of the General Fund This is an unbudgeted expenditure, however, it will be charged to non-
departmental, which will be reimbursed from TXU Gas after we have resolved our case
CB k
Submitted for City Manager's FUND ACCOUNT CENTER AMOUNT CITY SECRETARY
Office by: (to)
Charles Boswell 8511 APPROVED
Originating Department Head: ^
r
~j~"t Y CoUNI~~L
Charles Boswell 8511 (from) ~~N 13 21~
GG01 531200 0905500 $35,000 00
Additional Information Contact: ~ ,)
~
~ ~~~
~~
f th
S
t
r:i
-`
Danny Reed 6145 e
azq o
xe
a.
ty
~~i~} ~(c ort vi+orth, `Pexas
Adopted Ordi~~n~~e Noe ~yZ/G