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HomeMy WebLinkAbout2003-2650 - Ordinance - 07/24/2003ORDINANCE NO. 2650 AN ORDINANCE OF THE CITY OF COLLEGE STATION, TEXAS, DENYING TXU GAS COMPANY'S REQUEST TO CHANGE RATES AS A PART OF THE COMPANY'S STATEWIDE GAS UTILITY SYSTEM; PROVIDING A REQUIREMENT FOR A PROMPT REIMBURSEMENT OF COSTS INCURRED BY THE CITY; PROVIDING FOR A PUBLIC HEARING; PROVIDING FOR NOTICE OF THIS ORDINANCE TO TXU GAS COMPANY; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, on or about May 23, 2003, TXU Gas Company (the "Company") filed with the City of College Station ("City"), a Statement of Intent to change gas rates in all municipalities within the Company's statewide gas utility system effective June 27, 2003; WHEREAS, the City has previously extended the effective date of the Company's rate filing; WHEREAS, the City has exclusive original jurisdiction to evaluate the Company's Statement of Intent as it pertains to the distribution facilities located within the City, pursuant to Texas Utilities Code §§ 102.001 (b) and 103.001; WHEREAS, the Texas Utilities Code § 103.022 provides that costs incurred by the City in ratemaking activities are to be reimbursed by the regulated utility; WHEREAS, the City is participating with a coalition of over 120 other Cities in opposition to the Company's filing at the Railroad Commission, said coalition being known as Allied Coalition of Cities ("ACC"), in GUD No. 9400 pending at the Commission; WHEREAS, ACC and the Company have reached a procedural agreement regarding the schedule for processing GUD No. 9400 that includes TXU's concession to allow one hundred fifteen (115) additional days to process the rate case and ACC's commitment that member Cities expedite the process of getting city action appealed to the Commission; WHEREAS, ACC and TXU jointly endorse the City's denial of the Company's rate application pending before the City; WHEREAS, counsel for ACC, upon review of the Company's filing and upon consultation with various consultants, recommends findings that the Company's proposal is unjustified and unreasonable; now, therefore; BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF COLLEGE STATION, TEXAS' P/grou?agen-cal/for legal review/7-24-O3#TXU Gas- Deny Rate Change Request. doc ORDINANCE NO. 2650 .Page 2 SECTION 1. The Company's Statement of Intent to change gas rates within the City, as part of the Company's statewide gas utility system, is found to be unreasonable because: (a) TXU's requested remm on equity is excessive, generating more than 86% of the requested increase in rates; (b) the basis for TXU's proposed consolidations (of regional distribution systems and of pipeline costs with distribution costs) has not been established; (c) the City's jurisdiction to increase pipeline rates has not been established and, therefore, the proposed pipeline cost increases should be disallowed; (d) revenue requirements should be reduced rather than increased; and (e) the TXU filing should be denied pursuant to agreement with the Company; and is therefore denied in all respects. The reasons for denial are further set out by the Proposed Findings that are attached hereto as Exhibit A and made a part of this ordinance for all purposes. SECTION 2. A copy of this ordinance, constituting final action on the Company's application, be forwarded to the appropriate designated representative of the Company within 10 days as follows: Autry L. Warren, Director Gas Regulatory, TXU Business Services, 1601 Bryan Street, Dallas, Texas 75201-3402. SECTION 3. That it is hereby officially found and determined that the meeting at which this Ordinance is passed is a public hearing and that public notice of the time, place and purpose of said meeting was given as required. SECTION 4. The costs incurred by the City in reviewing the Company's application be promptly reimbursed by the Company. SECTION 5. This Ordinance shall become effective immediately from and after its passage. DULY PASSED AND APPROVED by the City Council of the City of College Station, Texas, on this the 24th day of July, 2003. ATTEST: APPROVED: C~(~IE HOOKS, City Secretary RoN S'I'LViA, Mayor APPROVED: City Attorney P/grou/agen-cal/for legal review/7-24-O3//TXU Gas- Deny Rate Change Request. doc ORDINANCE NO. 2650 Page 3 EXHIBIT A PROPOSED FINDINGS SUPPORTING DENIAL OF TXU'S REQUEST TO INCREASE RATES FOR NATURAL GAS TXU's requested return on equity is unreasonable. By far, the largest cost component of the Company's request for a rate increase is associated with rate of remm on equity. At a time when interest rates are at the lowest point in decades and investors' expectations for return on investment are the lowest in many years, TXU proposes to increase its remm dollars from gas operations by $60,255,075 (86.7 percent of the total rate increase). Such request is irrational in light of national economic conditions and outrageous in light of the fact that TXU Corporation recently wrote off more than $4 billion in shareholder equity related to poor or imprudent management of European Operations. Any increase in current remm dollars is unjustified. . The basis for proposed consolidation has not been established. The Company's filing fails to prove that it is reasonable and necessary to incorporate the pipeline cost of service into the distribution cost of service and to consolidate various regional distribution systems into a single statewide system. 3. The City's jurisdiction to increase pipeline rates has not been established and, therefore, the proposed pipeline cost increase should be disallowed. The Railroad Commission has always exercised exclusive original jurisdiction over pipeline costs, while municipalities have exclusive original jurisdiction over gas distribution rates. With this filing, TXU has incorporated pipeline costs in excess of those P/grou/agen-cal/for legal review/7-24-O3//TXU Gas- Deny Rate Change Request.doc ORDINANCE NO. 2650 Page 4 previously approved by the Commission into the proposed distribution rate to be considered by the City, and all such pipeline costs should be disallowed. , Revenue requirements should be reduced rather than increased. Cities have provided consistent and more than fair rate relief to TXU over the past five years. This case should be thoroughly reviewed at the Railroad Commission from the perspective that current revenue requirements are excessive and that revenues should be reduced rather than increased by $70 million as proposed by TXU. The proposed consolidations should result in cost savings, not cost increases. , The TXU filing should be denied pursuant to agreement with the Company. Cities and TXU have reached a procedural agreement for development of a thorough rate hearing and consideration by the Railroad Commission. That agreement calls for TXU to extend Commission jurisdiction from 185 days to 300 days in exchange for Cities taking prompt action at the local level to allow perfection of all appeals before development of the case commences at the Commission. P?grou?agen-cal?for legal review?7-24-O3//TXU Gas- Deny Rate Change Request. doc