1971-01-04 Regular Meeting - Laserfiche WebLink

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Houston Lighting & Powe~ny • -2 In constructing new electric plant, costs and operating expenses have been held down to the maximum extent possible by increasing the unit size of mayor components. It must be recognized, however, that much of the equipment directly related to serving each customer is not subject to economy because of size but must be tailored to meet their individual requirements. In addition, there has been a marked escalation of the operating expenses attendant to serving individual customers. We feel that an adjustment in the minimum step of the rates is appropriate because when the present minimum was fixed (at the conclusion of the Company's 1960-62 Houston rate hearing) the direct cost (exclusive of primary distribution lines, transformers, sub- station, generation and transmission expense) of serving a residential customer was approximately $3.00 and the minimum was set at $1.20, which was k0~ of the $3.00 service cost. At present the same direct cost of serving a residential customer is in excess of $5.00 so that with the same 40$ ratio the minimum should be $2.00. The last increase in the rates was in 1962, at which time the • cost of money was considerably lower than now. At that time top quality electric utility bonds were selling at interest cost ranging between 5.18 and 5.97. During the current year (January through December 9th) such costs have ranged between 7.92 and 9.17. In three recent cases the Texas Railroad Commission has approved a rate of return of 7.25 on a fair value rate base. On May 6, 1970, we filed with the City of Houston an appli- cation to increase from $1.20 to $2.00 the minimum step of rate schedules RS-l, Residential Service, and MGS-1, Miscellaneous General Service. The Company's Houston application was submitted to the City's Department of Public Service and to the City Attorney. The Company presented detailed information concerning its revenues, expenses, plant account and the current cost of money. It also presented a fair value rate base computed from current land appraisals and a trending of plant accounts, such trending having been done by Whitman, Requardt and Associates, the publishers of the Handy- Whitman Index. •