1977-01-24 Special Meeting - Laserfiche WebLink

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'~ • Mr. Davi d F. L~ebb -2- January 6, 1977 • 1) Inflati~ prices" see the creases believe gyn. The graphic representation from the U. S. Department of L relationship between increases that Entex has experienced. I the two necessarily correlate. of this is based on "all consumer abor Consumer Price Index. I don't in all consumer prices and in- am no statistician, but I do not 2) Entex has increased wages for almost all of its employees for the last eleven years. It does not say what percentage wages and salaries con- tributed to its over-all increases in expenses, so I do not see the reason for introducing this chart. 3) The third reason is that Entex has not had a rate increase in many cities since 1968, and that between 1968 and 1976 there has been a nationwide inflation of prices of 63% while Entex has experienced an increase of 33% in operating expense per customer. Again, I do not see any necessary correlation between increases in the consumer index and increases in Entex's expense per customer. Increases in total Company expenses would be more useful information to have. 4) Entex has had during the past two years an increase in the average in- vestment per customer in the Texas Coast Division from $224 to $287. Again, I do not see the relevance the increase in gross plant per cus- tomer has in a discussion of a rate case. 5) Next is the increase in the cost of money. Their financing does not • come 100% from A-rated utility bonds, so the chart is not representative. For example, capital also comes from loans and the sale of stocks (both common and preferred). 6) Entex presents a statement of operations for the Texas Coast Division for the twelve months ended June 30, 1976. According to Entex, their rate of return on adjusted value of invested capital Hras 4.11% as of June 30. No information is presented on how their fair value rate base is computed. Further, they state that unadjusted book revenues and expenses would show a 6.9% return on the fair value rate base after the proposed uniform ad- justment had been in effect 72 months but that knov~rn increases in expenses since June 30 would prevent rate of return reaching this 6.92%. There is no way to check this with the information presented. I do not find anywhere a figure representing the percentage increase, either for Shoreacres or the entire Division, and no figures giving the dollar increase for the entire Division. All we see is the net operating income anticipated after i2 months of the increase. Again, I would like numbers. As an aside, Entex's return on common equity is approximately 25% at this time. This is considerably higher than most utility companies; for example, Houston Lighting & Power Company now has a return on common of about 14-1/2%. •