1982-08-25 Special Called Meeting

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- ~EOUEST FOR COUNCIL ACTION - 1 t TO: Mayor via City Secretary Agenda Item OBJECT: HOUSTON LIGHTING be POWER COMPANY ~ge 6 Request for Rate Increase dated June 16, 1982. FROM (Department or other point of origin): Origination Date Agenda Date Public Service Department August 18, 1982 OR'S SIGNATURE: Council District affected: ALL For ad 'tional information co tact: Marsha Gardner Date and identification of prior authorizing Phone: 658-0343 Council action: RECOMMENDATION: Grant increase in revenues to Houston Lighting be Power Company in the amount of $181,561,000 and approve rate design to effect increase. On June 16, 1982, Houston Lighting do Power Company ("HLEcP") filed a request with the City to increase its revenues from electric service by a total of $336 million on a system-wide basis. Prior to the proposed effective date of July 22, 1982, Council suspended the rates for 120 days until November 18, 1982. By way of Resolution No. 82-26, Council authorized the Public Service Department to coordinate with the other cities with original jurisdiction in HLdcP's system in order to analyze and evaluate HL&P's application for a rate increase. Approximately 53 cities have joined together in the effort and have become known as the Coalition of Cities With Original Jurisdiction. The application as filed this year is particularly complex in that HL&P is seeking recovery of $362 million for the conditional abandonment of the Allen's Creek Nuclear Project, and the Company plans to expend $1,136,506,000 in 1983 for the construction of the South Texas Nuclear Project (2 units), and the Limestone (2 units) and Malakoff (2 units) lignite generating plants. This intensive construction program appears justified in order to maintain sufficient margins of electrical power to meet the growth of customers in HLbcP's 5,000 square mile service area. Presently there are approximately 1,141,440 customers in the total service area. However, after a thorough review of HLbcP's rate filing package, the opinion of the Public Service Department is that HLbcP's request for $336 million in additional revenue is excessive. It is our recommendation that Council grant HLacP a rate increase in the amount of $181,561,000, a 5.56% increase in rates. This represents 54% of its requested increase. The testimony of the Regulatory Affairs Division of the Public Service Department is attached hereto in support of our recommendation, as well as the report and recommendation of C.H. Guernsey bt Company, consultants retained by the City to study and evaluate the South Texas Nuclear Project. The following is a summary of the basis for the Public Service Department's recommendation: RATE BASE (Original Cost) Allen's Creek Nuclear Project The Public Service Department recommends no recovery of the $362 million that HLdcP has requested for abandonment or cancellation of the Allen's Creek Nuclear Project. In its rate filing package; the Company has not included the $362 million amount in the rate base; instead such amount is included in an account entitled "Extraordinary Losses " HLacP requests the recovery of its $362 million investment (using the sum-of-the-years' digits method) over aten-year period with „-o,