1982-08-25 Special Called Meeting

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Date Subject: 8/18/82 HLbcP RATE INCREASE Q~t i atOr'S I 5 page s 1'1~~ia1s of -_. helps to maintain the utility's bond ratings. There are arguments that the fuel adjustment clause discourages incentive on the part of the Company to vigorously and actively negotiate fuel contracts. On the other hand, if the fuel adjustment clause were to be incorporated into base rates (as expense for purchases of fuel) there would necessarily be a working capital allowance included, too. Fluctuating fuel costs and market conditions are a primary consideration in whether such a clause is warranted. These factors and others will be reviewed and analyzed for recommendations in any subsequent rate case or for legislative action. Siring Creek Agreement In 1978, Utility Fuels, Inc. ("UFI"), a coal supplier to HLBcP (both companies are subsidiaries of Houston Industries, Inc.) contracted with Spring Creek Coal Mining Company for coal deliveries. The coal was intended to fire HLbcP's Parish Units. However, because of slagging and fouling characteristics, the coal proved unsuitable for burning. There is a lawsuit pending on this issue. However, there is an $8 per ton non-deliverable charge which has been paid by UFI. We recommend that this $8 per ton charge not be recoverable through HLb~P's Fuel Adjustment Clause. RATE DESIGN Under our recommendation, the spread of the increase in revenues to customer classes will not differ proportionally from that proposed by HLbcP. Thus, 37% will be spread to the residential class, 4146 to the commercial class, and 18% to the industrial class. The Public Service Department is proposing a change in the rate structure for the residential class in order to encourage conservation and provide a rate incentive to do so. This will result in levelizing b0.ls all year round so that winter rates will increase, but summer rates will remain fairly constant for 750-1500 Kwh users and increase for those customers using more than 1500 Kwh. Thus, there should be incentive to move toward the 750-1500 category. The new "block" or "tier" is compared to the existing rate structure as indicated below: Present Rate Structure (a) Customer charge of $6.00 per month, which includes 30 Kwh plus (b) Kwh charge for May through Oetober of 3.8450 per Kwh over 30 Kwh. For b~11s of 750 Kwh or less, a charge of 2.345G per Kwh over 30 Kwh. Kwh charge for November through April of 2.345 per Kwh over 30 Kwh. plus (c) Fuel Adjustment Charge Proposed Rate Structure (City) (a) Customer charge of $8.00 per month, which includes 30 Kwh. • lus . P n-aa