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Tour.heRass &01 it . ~. . Phase II - Finalize Analysis and Prepare Testimony Should the City decide after a review of our preliminary findings to have testimony before the City Council, we will perform the following steps: 1. Finalize our analysis of the adjusted value of invested capital, test year operating income and pro forma adjust- ments, and allocation procedures. 2. Document and support our recommended adjustments to the areas in step 1. 3. Prepare a financial and economic study on the fair rate of return for Entex, Inc. 4. Prepare testimony on the adjusted value of invested capital, test year operating income, fair rate of return and revenue requirements for Entex, Inc. inside the City limits of La Porte. 5. Present testimony before the City Council and be avail- able for cross-examination. ~ Staffing and Fees Mr. Kenneth M. Stevens, Partner in our Dallas office, will have overall responsibility for this engagement. Appropriate experienced staff will be assigned as required. It is our understanding that we are the only firm you are consider ing to engage to perform this study. Therefore we are allowed to quote our estimate of professional fees. Touche Ross & Co. bills its clients for actual hours worked at stipulated hourly rates for personnel assigned, plus out-of- pocket expenses incurred at cost. We estimate our fees and expenses as follows: Phase I - Preliminary Analysis Phase II - Finalize Analysis and Prepare Testimony $10,000-$12,000 $15,000-$20,000 . In the event Entex, Inc. would appeal to the Railroad Commis- sion a decision of the City Council based upon our recommendations, we would anticipate additional fees and expenses of $10,000 to present testimony and stand cross-examination before the Railroad Commission, as well as assist legal counsel for the City in evalua- tion and cross-examination of Company testimony. This estimate assumes an appeal would be based upon the same test year as filed with the City.