HomeMy WebLinkAboutO-2006-2899
8
ASKINS & ARMSTRONG, P. C.
ATTORNEYS AT LAW
702 W. FAIR MONT PARKWAY
P.O. BOX 1218
LA PORTE, TEXAS 77572-1218
KNOX W. ASKINS
..JOHN D. ARMSTRONG
CLARK T. ASKINS
TELEPHONE 281.471.1886
TELECOPIER 281.471.2047
K A SKINS@HOUSTON.RR.COM
JOHN-A@SWBELl.NET
C TASKINS@SWBELL.NET
June 19, 2006
JUN 1 q 2006
Ms. Martha A. Gillett
City Secretary
City of La Porte
City Hall
La Porte, Texas
Re: Agenda Request for CenterPoint Energy, Inc. Matters
-- June 26, 2006.
Dear Martha:
Please place the ordinance approving and authorizing an agreement
between the City of La Porte and Centerpoint Energy Houston
Electric, in connection with the rate case, on the City Council
agenda of June 26, 2006, as an action item.
Mr. Richard arum, Service Area Supervisor for CenterPoint Energy,
Inc. has advised me that all of the coalition cities, together with
some additional cities within the company's system, have approved
the "Term Sheet for Settlement of Centerpoint Energy Houston
Electric (CEHE) Rate Case". It is my understanding that the
approval by the cities is not binding upon the Public utility
Commission. Upon passage of the requested ordinance, the City of
La Porte would join the other cities in their petition to the PUC
to approve the agreement.
Please place on the June 26, 2006, agenda, the enclosed ordinance
granting Centerpoint Energy Houston Electric, LLC, a 30 year
franchise, as a workshop item.
The City's Home Rule Charter requires two (2) readings on an
ordinance granting a franchise, which readings must be more than
thirty (30) days apart. I am requesting that the franchise
ordinance be placed on the City Council agenda of Monday, July 10,
2006, for its first reading, and placed on the City Council agenda
of Monday, August 14, 2006, for its second reading. Following
passage on second reading, the caption of the ordinance noting the
place where the full text may be examined by the public, shall be
published once each week for four (4) consecutive weeks in the
Bayshore Sun, the official newspaper of the City. The ordinance
takes effect sixty (60) days after its final passage, which will be
on October 15, 2006.
ASKINS & ARMSTRONG. p, C,
ATTORNEYS AT LAW
Martha A. Gillett
June 19, 2006
page 2
Mr. Richard Orum of CenterPoint Energy will be present for the
meeting of June 26, 2006, to answer any questions which City
Council may have concerning either of these items.
Y~trulY'
Knox W. Askins
City Attorney
City of La Porte
KWA: sw
Enclosures
;5(3
REQUEST FOR CITY COUNCIL AGENDA ITEM
Agenda Date Requested: A>>ril 24. 2006
A>>>>ro>>riation
Requested By: Debra Feazelle, City Mana2er
Source of Funds:
Department: Administration
Account Number:
Report:
Resolution:
Ordinance:
x
Amount Budgeted:
Exhibits:
Ordinance 2006-
Amount Requested:
Exhibits:
A.2reement
Budgeted Item: N/A
Exhibits:
SUMMARY & RECOMMENDATION
The Public Utility Commission of Texas issued an order requiring CenterPoint Houston to file a transmission and
distribution rate filing package on or before April 15, 2006. Center Point has approached La Porte to enter into an
agreement with CenterPoint that would resolve all issues related to the docket, to continue existing base rates, and to
establish certain procedures to be applied to CentePoint for the calendar years 2006-2009 as listed in the attached
Term Sheet for Settlement of CenterPoint Houston Electric Rate Case.
Staff recommends Council approve of an agreement with Center Point Energy Houston Electric.
Action Required bv Council:
Consider approval of an ordinance approving an agreement between the City and CenterPoint Energy Houston
Electric.
4- ;CJ-tJ!c
Dare {
iN 1
~
M~
ORDINANCE NO. 2006-). <jqq
AN ORDINANCE APPROVING AND AUTHORIZING AN AGREEMENT BETWEEN THE CITY
OF LA PORTE AND CENTERPOINT ENERGY HOUSTON ELECTRIC; MAKING VARIOUS
FINDINGS AND PROVISIONS RELATING TO THE SUBJECT; FINDING COMPLIANCE WITH
THE OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE HEREOF.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE:
Section 1. The City Council hereby approves and authorizes the contract, agreement, or other
undertaking described in the title of this ordinance, in substantially the form as shown in the document which
is attached hereto and incorporated herein by this reference. The City Manager is hereby authorized to
execute such document and all related documents on behalf of the City of La Porte. The City Secretary is
hereby authorized to attest to all such signatures and to affix the seal of the City to all such documents.
Section 2. The City Council officially finds, determines, recites, and declares that a sufficient
written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place
convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as
required by the Open Meetings Law, Chapter 551, Texas Government Code; and that this meeting has been
open to the public as required by law at all times during which this ordinance and the subject matter thereof
has been discussed, considered and formally acted upon. The City Council further ratifies, approves and
confirms such written notice and the contents and posting thereof.
Section 3. This Ordinance shall be effective from and after its passage and approval, and it is so
ordered ~ ~ ~ Of;
P ~SSED AND APPROVED, this 24111'd:a :fAp ~ 2066.
By:
C~R~..
L~,\~
Alton E. Porter, Mayor
qaMk-f1j JilL
Martha A. Gillett
City Secretary
~1
/---- .. (
APPRO~U ~ / '
. /"I,~
t.. v1.Y1-
Knox W. Askins
City Attorney
TERM SHEET FOR SETTLEl\1ENT OF
CENTERPOINT ENERGY HOUSTON ELECTRIC (CERE) RATE CASE
1)
Provide a system wide annual benefit of $70 million ($50 million plus $20 million for
renegotiated City of Houston franchise) for each of the years 2006-2009* - Y. 'i r.5
Dollars in Millions
System
Wide
a. Conservation/Energy efficiency programs**
b. Public use to promote health, safety,
welfare of citizens and rate credits
c. F~phise paytnents to non-Houston cities
d. Ren'bgotiated franchise payment to City of Houston
e. Storm reserve
$15
Totals in millions
$26
$ 4
$20
$ 5
$70
2) Current CERE base rates will not change.
3) The Company will continue to be able to file for the following:
a. Updates to Transmission Cost Recovery Factors
b. Updates to Transmission Cost Of Service
c. Surcharges for advance metering as approved by the PUC (parties may intervene)
d. Tariffs/riders to comply with the retail market's new terms and conditions
4) Beginning with the reporting year 2006, CERE agrees to file an Annual Settlement
Report providing a calcul,ation based on the PUC's current annual Earnings
Monitoring Report. The expenditures associated with paragraph 1 above shall be
included in the report 8f1d considered reasonable and necessary expenses for purposes
of calculating CERE's earned returns on equity (ROE) and overall cost of capital.
There will be a ROE range of 10% to 11 %. In the event that the calculated ROE is
above the 11%, an additional amount equal to one-half of those excess revenues
above that point will be provided as an additional benefit prorated between
conservation/energy efficiency programs and public use in the calendar year
following the year monitored by the Annual Settlement Report. In the event that the
calculated ROE falls below the 10%, then one-half of the revenue shortfall will
reduce the annual benefit prorated between conservation/energy efficiency programs
and public use. In the event that the ROE exceeds 12%, the settlement agreement
may be reopened. See Appendix A
Confidential for settlement purposes only
1
5)
CEHE agrees to file a system wide rate case in June 2010, based on a 2009 test year,
unless the Cities and the Company mutually agree that such a filing is unnecessary.
6)
Rates can be adjusted for force majeure (including but not limited to
regulatory/legislative changes, tax law changes, accounting changes or terrorism).
*
**
Assumes agreement by all coalition cities.
The annual benefit associated with conservation/energy efficiency programs is in
addition to the $13 million currently in base rates.
Confidential for settlement purposes only
2
Appel)dix A
CenterPoint Energy Houston Electric (CEHE)
If ROE> 12% - Option to Re-Open
If ROE > 11%
Excess Revenues
Shared 50/50
and Provided as
an Additional
Annual Benefit*
11.0% ROE
If ROE is within this Range,
............
t
10.5% Midpoint ROE
No Change to Annual Benefit
!
~~crJlnW~~~ra'N&'~8cf.r.rr:~~gnservationlenergy
10.0% ROE
If ROE < 10%
Annual Benefit
to be Reduced
by One-half of
Revenue Shortfall*
Confidential for settlement purposes only
3
ALLOCATION OF BENEFITS
Recommendation for the proposed allocation of the annual benefit of $50 million is as
follows:
1. Franchise agreements for cities other than Houston will be extended for 30 years or
until 2046, which ever is sooner, contingent on an approved settlement agreement.
The franchise payments for these cities will be based on the average of the two
highest years from 1998-2005, but in no case will it be less than the highest annual
payment received since deregulation. 1bis is consistent with the mechanism used in
the City of Houston's new franchise agreement. Re-negotiated franchises are not
reflected in current base rates and will be taken into account under paragraph 4 of the
term sheet The City of Houston annual franchise payment increased by
approximately $20 million.
2. Storm reserve in the amount of $5 million is an estimated annual amount to build the
reserve to handle costs associated with a catastrophic event and will be applied on a
system-wide basis only.
3. Additional ConservationJEnergy Efficiency measures above those included in current
base rates are projected to be approximately $15 millIon a year. The projected
funding will be allocated between the City of Houston (40%) and all remaining areas
(60%). The 40% allocation approximates the revenues received from meters located
within the City of Houston.
4. Any remaining dollars that have not been used to achieve the $50 million annual
benefit will be allocated to Public use to promote health, safety & welfare of citizens
and provide rate credits. These amounts will be allocated based on a ratio of kwh
delivered in each city to the kwh delivered on the total system.
Based on above, the following allocations were determined:
Total system wide annual benefit $50 million
1) Houston total *
Conservation/Energy Efficiency
Public Use
$16 million
$ 6 million
$10 million
2) Non Houston total
Franchise
Conservation/Energy Efficiency
Public Use
$29 million
$ 4 million
$ 9 million
$16 million
3) Storm Reserve
$ 5 million
* Increases to $36 million when renegotiated Franchise payment of $20 million is added.
Confidential for settlement purposes only
4
CenterPoint Energy Houston Electric - Energy Conservation Expansion Plan
Projected
Current Additional
Pro2l"am Prouam Type Snend.in2 Spendin2:
Community Weatherization Low Income - Existing $0.4 $1.6
Hard-to-Reach Std. Offer Low Income - Existing 1.9 1.0
Multi-Family Water/Space Htg Low Income - Existing 0.5 0.5
Energy Star Affordable Homes Low Income - Existing 0.1 0.5
Appliance RecycIing/Replacement Low IncomelResidential - New 1.0
Community Agency Outreach Low Income - New 1.0
Multi-Family Energy Efficiency Multi-Family Res. - New 1.0
Energy Star New Home Residential - Existing 3.0 1.0
Trees for Efficiency Res.fLow Income - Existing Pilot 0.1 0.2
Energy OutreacblEducation Residential - New 1.0
Residential/8m Commercial Std. Offer ResJSm.Commercial- Existing 0.8 1.0
T..Joad Management ResJCommercial- New 0.1 0.5
Jreen Building / LEED Program Commercial - New 0.5
CommerciallIndustrial Std. Offer CommerciallIndustrial Existing 4.6 2.0
Building Commissioning CommerciallIndustrial Existing 1.6 0.5
Smart Schools .. Institutional - Existing Pilot 0.3 0.7
Municipal Efficiency Program Municipal - New 1.0
Total $13.4 $15.0
(1) All spending values in million $
(2) Projected additional spending is incremental over current spending.
/,q ~J
Confidential for settlement purposes only
5
CriterialRationale for Selectill!! Prouams
. Emphasize Residential and low income but not exclusively
. Scale-up existing programs based on current demand for them
. Select programs with fast start-up
. Add new programs which we have implemented in past or which have been implemented
by other utilities
. Select programs that are sustainable and can transform energy efficiency IIiarkets
. Leverage and expand the Pleasantville weatherization initiative
. Integrate the TDHCA weatherization program into low-income weatherization program
. Utilize local community action and development agencies as an energy conservation
delivery channel
. Initiate a strong bilingual consumer outreach and education program that giyes
consumers useable tools and information to control and manage energy bills
. Programs are implemented through the competitive market by energy efficiency service
providers to maximum extent
Proe-ram Descriptions
Community Weatherization - Expansion of the Pleasantville weatherization project to other
communities and multi-family dwellings. Integrates TDHCA Weatherization Program.
Hard-to-Reach Standard Offer - Incentives for energy efficiency measures targeting
customers below 200% of federal poverty guidelines.
Multi-Family Water and Space Heating - Incentives to developers for installation of gas water
and space heating in apartments, primarily low-income.
Energy Star Affordable Homes - Promotion of Energy Star efficiency standards in affordable
new home market.
Appliance RecyclinglReplacement - Removal of old refrigerator and replacement with new
energy efficient model for low income customers. Also includes window NC upgrades plus
insulation addition.
Community Agency Outreach - Incentive program for efficiency upgrades to new and existing
homes through area community development and action agencies such as Sheltering Arms,
Urban League, Habitat for Humanity, Rebuild Houston Together, etc.
Multi-Family Energy Efficiency - Incentives to builders/developers who build apartments to
Energy Star standards.
Energy Star New Home - Promotion of energy efficient new home construction through
incentives, training, Energy Star certification.
Confidential for settlement purposes only
6
Trees for Efficiency - Promotion of tree planting to promote shading and reduced AlC energy
use. Includes low income component involving City of Houston/Houston HOPE organization.
Energy OutreachlEducation - Area-wide dissemination of educational materials and kits to
give customers tools to reduce energy use.
Residential/SmaIl Commercial Standard Offer - Incentives for a variety of residential and
small commercial efficiency measures.
Load Management - Payments to customers for shifting electric load from peak to off-peak
periods. The City of Houston plus other cities have participated in this type of program in the
past.
Green BuildinglLEED Program - Incentives to commercial developers/building owners for
construction of green/LEED (Leadership in Energy and Environmental Design) qualified
buildings.
CommerciaIllndustrial Standard Offer - Incentive program for installation of efficiency
measures in large commercial and industrial facilities.
Building Commissioning - Energy audit and building tune-up for commercial and industrial
facilities.
Smart Schools - District-wide energy management program for local school districts.
Municipal Efficiency Program - Incentives for energy efficiency projects at municipal
facilities including office buildings, water/wastewater facilities, traffic light upgrades to LED's.
Confidential for settlement purposes only
7
>
=.
...
;.
II:'
Co
...
;I
o
;:r
...
~
=-
..
;:
i
;I
So
;;-
...
;;-
;I
o
-
'C
..
p:
1-3
~~
=
l;;"
'"tl
o
;:l.
CD
~n
CD....
0.1;1)
o
<0
~
(l)
CO....
_0) g
gl;l)
(l)
0.
~
n
-
~.
~s
~
~~~4~
Co
CD
(.>
-I
~
~-
5: :!l
0,9
(j
- en
<Or-
~m
o -I ~
. 0 0
~ - 0
~m_
I'J -
~
o
-EI') ~ "U
oce
~o2:
-"feS-=n
~mC.mc
N :!lien
m .. CD
en ::r
-"
-EI'} ill
llIc;;o
CiJ '5 0
...... III ... C
~ - 1lI ::I
~ ~a.g.
8 as"Q.
o ;
o Q.
.'
'.
:;.
.. .. Ill:
;; IS
.. ..
~~
..
s
I
...
e
..
o~~
to ~ 15:
"''''
0\0\
"''''
;;-..
.. l!!
~ it
13...
~ <5
.. ..
o :il
~ -
c ~:=s
.. .,,=1;
j 1ft
l!: c; 0< ~
=!o
C ' t:JS
o 8 Ii If
't!"'&"S'
~ .. ~
~"I ;I-
~~ ~
"'~ ..
~ ~ ':
......
"''''
~t:J.,,~
--€:$!Lgl!!
l:ll:l ~ta...~
......~. ~a'1
ee~fgi"
...... ..
.. ~lirr
t:J~E.
:l'5 t ~~
-;;ii!l~B
~~!g.ts;:-
~nil II~;'~
~~ !Qg.
.. :z
__ jllt
"'''' B'"
ii !t
...... Iii"
"'''' ..
!i i r,
lllfl~!s-i8
~=:!B!f'2ft
~~ ! &. ..
i
!
I
=
8~
I~
~E
~
~
~
!:!
~
Dereaulation of Electric Utility Industrv - Januarv. 2002
Prior to deregulation - integrated utility, same company generated electricity,
delivered electricity and billed customers.
RELIANT ENERGY
. . .
Generation Delivery Billing
& &
Metering Retail
Subsequent to deregulation - utility (and Reliant) split into three separate
businesses. S 131
Billina Be.
Retail
Retailers
Retailers include Reliant Energy, TXU, GEXA Energy, First Choice, Green
Mountain, First Constellation, etc.
Customers receive one bill from their retail provider. CenterPoint Energy bills the
retail providers for "delivering" the electricity. Our portion of the bill received by
the customer is about 3.5 centsjkwhr. The average residential rate is
approximately 15 centsjkwhr.
Franchise Payments
. Prior to deregulation, CenterPoint Energy paid 40/0 of gross receipts as a
franchise fee.
. With deregulation, the utility is unable to pay on gross receipts since the
"wire company" does not bill customers.
. Senate Bill 7, based upon input from TML, established franchise payments
based upon the amount of electricity delivered and the franchise amounts
paid in 1998.
. $ Paid in Franchise Fees in 1998 = Franchise Factor
Kwhr Delivered in 1998
. During subsequent years, franchise fees were paid using the franchise
factor
Franchise Factor x Kwhr Delivered = Franchise Payment
. Proposal- franchise payments will be set as the greater amount of a) the
averae of the two (2) highest years from 1998 to 2005 or b) the highest
deregulation payment.
. Provision for annual adjustment.
. Annual Adjustment
Annual Adjustment Factor =
Year "X" Kwhr
2005 Kwhr