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HomeMy WebLinkAboutR-2008-03 Tabled/suspend effective date of CenterPoint’s rate increase for 90 days 8 REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested: March 24, 2008 Budl?:et Requested By: Ron Bottoms Source of Funds: Department: Administration Account Number: Report: Resolution: "/. Ordinance: Amount Budgeted: Exhibits: Ordinance Amount Requested: Exhibits: Model Staff Report Budgeted Item: YES NO Exhibits SUMMARY & RECOMMENDATION Attached is a report and a resolution dealing with CenterPoint Energy's recent rate filing that was put together by attorneys with Lloyd Gosselink. The report addresses some general background information and the resolution actually suspends the effective date of Center Point's action by 90 days allowing us time to thoroughly analyze the rate increase. Suspending the effective date does not obligate us to intervene in the rate filing. :1/'7/00 Date RESOLUTION NO. .ACOr-a5 \ i WJ .\Q\ J 3\)~ RESOLUTION OF THE CITY OF LA PORTE SUSPENDING THE APRIL 10,2008, EFFECTIVE DATE OF CENTERPOINT ENERGY RESOURCES CORP., D/B/A CENTERPOINT ENERGY ENTEX AND CENTERPOINT ENERGY TEXAS GAS (CENTERPOINT) REQUESTED RATE CHANGE TO PERMIT THE CITY TIME TO STUDY THE REQUEST AND TO EST ABLISH REASONABLE RATES; APPROVING COOPERATION WITH THE GULF COAST COALITION OF CITIES AND OTHER CITIES IN THE CENTERPOINT AREA TO HIRE LEGAL AND CONSULTING SERVICES AND TO NEGOTIATE WITH THE COMP ANY AND DIRECT ANY NECESSARY LITIGATION AND APPEALS; RATIFYING THE SELECTION OF LLOYD GOSSELINK AS LEGAL COUNSEL; REQUIRING REIMBURSEMENT OF CITIES' RATE CASE EXPENSES; FINDING THAT THE MEETING AT WHICH THIS RESOLUTION IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW; REQUIRING NOTICE OF THIS RESOLUTION TO THE COMPANY AND LEGAL COUNSEL WHEREAS, on or about March 6, 2008, CenterPoint Energy Resources Corp., d/b/a CenterPoint Energy Entex and CenterPoint Energy Texas Gas ("CenterPoint" or "Company"), pursuant to Gas Utility Regulatory Act S 104.102 filed with the City of La Porte a Statement of Intent to change gas rates in all municipalities exercising original jurisdiction within its Texas Coast Division service area effective April 10, 2008; and WHEREAS, it is reasonable for the City of La Porte to maintain its involvement in the Gulf Coast Coalition of Cities ("GCCC") and to cooperate with the other similarly situated city members in conducting a review of the Company's application and to hire and direct legal counsel and consultants and to prepare a common response and to negotiate with the Company and direct any necessary litigation; and WHEREAS, the Gas Utility Regulatory Act S 104.107 grants local regulatory authorities the right to suspend the effective date of proposed rate changes for ninety (90) days; and WHEREAS, the Gas Utility Regulatory Act S 103.022 provides that reasonable costs incurred by Cities in ratemaking activities are to be reimbursed by the regulated utility; and WHEREAS, on or about March 6, 2008 simultaneous with the filing with the City, CenterPoint filed a Statement of Intent to change gas rates for the Texas Coast environs with the Railroad Commission of Texas referred to as Gas Utility Docket ("GUD") No. 9791. 1 THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LA PORTE, TEXAS: 1. That the April 10, 2008, effective date of the rate request submitted by CenterPoint on or about Mach 6, 2008, be suspended for the maximum period allowed by law to permit adequate time to review the proposed changes and to establish reasonable rates. 2. That the City is authorized to cooperate with GCCC and its member cities in the Texas Coast Division service area to hire and direct legal counsel and consultants, negotiate with the Company, make recommendations to the City regarding reasonable rates and to direct any necessary administrative proceedings or court litigation associated with an appeal of a rate ordinance and the rate case filed with the City or Railroad Commission. 3. That the selection of the law firm of Lloyd Gosselink to represent the GCCC and its members in this matter is ratified. 4. That the City is authorized to intervene and patlclpate in GUD No. 9791, Statement of Intent of Center Point Energy Resources Corp. D/B/A CenterPoint Energy Entex and CenterPoint Energy Texas Gas to Increase Rates in the Unincorporated Areas of CenterPoint's Texas Coast Division, in order to protect the interests of the City. 5. That the City's reasonable rate case expenses shall be reimbursed by CenterPoint. 6. That it is hereby officially found and determined that the meeting at which this Resolution is passed is open to the public as required by law and the public notice of the time, place, and purpose of said meeting was given as required. 7. A copy of this Resolution shall be sent to CenterPoint, care of Denise Hardcastle, Director of Regulatory Activities and Compliance, CenterPoint Energy, P.O. Box 2628, Houston, Texas 77252-2528 and to Thomas Brocato, at Lloyd Gosselink, P.C., 816 Congress, Avenue, Suite 1900, Austin, Texas 78701. Alton Porter Mayor, City of La Porte ATTEST: CUy At:tolLnetj 2 MODEL STAFF REPORT CenterPoint Energy Gas has filed an application with cities retaining original jurisdiction over rates and services to increase rates within their Texas Coast Division by $7.36 million. The Company's application was filed with the City on March 6, 2008. Purpose of the Resolution: The resolution suspends the effective date of the Company's rate increase for the maximum period permitted by law to allow the City time to evaluate the filing, determine whether the filing complies with law, and if lawful, to determine what further strategy, including settlement, to pursue. The law provides that a rate request made by a natural gas utility cannot become effective until 35 days following the filing of the application to change rates. The law permits the City to suspend the effective date for 90 days. If the City does not take action to suspend the filing, CenterPoint may begin charging increased rates after April 10, 2008. According to CenterPoint, annual rates would increase by approximately $42 for residential customers. The City has participated in prior rate matters with a coalition of cities now known as Gulf Coast Coalition of Cities (GCCC). GCCC is a coalition of thirteen cities who have passed resolutions authorizing GCCC to intervene on behalf of the city in numerous utility matters pending before regulatory agencies, the Courts or the Legislature. A list of the current members impacted by this application is attached. Explanation of "Be It Resolved" Paral!raphs: Section 1. The city is authorized to suspend the effective date for 90 days for any legitimate purpose. Time to study and investigate the application is always a legitimate purpose. Please note that the resolution refers to the suspension period as "the maximum period allowed by law" rather than ending by a specific date. This is because the Company controls the effective date and can extend the deadline for final city action to increase the time that the City retains jurisdiction if necessary to reach settlement on the case. If the suspension period is not increased by the Company, the City must take final action on CenterPoint's request to raise rates by April 10, 2008. Section 2. Negotiating clout and efficiency are enhanced by the City cooperating with other GCCC cities in a common review and common purpose. Additionally, rate case expenses are minimized when GCCC hires one set of attorneys and experts who work under the guidance and control of the GCCC. This provision authorizes the GCCC to act on behalf of the City at the local level in settlement discussions, and in preparation of a rate ordinance and on appeal of the rate ordinance to the Railroad Commission and on appeal to the Courts. Any settlement negotiated by GCCC must be approved by all GCCC member city councils through new rate ordinances. Section 3. Lawyers with Lloyd Gosselink have extensive experience in representing cities and coalitions of cities in ratemaking matters. Geoffrey Gay of Lloyd Gosselink has represented GCCC in regulatory matters for the last decade. This section ratifies the Coalition's continued reliance on Lloyd Gosselink for legal services. Section 4. This provision authorizes the GCCC to intervene in GUD No. 9791 at the Railroad Commission. Because the Company is seeking uniform rates within its Texas Coast Division and because the Railroad Commission has original jurisdiction over the rates in the environs, simultaneous with its filing with the cities on March 6, CenterPoint also filed its rate application with the Railroad Commission for the environs. Once the city proceedings are finalized, it is anticipated that they will be appealed to the Railroad Commission where they will be consolidated into the current pending case. Section 5. Cities, by statute, are entitled to recover their reasonable rate case expenses from the utility. Legal counsel and consultants approved by the GCCC will submit monthly invoices to the City of Friendswood that will be forwarded to CenterPoint for reimbursement. No individual city incurs liability for payment of rate case expenses by adopting a suspension resolution. Section 6. This section merely recites that the resolution was passed at a meeting that was open to the public and where the consideration ofthe Resolution was properly noticed. Section 7. This section provides that both CenterPoint and counsel to GCCC will be notified of the City's action by sending a copy of the approved and signed resolution to certain designated individuals. HOW ARE RATE CASE EXPENSES RECOVERED FROM CUSTOMERS IN RATE PROCEEDINGS? 1. The Gas Utility Regulatory Act ("GURA") allows a utility to recover from customers both the reasonable rate case expenses the utility directly incurs to put on its case, as well as any reimbursement to the municipality for its costs. 1 2. The regulatory authority (either the municipality having original jurisdiction over the utility's rates or the Railroad Commission of Texas on appeal) only has the authority to order the recovery of rate case expenses from customers whose rates will change as a result of the case pending before the regulatory authority. WHAT DOES THIS MEAN? In Texas, a city gets the exclusive right to determine whether a rate request is reasonable for customers in that city. It is only if the utility appeals a city's decision on rate relief to the Railroad Commission that the Commission gains the authority to set rates for those city's customers. In contrast, if a city approves the requested rates or lets them go into effect, the Railroad Commission has no authority to change the rates for that city. This also means that on appeal, the Railroad Commission cannot order a surcharge on rates for recovery of rate case expenses associated with the appeal for city customers whose rates are not at issue on appeal. WHY? Because the Railroad Commission does not have authority to change the rates of customers in those cities that are not participating in the appeal case. WHAT IS THE CONSEQUENCE OF THIS? The consequence is that the Railroad Commission can only order the recovery of rate case expenses from those customers who live in the cities that deny the rate change and end up in an appeal before the Railroad Commission. WHY HAVE ALL CUSTOMERS OF ATMOS MID-TEX PAID FOR RATE CASE EXPENSE IN THE PAST? Because in past cases (GUD No. 9400 and GUD No. 9670) every city served by Atmos Mid-Tex participated in the appeal at the Railroad Commission. HAS THE RAILROAD COMMISSION REJECTED SURCHARGING RATE CASE EXPENSES ON A CITY NOT PARTICIPATING IN AN APPEAL? Yes. In GUD No. 9465, the utility filed for a rate change in four cities. The utility settled with the City of Port Arthur, Texas, agreeing to give that city most favored nation treatment from any resulting appeal. The other three cities denied the proposed rates and litigated an appeal at the Railroad Commission. Over those three cities' objections, the Railroad Commission surcharged rate case expenses only on the three cities involved in the appeal and not on the settling city. Although the Commission approved a revenue increase of only $518,950 for the three non-settling, rate case expenses for the utility and the three non-settling cities exceeded $1 million, which worked out to about $70 per person in litigation costs. IS THERE ANY GUARANTEE THAT THE RAILROAD COMMISSION WILL ALLOW THE CITY TO RECOUP ITS RATE CASE EXPENSES? No. A city's recovery of rate case expense is not guaranteed. The Railroad Commission has become tougher on the recovery of rate case expenses by both cities and utilities. I See Railroad Commission of Texas case GUD No. 9002-9135, citing GURA S 1 03.022 and S 104.051. W:C:\Docurnents and Settings\00061286.CNP\Local Settings\Ternporary Internet Files\Content.Outlook\JZRNJG3W\CP Revised Rate Case Expense Handout.doc . CenlerPoinL Energy March 20, 2008 Mayor and City Officials City of La Porte La Porte, Texas RE: Pending Statement of Intent to Change Rates Ladies and Gentlemen: I am writing to confirm to you that if the City of La Porte approves the rates proposed by CenterPoint Energy in its Statement of Intent to Increase Rates filed with the city on March 6, 2008, and if the Railroad Commission of Texas shall subsequently establish a lower level of division-wide base rates with respect to this filing for customers in CenterPoint Energy's Texas Coast Division, or if CenterPoint Energy shall otherwise agree to implement a lower level of base rates with respect to this filing in another city or cities in the Texas Coast Division, CenterPoint Energy shall file such lower level of base rates with the City of La Porte immediately on the issuance of the final, non-appealable order of the Railroad Commission establishing such lower base rates or the filing by CenterPoint Energy of tariffs in another Texas Coast city implementing such lower base rates. By approving the proposed rates, the City of La Porte and its citizens will avoid potentially substantial litigation expenses associated with proceedings undertaken by other municipalities or coalitions of municipalities or the Railroad Commission of Texas. If you have any questions, please contact Doug Ward at 281-342-8881. r ruly yours, C3~' Richard A. Zapalac Regional Vice President-Texas cc: George Hepburn Keith Wall Doug Ward . CenterPoint. Energy March 12, 2008 Mayor and City Officials City of La Porte La Porte, Texas RE: Pending Statement of Intent to Change Rates Ladies and Gentlemen: I am writing to confirm to you that if the City of La Porte approves the rates proposed by CenterPoint Energy and if the Railroad Commission of Texas shall subsequently establish a lower level of division-wide base rates for customers in CenterPoint Energy's Texas Coast Division, CenterPoint Energy shall file such lower level of base rates with the City of La Porte immediately on the issuance of the final, non-appealable order of the Railroad Commission establishing such lower base rates. By approving the proposed rates, the City of La Porte and its cItlzens will avoid potentially substantial litigation expenses associated with proceedings undertaken by other municipalities or coalitions of municipalities or the Railroad Commission of Texas. If you have any questions, please contact Doug Ward at 281-342-8881. (~ly yours, ~~<-~~~.- Richard A. Zapalac Regional Vice President-Texas cc: George Hepburn Keith Wall Doug Ward