HomeMy WebLinkAbout1982-08-25 Special Called Meeting• •
• MINUTES
OF THE
SPECIAL CALLED MEETING FOR A
PUBLIC UTILITY RATE INCREASE HEARING
OF THE LA PORTE CITY COUNCIL
AUGUST 25, 1982
The meeting was called to order by Mayor Cline at 7:00 P.M.
Members of the City Council Present: Mayor Virginia Cline,
Councilpersons Norman Malone, John Longley, Ed Matuszak, Kevin
Graves, Lindsay Pfeiffer, Deotis Gay, Don Skelton, Linda
~nlestergren
Members of the City Council Absent: None
Members of the City Staff Present: City Manager Jack Owen,
City Attorney Knox Askins, City Secretary Betty Waters, Director
• of Administrative Services Robert Herrera, Fire Chief Joe Sease,
Fire Marshal Paul Hickenbottom
Others Present: Dick Bell, Bayshore Sun; Ellen Stover, La Porte
Broadcaster; Jeff Patterson, Southeast Weekly; and 9 interested
citizens.
Mayor Cline stated this public hearing has been called to provide
time for all persons interested in the rates of Houston Lighting
and Power Company to appear and be heard. Mayor Cline further
stated all pre-filed materials concerning this rate increase ap-
plication and direct testimony and exhibits of Harvey L. Winkel-
mann, Manager of Regulatory Affairs and Jane K. Wilton, Assistant
Manager of Regulatory Affairs, both of the Public Service Depart-
ment of the City of Houston, were available for public review.
City Attorney Askins read: AN ORDINANCE RELATING TO RATES TO BE
CHARGED BY HOUSTON LIGHTING & POWER COMPANY FOR ELECTRIC UTILITY
SERVICE WITHIN THE CORPORATE LIMITS OF THE CITY OF LA PORTE,
TEXAS; CONTAINING FINDINGS AND PROVISIONS RELATED TO THE SUBJECT;
PROVIDING FOR A REPEALER AND FOR SEVERABILITY
A motion was made by Councilperson Skelton to accept and approve
Ordinance No. 1332 as read by the City Attorney. Second by
Councilperson Pfeiffer.
• •
• Minutes, Special Called Meeting for Utility Rate Increase Hearing
August 25, 1982, Page 2
Mayor Cline asked if there was any discussion from the floor or
from the Council table. There being none, the Mayor called for
a vote.
The motion carried, 9 ayes and 0 nays.
Ayes: Councilpersons Malone, Longley, Matuszak, Graves, Pfeiffer,
Gay, Skelton, Westergren and Mayor Cline
Nays: None
A motion was made by Councilperson Graves requesting an executive
session concerning personnel. Second by Councilperson Matuszak.
The motion carried, 9 ayes and 0 nays.
Ayes: Councilpersons Malone, Longley, Matuszak, Graves, Pfeiffer,
Gay, Skelton, Westergren and Mayor Cline
Nays: None
The Council adjourned into executive session at 7:12 P.M.
The Council returned to the Council table at 8:34 P.M.
• A motion was made by Councilperson Skelton to call a special
called workshop on the 1982-83 budget for Tuesday, August 31, at
5:00 P.M. at the I. J. Kibodeaux Service Center. Second by
Councilperson Pfeiffer. The motion carried, 9 ayes and 0 nays.
Ayes: Councilpersons Malone, Longley, Matuszak, Graves, Pfeiffer,
Gay, Skelton, Westergren and Mayor Cline
Nays: None
There being no further business to be brought before the Council,
the meeting was duly adjourned at 8:35 P.M.
Respectfully submitted:
~GC~.~?r¢~'
ty aters, City Secretary
Passed & Approved this the
is day of September, 1982
~ ~ r I ,
Vir inia Cline, Mayor
•
•
Kathryn J. Whitmire, Mayor
~ CITY OF HOUSTON
Post Office Box 1562 Houston, Texas 77251
CITY COUNCIL MEMBERS: Larry McKaskle • Ernest McGowan. Sr. • George Greanias • Antt,cx,y W. Halt, Jr. • Frank O. Mancuso • John G. Goodner • Christin Hartung
Dale M. Gorcrynski • Ben T. Reyes • Jim Westmoreland • Eleanor Tinsley • J:m Greenwood • Homer L Ford • Judsan Robinson. Jr- • CITY CONTROLLER: Lance Lalor
Suggestions for the Cities in the Coalition of Cities with Original Jurisdiction:
1) Circulate copies of the "Request for Council Action" to Council persons before
the hearing for their review.
2) Adopt ordinance at hearing on or before August 26, 1982.
3) Give HLbcP representative the original ordinance or a certified copy of the
ordinance.
4) Please provide A~arsha R. Gardner with copy of ordinance by August 27, 1982.
• 5) If there are any questions, please call:
Diane Tate
jt'ork 465-8308
Home 464-2407
City of Houston
Public Service Department
P. O. Box 1562, Houston 77251
612 Gray, Houston
658-0343
•
Date Subject: - Q~ ~ ator's Pa e
8/18/82 HLacP RATE INCREASE 1f1hi~als 6 e 6
of -__
• t Kwh consumed times the a ro riate rate as follows:
(b) An amount based on to al pp p
30 Kwh - 750 Kwh, a rate of 2.1015 per Kwh
30 Kwh - 1500 Kwh, a rate of 3.1015 per Kwh
1501 Kwh and over, a rate of 4.1015@ per Kwh
The thrust of the new middle tier based on average summer usage is to afford a price
advantage for consumption up to 1500 Kwh.
Ply
(c) Fuel Adjustment Clause.
The Public Service Department recommends that HLbtP be permitted to-produce additional
revenues in the amount of $181,561,000. This excludes recovery for the Allen's Creek Nuclear
Project, and imposes cost limitations upon the South Texas Nuclear Project and makes appropriate
deductions from rate base for South Texas Nuclear Project.
Rate design treatment includes an additional tier to provide a price incentive for
conservation among residential customers.
•
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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,
Date Subject: - Ori inator's
8/18/82 HL&P RATE INCREASE 1~I~ 2 Poe 6
r~{ials
•
a return on the unamortized balance of its investment less accumulated deferred taxes. However, 73%
would be recovered during the five-year period between 1983-1987. We recommend disallowance of
$388 million actually attributable to the Project, including $324 million for plant and $64 million for
nuclear fuel, whether categorized as an extraordinary loss or as an item in the rate base under
"Construction Work In Progress", as explained below.
The reason for disallowance as an extraordinary loss is that HL&P in testimony filed with the
City as a part of its application admits that no decision has been made by the Company as to whether
to cancel the plant. Such a decision is predicated on "appropriate action by the (Public Utility)
Commission which provides for recovery of the investment in the Project through rates " Jordan, Vol.
1, p.6. In other words, HLdcP is asking the City and ultimately the Public Utility Commission to
indicate the amount of recovery they will be granted before they will decide whether or not to build
the plant.
Our position is that until there has been a formal cancellation of HL&P's certificate to build
Allen's Creek Nuclear Project ("Allen's Creek"), it is untimely and inappropriate to recover any funds
for such cancellation.
Because the recover of Allen's Creek is disallowed under "Extraordinary Losses", the alternative
for recouping funds would be to include it in rate base or "Construction ti'Vork In Progress".
However, because the Company has stated that they have virtually ceased investing funds in the
Allen's Creek and do not consider it to be economically feasible, such item is not properly included in
rate base as Construction j'; ork In Progress. Eliminating Allen's Creek from the case reduces the
Company's $336 million rate increase request by more than $90 million.
South Texas Nuclear Project
Another major consideration for analysis and treatment is the South Texas Nuclear Project
("STNP"). HL&P recently filed with the City a report by Bechtel Power Corporation, the proposed new
architect/engineer for the STNP, which indicates an estimated cost of $5.5 billion to complete the
project. While blaming Nuclear Regulatory Commission changes in rules and requirements along with
management deficiencies of Brown Ec Root, the former architect/engineer and contractor for STNP,
the costs for the project have soared from estimates of $790 million to $5.5 billion. The PUC has
ignored the reasons for such cost escalations in the past, but our opinion is that the burden upon the
ratepayer to finance this project is rapidly becoming impermissible and it is extremely appropriate to
address the situation at this time. While the Public Service Department had neither the time nor
manpower to investigate all allegations of mismanagement in the operation of the Project, there likely
will be a full inquiry as a result of the suit filed by HLacP against Brown be Root. We are
recommending certain rate treatment based on the outcome of the court's findings.
C.H. Guernsey & Company has made the following reQOmmendations affecting both present and
future rate treatment, in which we concur (see Blumenthal testimony):
1) Eliminate the equity portion of Allowance for Funds Used During Construction ("AFUDC") when
there was no construction under way. This includes 12/1/79-10/31/80; 12/1/81-3/31/82 (end of
test year). For any future rate case, we recommend the exclusion of the period from 3/31/82
until construction commences. The total dollars eliminated from the proposed rate base are
$16,312,480.
2) Disallow accrual of the equity portion of AFUDC or additional money invested for any
construction until there is Council review in a subsequent rate case.
t~-o~
i Date Subject: ~ - Q~ ator's pe e
I 8/18/82 HLbcP RATE INCREASE "`th~ials 3 e 6
of ---
i`
3) Limit HL~CP's total participation in the $5.5 billion project to $1,692,460,000 with cost overruns ~
being borne by the investor and not the ratepayer. (This amount excludes AFUDC and sales and
property taxes.)
4) Disallow the cost of the lawsuit filed by HLbcP against Brown & Root.
5) Credit any recovery in the lawsuit filed by HL&P against Brown ac Root to the cost of the
Project.
6) Disallow recovery from the ratepayer of any damages found to be payable by HLbcP in the
lawsuit filed by HLEcP against Brown be Root.
Other Major Adjustments
Excluding Allen's Creek, HLdcP requests a rate base of $4,006,153,000. The Public Service
Department recommends an original cost rate base of $3,953,996,000. Other primary differences
between the two rate bases include: (1) elimination of $6,319,000 for certain cost-free capital; (2)
elimination of $5,993,000 in deferred taxes; and (3) elimination of $22,954,000-for plant held for future
use which includes the site for Allen's Creek.
COST OF CAPITAL
The average weighted cost of capital proposed by HLbcP is 12.98%. The Public Service
Department recommends 12.73% based on the following considerations: (See tiVilton, Schedule I, for
• suggested method for determining cost of capital).
Average Cost of Debt
HLbcP proposes 9.55%. The Public Service Department recommends 9.55%. This percentage is
based on the actual average cost of long-term debt for which the Company is presently obligated.
Return on Equity
HLBcP has requested a 17.50% return on equity. The Public Service Department recommends
16.95%. The recommendation is based on an assessment of risk in raising capital for the Company's
massive construction program. Although the Company has indicated that by recovering money for the
cancellation of Allen's Creek Nuclear Project they would be able to bring the two lignite projects (4
units) on line one year earlier than originally anticipated, we have had to maintain the original
schedule for the lignite plants in order to allow the Company enough internal cash to finance the other
projects. By eliminating Allen's Creek as a means for recovery of funds, the Company's ability to
generate cash internally is reduced.
Both Standard be Poor's Corporation and Moody's Investor Service, the two major securities
rating agencies, have downgraded HLacP to A+ and A-1, respectively, from a AA status because of the
financial risk associated with the Company's construction program. Further downgrading would lead to
higher interest cost to the ratepayer and limit the available financial markets. Therefore, it is
important to generate sufficient cash internally to enable the Company to finance the majority of its
needs through stocks and bonds. Although the PUC has generally prescribed a parameter of 40% for
internal cash generation, our recommendation allows the Company to recover approximately 35%
.through rates. A 16.95% return on equity is necessary to achieve the 35% parameter. The recent
decline in market interest rates should impact favorably upon the Company's ability to finance its
capital needs for the next year.
n-0a
Date Subject: ~ator's page 6
8/18/82 HLbcP RATE INCREASE ~~fini#iats 4
of -__
• ADDITIONAL REVENUE REQUIREMENTS
i
Based on invested capital (rate base) of $3,953,996,000, arate of return of 12.73%, and revenue
requirements of $3,529,921,000 (see Winkelmann, Schedule I), HLdtP has an additional revenue
requirement of $181,561,000.
OTHER LSSUES
Street Lights
HL&P has proposed a change in its street light tariff, which will greatly benefit the ratepayer
and the public-at-large. The Company has effectively eliminated the present charge for installation,
which has ranged from $350-$850 per street light, payable by the customer. In addition, the Company
has decreased the rates pertaining to high pressure sodium lights to make this efficient light more
economical to use. These changes will facilitate the Department's master plan to install
approximately 12,000 street lights within the City.
Lead-lag Study
Pursuant to Council's request in its 1981 order concerning HLEcP's 1981 rate application, the
Company performed alead-lag study through Arthur Anderson & Company to determine the actual
working capital allowance which should be allowed in the rate base for the test year ending March 31, ~
1982. Working capital is required to fund the timing difference between the payment of operating
.costs and the receipt of customer revenue. The "formula approach" utilized presently by HL&P and
the PUC adopts a 45-day lag period for determining working capital needs, which represents 1/8 times
operation and maintenance expenses, less any prepayments and materials/supplies charged to operation
and maintenance.
The purpose of the special lead-lag study was to determine the method most favorable to the
ratepayer. The result is that the formula method in this case saves the ratepayer more than $2 million
annually. Because the study itself costs approximately $70,000 annually, and the results are
unfavorable to the ratepayer, we recommend the continuation of the "1/8 formula approach" until
changes in HL~CP's operational procedure indicate otherwise.
Cogeneration
In simple terms, cogeneration is the ability of a company to produce electricity as a by-product
of its normal operation. Such electricity can be used for internal purposes or sold to someone else,
ems., HLdcP. Because HLbcP's massive construction program is directly related to customer demand, in
particular the industrial customers, we recommend that HLdcP be directed to evaluate and determine
cogeneration potential in the Houston area and aggressively seek to develop power through such
sources. If such opportunity and capability is developed, the result will be a reduced need for new
plants and excessive capital expenditures, which would in turn stabilize the rates now paid by the
consumer.
Fuel Adjustment Clause
The Public Service .Department has received numerous complaints about the fuel adjustment
clause on the customer's bill, which allows the pass-through of certain costs associated with the
.purchase of fuel. by HLacP. Although we have had inadequate time for a thorough analysis of the
appropriateness of the fuel adjustment clause for this proceeding, the Public Service Department
intends to undertake such an analysis on behalf of the ratepayer. One reason for the clause is that it
n~
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
Oate Subject: p~ i ator's
8/18/82 HLEtP RATE INCREASE M~~a~s 6 Pe9e 6
of -__
•
(b) An amount based on total Kwh consumed times the appropriate rate as follows: ~
30 Kwh - 750 Kwh, a rate of 2.1015 per Kwh
30 Kwh - 1500 Kwh, a rate of 3.1015 per Kwh
1501 Kwh and over, a rate of 4.1015 per Kwh
The thrust of the new middle tier based on average summer usage is to afford a price
advantage for consumption up to 1500 Kwh.
plus
(c) Fuel Adjustment Clause.
SUI~iMARY
The Public Service Department recommends that HLdcP be permitted to-produce additional
revenues in the amount of $181,561,000. This excludes recovery for the Allen's Creek Nuclear
Project, and imposes cost limitations upon the South Texas Nuclear Project and makes appropriate
deductions from rate base for South Texas Nuclear Project.
Rate design treatment includes an additional tier to provide a price incentive for
• conservation among residential customers.
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SCHEDULEI
PAGE 2 of 2
CITY OF HOUSTON
HOUSTON LIGHTING & POWER COMPANY
Weighted Average Cost of Capital (000's)
For the Test Year ended March 31, 1982
Including ITC in the Capital Structure
Adjusted
Capitalization Percent __ Weighted
as of of Total ~ Average
March 31, 1982 Capitalization Cost Cost
•
Loner Term Debt 2 028 042
~> > .4664 .0955 .0445
Preferred Stock 243,518 .0560 .0823 .0046
Common Equity 1,795,597 .4129 .1695 .0700
Unamortized ITC 281,393 .0647 .1273 .0082
Total $4,348,550 1.0 .1273
• -
. INCREASE OVER CURRENT RATE BY CLASS
(Proposed $181 Million Increase)
6.59% RS (37% of Increase)
6.90% MGS 41.3% of Increase to Commercial
4.97% LGS
4.10% LOS "A 17.8% of Increase
3.82% LOS B to Industrial
3.36% DOW Including Dow
3.32% Ti4SP
8.11% ST LTS
4.32% GUARD LTS
System average increase is 5.56% of adjusted test year revenues.
•
RS =Residential Service
MGS =Miscellaneous General Service
LGS =Large General Service
LOS A =Large Overhead Service (A)
LOS B =Large Overhead Service (B)
TMP =Texas-New Mexico Power Company Contract
DOW =Dow Contract for Firm and Interruptible Service
ST LTS =Street Lights
GUARD LTS =Protective Lighting
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•
•
•
COfidPARISON OF RATES
CURRENT RATES (Summer -Winter Differential)
Customer Charge:
plus
May through October (summer rate)
31 Kwh - 750 Kwh
November through April (winter rate)
plus
Fuel adjustment clause
$ 6.00 per month (includes 30Kwh)
3.845~/Kwh over 30 Kwh
2.345~/Kwh
2.345~/Kwh over 30 Kwh
PROPOSED NEW TIERS ($181 Million)
l~
u
Customer Charge: $ 8.00 per month (includes 30 Kwh)
plus total Kwh based on following rate:
31 Kwh - 750 Kwh 2.1015/Kwh
751 Kwh - 1500 Kwh 3.1015/Kwh -.
1501 Kwh and over 4.1015/Kwh
plus
Fuel adjustment clause
SUMMER -WINTER DIFFERENTIAL (Existing Method) at $181 Million
Customer Charge:
plus
May through October (summer rate)
31 - 750 Kwh
November through April (winter rate)
plus
Fuel cost adjustment
$ 8.00 per month (includes 30 Kwh)
4.2263~/Kwh over 30 Kwh
2.5763~/Kwh
2.5763@/Kwh over 30 Kwh
SUMMER -WINTER DIFFERENTIAL (Existing Method) at $336 Million
•
Customer Charge:
plus
May through October (summer rate)
31 Kwh - 750 Kwh
November through April (winter rate)
plus
Fuel adjustment clause
B-2014
$8.00 per month (includes 30 Kwh)
4.846~/Kwh over 30 Kwh
2.5763@/Kwh over 30 Kwh
2.57.63~/Kwh over 30 Kwh
•
•
THE STATE OF TEXAS X
COUNTY OF HARRIS X
CITY OF LA PORTE X
I, Betty T. Waters, City Secretary of the City of La Porte,
Texas, do hereby certify that the attached is a true and correct
copy of Ordinance 1332; passed and approved and adopted by the
City Council o~f the City of La Porte at a Special Called Meet-
ing thereof duly called and held on the 25th day of August,
1982, as same appears of record in the minutes of said meeting,
at whcih meeting a quorum of the City Council was present and
all present voted for the approval, passage and adoption of
said Ordinance.
TO CERTIFY WHICH WITNESS MY HAND AND OFFICIAL SEAL of the
City of La Porte, Texas, this the 25th day of August, 1982.
• City of La Porte
ti~ G~-t G'LIJ
ett T. Waters
Cit Secretary
•
ORDINANCE NO. 1332
AN ORDINANCE RELATING TO RATES TO BE CHARGED BY HOUSTON LIGHTING
& POWER COMPANY FOR ELECTRIC UTILITY SERVICE WITHIN THE CORPORATE
LIMITS OF THE CITY OF LA PORTE, TEXAS; CONTAINING FINDINGS AND
PROVISIONS RELATED TO THE SUBJECT; PROVIDING FOR A REPEALER AND
FOR SEVERABILITY.
WHEREAS, an or about June 16, 1982, Houston Lighting &
Power Company (the "Company"), filed with the City of La Porte
a Statement of Intent and Petition for Authority to Change Rates
relating to the electric utility service, and proper notice
thereof was duly given; and
• LJHEREAS, by Ordinance No. 1331, the City Council suspended
the effective date of such proposed rate increase; and
WHEREAS, the City Council, having considered the Company's
rate increase at a public hearing for which proper notice was
duly given, finds that such request is excessive; and
WHEREAS, the City Council having original jurisdiction over
the matter finds that a lesser increase in rates should be
prescribed for the Company; NOW, THEREFORE,
BE IT ORDAINED BY ^1 HE CITY COUNCIL OF THE CITY OF LA PORTS:
Section 1. The City Council of the City of La Porte hereby
finds the requested rates of the Company to be excessive and
• unreasonable. _
Section 2. The City Council of the City of La Porte hereby
additionally finds and detsrm.ines the following:
I. Findings
1. Cost of Service
The revenue requirement of the Company is $3,529,921,000.00.
Adjustments were made to Fuel, Operations and Maintenance,
• Extraordinary Amortization, Depreciation, Other Taxes, Franchise
Fees, Federal Income Taxes and the Return•Component.
•
u
Ordinance No. 1332, Page 2
a. Operations and 1~Iaintenance Expenses
Adjustmen s to the Company's O & M expenses amounted to
$7,260.,000.00. The major adjustments include reductions in
salaxies and wages expense of $2,695,000.00, employee benefits
of $291,OOD.00, wheeling cost and line loss of $818,000.00,
amortization of deferred charges of $241,000.00, $2,922,000.00
for other Operations and Maintenance expenses, $498,000.00 for
uncollectibles, $422,000.00 for liquid metal breeder reactor
• accrual, and $122,000.00 for South Texas Project litigation
fees, and an addition of $749,000.00 for Electric Power Research
Institute support.
b. Federal Income Taxes
The adjustment to the Cost of Service for Federal Income
Taxes is a reduction of $30,673,000.00.
c. Other Taxes and Fees
The total adjustment for all taxes other than federal income
taxes is a reduction of $2,409,000.00. The components of this
adjustment are the Public Utility Commission fee, State gross
receipts taxes, ad valorem taxes, and payroll taxes. An addi-
tional reduction of $2,621,000.00 for local franchise fees was
also made.
• d. Return
The rate of return on equity is 16.95 percent. The rate
fl~ _retua~n on invested capital is 12.73 percent and the return
on the adjusted value of invested capital is 8.25 percent.
2. Invested Capital
The invested capital is determined to be $3,953,996,000.00.
3. Adjusted Value of Invested Capital
The adjusted value of invested capital is $6,103,672,000..00.
The adjusted value of invested capital includes $943,643,000.00
L_J
•
Ordinance No. 1332, Page 3
for construction work in progress, $60,409,000.00 for nuclear
fuel in process and $3,193,000.0 for property held for future
use.
4. Revenue Deficiency
The overall revenue deficiency is $181,561,000.00.
II. Conclusions
1. The City has original jurisdiction over this case
pursuant to Section 43 of the Public Utility Regulatory Act,
. TEX. REV. CIV. STAT. ANN., art. 1446c (1980).
2. The Company has the burden of establishing its revenue
deficiency under its present rates and of establishing the amount
of such deficiency that will be collected under its proposed
rates pursuant to Section 40(b) of the Public Utility Regulatory
Act.
3. The rates prescribed herein will allow the Company to
recover its operating expenses together with a reasonable return
on its invested capital, pursuant to provisions of Section 39
of the Public Utility Regulatory Act.
4. The rates prescribed herein will yield no more than
a fair return upon the adjusted value of the invested capital
used and useful by the Company in rendering service to the
• public as provided by Section 40(a) of the Public Utility
.Regulatory Act.
~,. The Tariff for Electric .service set forth in Exhibit
"A" provides just and reasonable and not unreasonably pre-
ferential, prejudicial, or discriminatory rates, as provided
by Section 38 of the Public Utility Regulatory Act.
Section 3. The City Council hereby determines, prescribes,
establishes, and authorizes increased rates .for sale or supply
Ordinance No. 1332, Page 4
of electric service by the Company within the corporate limits
of the City of La Porte. Such increased rates are hereby fixed
~~ set out in Exhibit "A", which is attached hereto, incorporated
herein by this reference and made a part hereof for all purposes.
Such increased rates shall take effect for electric utility
service provided from and after October 19, 1982. The Company
shall be authorized to collect such rates until such time as
they may be changed, modified, amended or withdrawn in accordance
• with applicable statutes and ordinances.
Section 4. The City Council hereby authorizes and directs
the City Secretary to serve the Company with a certified copy
of this ordinance which is the final determination and order
of the City.
Section S. The Company shall, within ten days following
the passage and approval of this ordinance and thereafter
whenever required by applicable statutes and- ordinances and
whenever requested by the City Manager, file a complete schedule
of rates and tariffs with the .said City P~Ianager setting forth
all of the Company's rates and charges for utility service then
in effect.
•
Section {,. Nothing contained in this ordinance shall be
construed no~~ or hereafter as limiting or modifying, in any
manner, the .right .and power of the City under the law to regulate
the rates and charges of the Company.
Section 7. All ordinances or parts of ordinances in
conflict herewith are repealed to the extent of the conflict
only.
•
•
•
Ordinance No. 1332, Page 5
Section 8. If any provision, section, subsection, sen-
tence, clause, or phrase of this ordinance, or the application
of same to any person or set of circumstances is for any reason
held to be unconstitutional, void or invalid, the validity of
the remaining portions of this ordinance or their application
to other persons or sets of circumstances shall not be affected
thereby, it being the intent of the City Council in adopting
• this ordinance that no portion hereof or provision or regulation
contained herein shall become inoperative or fail by reason
of any unconstitutionality, voidness or invalidity of any other
portion hereof, and all provisions of this ordinance are declared
to be severable for that purpose.
Section 9. In the event that Houston Lighting & Power
Company appeals from this order herein setting forth electrical
rates for Houston Lighting & Power Company, the City hereby
waives written notice of the hearing before the Public Utility
Commission on such appeal. Further, the City has no objection
to the consolidation of the appeal with the pending environs
case over which the Pu'niic Utility Commission has original
jurisdiction.
•
Section 10. The City Council officially finds, determines,
xecites 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, Article 6252-17, Texas
Revised Civil Statutes Annotated; 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
•
Ordinance No. 1332, Page 6
•
discussed, considered and formally acted upon.. The City Council
further ratifies, approves and confirms such written notice and
the contents and posting thereof.
PASSED AND APPROVED this the 25th day of August, 1982.
CITY OF LA PORTE
•
Vi inia Cline, Mayor
APPROVED:
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• City Attorne
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