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HomeMy WebLinkAboutO-1977-1074 e . ORDINANCE NO. 1074 . AN ORDINANCE AUTHORIZING THE HIRING OF THE FIRM OF TOUCHE, ROSS & COMPANY; INCORPORATING THE LETTER AGREEMENT BETWEEN THAT FIRM AND THE CITY OF LA PORTE FOR THE PURPOSES AND AT THE TERMS STATED THEREIN; ESTABLISHING A POLICY FOR ANY PRIVATELY-OWNED UTILITY FOR PAYMENT TO THE CITY AND/OR TO PERSONNEL HIRED BY THE CITY UNDER SECTION 24 OF THE TEXAS PUBLIC UTILITY REGULATORY ACT; AND MAKING CERTAIN FINDINGS OF FACT; AND PROVIDING AN EFFECTIVE DATE HEREOF. BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF LA PORTE: Section 1. Pursuant to the March 30, 1977 "Statement of Intent to Change Rates" filed with the City by Entex, Inc., a privately-owned public utility, for an increase in gas rates and other considerations (the "Entex Mattern) and pursuant to Article l446(c), V.A.T.S., the "Public Utility Regulatory Act", 4It the City Commission of the City of La Porte, acting on its own motion, finds it necessary to employ outside utility accounting consultants to handle the Entex Matter on behalf of the City. Section 2. Pursuant to the agreement between the City Commission of the City of La Porte and the accounting firm of Touche, Ross & Company, which agreement is attached hereto and made a part of this ordinance for all purposes stated both herein and in said letter agreement, the Mayor and City Clerk are authorized to execute this agreement on behalf of the City commission. . Section 3. Pursuant to Article l446(c), Sections 23 and 24, the City Commission of the City of La Porte is obligated to make a reasonable determination of rate base, expenses, investment and rate of return within the municipal boundaries in order to regulate its public utilities. To do so, the City Commission of the City of La Porte must hire outside rate experts pursuant to Section 24 of Article l446(c). The City Commission of the City of La Porte finds that it does not have budget funds in its current budget adopted October 1, 1976, to provide for payment of such outside experts before being reimbursed by the public utility as provided in Section 24 of Article l446(c), . e . Ordinance No. 1074 V.A.T.S. Therefore, in accord with Ordinance No. 1063, the City ~ Commission of the City of La Porte will hereby require any public utility, upon receipt of the statement of the City and/or of the . . . outside experts to reimburse the City for its debt to such outside experts or to pay them directly. Section 4. The City Commission of the City of La Porte has reviewed the letter agreement made a part hereof and finds that the fees and expense charges proposed in that letter agreement are reasonable under Section 24, Article l446(c), V.A.T.S., based on the nature of the work to be done and the skill and expertise required. Section 5. This Ordinance shall be effective immediately upon its passage and approval. PASSED AND APPROVED, this 27th day of April, 1977. CITY ~ OF LA PORTE ~ J. J. Meza, Mayor' - &.t" ATTEST: ~~~ Clo ty c~rk APPROVED: ~~~ Cloty Attorney -2- '. . . Touche Ross & en .-. .... -. April 15, 1977 Mr. David Webb Leonard, Koehn, Suite 105 6330 West Loop Houston, Texas Rose & Webb South 77401 Dear Mr. Webb: At your request we are submitting this proposal to assist the Ci ty of La Porte in evaluating the present rate application by Entex, Inc. Our proposal is based upon the City obtaining financial data for inside the City limits in the same format as Exhibits 5, 6 and 7 filed for the integrated distribution system in the letter sent to the City of La Porte from Entex Inc., dated April 11, 1977. Our scope of assistance will include the following phases: ~ Phase I - Preliminary Analysis Our preliminary analysis will include the following steps: 1. Trace actual results for the test year for the City of La Porte to appropriate source documents. 2. Review the reasonableness of the pro forma adjustments to the test year. 3. Analyze the adjusted value of invested capital proposed by Entex, Inc. in providing service inside the City limits of La Porte. 4. Review the allocation procedures employed by Entex, Inc. in allocating investment and expenses inside the City limits of La Porte. . 5. Determine the rate of return on common equity requested by Entex, Inc. and calculate effect of alternative returns on revenue requirements. 6. Meet with City officials to discuss our preliminary find- ings and determine future course of action. 2001 BRYAN TOWER - SUITE 2400 - DALLAS, TEXAS 75201 - (214) 741-3553 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. -. , " ~ . . . Toud1e1bs&Ca e e To indicate acceptance of this proposal, please sign one copy and return it to our Dallas office. If you have any questions, please contact Ken Stevens at (214) 741-3553. Very truly yours, ~~J~ Accepted: By=--- ~ l ~- :( 7- ? 7 Date: