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HomeMy WebLinkAboutCity Council Resolutions (R-90-592)-05/15/1990 11 12 13 14 15 16 17 18 19 20 21 22 23 1 2 RESOLUTION R-90-592 3 WHEREAS, Texas Utili ties Electric Service Company did on January 16, 1990 file a statement of intent to change the rates charged for electric service within the City of Colleyville, Texas to become effective on May 21, 1990; and, 4 5 6 WHEREAS, the City Council did delay the effective date of that ra te increase for the purpose of investigation, study and presentation of evidence; and, 7 WHEREAS, the City Council deems it is of the citizens of the City said rate increase; in the best of Colleyville interest to deny 8 9 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL, CITY OF 10 COLLEYVILLE, TEXAS: Sec. 1. THAT the proposed rate increase reflected in the statement of intent filed by Texas Utili ties Electric Service Company with the City of Colleyville on January 16, 1990, be and the same is hereby denied. AND IT IS SO RESOLVED. Passed by a vote of S- to 1990. v on this the 15th day of May, CITY OF COLLEYVILLE ~,;,J// _ ~ ;. & /~ -~,/.. / ./ /~dc/ ~~/~~//V CHRIS HAW6NS~ Mayor dj~~ LaVada Johnson City Secretary ,.;'\~~~OVED AS, 10~~7 AND 0-;-t/} ( J~__d Ross T. Foster City Attorney LEGALITY: 24 1 v j 25 L/D/60 26 Note: Council included Diversified Utility Consultants, Inc. 's testimony as an attachment to this Resolution. DIVERSIFIED UTILITY CONSULT ANTS, INC. cc. ~ M l c... f::'{I:. ~POIU~tVl- . r u. 6, ~t::?f"" W u.N C-I- '"' fl<?,J,~. ~ ... 1'~.:o.(~'~1~~'" t., 7800 SHOAL CREEK BLVD.. SUITE 246 SOUTH. AUSTIN. TX 78757 TELEPHONE '5121 454-3500 LEITER OF TRANSMITTAL April 12, 1990 To: Participating Cities in Docket No. 9300, Texas Utilities Electric Company Request for Rate Increase Dear Honorable Mayor and City Council: Enclosed, please find Diversified Utility Consultant's, Inc. ("DUCI") Phase I Revenue Requirement testimony in the current Texas Utilities Electric Company's ("TUEC") rate case. This testimony was filed on Thursday, April 12, 1990 at the Public Utility Commission of Texas ("PUC,.") on behalf of your City. As you are aware, TUEC filed for a rate increase on January 16,1990. The following table summarizes TUEC's requested rate increase: TEXAS UTIUTIES ELECTRIC COMPANY PROPOSED INCREASE SUMMARY TEST YEAR ENDED JUNE 30, 1989 REVENUES CURRENT REVENUES PROPOSED INCREASE IN REVENUES $ ~ PROPOSED REVENUES Total Base $ 4,320,765,276 $ 2,605,507,370 $442,353,715 $669,940,617 10.2 25.7 $ 4.763,118,923 $ 3.275.447.987 As can be been from the above table, TUEC is requesting an annual r increase of $442,353,715 or about 10.2 percent. On a base rate basi, 'e. all expenses less fuel expenses, the annual rate increase is $669,940,6 or 25.7 percent. Fuel costs are a substantial part of ratepayers' bills which re directl passed through to customers on an estimated basis and trued-up to a sts after the fact. The base rate components of ratepayers' bills reflect all expenses such as labor costs, return on investment, taxes, etc. Thus, TUEC is requesting an annual increase of 25.7 percent to provide electricity to its customers before fuel expenses are considered. The major reason for this substantial annual base rate increase request is the inclusion of Comanche Peak Unit 1 investment and operating costs in rates. Our estimates indicate that the cost of operating Comanche Peak Unit 1 for one year is about $1,137,856,199. DUCI has submitted the attached testimony which recommends numerous adjustments to the Company's request. A summary of DUCI's recommended adjustments is attached to this letter. As can be seen from the attachment, DUCI is recommending a $104,597,251 increase or 2.4% rather than the Company's $442,353,715 or 10.2 percent overall increase. On a base rate basis, DUCI is recommending adjustments which reduce TUEC's annual base rate increase from $669,940,617 by $337,756,464 to a level of $332,184,153. Thus, DUCI is recommending at this time about one-half of TUEC's base rate request. It should be noted, that the Cities have hired consultant's to investigate the prudence of the Company's investment in Comanche Peak. This prudence report will not be complete until June 1990. Thus, the recommended rate increase described above does not reflect the impact of any disallowance that may be recommended by Cities' consultants on the issue of Comanche Peak prudence. DUCI will be submitting supplemental testimony after the prudence consultant's report is issued. This supplemental testimony will quantify for the PUCT any and all recommended Comanche Peak disallowances for this case. In addition, DUCI is preparing a final report for your City so that you may take the necessary final action regarding this case by May 21, 1990. Also, the firm of Butler & Casstevens will be providing sample ordinances which will be included with the final report to assist in the final determination you must take. DUCI is available to answer any questions you may have regarding these important matters. Please call Dan Lawton or Jack Pous at (512) 454-3500. ~CereIY, V~ U~~/~. Diversified Utility Consultants, Inc. Texas UtIlities 8ectric Company Overall Cost of Service Summary of Consultant's Recommended Adjustments TUEC Consultant Consultant DescriDtion ~ Adlustment Recommendation Recoverable Fuel Cost $1,487,670,936 0 $1,487,670,936 O&M Expenses 1,184,386,406 (21,780,500) 1,162,605,906 Decommissioning Expenses 8,722.800 ( 1,744,560) 6,978,240 Depreciation Expenses 356,904,847 (25,114,629) 331,790,220 Federal Income Taxes 253,708,239 (164,939,113) 88,769,126 Other Taxes 351,946,336 136,415.683) 315.530,654 Total Operating Exp. $3,643,339,564 ($ 249,994,485) $ 3,393,345,082 Interest on Customer Deposits 3,307,760 0 3,307,760 Retum on Invested Cap. 1,116.471.686 187.761.979) 1,028.709.701 Total Cost of Service $4.763.119.013 1$337.756.464) $4.425.362.549 Total Revenue Increase $ 442.353.715 1$337.756.464) S 104.597.251 DUCI RECOMMENDED ADJUSTMENTS RATE OF RETURN ON EQUITY TUEC has requested a 13 percent return on its stockholders capital investment in this rate filing. Based upon an analysis of investor expectations DUCI has proposed an 11.75 percent return for the Company's stockholders. The reduction in TUEC's revenue requirements resulting from this adjustment is approximately $54 million. RATE BASE DUCI has proposed a number of adjustments to the Company's rate base. The cumulative impact of these adjustments reduces TUEC's rate base by approximately $314 million and the Company's revenue requirements by approximately $33.9 million. Included in these adjustments are: (i) A proposed decrease in the Company's Working Capital requirements. This adjustment is associated with a reduction in TUEC's fuel inventory requirements, increased allowance for prepayments by customers and a lower level of operating cash requirements. Elimination of.the Company's inclusion in rate base for past losses accumulated to their self-insurance reserves. (ii) FEDERAL INCOME TAXES DUCI has recommended that the Company's requested FIT expense be reduced by approximately $165 million. This adjustment is based upon DUCI's estimation of the actual tax expenses which the Company should incur versus the hypothetical level calculated by TUEC. This adjustment results in part from the inclusion of consolidated tax savings, actual interest expense and a reduced level of return. DUCl's use of actual versus hypothetical tax expenses is in accordance with past Texas Supreme Court rulings. TAXES OTHER THAN INCOME DUCI has recommended an approximate $36.4 million reduction in the Company's proposed expenses for Taxes Other Than Income. This reduction is associated with the Company's estimated State Franchise taxes, Gross Receipts fees and State Regulatory Commission fees. The level of franchise tax has been reduced by approximately $22 million based on a reduction in the current amount of franchise tax expense included in revenue requirements and a two year amortization of the Company's recent franchise tax refund. Gross receipts fees and regulatory commission fees are directly related to the Company's total revenues. These expenses have therefore been reduced in accordance with the proposed reduction in TUEC's total revenue requirements. DEPRECIATION EXPENSE DUCI has recommended that the Company's requested level of depreciation expense be reduced by approximately $25 million. This recommendation is based upon an extensive analysis of TUEC's depreciation rates for its existing facilities. OPERATION AND MAINTENANCE EXPENSES DUCI has recommended a number of adjustments to the Company's requested level of O&M expenses. The cumulative effect of these adjustments is to reduce the level of O&M expenses by $21,780,500. Included in these adjustments are: (i) Elimination of "Nuclear Refueling Outage" Expense. DUCI has recommended the elimination from O&M expenses of $9.25 million related to a future refueling outage at Comanche Peak. This adjustment is due to the uncertainty as to when Unit 1 of Comanche Peak will even become operational much less require a refueling. (ii) Reduction in "Uncollectible Accounts" Expense. The level of Uncollectible accounts is directly related to the Company's total revenues. This expense has been reduced by approximately $1.4 million as a result of our reduction in TUEC's total revenue requirements. (Hi) Reduction in "Cancelled Plant" Amortization. TUEC has included in O&M expense an amount associated with a five year amortization of the Company's investment in the cancelled Martin Lake Unit 4 facility. DUCI has recommended that these expenses be recovered over a ten year period resulting in a reduction in O&M expense of approximately $3.7 million. (iv) Eliminate Amortization of "Utigation" Expenses. As a condition of the settlements between TU EC and the previous minority owners in Comanche Peak (TMPA, Brazos, and Tex-La) the Company agreed to reimburse these entities for the litigation expenses they incurred during these proceedings. DUCI recommends that the $1.8 million included in the Company's expenses associated with these litigation costs be eliminated. (v) Reduce Contributions to "Self-Insurance" Reserves. TUEC has requested that ratepayers contribute approximately $8.8 million per year to the Company's self-insurance reserves. DUCI has recommended that this level of annual contributions be reduced to $3.6 million per year based upon an analysis of the Company's actual historical losses. DECOMMISSIONING EXPENSE Included in TUEC's estimated cost for the decommissioning of the Comanche Peak facilities is an additional 25 percent "contingency fee". DUCI has eliminated the expenses associated with this "contingency fee" based on the belief that technological advances over the next forty years should, if anything, facilitate the effort required to decommission nuclear plants therefore eliminating the need for any "contingency" in addition to the present expected cost. This adjustment has reduced the Company's requested decommissioning expense level by approximately $1.7 million.