06-C Settlement Agreement TXU - Laserfiche WebLink

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AGENDA INFORMATION SHEET PURPOSE: The City of Paris is a member of a 1 09-member city coalition known as the Steering Committee of Cities Served by TXU. The Steering Committee has negotiated a settlement agreement with TXU Electric Delivery Company (TXU) to delay the filing of a rate case in exchange for terms that benefit the City and the public. The purpose of this report is to seek authorization for the City to ratify the settlement agreement between the Steering Committee and TXU. BACKGROUND: The Steering Committee has been in existence since the late 1980s. It took on a formal structure in the early 1990s when cities served by TXU gave up their statutory right to rate case expense reimbursement in exchange for higher franchise fee payments. Empowered by city resolutions and funded by per capita assessments, the Steering Committee has been the primary public interest advocate before the Public Utility Commission, the Courts, and the Legislature on electric utility regulation matters dealing with TXU for nearly two decades. DESCRIPTION: After months of consideration in 2004, the Steering Committee recommended that TXU be forced into a full scale review of its historic cost of service, something that had not occurred in more than a decade. In the fall of 2004, twenty Steering Committee cities passed resolutions requiring TXU Electric Delivery to show cause why the non-bypassable transmission and distribution charges should not be reduced. The rate inquiry was justified by several factors. First, the PUC categorized municipal accounts with broader commercial services accounts in the 2001 rate proceedings that led to the deregulated environment. This led to application of unfair demand ratchets and higher charges for municipal water pumping. It also led to extremely high charges for street lighting. Second, TXU had filed earnings monitoring reports at the PUC that established the Company was over-earning. Third, the Company had recently gone through massive reorganization and the hypothetical cost structures the PUC had used to justify current rates in 2001 were no longer valid. The Steering Committee and TXU reached a settlement in early 2005 to delay the filing of rate information by TXU until the summer of 2006. The settlement terms called for TXU to work with cities on certain items of concern and to make annual cash payments of $8 million to the Steering Committee, which was then dispersed to member cities. Over the past several months, TXU and the Steering Committee have been discussing the possibility of modifying and extending the terms of the original settlement agreement and delaying TXU's July 2006 rate case filing. After comparing the benefits to be derived from accepting the settlement and delaying the rate case against the likelihood of success in achieving positive outcomes for residential and city-specific issues in a rate case initiated in July 2006, the Steering Committee approved acceptance of the settlement agreement earlier this month. Key items of the Settlement Agreement are: 1. TXU will file a rate case in June 2008 with a December ending test year. 2. TXU will continue to make annual $8 million payments to the Steering Committee until a final order is entered in the 2008 rate case, which probably will not be until - "r' .