06-C Settlement Agreement TXU - Laserfiche WebLink

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the end of 2009. This is a two year extension to the previously negotiated agreement. This reimburses Cities for excessive street lighting and water pumping rates. It brings approximately $38 million in value to the Steering Committee members between 2005 and 2009. 3. TXU will make two payments of $9 million to Steering Committee cities before January 31, 2007 for "beneficial public use." 4. All unexpired provisions of the last agreement will be preserved and the task forces referenced in the earlier agreement will still be created. 5. The Company will reimburse up to $40,000 per month to the Steering Committee for participation at ERCOT and the PUC. This is worth over $2 million. 6. Separate from the rate settlement, but linked in benefit under the Settlement Agreement, is the Company's commitment to increase franchise fee factors and permit all Cities who desire to receive quarterly franchise fee payments as opposed to annual payments to obtain that result. The franchise fee factor increase will produce approximately $27 million in benefit to Steering Committee members between 2006 and 2009 and approximately $12 million annually thereafter. The Steering Committee concluded that delaying a comprehensive rate case until June 2008 and immediately capturing beneficial financial terms was the optimal course of action for the reasons stated below. Most residential customers remain on price to beat (PTB) rates and no rate relief from successful prosecution of a rate case against the Company would flow to PTB customers. While the current PTB structure terminates January 1,2007, policy makers at the Public Utility Commission (PUC) and the Legislature are discussing extending some form ofPTB after January 1,2007. Even if Cities won a considerable victory by reducing TXU' s revenues by over $100 million, numerous parties representing different types of customers would fight amongst themselves over how the revenue reduction should be allocated to reduce rates for the various classes of customers. There is no certainty that the residential and small commercial customers would receive any meaningful rate reduction. In the only major rate case to be litigated since deregulation occurred on January 1, 2002, the PUC found that the utility in question should have its overall revenues reduced, but nonetheless raised residential rates. Furthermore, even if significant rate reductions to residential and commercial tariffs could be achieved, benefits would not necessarily be passed on to end-users by the retail electric providers (REPs) that serve customers who have entered the deregulated market. Much of the benefit in cutting TXU Electric Delivery's rates would, under the present market structure, simply flow to the TXU affiliated REP. The Settlement Agreement provides $18 million for Cities to apply to "beneficial public use" in lieu of very uncertain residential rate reductions stemming from litigation. The annual $8 million payment to Steering Committee members was based upon a belief that street lighting rates are excessive and that water pumping demand ratchets are inappropriate. While the Company is obligated under the 2004 Settlement (approved by Steering Committee members in 2005) to support reduction to street lighting and pumping rates consistent with the annual -T