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STAFF REPORT ***ACTION MUST BE TAKEN TO DENY THE REQUESTED RATE INCREASE ON OR BEFORE NOVEMBER 6, 2008*** PURPOSE Oncor Electric Delivery Company ("Oncor" or "the Company") filed an application on or about June 27, 2008 with cities retaining original jurisdiction seeking to increase system-wide transmission and distribution rates by $275 million. (Until last year, Oncor was known as TXU Electric Delivery Company.) The Company asks the City of Paris to approve a 17.6% increase in residential rates, a 9.1% increase in commercial rates, and a 5.8% increase in street lighting rates. According to Oncor, annual rates would increase by approximately $60 for an average residential customer. Oncor's request has been assigned Public Utility Commission Docket No. 35717. The resolution denies the Company's requested rate increase and requires that the Company's current rates be maintained for all customers within the City of Paris. DISCUSSION The City of Paris, pursuant to § 33.001 of the Public Utility Regulatory Act, has exclusive original jurisdiction over the electric rates charged by the Company. In accordance with that authority, the City of Paris lawfully suspended the August 8`" effective date for 90 days to review the Company's requested rate increase. The City's review of Oncor's rate increase request is coordinated by the Oncor Cities Steering Committee ("Steering Committee"). The City of Paris is a member of the 145-city Steering Committee. 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 for the last 20 years. To conduct the review and any necessary litigation of Oncor's requested rate increase, the Executive Committee of the Steering Committee retained lawyers and consultants with expertise in regulatory rate making issues. Legal efforts are being directed by Geoffrey Gay, Kristen Doyle and Thomas Brocato with the law firm of Lloyd Gosselink Rochelle & Townsend. All reasonable consulting and legal fees incurred by the Steering Committee are reimbursable by the Company. The major components underlying Oncor's requested $275 million increase include an increase for depreciation expense ($131 million), a substantial increase to the Company's storm reserve ($81 million) and additional costs for pension and post retirement benefits ($36 million). Based upon the analysis of the Company's filing and review of discovery responses, the Steering Committee's consultants have determined that the Company's increase cannot be substantiated by evidence. In particular, Steering Committee experts have identified problems with the evidence offered by the Company supporting its requested rate of return, cash working capital, depreciation expense, consolidated taxes, federal income taxes, storm damage reserve and « 000076