2001-047-ORD AFTER REASONABLE NOTICE AND HEARING, TXU GAS DISTRIBUTION'S RATES AND CHARGES WITH COP SHOULD BE CHANGED

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EAST REGION RATE CASE DRAFT STAFF REPORT The City has original jurisdiction over TXU Gas Distribution's rates and services within the municipal limits. This does not include jurisdiction over the cost of natural gas. TXU is entitled to recover its reasonable actual cost of natural gas plus a profit as detennined exclusively by the Railroad Commission. The City's jurisdiction over distribution costs ~ommences when gas is delivered to the city gate. The rates set by the City may be appeakci to the Railroad Commission ifthe Company is dissatisfied with the City's consideration of its requested increase in rates. On March 2, 2001, TXU Gas Distribution filed a request to increase rates effective April 6, 2001. The City passed a resolution suspending the effective date for 90 days and authorized participation with other Cities in a review of the reasonableness of the Company's request. The Coalition of Cities reviewing TXU's request had assistance of legal counsel from Geoffrey Gay of Lloyd, Gosselink, Blevins, Rochelle, Baldwin & Townsend in Austin, Texas and rate consultants Bill McMorries, Connie Cannady and Stephen Hill. Following issuance of a consultants' report a series of settlement discussions were pursued with policy and strategic determinations being made by City representatives. Protracted good faith settlement discussions led the Company to extend its effective date and increase the City's jurisdiction by 30 days. A settlement has been reached between the Cities and the Company, and TXU has agreed to further extend its effective date to accommodate the schedules of the Cities in passing a rate ordinance that reflects the settlement. The current generic extension authorizes City action through August 31,2001. The Company originally requested an increase in annual revenues of $6,886,682 but disguised the percentage increase suggested to be 8.81 % by rolling all the cost of the commodity (natural gas) into the base rates. The real proposed increase in the portion of costs regulated by the City was substantially higher. Cities' consultants proposed an alternative revenue requirement deficiency of $2,977,000. A compromise was ultimately reached on an increase of $3,977,141. A comparison of the amount of additional dollars to be recovered from each customer class under the settlement with the amounts proposed by TXU is as follows: Rate Class Original TXU Filinl! Settlement Residential 2,847,681 1,391,427 Commercial 1,955,575 502,288 Industrial 2,067,336 2,067,336 Service Charl!es 16,090 16,090 TOTAL 6,886,682 3,977,141