05-D TXU Settlement Agreement - Laserfiche WebLink

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AGENDA INFORMATION SHEET PROJECT: A Resolution approving and ratifying a Settlement Agreement between the Steering Committee of Cities served by TXU (including Paris) and TXU Electric Delivery. BACKGROUND: The City of Paris is and has been for some time a member ofa 110 member city coalition known as the Steering Committee of Cities Served by TXU. The Committee has been in existence since the late 1980s. It took on a formal structure in the early 1990s when TXU Cities 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 for approximately 17 years the primary public interest advocate before the Public Utility Commission, the Courts, and the Legislature on electric utility regulation matters dealing with TXU. 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. To facilitate the efforts of the Steering Committee, twenty (20) 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 had thrown municipal accounts in with broader commercial services in the 2001 rate proceedings that led to the deregulated environment. In the case of Paris and most other cities, THIS LED TO APPLICATION OF UNFAIR DEMAND RATCHETS AND HIGHER CHARGES FOR WATER PUMPING. IT ALSO LED TO OUTRAGEOUS 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massive reorganization and the hypothetical cost structures the PUC had used to justify current rates in 2001 were no longer valid. Information was to have been filed by TXU with the 20 cities initiating the rate review in late November 2004. Assuming that the cities that reviewed that material would have passed ordinances reducing rates in the January-February time frame, appeals to the PUC would have been triggered that would have led to a statewide rate case in the summer of2005. A final order would have been expected in mid to late 2006. DESCRIPTION: The Steering Committee and TXU began settlement discussions last fall and before Thanksgiving sufficient progress had been made to justify delaying the required rate filing. A Settlement Agreement was signed on February 22, 2005. The Agreement postpones or abates the statewide rate proceeding for approximately 14 months. In exchange for abating its rate inquiry, the cities have been promised rate design changes to be proposed to the PUC that should significantly reduce future electric charges. The Agreement also includes certain lump sum payments by TXU to the Steering Committee. As soon as all original jurisdiction city members of the Steering Committee ratify the Settlement Agreement, TXU will pay $8.5 million to the Steering Committee. The Committee has decided to distribute funds back to members by: (1) providing an amount equivalent to 25% of the total street lighting revenues collected by TXU in 2004; (2) holding back $100,000; and (3) distributing the residual based upon per capita participation in the Committee. Since all prior assessments have been on a per capita basis, it was believed that this manner of distribution would be the fairest to all cities. Additional payments of $8 million are expected in 2006 and 2007.