05-D TXU Settlement Agreement - Laserfiche WebLink

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There is no one factor that tilted the Steering Committee toward accepting a Settlement with TXU. Instead, all of the following factors were influential: 1. Most residential customers remain on price to beat (PTB) rates. Cost of service rate reductions cannot be shared with PTB customers until after January 1, 2007. Neither a litigated outcome nor a settlement will benefit PTB customers before that date. 2. The settlement delays rather than terminates a rate review. TXU must file a statewide case on or before July 1, 2006. The settlement provides that the Company must cooperate with cities in the interim period before the rate filing by funding a cities' consultant to evaluate affiliate transactions of TXU. Additionally, the Company must provide up to $2 million of reimbursement of cities' future rate case expenses. Without the settlement, the Steering Committee would have to make assessments to raise a comparable amount of money. 3. Cities have been consistently treated unfairly in the cost allocation/rate design process associated with the transition from regulated to competitive industry. This is especially true with regard to street lighting and water pumping. The settlement guarantees that TXU will propose fixes to those tariff problems when it files its rate case. That is particularly significant since rate design issues typically do not receive adequate consideration in a rate case. The settlement provides specific relief to cities that would be difficult to obtain in a rate case. 4. TXU has agreed to provide the Steering Committee $8.5 million after approval of the Settlement Agreement is obtained from cities. A payment of $8 million will be paid in 2006 and a third payment in 2007 will be based on $8 million pro rata to the point of a final rate order from the Public Utility Commission. 5. CAPP has an extremely important legislative agenda and the potential benefit to residential citizens and the cities where they reside from the four bills drafted by CAPP exceed benefits expected from a rate case. It is better to postpone the rate case and concentrate current efforts on the Legislature. RECOMMENDED ACTION: Adoption of the Resolution ratifying the Settlement Agreement. IF THE SETTLEMENT IS APPROVED, THE CITY OF PARIS' ESTIMATED SHARE OF THE INITIAL SETTLEMENT PROCEEDS IS $64,197.72.