05-B-Suspend TXU Gas Rates - Laserfiche WebLink

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AGENDA INFORMATION SHEET SUBJECT: Consider adoption of an ordinance suspending for ninety (90) days the proposed effective date of proposed rate schedules resulting in a rate increase filed by TXU Gas Distribution. BACKGROUND: On March 2, 2001, TXU Gas Distribution filed with the City of Paris a statement of intent, accompanied by a rate filing package, proposing to change its rate schedules within the corporate limits of the city of Paris, effective April 6, 2001. The Company has provided multiple copies of the executive summary of the rate increase and has filed a complete rate package with the City Clerk. City Council has been provided individual copies of the executive summary. A careful review of the executive summary indicates TXU has designated something called the "East Region Distribution System" for purposes of this particular proposed rate increase. Based on discussions with other cities, this East Region Distribution System exists only with regard to its designation by the Company. As a consequence, the participant cities in this particular rate case are all of a population slightly larger than the city of Paris to considerably smaller than the city of Paris. None of the major metropolitan areas (i.e. Dallas, Ft. Worth, etc.) are included in this so-called East Region. The nature of the proposed increase is based on the cost of the infrastructure to provide gas distribution within the individual city limits of each city. As a consequence, the amount of revenue to be generated by the rate adjustment, and the percent of the rate adjustment (whether increased or decreased) varies from city to city. You will note, while the 10.56% increase for customers in the city of Paris is substantial, the actual dollar increase at $542,068.76 distributed over all the customers in the city of Paris is second only to the actual dollar increase for the city of Sherman, in the amount of $1,658,569.55. In addition, the percent increase varies from 31.86% for the city of South Mayd to a percent decrease of 17.06% for the city of Emhouse. The summary report also indicates the average increase in the so-called "East Region" is 8.81%, or approximately 2% less than the increase proposed for the City of Paris. The process imposed upon the cities by state law to review these proposed rate increases is set out in the Gas Utility Regulatory Act (GURA). Among the actions available to the cities include: 1) a review of the proposed rate and approval of same; 2) suspension of the rate for ninety (90) days during which the rate could be reviewed by special consultants; 3) rejection of the proposed rate increase, which would presumably prompt a direct appeal to the railroad commission and a subsequent rate hearing. The Company has also proposed a "most favored nation status" for those cities which go forward and approve the proposed rate. A "most favored nation status" means if a city accepts the proposed rate changes as filed, and forgoes any further appeals, the Company agrees that if any other city in the distribution system thereafter negotiates a more favorable rate settlement, the Company will subsequently offer the same settlement terms to the first city. However, "most favored nation" letters do not have legal efficacy, are not necessarily binding on the Company, and are subject to considerable interpretation as to how a rate settlement in one city, with a completely different rate base, could somehow be construed to trigger a similar rate settlement in another city. In addition, ifa rate case is appealed by other cities to the Railroad Commission, cities signing such letter will not benefit from any favorable adjustments imposed by the Railroad Commission.