04-A TXU Gas Statmt of Intent - Laserfiche WebLink

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B. Compliance with Rule 7.205 As required by Commission Rule 7.205 as set forth in Title 16 of the Texas Administrative Code § 7.205, details of each proposed rate increase are contained in Schedules A thi-ough L of the Cost of Service Schedules, which are filed herewith. The effect of the proposed increase in revenues of the utility is set forth in Schedule A. All customers within the System will be affected by this change. The class and number of affected customers is set forth in Schedule J-I of the Schedules. The specific affects of the rate changes in your city are described in the attached Exhibit A. C. Reason for Rate Change Under current rates, the Company is not recovering its reasonable and necessary costs associated with operating the System. The Company has invested more than $721 million in gross new capital in the System between December 31, 1997, and December 31, 2002. Primarily, the Company invests new capital in the System for the following reasons: (1) to promote safety and reliability through the replacement of pipelines and other facilities that have reached the end of their service lives; (2) to accommodate government entities by relocating pipelines and other facilities to promote increased economic activities; (3) to provide service to new customers; and (4) to comply with regulatory requirements set by federal, state, and municipal authorities. The Company is currently earning a rate of return on net capital investment of only 4.31% in the System. TXU Gas is therefore not earning a reasonable return on its capital investment in the System, nor does it have a reasonable opportunity to do so. Accordingly, the rates currently in effect in the System are not just and reasonable, in violation of Utilities Code § 104.003. In this filing, TXU Gas proposes a revenue requirement that will permit it the opportunity to earn a reasonable rate of return of 8.99%. STATEMENTOFtNTENT-PAGE4