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2008-054-RES SUSPENDING THE AUGUST 8, 2008 EFFECTIVE DATE OF ONCOR ELECTRIC DELIVERY COMPANY REQUESTED RATE CHANGE TO PERMIT THE CITY TIME TO STUDY THE REQUEST AND TO ESTABLISH REASONABLE RATESRESOLUTION NO. 2008-054 RESOLUTION OF THE CITY OF PARIS, TEXAS, SUSPENDING THE AUGUST 8, 2008, EFFECTIVE DATE OF ONCOR ELECTRIC DELIVERY COMPANY REQUESTED RATE CHANGE TO PERMIT THE CITY TIME TO STUDY THE REQUEST AND TO ESTABLISH REASONABLE RATES; APPROVING COOPERATION WITH ONCOR CITIES STEERING COMMITTEE TO HIRE LEGAL AND CONSULTING SERVICES AND TO NEGOTIATE WITH THE COMPANY AND DIRECT ANY NECESSARY LITIGATION AND APPEALS; FIIVDING THAT THE MEETING AT WHICH THIS RESOLUTION IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW; REQUIRING NOTICE OF THIS RESOLUTION TO THE COMPANY AND LEGAL COUNSEL FOR THE STEERING COMMITTEE. WHEREAS, on or about June 27, 2008, Oncor Electric Delivery Company (Oncor), pursuant to the Public Utility Regulatory Act ("PURA") 33.001 and 36.001 filed with the City of Paris, Texas a Statement of Intent to increase electric transmission and distribution rates by $275 million in all municipalities exercising original jurisdiction within its service area effective August 8, 2008; and WHEREAS, the City of Paris is a member of the Oncor Cities Steering Committee ("Steering Committee") and will cooperate with the 109 similarly situated city members and other city participants in conducting a review of the Company's application and to hire and direct legal counsel and consultants and to prepare a common response and to negotiate with the Company and direct any necessary litigation; and WHEREAS, PURA § 36.108 grants local regulatory authorities the right to suspend the effective date of proposed rate changes for ninety (90) days after the date the rate change would otherwise be effective; and WHEREAS, PURA § 33.023 provides that costs incurred by Cities in ratemaking activities are to be reimbursed by the regulated utility. THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS: Section 1. That the findings set out in the preamble to this resolution are hereby in all things approved. Section 2. That the August 8, 2008 effective date of the rate request submitted by Oncor on or about June 27, 2008, be suspended for the maximum period allowed by law to permit adequate time to review the proposed changes and to establish reasonable rates. Section 3. That as indicated in the City's resolution approving membership in the Steering Committee, the Executive Committee of Steering Committee is authorized to hire and direct legal counsel and consultants, negotiate with the Company, make recommendations regarding reasonable rates, and to intervene and direct any necessary administrative proceedings or court litigation associated with an appeal of a rate ordinance and the rate case filed with the City or Public Utility Commission. Section 4. That the City's reasonable rate case expenses shall be reimbursed by Oncor. Section 5. That it is hereby officially found and determined that the meeting at which this Resolution is passed is open to the public as required by law and the public notice of the time, place, and purpose of said meeting was given as required. Section 6. That a copy of this resolution shall be sent to Oncor, care of Debra Anderson, Oncor Electric Delivery Company, 1601 Bryan St., Suite 23-055C, Dallas, Texas 75201 and to Geoffrey Gay, General Counsel to the Oncor Steering Committee, at Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767-1725. Section 7. That this resolution shall be effective immediately upon passage. PASSED AND APPROVED this 14th day of July, 2008. J sse Jam Freelen, Mayor ATTEST: ~ ice Ellis, City Clerk APPROVED AS TO FORM: W. Kent McIlya Ci Attorney 2 Lloyo 816 Congress Avenue, Suite 1900 Austin, Texas 78701 Gosselink Telephone: (512) 322-5800 Facsimile: (512) 472-0532 Is-ka ATTORNEYS AT LAW www.lglawfirm.com Ms. Doyle's Direct Line: (512) 322-5820 Email: kdoyle@lglawfirrn.com MEMORANDUM TO: Oncor Cities Steering Committee Members FROM: Geoffrey Gay Kristen Doyle DATE: June 27, 2008 RE: Oncor Electric Delivery Company's Statement of Intent to Increase Rates Suspension Packet . ACTION REQUIRED TO SUSPEND THE EFFECTIVE DATE BY AUGUST 8, 2008 Oncor is filing a Statement of Intent to Increase Rates today with all cities in its service area that retain original jurisdiction. The Company is seeking a$265 million rate increase. If approved, the $275 million increase would raise rates for the average residential customers by $60 per year. The rate increase requested by Oncor will become effective on August 8, 2008, unless the city takes action to suspend the effective date. The statute permits cities to extend the effective date by up to 90 days in order to study the filing. The city must take action to suspend the effective date by August 8, 2008. If your city does not have a regular council meeting scheduled before August 8h or is otherwise unable to take action on the suspension resolution by August 8t', please contact me as soon as possible. Attached to this memo is a model suspension resolution and staff report. It is our understanding the Oncor local managers may be providing cities with a model denial resolution and recommending that the city immediately deny the rate request. We do not recommend that you deny the request at this time. Suspending the effective date allows cities more time to review the application and decide on the final action, including settlement or denial of Oncor's requested rate increase. The Oncor Cities Steering Committee will hold a meeting of all Steering Committee members in August to discuss Oncor's rate request. Representatives from Oncor will attend part of the meeting to discuss the filing. There will also be an opportunity for Steering Committee members to discuss strategy with Steering Committee consultants and attorneys. If you have any questions, please feel free to contact Geoffrey (512/322-5875, ggay@lglawfirm.com) or Kristen (512/322-5820, kdoyle@lglawfirm.com). 2557/00/mmo070601 I t- ..d !~.-..,...-.I:-1. r1 l.-...:.-... ~.-..-.h..ll.. n-r-....-....-...ri r'-I r STAFF REPORT ***ACTION MUST BE TAKEN TO SUSPEND THE EFFECTIVE DATE ON OR BEFORE AUGUST 8, 2008*** PURPOSE Oncor Electric Delivery Company ("Oncor" or "the Company") filed an application on or about June 27, 2008 with cities retaining original jurisdiction seeking to increase system-wide transmission and distribution rates by $27S million. (Until last year, Oncor was known as TXU Electric Delivery Company.) The Company asks the City to approve an 17.6% increase in residential rates, a 9.1 % increases in commercial rates, and a 5.8% increase in street lighting rates. According to Oncor, annua.l rates would increase by approximately $60 for an average residential customer. The resolution suspends the August 8, 2008 effective date of the Company's rate increase for the maximum period permitted by law to a11ow the City, working in conjunction with the Steering Committee of Cities Served by Oncor, to evaluate the filing, determine whether the filing complies with law, and if lawful, to determine what further strategy, including settlement, to pursue. The law provides that a rate request made by an electric utility cannot become effective until at least 35 days following the filing of the application to change rates. The law permits the City to suspend the rate change for 90 days after the date the rate change would otherwise be effective. If the City fails to take some action regarding the filing before the effective date, Oncor's rate request is deemed administratively approved. DISCUSSION The City of Paris, Texas is a member of a 109-city coalition known as the Steering Committee of Cities Served by Oncor ("Steering Committee"). The Steering Committee has been in existence since the late 1980s. It took on a formal structure in the eaxly 1990s when Cities served by the former TXLJ 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 the primary public interest advocate before the Public Utility Commission, the Courts, and the Legislature on electric utility regulation matters for the last 20 years. This filing is the result of a rate investigation started by the Steering Committee in 2004. That year, 20 members of the Steering Committee exercised their original jurisdiction to investigate the transmission and distribution rates charged by TXU. The 2004 rate inquiry was justified by several factors. First, the Company's rates charged had not been fully reviewed by the PUC since the early 1990s. Second, when the PUC "unbundled" the transmission and distribution rates from generation and retail costs during the transition to deregulation in 2002, municipal accounts were grouped within the broader category of commercial services. This led to application of unfair demand ratchets and higher charges for municipal accounts like water pumping. It also led to high charges for street lighting. Third, the Company's earnings monitoring reports required by the PUC revealed that the Company was earning profits in excess of its approved rate of return for monopoly services. Finally, the Company had recently gone through massive reorganization and the hypothetical cost structures the PUC had used to justify current rates were no longer valid. The Steering Committee negotiated a comprehensive settlement in 2005 that called for the Company to work with cities on certain items of concern to cities including municipal and street lighting rates, maintenance, undergrounding and relocation of TXU facilities, and to make cash payments to the Steering Committee for distribution to all members. In 2006, the Steering Committee voted to approve an agreement that extends the benefits of the earlier settlement and increases value to Cities. The settlement terms called for the Company to file a rate case in 2008. The total benefits of the Steering Committee settlement agreement are worth approximately $85 million for the period 2005 - 2009. Exulanation of "Be It Resolved" Paragraphs: Section 1. The city is authorized to suspend the rate change for 90 days after the date that the rate change would otherwise be effective for any legitimate purpose. Time to study and investigate the application is always a legitimate purpose. Please note that the resolution refers to the suspension period as "the maximum period allowed by law" rather than ending by a specific date. This is because the Company controls the effective date and can extend the deadline for final city action to increase the time that the City retains jurisdiction if necessary to reach settlement on the case. If the suspension period is not otherwise extended by the Company, the City must take final action on Oncor's request to raise rates by November 6, 2008. Section 2. This provision authorizes the Steering Committee, consistent with the City's resolution approving membership in the Steering Committee, to act on behalf of the City at the local level in settlement discussions, in preparation of a rate ordinance, on appeal of the rate ordinance to the PUC, and on appeal to the Courts. Negotiating clout and efficiency are enhanced by the City cooperating with the Steering Committee in a common review and common purpose. Additionally, rate case expenses are minimized when the Steering Committee hires one set of attorneys and experts who work under the guidance and control of the Executive Committee of Steering Committee. Section 3. The Company will reimburse the Steering Committee for its reasonable rate case expenses. Legal counsel and consultants approved by the Executive Committee of the Steering Committee will submit monthly invoices that will be forwarded to Oncor for reimbursement. No individual city incurs liability for payment of rate case expenses by adopting a suspension resolution. Section 4. This section merely recites that the resolution was passed at a meeting that was open to the public and that the consideration of the Resolution was properly noticed. Section 5. This section provides that both Oncor and Steering Committee counsel will be notified of the City's action by sending a copy of the approved and signed resolution to certain designated individuals.