24-Ordinance approving the electric rates between the City of Paris and Oncor
CITY COUNCIL AGENDA ITEM BRIEFING SHEET
Submittal Date: Originating Department: Presented By: Agenda Item No.:
5-13-2011
Council Date: Finance Gene Anderson 24.
5-23-2011
RECOMMENDED MOTION:
First reading, deliberate and possibly action on approving an ordinance that provides a rate increase for Oncor
Electric Delivery Company, LLC.
POLICY ISSUE(S):
Administration
On or about January 7, 2011, Oncor filed with the City an application to increase electric rates.
The Oncor filing sought a $353 million rate increase. The City of Paris, along with approximately 160
other cities served by Oncor Electric Delivery Company LLC, is a member of the Steering Committee of
Cities Served by Oncor. The City of Paris worked with the Steering Committee to analyze the schedules
and evidence offered by Oncor to support its request to increase rates. The attached ordinance, the
related rates, and tariffs are the result of negotiations between the Steering Committee and the Oncor to
resolve issues raised by the Steering Committee and other interveners during the review and evaluation
of the filing. This ordinance resolves the Company's filing by authorizing an increase in the Company's
base rate of $136.7 million. The monthly bill impact for the average residential customer will be a $2.35
increase (as opposed to the $5.00 per bill increase as proposed in the Oncor's filing).
The Executive Committee of the Steering Committee and the Steering Committee's legal counsel
recommend that all city members of the Steering Committee adopt the Ordinance implementing the rate
change.
BOARD/COMMISSION RECOMMENDATION:
None
EXHIBITS:
Ordinance; Staff Report
ACTION: BUDGET INFO:
❑ Financial Report ❑ Minute Order Expense $NA
❑ Department Report ❑ Resolution Budgeted Amt. $NA
❑ Presentation ® Ordinance YTD Actual $NA
❑ Public Hearing ❑ Other Acct. Name NA
Acct. Number NA
FISCAL NOTES:
None
REVIEWED AND APPROVED BY:
® Administration ® City Clerk ❑ Community Development ❑ EMS/IT ® Finance ❑ Fire
❑ Municipal Court ® Legal ❑ Library ❑ Police ❑ Eng./Public Works ❑ Utilities
City of Paris Revised 2/04/08
15 8
DRAFT
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS,
("CITY") APPROVING A NEGOTIATED RESOLUTION BETWEEN THE
STEERING COMMITTEE OF CITIES SERVED BY ONCOR ("STEERING
COMMITTEE") AND ONCOR ELECTRIC DELIVERY COMPANY LLC
("ONCOR" OR "COMPANY") REGARDING THE COMPANY'S APPLICATION
TO INCREASE ELECTRIC RATES IN ALL CITIES EXERCISING ORIGINAL
JURISDICTION; DECLARING EXISTING RATES TO BE UNREASONABLE;
REQUIRING THE COMPANY TO REIMBURSE CITIES' REASONABLE
RATEMAKING EXPENSES; ADOPTING TARIFFS THAT REFLECT RATE
ADJUSTMENTS CONSISTENT WITH THE NEGOTIATED SETTLEMENT
AND FINDING THE RATES TO BE SET BY THE ATTACHED TARIFFS TO BE
JUST AND REASONABLE; APPROVING ONCOR'S PROOF OF REVENUES;
ADOPTING A SAVINGS CLAUSE; DETERMINING THAT THIS ORDINANCE
WAS PASSED IN ACCORDANCE WITH THE REQUIREMENTS OF THE
TEXAS OPEN MEETINGS ACT; DECLARING AN EFFECTIVE DATE; AND
REQUIRING DELIVERY OF THIS ORDINANCE TO THE COMPANY AND THE
STEERING COMMITTEE'S LEGAL COUNSEL.
WHEREAS, the City of Paris, Texas ("City") is an electric utility customer of Oncor
Electric Delivery Company LLC ("Oncor" or " Company"), and a regulatory authority with an
interest in the rates and charges of Oncor; and
WHEREAS, the City is a member of the Steering Committee of Cities Served by
Oncor ("Steering Committee"), a coalition of approximately 160 similarly situated cities
served by Oncor that have joined together to facilitate the review of and response to
electric issues affecting rates charged in the Oncor service area; and
WHEREAS, on or about January 7,, 2011, Oncor filed with the City its application to
increase electric base rates by approximately $353 million, such increase to be effective in
every municipality within Oncor's service territory; and
WHEREAS, the Steering Committee coordinated their review of Oncor's filing by
designating an Executive Committee made up of Steering Committee representatives,
assisted by Steering Committee attorneys and consultants, to resolve issues identified by
the Steering Committee in the Company's filing; and
WHEREAS, the Company has filed evidence that existing rates are unreasonable and
should be changed; and
WHEREAS, independent analysis by the Steering Committee's rate experts
concluded that Oncor is able to justify an increase over current rates of $136.7 million; and
L1 15)
WHEREAS, the Steering Committee has entered a Settlement Agreement with Oncor
("Attachment C") with Oncor to increase base rate revenues by $136.7 million; and
WHEREAS, the Executive Committee of the Steering Committee, and the Steering
Committee's lawyers and consultants recommend that Steering Committee members
approve the attached rate tariffs ("Attachment A" and "Attachment B" to this Ordinance),
which will increase the Company's revenue requirement by $136.7 million; and
WHEREAS, the attached tariffs implementing new rates are consistent with the
negotiated resolution reached by the Steering Committee and are just, reasonable, and in
the public interest; and
WHEREAS, it is the intention of the parties that if the City determines any rates,
revenues, terms and conditions, or benefits resulting from a Final Order or subsequent
negotiated settlement approved in any proceeding addressing the issues raised in the
Company's filing would be more beneficial to the City than the terms of the attached tariff,
then the more favorable rates, revenues, terms and conditions, or benefits shall
additionally accrue to the City; and
WHEREAS, the negotiated resolution of the Company's filing and the resulting rates
are, as a whole, in the public interest.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF
PARIS, TEXAS:
Section 1. That the findings set forth in this Ordinance are hereby in all things
approved.
Section 2. That the City Council finds the existing rates for electric service provided
by Oncor are unreasonable and new tariffs, which are attached hereto and incorporated
herein as Attachment A and B, are just and reasonable and are hereby adopted.
Section 3. That Oncor shall reimburse the reasonable ratemaking expenses of the
Steering Committee in processing the Company's rate application.
Section 4. That to the extent any resolution or ordinance previously adopted by the
Council is inconsistent with this Ordinance, it is hereby repealed.
Section 5. That the meeting at which this Ordinance was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code,
Chapter 551.
Section 6. That if any one or more sections or clauses of this Ordinance is adjudged
to be unconstitutional or invalid, such judgment shall not affect, impair or invalidate the
remaining provisions of this Ordinance and the remaining provisions of the Ordinance shall
be interpreted as if the offending section or clause never existed.
160
Section 7. That if the City determines any rates, revenues, terms and conditions, or
benefits resulting from a Final Order or subsequent negotiated settlement approved in any
proceeding addressing the issues raised in the Company's filing would be more beneficial
to the City than the terms of the attached tariff, then the more favorable rates, revenues,
terms and conditions, or benefits shall additionally accrue to the City.
Section 8. That this Ordinance and settlement Agreement ("Attachment C") shall
become effective from and after its passage with rates authorized by attached Tariffs to be
effective in two phases. Phase one tariffs (attached to this Ordinance as "Attachment A"),
increasing Oncor's revenues by $93.7 million, are effective for bills rendered on or after
July 1, 2011. Phase two tariffs (attached to this Ordinance as "Attachment B"), increasing
Oncor's revenues by $43 million, are effective for bills rendered on or after January 1, 2012.
Section 9. That a copy of this Ordinance shall be sent to Oncor, care of Autry
Warren, Oncor Electric Delivery Company, LLC, 1601 Bryan St., 23rd Floor, Dallas, Texas
75201 and to Thomas Brocato, at Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box
1725, Austin, Texas 78767-1725.
Section 10. That the City Council voted by a supermajority vote of the entire
Council to suspend the rule requiring two readings before adoption of ordinances ayes
and _ nays.
Section 11. That this ordinance shall become effective from and after its passage
of the first reading and publication as required by law.
PASSED AND ADOPTED on first and final reading this May 23, 2011.
Joe McCarthy, Mayor Pro Tem
ATTEST:
Janice Ellis, City Clerk
APPROVED AS TO FORM:
W. Kent McIlyar, City Attorney
161.
STAFF REPORT
The City of Paris, along with approximately 160 other cities served by Oncor Electric
Delivery Company LLC, is a member of the Steering Committee of Cities Served by Oncor. On
or about January 7, 2011, Oncor filed with the City an application to increase electric rates.
The Oncor filing sought a $353 million rate increase. The City of Paris worked with the
Steering Committee to analyze the schedules and evidence offered by Oncor to support its
request to increase rates. The Ordinance, the related rate, and tariffs are the result of negotiations
between the Steering Committee and the Oncor to resolve issues raised by the Steering
Committee and other intervenors during the review and evaluation of the filing. The Ordinance
resolves the Company's filing by authorizing an increase in the Company's base rate of $136.7
million. The monthly bill impact for the average residential customer will be a $2.35 increase
(as opposed to the $5.00 per bill increase as proposed in the Oncor's filing).
The Executive Committee of the Steering Committee and the Steering Committee's legal
counsel recommend that all city members of the Steering Committee adopt the Ordinance
implementing the rate change.
Background:
The tariff was approved by the Executive Committee of the Steering Committee as part
of the settlement agreement to resolve the Oncor rate filing at the Public Utility Commission of
Texas. As stated above, the agreement reduces Oncor's request for a $353 million increase to
$136.7 million. The agreement does not change the current authorized capitalization of 60% debt
and 40% equity and return on equity of 10.25% from Oncor's last rate proceeding.
Also, the settlement results in a system-wide rate increase of 6.1%. Residential
customers will see an increase of 6.2%, much lower than Oncor's requested 14.6% increase.
Street lighting rates will increase 13.8%, which is also lower than Oncor's requested increase of
25.9%. Oncor has agreed that it will not file another general base rate case prior to July 1, 2013.
However, as cities are regulatory authorities., cities may still initiate a rate case prior to that date.
Additionally, consistent with the District Court's reversal of the Commission's decision
relating to municipal franchise fees in Docket No. 35717, Oncor will increase franchise fees to
the contractually agreed to amounts within 60 days of the final order, or July 1, 2011, whichever
is later. Additionally, Oncor will pay cities retroactive franchise fees from the date the rates
approved in Oncor's prior rate case, Docket No. 35717, went into effect.
Oncor will also pay cities' rate case expenses and recover those amounts over three years
with no carrying charges. Finally, at its own expense, the Company will reinstate Rider SCUD,
which provides for a 20% discount for institutions of higher learning.
Oncor Settlement Ordinance Staff Report 1
162
Purpose of the Ordinance:
Rates cannot change and the Settlement Agreement with Oncor cannot be implemented
without passage of rate ordinances by cities. The purpose of the Ordinance is to approve rate
tariffs ("Attachment A" and "Attachment B") that reflect the negotiated rate changes pursuant to
the process and to ratify a Settlement Agreement recommended by the Steering Committee.
As a result of the negotiations, the Steering Committee was able to reduce the Company's
requested $353 million increase to $136.7 million (a decrease of over 60% of the Company's
request). Approval of the Ordinance will result in the implementation of new rates that increase
Oncor's revenues in two phases: by $93.7 million effective July 1, 2011 (i.e. "Attachment A")
and by $43 million effective January 1, 2012 ("Attachment B").
Reasons Justifying Approval of the Negotiated Resolution:
During the time that the City has retained original jurisdiction in this case, consultants
working on behalf of the Steering Committee have investigated the support for the Company's
requested rate increase. While the evidence does not support the $353 million increase requested
by the Company, the Steering Committee consultants agree that the Company can justify an
increase in revenues of $136.7 million. The agreement on $136.7 million is a compromise
between the positions of the parties.
The alternative to a settlement of the filing would be a contested case proceeding before
the Public Utility Commission of Texas on the Company's current application, would take
several months and cost ratepayers millions of dollars in rate case expenses, and would not likely
produce a result more favorable than that to be produced by the settlement. The Executive
Committee and counsel for the Steering Committee recommend that Steering Committee
member cities take action to approve the Ordinance authorizing new rate tariffs.
Oncor Settlement Ordinance Staff Report 2
163