04-A TXU Gas Rate Case Summary EXHIBIT A
TXU Gas Rate Case
Paris, Texas Case Summary
Impact of Rate Filing in Paris Increase
Residential Revenue $ 213,014 or 8.50%
Commercial Revenue 71,730 or 5.56%
Industrial Sales/Transportation -44,814 or -16.13%
Service Charges 31,976 or 93.58%
Total Revenue Change $ 271,906 or 6.62%
Impact of Rate Filing on Typical Customer Bills in Paris
· Typical residential customer's bill using 6 MCF per month will be $ 41.69 or an increase of
approximately $2.96 per month
· Typical commercial customer's bill using 30 MCF per month will be $173.04 or an increase of
approximately $6.39 per month
Number of Customers in Pads
· 6,824 total customers
)* 5,924 residential customers
~ 890 commercialcustomers
~- 10 industrial sales/transportation customers
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TXU Gas Company
2003 Rate Case
Executive Summary
O TXU
INTRODUCTION
Since 1909, TXU Gas has been providing natural gas service to homes and
businesses in north central Texas. From the natural gas pipeline built from the
Petrolia field in Clay County ~nd growing to over 6,800 miles of pipeline and 26,000
miles of distribution lines existing today, TXU Gas has grown with Texas. The
Company now serves over 1.4 million residential, commercial and industrial
customers in approximately 550 communities with safe, reliable and reasonably
priced natural gas. With this rate case, TXU Gas is taking another bold step to ensure
that our customers will continue to receive the same high quality service they have
come to expect and depend on.
OVERVIEW
TXU Gas has met the challenge of the rapidly growing economy that it serves.
The Company has made the investment and incurred the expenses necessary to keep
the gas flowing to our customers in a safe and efficient manner. We have worked
hard to control O&M expenses and will continue to do so in the future.
TXU Gas has filed this rote case because our rates do not reflect our current
level of reasonable and necessary expenses. Like any investor, investors in TXU Gas
expect to earn a return on their investment and for that investment to be returned to
them over time. Largely because of the infrastructure improvements we have made in
the last five years, we are not earning a reasonable return overall on the TXU Gas
invested capital.
CAPITALINVESTMENT
TXU Gas has invested approximately $721 million in its gas pipeline and
distribution system in the last five years. After taking into account depreciation
during that period, the value of our plant in service has increased over $400 million.
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This is a 66% increase in the net plant in service over a five-year period. These
investments were necessaw to maintain the safety and reliability of the system. Much
of the investment was to replace pipe and other facilities that had reached the end of
their service lives. The investments were also made in response to the rapid
economic growth in our service area, which required the replacement of pipe as
development encroached on high pressure lines, relocations of pipe as roads and
freeways were built or expanded, and extensions of pipe and increases in capacity as
the population expanded into outlying areas.
OPERATING AND MAINTENANCE EXPENDITURES
Despite the rapid growth in the economy and the increased capital investment,
TXU Gas has been able to closely control its operating and maintenance (O&M)
expenses. Between 2001 and 2002, expenses in the field have slightly decreased.
Operating expenses over all have slightly increased as a result of' increased pension
funding requirements and employee benefits, areas of expense that have been rapidly
rising across the national economy and are largely outside of the Company's control.
TXU Gas is continuing to take steps to limit increases in O&M expenses. This rote
case contains several adjustments reflecting additional steps that have been taken to
reduce O&M after the close of the recent calendar year. As a result of our WINS
program, for example, O&M expenses have been adjusted downward in the rate case
from actual costs by $6.7 million.
SIMPLIFIED RATES
We have taken great care in developing this rote case. We have simplified our
approach so that it will be much easier for our customers and our regulators to
understand our business. For instance, in this case we are proposing rates for only six
customer classes: Four classes of service from the inlet of our system tlu'ough both
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pipeline and distribution facilities and two classes of service for customers that only
use the pipeline facilities. All of our customers will have only one rate to pay.
RATE FILING PACKAGE
We have improved and updated the rate filing package in many areas. We
have a new detailed cost of service study and a newly designed Tariff for Gas
Service. We have prepared a new depreciation study for both the Pipeline and
Distribution assets and a new lead/lag study to determine the need for cash working
capital. The filing package itself has been made much simpler and is presented in a
format that we feel will be easier to use. Finally, we have spent many hours ensuring
the connection between our books and records and the filing package is transparent
and accurate. Our various accounting teams have spent a lot of time trying to make
sure the f'mancial presentations are as straightforward as possible. We are preparing to
answer any questions that may arise over the course of the case as expeditiously as
possible.
RATEINCREASE
Overall, TXU Gas is asking for approximately a 7.2% rote increase.
Residential rates would increase approximately 10% even though our analysis shows
that an increase well in excess of this amount could be justified. For residential
customers, this will increase their typical bill approximately $3.59. As a matter of
policy, we believe that the increase in Residential rates should be limited to 10%.
There is a slight increase for the commemial class and no increases for other classes
of customers.
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TARIFF IMPROVEMENTS
We are requesting, in addition to a rate increase, a number of other changes to
our tariff. The two most important are to provide a capital investment adjustment
factor (CIAF) and we are also seeking to revise the gas cost recovery mechanism.
Both of these proposals are meant to reduce furore rate case expenses and to provide
more timely recovery of costs, thus reducing regulatory expenses and improving the
Company's financial future. As our service area grows and our facilities continue to
age, we expect that our investment in the system will continue to exceed depreciation
for the foreseeable future. This will make it highly likely that we will have to
continue to file rote cases on a regular basis if the CIAF is not approved. We are also
proposing changes in the gas cost recovery procedures, which will limit future rate-
case expenses while enhancing the TRC's and City's ability to monitor and review
those costs. Rate cases are expensive for all concerned, especially for our ratepayers.
A broad consensus exists that steps should be taken to limit those costs. We believe
our proposals will accomplish that end.
CONCLUSION
TX'U Gas is proud of its achievements since 1909, and especially in the last
five years. We have maintained a safe and reliable gas system through the hard work
of our employees and the investment of a tremendous amount of capital. Reducing
our field operating expenses has not been easy but we have done it. Through our rate
activities of the last few years we have gained a better understanding of what the
Cities and TRC want to see in a rate filing. While areas of disagreement may remain
over policy, we are confident that our hard work in preparing this package will allow
the process to focus on those policy differences. We expect the result of this effort to
produce a fair treatment of our request that will allow us to continue to provide safe
and reliable service to our customers.
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ORDINANCE NO.
AN ORDINANCE ELECTING TO HAVE THE RAILROAD COMMISSION
OF TEXAS EXERCISE ORIGINAL JURISDICTION OVER GAS UTILITY
RATES, OPERATIONS, AND SERVICES WITHIN THE INCOP~PORATED
LIMITS OF THIS MUNICIPALITY CONCERNING THE TXU GAS
COMPANY STATEMENT ~OF INTENT FILED ON MAY 23, 2003;
PROVIDING FOR AN EFFECTIVE DATE; FINDING AND DETERMINING
THAT THE MEETING AT WHICH THIS ORDINANCE IS PASSED IS OPEN
TO THE PUBLIC AS P~EQUIRED BY LAW; PROVIDING FOR NOTICE OF
THIS ORDINANCE TO THE RAILROAD COMMISSION OF TEXAS; AND
PROVIDING FOR NOTICE OF THIS ORDINANCE TO TXU GAS
COMPANY.
WHEREAS, on or about May 23, 2003, TXU Gas Company (the "Company") filed with
the City of PARIS ("City"), a Statement of Intent to change gas rates in all municipalities within
the Company's statewide gas utility system effective June 27, 2003; and
WHEREAS, the City, has exclusive original jurisdiction to evaluate the Company's
Statement of Intent as it pertains to the distribution facilities located within the City, pursuant to
Texas Utilities Code §§ 102.001(b) and 103.001; and
WHEREAS, provision is made in Section 103.003 of the Texas Utilities Code whereby a
municipality may elect to have the Railroad Commission of Texas (the "Commission") exercise
original jurisdiction over gas utility rates, operations, and services within the incorporated limits
of said municipality; and
WHEREAS, the Governing Body of this municipality, after having thoroughly
considered the matter, is of the opinion that the best interests of this municipality will be served
by having the Commission exercise original jurisdiction over gas utility rates, operations, and
services as to this Statement of Intent;
NOW, THEREFORE,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PARIS. TEXAS:
SECTION 1. That the Governing Body of this municipality does hereby elect to have
the Commission exercise original jurisdiction over gas utility rates, operations, and services
within the incorporated limits of this municipality concerning the TXU Gas Company Statement
of Intent filed on May 23, 2003.
SECTION 2. That this Ordinance shall become effective, and the Commission shall
exercise the exclusive original jurisdiction over said gas utility rates, operations, and services as
to this Statement of Intent on and after the date of the passage hereof until such time as a final
rate is set for TXU Gas Company by the Commission.
SECTION 3. That it is hereby officially found and determined that the meeting at which
this Ordinance is passed is open to the public as required by law and that public notice of the
time, place and purpose of said meeting was given as required.
SECTION 4. That the Secretary of this municipality shall give notice of this Ordinance
to the Commission by forwarding a certified copy of same to the Commission upon the passage
of this Ordinance.
SECTION 5. That the Secretary of this City shall forward a copy of this Ordinance to
the following representative of TXU Gas Company within 10 days after the Ordinance is
approved: Autry L. Warren, Director Gas Regulatory, TXU Business Services, 1601 Bryan
Street, Dallas, Texas 75201-3402.
PASSED AND APPROVED at a Regular Meeting of the City of PARIS, Texas on this
the __ day of ,2003.
Mayor
ATTEST:
Secretary
ORDINANCE NO.
AN ORDINANCE OF THE CITY OF PARIS, TEXAS, DENYING TXU GAS
COMPANY'S REQUEST TO CHANGE RATES IN THIS MUNICIPALITY,
AS A PART OF THE COMPANY'S STATEWIDE GAS UTILITY SYSTEM;
PROVIDING A R~QUIREMENT FOR A PROMPT REIMBURSEMENT OF
COSTS INCURRED BY THt~ CITY; PROVIDING AN EFFECTIVE DATE;
FINDING THAT THE MEETING AT WHICH THIS ORDINANCE IS PASSED
IS OPEN TO THE PUBLIC AS REQUIRED BY LAW; AND PROVIDING FOR
NOTICE OF THIS ORDINANCE TO TXU GAS COMPANY.
WHEREAS, on or about May 23, 2003, TXU Gas Company (the "Company") filed with
the City of PARIS ("City"), a Statement of Intent to change gas rates in all municipalities within
the Company's statewide gas utility system effective June 27, 2003; and
WHEREAS, the City, has exclusive original jurisdiction to evaluate the Company's
Statement of Intent as it pertains to the distribution facilities located within the City, pursuant to
Texas Utilities Code §§ 102.001(b) and 103.001; and
WHEREAS, the Texas Utilities Code § 103.022 provides that costs incurred by the City
in ratemaking activities are to be reimbursed by the regulated utility;
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF PARIS, TEXAS:
SECTION 1. The Company's Statement of Intent to change gas rates within the City, as
part of the Company's statewide gas utility system, be denied in all respects.
SECTION 2. The costs incurred by the City in reviewing the Company's application be
promptly reimbursed by the Company.
SECTION 3. This Ordinance shall become effective immediately from and after its
passage, as the law and charter in such cases provide.
SECTION 4. That it is hereby officially found and determined that the meeting at which
this Ordinance is passed is open to the public as required by law and that public notice of the
time, place and purpose of said meeting was given as required.
SECTION 5. A copy of this ordinance, constituting final action on the Company's
application be forwarded to the appropriate designated representative of the Company within 10
days as follows: Autry L. Warren, Director Gas Regulatory, TXU Business Services, 1601 Bryan
Street, Dallas, Texas 75201-3402.
DULY PASSED and approved by the City Council of the City of PARIS, Texas, on this
the day of ,2003.
APPROVED:
ATTEST:
APPROVED AS TO FORM:
, CITY ATTORNEY