05-A TXU Gas Rate Inc. Request DRAFT
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PARIS,
PARIS, TEXAS, DENYING TXU GAS COMPANY'S REQUEST TO
CHANGE RATES INSIDE THE CITY LIMITS OF THE CITY OF PARIS,
AS PART OF THE COMPANY'S STATEWIDE GAS UTILITY SYSTEM;
PROVIDING A REQUIREMENT FOR A PROMPT REIMBURSEMENT OF
COSTS INCURRED BY THE CITY; FINDING THAT THE MEETING AT
WHICH THIS ORDINANCE IS PASSED IS OPEN TO THE PUBLIC AS
REQUIRED BY LAW; PROVIDING AN EFFECTIVE DATE; 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, Paris, Texas ("City"), a Statement of Intent to change gas rates in all
municipalities within the Company's statewide gas utility system effective Jurle 27, 2003; and,
WHEREAS, the City has previously extended the effective date of the Company's rate
filing; 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; and,
WHEREAS, the City is participating with a coalition of over 120 other cities in opposition
to the Company's filing at the Railroad Commission, said coalition being known as the Allied
Coalition of Cities ("ACC"), in GUD No. 9400 pending at the Commission; and,
WHEREAS, ACC and the Company have reached a procedural agreement regarding the
schedule for processing GUD No. 9400 that includes TXU's concession to allow one hundred
fifteen (115) additional days to process the rate case and ACC's commitment that member cities
expedite the process of getting city action appealed to the Commission; and,
WI-I~REAS, ACC and TXU jointly endorse the City's denial of the Company's rate
application pending before the City; and,
WHEREAS, counsel for ACC, upon review of the Company's filing and upon consultation
with various consultants, recommends findings that the Company's proposal is unjustified and
unreasonable; NOW, THEREFORE,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS,
TEXAS:
Section 1. That the findings set out in the preamble to this ordinance are hereby in all
things approved.
Section 2. That the Company's Statement of Intent to change gas rates within the City,
as part of the Company's statewide gas utility system, is found to be unreasonable because: (a)
TXU's requested return on equity is excessive, generating more than 86% of the requested
increase in rates; (b) the basis for TXU's proposed consolidations (of regional distribution systems
and of pipeline costs with distribution costs) has not been established; (c) the City's jurisdiction
to increase pipeline rates has not been established and, therefore, the proposed pipeline cost
increases should be disallowed; (d) revenue requirements should be reduced rather than increased;
and (e) the TXU filing should be den/ed pursuant to agreement with the Company; and is therefore
den/ed in all respects.
Section 3. That the costs incurred by the City in reviewing the Company's application be
promptly reimbursed by the Company.
Section 4. That this Ordinance shall become effective immediately from and after its
passage, as the law and charter in such cases provide.
Section 5. 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 6. That 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, Paris,
Texas, on this the 14th day of July, 2003.
Curtis Fendley, Mayor
ATTEST:
Mattie Cunningham, City Clerk
APPROVED AS TO FORM:
Larry W. Schenk, City Attorney
LLOYD, GOSSELINK, BLEVINS, ROCHELLE,
BALDWIN & TOWNSEND, P.C.
ATTORNEYS AT LAW
111 CONGRESS AVENUE TELEPHONE (512) 322-5800
SUITE1800 Mr. Gay's Direct Line: (512)322-5875 TELECOPIER (512)472-0532
AUSTIN, TEXAS 78701 Ernail: ggay~lglawfirm.com www. lglawfirm.com
CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION
MEMORANDUM
TO: 123 Cities Allied In Opposition To TXU Gas
FROM: Geoffrey M. Gay on behalf of your Steering Committee
DATE: July 3, 2003
RE: Status Of Case; Need To Adopt Ordinance Denying Rate Relief To TXU Gas
Last Friday, June 27, 2003, was the effective date of the new gas rates proposed by TXU
in its statewide rate filing. Your city suspended the effective date, authorized the joining of a
coalition of cities working under the direction of a Steering Committee~ and authorized the filing
of an intervention in the proceeding on TXU's rate application pending at the Railroad
Commission (RRC), GUD No. 9400.
For ease of identification in GUD No. 9400, the 123 cities that passed the suspension
resolution recommended by the Steering Committee and joined the coalition chaired by Jay
Doegey, City Attorney of Arlington, are being referred to as Allied Coalition of Cities (ACC).
Attached please find a current listing of all cities that have authorized participation in the
ratemaking process. Pleadings are on file at the RRC to intervene each of the 123 cities as part
of ACC.
There are 1.4 million customers on the TXU Gas system. Residents of ACC members
total approximately 870,000 or approximately 63% of all TXU gas customers. If the City of
Dallas (with about 234,433 customers) decides to join ACC, your coalition will be speaking on
behalf of nearly 80% of all customers and reflecting more than 80% of total sales volumes.
~ Your Steering Committee members are: Jay Doegey, Arlington; Chester Nolen, Cleburne; Nick Fehrenbach, Don
Knight and Amy Bock, Dallas; Tom Akins, Denison; Margaret Somereve and John Boyle, Farmers Branch; Van
James and Steve Williams, Flower Mound; Danny Reed, Fort Worth; Cathy Cnnningham, Irving; Diane Wetherbee
and John Gilliam, Piano; John Gayle and Carolyn House, Snyder; Dale Cheatham, The Colony, Art Pertile, Waco;
and Bok Sokoll and Janet Adkins, Waxahachie.
1668\09~9400~nmo030703gmg
There is another group of cities, referred to as Association of TXU Municipalities
(ATM), represented by Jim Boyle and Monte Akers, involved in the RRC proceeding. ATM has
46 members, mostly small cities. The number of residents of ATM cities is about 9% of total
customers and they consume about 6% of the gas sold on the system.
During the period of time that cities were considering whether to deny or suspend TXU's
application, my office negotiated concessions from TXU regarding development of a procedural
schedule for RRC proceedings. As this statewide case is the flint of its kind with many
controversial and difficult issues, it is unlikely that Cities' case could be thoroughly developed
within the traditional 185 day time frame. We successfully negotiated an agreement from the
Company to extend the Commission jurisdiction from 185 days to 300 days; in return, ACC
agreed that the Cities would expedite the process of getting RRC jurisdiction over city action by
expediting denials that could be appealed. Having worked out that agreement with TXU, it is
now appropriate for the members of the coalition that I represent to pass ordinances denying the
Company's application. I have revised the denial ordinance TXU previously asked you to pass.
It is attached to this memo and should be placed before your council at the earliest convenient
time.
I had several Steering Committee members ask that I include findings of fact to justify
denial. The Steering Committee then directed that such findings be included with this package.
I have included a list of proposed f'mdings which are also reflected in the ordinance. I have
carefully structured the findings to address generic issues so that we can avoid premature release
of issues being pursued by your consultants.
Your consultants were selected to tap the strengths of several different firms. A three-
phased approach is being used to develop your positions. Phase 1 was used to evaluate issues
and potential consultants. Phase 2 is the discovery and development phase that we are in
currently. A six-hour meeting was held in my office on July 1st with the various consultants to
share ideas and issues. Phase 2 will continue through the end of August. Phase 3 will focus on
development of testimony and re-evaluation of preliminary decisions as to who should testify.
Your consultants and witnesses consist of several members from R.J. Covington Consulting,
Steve Hill (on rate of return), Steve Andersen (on class cost allocation and rate design), Connie
Cannady and 4MP, consisting of former TXU employees.
The first preheating conference at the RRC in GUD No. 9400 will occur on Monday,
July 14, 2003.
1668\09~9400~mmoO30703gmg
GUD NO. 9400
PARTICIPATING CITIES IN THE
ALLIED COALITION OF CITIES
Abilene Everman N. Richland Hills
Addison Fairview Ovilla
Allen Farmers Branch Palestine
Alvarado Farmersville Parker
Angus Fate Paris
Argyle Flower Mound Pecan Hill
Arlington Forest Hill Petrolia
Athens Fort Worth Plano
Bedford Frisco Ponder
Bellmead Gainesville Pottsboro
Bells Grand Prairie Putnam
Benbrook Grapevine Red Oak
Blossom Haltom City Richardson
Blue Ridge Harker Heights Richland Hills
Bowie Haskell Robinson
Brownwood Haslet Rockwall
Bryan Henrietta Rowlett
Burkburnett Highland Park Sachse
Burleson Highland Village Saginaw
Caddo Mills Honey Grove San Angelo
Carrollton Howe Seagoville
Celina Hurst Sherman
Cleburne Irving Snyder
Clyde Justin Southlake
College Station Kaufman Stamford
Colleyville Kennedale Stephenville
Comanche Kerrville Sulphur Springs
Coppell Killeen Sweetwater
Corinth Lancaster The Colony
Corral City Lewisville Throckmorton
Crandall Lincoln Park Trophy Club
Crowley Little Elm University Park
Dalw. Gardens Malakoff Vernon
Denison Mansfield Waco
DeSoto McKinney Watauga
Duncanville Megargel Waxahachie
Early Mesquite Westworth Vilge.
Eastland Midlothian White Settlement
Edgecliff Village Murphy Wichita Falls
Ennis Nocona Woodway
Euless Northlake Wylie
1668\09~9400~mmo030703 gmg
Alice Pinalto
From: Gall Johle [gjohle~lglawfirm.com]
Sent: Thursday, July 03, 2003 2:32 PM
To: Alan Hein (E-mail); Andy Fontenot (E-mail); Ann Honza (E-
mail); Anthony "Biff" Johnson (E-mail); Art Pertile (E-mail);
Barbara Alavarado (E-mail); Betty McMenamy (E-mail); Bill
Atkinson (E-mail); Bill Davison (E-mail); Bill Flannery (E-
mail); Bill Lindley (E-mail); Bill Lindsay (E-mail); Bill
Sullivan (E-mail); Billy Campbell (E-mail); Bo Bass (E-
mail); Bob Livingston (E-mail); Carolyn House (E-mail);
Cary K. Conklin (E-mail); Cathy Anderson (E-mail); Cathy
Cunningham (E-mail); Chad Beach (E-mail); Charles
Boswell (E-mail); Charles Rowland (E-mail); Charlie Shear
(E-mail); Chester Nolen (E-mail); Chuck Barnett (E-mail);
Claude King (E-mail); Clayton Chandler (E-mail); Clinton
Bit-tick (E-mail); Codi Delcambre (E-mail); Collin Boothe (E-
mail); Curtis Snow (E-mail); Dale Cheatham (E-mail);
Daniel W. Parker (E-mail); Danny Reed (E-mail); David
Geesiin (E-mail); David Hall (E-mail); David Maddox
mail); David Miller (E-mail); David Vestal (E-mail); Diane
Rasor (E-mail); Diane Wetherbee (E-mail); Don Postell (E-
mail); Don Wilson (E-mail); Donna Anderson (E-mail);
Donna Welsh (E-mail); Frances Slater (E-mail); Gary Butts
(E-mail); George Patterson (E-mail); George Purefoy (E-
mail); George Staples (E-mail); Gerry Boren (E-mail); Greg
Vick (E-mail); Greg Wilmore (E-mail); Gus Pappas (E-
mail); Harvey Cargill Jr. (E-mail); James B, Baugh (E-
mail); James Blystone (E-mail); ]ames R, Hogan (E-mail);
James W. Quin (E-mail); Janet Adkins (E-mail); Jay Doegey
(E-mail); Jeff ]ones (E-mail); Jim Berzina (E-mail); Jim
Landan (E-mail); Jim Murray (E-mail); Jim Witt (E-mail);
Jimmie McClure (E-mail); Joe Hennig (E-mail); Joe LaBeau
(E-mail); Joe Pence (E-mail); John Daniel (E-mail); John
Gayle (E-mail); John Gilliam (E-mail); John Godwin (E-
mail); Judy Bell (E-mail); Judy Graves (E-mail); .lulie Couch
(E-mail); Karin Herrmann (E-mail); Ken Heerman (E-mail);
Ken Lane (E-mail); Ken Pfeifer (E-mail); Ken Seale (E-
mail); Kent Austin (E-mail); Kent Cagle (E-mail); Kerry
Lacy (E-mail); Larry Robinson (E-mail); Larry Schenk (E-
mail); Lee Roy George (E-mail); Leonard Martin (E-mail);
Loretta Getchell (E-mail); Lynn Nunns (E-mail); Marc
Maxwell (E-mail); Margaret Somereve (E-mail); Margaret
Ward (E-mail); Hark A, Kaiser (E-mail); Mark Tsraelson (E-
mail); Mary Kay Fischer (E-mail); Mary Kaye Moore (E-
mail); Mary O. Daly (E-mail); Matthew Boyle (E-mail);
Melisa Leal (E-mail); Michael Cosentino (E-mail); Michael
!
To: Hitt (E-mail); Michael 3. Savoie (E-mail); Michael Land (E-
mail); Michael Malone (E-mail); Mike Castro (E-mail); Mike
Slye (E-mail); Minnie Walker (E-mail); Nan Stanford (E-
mail); Odis Dolton (E-mail); Pat Chesser (E-mail); Patricia
Stack (E-mail); Pete Eckert (E-mail); Peter Phillis (E-mail);
R. C. Fletcher (E-mail); Randy Moravec (E-mail); Rhett
Clark (E-mail); Richard Torres (E-mail); Robert S.
Sparkman (E-mail); Robert Sokoll (E-mail); Roger Carlisle
(E-mail); Ron Hutchison (E-mail); Ron Patterson (E-mail);
Ronald Whitehead (E-mail); S. G. "Scooter" Radcliffe (E-
mail); Sam Watson (E-mail); Scott Albert (E-mail); Scott
Campbell (E-mail); Scott Holaway (E-mail); Scott Wall (E-
mail); Sharon Elam (E-mail); Sharon Hicks (E-mail);
Shawna Cortez (E-mail); Shelli Siemer (E-mail); Stan
Wilkes (E-mail); Stephen W. McCullough (E-mail); Steve
Bacchus (E-mail); Steve Williams (E-mail); Steven
Carpenter (E-mail); Steven McKay (E-mail); Susan K.
Thorpe (E-mail); Thomas Caffall (E-mail); Tom Adams (E-
mail); Tom Akins (E-mail); Tom Hart (E-mail); Van 3ames
(E-mail); Vicki Faulkner (E-mail); Virginia Blevins (E-mail);
Yousry Zakhary (E-mail)
Subject: GUD No. 9400
mmo030702gmg
memo to 124 par.
Attached is a memo from Geoffrey Gay, a list of participating cities, a draft ordinance, and proposed
findings supporting denial of TXU's request to increase rates for natural gas.
<<mmoO30702gmg memo to 124 participating
cities re status of case.doc>>
Gall Johle
gjohle@lglawfirmcom
Lloyd, Gosselink, Blevins, Rochelle, Baldwin & Townsend, P.C.
111 Congress Avenue, Suite 1800
Austin, Texas 78701
(512) 322-5800 phone
(512) 322-5877 direct
(512) 472-0532 fax
If you would like more information about the firm, please visit our website at www.lglawfirm.com.
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2
ORDINANCE
AN ORDINANCE OF THE CITY OF ., TEXAS, DENYING
TXU GAS COMPANY'S REQUEST TO CHANGE RATES IN THIS
MUNICIPALITY, AS A PART OF THE COMPANY'S STATEWlDE GAS
UTILITY SYSTEM; PROVIDING A REQUIREMENT FOR A PROMPT
REIMBURSEMENT OF COSTS INCURRED BY THE CITY; 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 ("City"), a Statement of Intent to change gas rates in all municipalities
within the Company's statewide gas utility system effective June 27, 2003;
WHEREAS, the City has previously extended the effective date of the Company's rate
filing;
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;
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;
WHEREAS, the City is participating with a coalition of over 120 other Cities in
opposition to the Company's filing at the Railroad Commission, said coalition being known as
Allied Coalition of Cities ("ACC"), in GUD No. 9400 pending at the Commission;
WHEREAS, ACC and the Company have reached a procedural agreement regarding the
schedule for processing GUD No. 9400 that includes TXU's concession to allow one hundred
fifteen (115) additional days to process the rate case and ACC's commitment that member Cities
expedite the process of getting city action appealed to the Commission;
WHEREAS, ACC and TXU jointly endorse the City's denial of the Company's rate
application pending before the City;
WHEREAS, counsel for ACC, upon review of the Company's filing and upon
consultation with various consultants, recommends findings that the Company's proposal is
unjustified and unreasonable; and
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF ~ 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, is found to be unreasonable because: (a)
TXU's requested return on equity is excessive, generating more than 86% of the requested
increase in rates; (b) the basis for TXU's proposed consolidations (of regional distribution
systems and of pipeline costs with distribution costs) has not been established; (c) the City's
jurisdiction to increase pipeline rates has not been established and, therefore, the proposed
pipeline cost increases should be disallowed; (d) revenue requirements should be reduced rather
than increased; and (e) the TXU filing should be denied pursuant to agreement with the
Company; and is therefore 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 , Texas,
on this the __. day of _, 2003.
APPROVED:
ATTEST:
APPROVED AS TO FORM:
City Attorney
1668\09~9400~mmoO30703gmg
PROPOSED FINDINGS SUPPORTING DENIAL OF TXU'S
REQUEST TO INCREASE RATES FOR NATURAL GAS
1. TXU's requested return on equity is unreasonable. By far, the largest cost
component of the Company's request for a rate increase is associated with rate of return on
equity. At a time when interest rates are at the lowest point in decades and investors'
expectations for re~urn on investment are the lowest in many years, T×U proposes to increase its
return dollars from gas operations by $60,255,075 (86.7 percent of the total rate increase). Such
request is irrational in light of national economic conditions and outrageous in light of the fact
that TXU Corporation recently wrote off more than $4 billion in shareholder equity related to
poor or imprudent management of European Operations. Any increase in current return dollars
is unjustified.
2. The basis for proposed consolidation has not been established. The
Company's filing fails to prove that it is reasonable and necessary to incorporate the pipeline
cost of service into the distribution cost of service and to consolidate various regional
distribution systems into a single statewide system.
3. The City's jurisdiction to increase pipeline rates has not been established
and, therefore, the proposed pipeline cost increase should be disallowed. The Railroad
Commission has always exercised exclusive original jurisdiction over pipeline costs, while
municipalities have exclusive original jurisdiction over gas distribution rates. With this filing,
TXU has incorporated pipeline costs in excess of those previously approved by the Commission
into the proposed distribution rate to be considered by the City, and all such pipeline costs should
be disallowed.
1668\09~9400~nmo030703gmg
4. Revenue requirements should be reduced rather than increased. Cities have
provided consistent and more than fair rate relief to TXU over the past five years. This case
should be thoroughly reviewed at the Railroad Commission from the perspective that current
revenue requirements are excessive and that revenues should be reduced rather than increased by
$70 million as proposed by TXU. The proposed consolidations should result in cost savings, not
cost increases.
5. The TXU filing should be denied pursuant to agreement with the Company.
Cities and TXU have reached a procedural agreement for development of a thorough rate hearing
and consideration by the Railroad Commission. That agreement calls for TXU to extend
Commission jurisdiction from 185 days to 300 days in exchange for Cities taking prompt action
at the local level to allow perfection of all appeals before development of the case commences at
the Commission.
1668\09~9400~mmoO30703gmg