14 - ONCOR RATE CASEItem No. 14
memorandum
TO: City Council
John Godwin, City Manager
FROM: Gene Anderson, Finance Director
SUBJECT: ONCOR RATE CASE
DATE: April 13, 2016
BACKGROUND: Recent Public Utility Commission of Texas (PUC) proceedings related to
approval of conversion of Oncor into a Real Estate Investment Trust (REIT) resulted in the
Commissioners' desire to share $200 million to $250 million in annual federal income tax (FIT)
savings with Oncor ratepayers. Since the proceeding involving a change of ownership and
control of Oncor was not a rate case, the Commission had no jurisdiction to order a reduction in
rates. The new owners of Oncor indicated intent to file a rate case in mid -2017 to become
effective in 2018. Believing that a two year wait to factor FIT savings into rates was too long to
wait, the Steering Committee of Cities Served by Oncor (Paris is a member) decided to initiate a
rate case against Oncor. Paris and other cities can file a rate case because they have original rate
making jurisdiction over Oncor's rates and services within their municipal limits.
STATUS OF ISSUE: In order for there to be a rate hearing in calendar year 2016, cities must
pass a resolution starting that process in April 2016. Oncor will have to provide historical data
from which the cities will prepare a report on why rates should be lowered. Oncor can agree with
the cities' report or it can file a rebuttal report. The final step either way is that the PUC will
have a rate hearing in November or December and a final order will be issued before the end of
the calendar year.
BUDGET: This item will have no impact on the City budget. Expenses related to the case will be
paid for by the Steering Committee of Cities Served by Oncor.
RECOMMENDATION: Motion to approve a resolution which initiates a rate case with Oncor.
Model Staff Report to Support Resolution
Directing Oncor Concerning Just and Reasonable Rates
Recent Public Utility Commission of Texas ( "Commission ") proceedings related to
approval of conversion of Oncor into a Real Estate Investment Trust ( "REIT ") resulted in the
Commissioners' desire to share $200 million to $250 million in annual federal income tax
( "FIT ") savings with Oncor ratepayers. Since the proceeding involving a change of ownership
and control of Oncor was not a rate case, the Commission had no jurisdiction to order a reduction
in rates. The new owners of Oncor indicated an intent to file a rate case in mid -2017 to become
effective in 2018. Believing that a two year wait to factor FIT savings into rates was too long to
wait, the Steering Committee of Cities Served by Oncor decided to initiate a rate case against
Oncor.
Whereas Clauses Explained
Cities have original rate making jurisdiction over Oncor's rates and services within their
municipal limits. The Commission has original jurisdiction over the environs outside municipal
limits and appellate jurisdiction over city rate mailing orders.
As a regulatory authority, Cities that retain original jurisdiction may initiate rate making
proceedings by filing a resolution requiring a public utility to show cause why rates should not
be reduced.
The City works with other similar Oncor Cities on regulatory issues through the Steering
Committee of Cities Served by Oncor which has functioned continuously since 1988.
The Executive Committee of the Steering Committee recommends that member Cities
pass show cause resolutions to initiate a rate case so that Oncor rates may be reduced.
Resolved Sections Explained
Section 1, provides notice to Oncor that it is compelled to file information that would
otherwise be required if the Company filed a request to increase rates at the Commission by
September 1, 2016. This Section requires that historic data from calendar year 2015 be filed to
demonstrate that its rates should not be reduced.
Section 2 authorizes Cities' representatives to file requests for information which shall be
answered by Oncor within 15 days of receipt.
Sections 3 and 4 set other dates critical to the procedural process for rate setting. Cities'
report will be due on October 13, 2016 and the Oncor rebuttal will be due November 10, 2016.
Section 5 establishes that a hearing will occur and final order will be issued between
November 15, 2016 and December 15, 2016.
Section 6 provides that the procedural schedule may be amended by the City and that
other orders may be extended. For example, once the REIT conversion is finalized, Cities may
enter interim orders requiring a sharing of tax savings that benefit ratepayers.
Section 7 authorizes the hiring of legal counsel and authorizes the Executive Committee
to hire consultants.
Section 8 confirms that Cities will seek reimbursement of their rate making expenses
from Oncor.
Section 9 confirms that the resolution was passed in compliance with Open Meeting laws.
1669/- /7071959
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Draft
RESOLUTION NO.
DIRECTING ONCOR ELECTRIC DELIVERY COMPANY, LLC TO FILE
CERTAIN INFORMATION WITH THE CITY OF PARIS, TEXAS; SETTING A
PROCEDURAL SCHEDULE FOR THE GATHERING AND REVIEW OF
NECESSARY INFORMATION IN CONNECTION THEREWITH; SETTING
DATES FOR THE FILING OF THE CITY'S ANALYSIS OF THE COMPANY'S
FILING AND THE COMPANY'S REBUTTAL TO SUCH ANALYSIS;
RATIFYING THE HIRING OF LEGAL COUNSEL AND CONSULTANTS;
RESERVING THE RIGHT TO REQUIRE THE REIMBURSEMENT OF THE
CITY OF PARIS, TEXAS' RATE CASE EXPENSES; SETTING A PUBLIC
HEARING FOR THE PURPOSES OF DETERMINING IF THE EXISTING
RATES OF ONCOR ELECTRIC DELIVERY COMPANY ARE UNREASONABLE
OR IN ANY WAY IN VIOLATION OF ANY PROVISION OF LAW AND THE
DETERMINATION BY THE CITY OF PARIS, TEXAS OF JUST AND
REASONABLE RATES TO BE CHARGED BY ONCOR ELECTRIC DELIVERY
COMPANY, LLC.; NOTING COMPLIANCE WITH OPEN MEETINGS LAW;
PROVIDING NOTICE OF PASSAGE.
WHEREAS, the City of Paris, Texas is a regulatory authority under the Public Utility
Regulatory Act ( "PURA ") and has original jurisdiction over the rates of Oncor Electric
Delivery Company, LLC ( "Oncor ") to determine if such rates are just and reasonable; and
WHEREAS, Sections 33.021, 36.003 and 36.151 of PURA empower a regulatory
authority, on its own motion or on a complaint by any affected person, to determine
whether the existing rates of any public utility for any service are unreasonable or in any
way in violation of any provision of law, and upon such determination, to determine the
just and reasonable rates; and
WHEREAS, the City of Paris, Texas has reason to believe that Oncor is over - earning
and its rates are excessive; and
WHEREAS, the City of Paris, Texas is a member of the Steering Committee of Cities
Served by Oncor; and
WHEREAS, the Executive Committee of the Steering Committee of Cities Served by
Oncor has recommended that cities pass a resolution that requires Oncor to show cause
why its transmission and distribution rates should not be reduced; and
WHEREAS, the City of Paris, Texas, and the City Council of the City of Paris, Texas
desires, on its own motion, to exercise its authority under Sections 33.021, 36.003 and
36.151 of PURA; and
WHEREAS, a procedural schedule should be established for the filing of certain
information by Oncor, procedures to be followed to obtain and review information from
Oncor, the filing of an analysis of such information by the City, the filing of rebuttal
information from Oncor, and a public hearing at which time the City shall make a
determination whether the existing rates of Oncor are unreasonable or are in any way in
violation of any provision of law, and if such rates should be revised, and just and
reasonable rates determined for Oncor.
THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS,
TEXAS:
SECTION 1. This resolution constitutes notice of the City's intent to proceed with
an inquiry into the transmission and distribution rates charged by Oncor. On or before
September 1, 2016, Oncor shall file with the City of Paris, Texas information that
demonstrates good cause for showing that Oncor's transmission and distribution rates
should not be reduced. Specifically, Oncor shall file with the City of Paris, Texas
information for the test year beginning January 1, 2015 and ending December 31, 2015,
regarding Oncor's cost of service elements, including, but not limited to, the elements
detailed by the Public Utility Commission as necessary for the filing of a Statement of Intent
to Change Rates. The test year may be updated for more current data and shall be adjusted
for known and measureable changes.
SECTION 2. City's designated representatives shall have the right to obtain
additional information from Oncor through the filing of requests for information, which
shall be responded to within fifteen (15) days from the receipt of such request for
information.
SECTION 3. City's designated representatives shall file their analysis of Oncor's
filing and information on or before October 13, 2016.
SECTION 4. Oncor shall file any rebuttal to the analysis of City's representatives
on or before November 10, 2016. With its rebuttal, Oncor may present whatever
additional information it desires to defend its current rates.
SECTION 5. A public hearing shall be conducted by the City Council for the City of
Paris, Texas during a regular council meeting scheduled between November 15 and
December 15. At such hearing a representative of Oncor and a representative of the City of
Paris, Texas' consultants will each be allowed to address the City Council and summarize
previously filed reports for no more than 15 minutes. Based upon such hearing, a
determination of the reasonableness of the existing rates of Oncor shall be made by the City
Council and, if necessary, just and reasonable rates shall be determined to be thereafter
observed and enforced for all services of Oncor within the City of Paris, Texas.
SECTION 6. The City Council may, from time to time, amend this procedural
schedule and enter additional orders as may be necessary in the public interest and to
enforce the provisions hereof.
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SECTION 7. Subject to the right to terminate employment at any time, the City of
Paris, Texas hereby ratifies the Steering Committee's selection of Geoffrey Gay with the law
firm of Lloyd, Gosselink, Rochelle & Townsend as legal counsel to assist the City of Paris,
Texas in its ratemaking and to prosecute any appeals to the Texas Public Utility
Commission or court. The Executive Committee of the Steering Committee of Cities Served
by Oncor shall retain appropriate consultants to prepare a report and make rate
recommendations.
SECTION 8. Fees and expenses of attorneys and consultants assisting the City in
the Steering Committee's review of the reasonableness of Oncor's rates will be processed
through the Steering Committee but the City reserves the right to seek reimbursement
from Oncor pursuant to the PURA Section 33.023.
SECTION 9. That it is hereby officially found and determined that the meeting at
which this resolution was passed was open to the public as required by law, and that public
notice of the time, place, and purpose of said meeting was given all as required by Section
551.041, Texas Government Code.
SECTION 10. That a copy of this Resolution shall be sent to E. Allen Nye, Jr., Senior
Vice President, General Counsel and Secretary, Oncor Electric Delivery Company LLC, 1616
Woodall Rodgers Freeway, Dallas, Texas 75202, and to Geoffrey Gay, General Counsel to
the Steering Committee of Cities Served by Oncor, at Lloyd Gosselink Rochelle & Townsend,
P.C., P.O. Box 1725, Austin, Texas 78767 -1725.
PASSED AND APPROVED at a regular meeting on this the day of 2016, by
the following votes:
Ayes:
Nays:
Abstentions:
ATTEST:
Janice Ellis, City Clerk
APPROVED:
Stephanie H. Harris, Interim City Attorney
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A.J. Hashmi, M.D., Mayor