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HomeMy WebLinkAboutItem 06 - TXU Gas Steering CommitteeITEM 1 MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: ROGER NELSON, CITY MANAGER'., MEETING DATE: MAY 7, 2002 SUBJECT: RESOLUTION TO PARTICPATE IN STEERING COMMITTEE OF CITIES SERVED BY TXU GAS RECOMMENDATION: City Council approve a resolution authorizing the City of Grapevine to participate in the Steering Committee of Cities to intervene in TXU Lone Star Pipeline (TXU LSP) rate filing at the Railroad Commission, Gas Utilities Docket (GUD) 9292. FUNDING SOURCE: The City of Grapevine will not incur any costs for participation in this process since TXU Gas, according to state law, is required to reimburse the cities for any expenses related to a rate review. BACKGROUND: On April 5, 2002, TXU Lone Star Pipeline (TXU LSP), a division of TXU Gas, filed a statement of intent with the Railroad Commission (GUD 9292). The filing, if approved, would enable TXU LSP to surcharge residential ratepayers 37¢ per month and commercial ratepayers $2.10 per month to cover the costs associated with a new pipeline to serve the DFW Metroplex. Despite the fact that the pipeline will be constructed to meet needs in the DFW area, the company believes it will indirectly provide benefits to the entire system and therefore should charge all users. The surcharge, if approved, will impact more than 1.4 million residential and commercial customers served by TXU Gas throughout the state. Additionally, TXU LSP will increase revenues by approximately $9.8 million or 8% with the surcharge. The Staff recommends participating in the Steering Committee in order to intervene in this filing. Please read the attached letter from Geoffrey Gay, the consultant that has worked for the Steering Committee in previous rate cases, who recommends the cities oppose this form of ratemaking. MYL April 30, 2002 (1:4613M) RightFAX 4/5/2002 12:54 PAGE 3/4 RightFAX LLOYD, GOSSELINK, BLEVINS, ROCHELLE, BALDWIN & TOWNSEND, P.C. ATTORNEYS AT LAW 111 CONGRESS AVENUE, SUITE 1800 AUSTIN, TEXAS 78701 TO: TXU Client Cities ]FROM: Geoffrey M. Gay DATE: April 5, 2002 Mr. Gay's Direct Line: (5 12) 322-5875 Email: ggay@lglawfirmcom MEMORANDUM RE: New TXU Pipeline Case TELEPHONE (512) 322-5800 TELECOPIER (512) 472-0532 �Today TXU Lone Star Pipeline (LSP) filed a case at the Railroad Commission for a statewide surcharge on residential and commercial customers to cover the investment in a new 76 -mile pipeline originating at Mitchell -Bridgeport processing plant in Wise County, crossing Denton County and terminating in Collin County. Designated as the Northside Project, the pipeline is intended for service in late 2004 to meet the growth needs in the North Texas Metroplex Area (NTMA). TXU alleges that it has adequate pipeline capacity to serve the Metroplex at the moment, but that system operations require that gas be routed from the `Vest and South Regions into Dallas and that the system will be capacity constrained in 2005 if the pipeline is not built. According to LSP, although the pipeline will only directly benefit the Metroplex, it will indirectly benefit system operations and thus, all residential and commercial customers should pay the surcharge. The Company is requesting monthly surcharges for seven years of 37¢ for residential customers and 52.10 for commercial customers. LSP also plans to file a second surcharge case at the end of the month to recover ongoing pipeline integrity costs. It is possible that if these matters were litigated in the context of an overall rate case that in 2003 or 2004 there would be no discernable impact upon rates because of declines in depreciation expense, cost of capital, O&M or other items. The requested surcharges reflect piecemeal ratemaking that should be rejected as contrary to public policy. 1(03 07'mrvto020405grrg RightFAX 4/5/2002 12:54 PAGE 4/4 RightFAX I will prepare a model intervention resolution for those Cities interested in forming a coalition to review the filings and oppose the proposed method of cost recovery. I will discuss the resolution with Jay Doegey, Chairman of the TXU Cities Steering Committee, when he returns from vacation next Tuesday. I am sure that he will contact you in the near future. ! 66S%G7 mmo020405gmg 0 771L RESOLUTION 71L.- RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS AUTHORIZING INTERVENTION IN GAS UTILITIES DOCKET 9292 AT THE RAILROAD COMMISION; AUTHORIZING PARTICIPATION IN A STEERING COMMITTEE WITH OTHER CITIES SERVED BY TXU; REQUIRING REIMBURSEMENT FROM TXU LONE STAR PIPELINE OF CITIES REASONABLE RATE CASE EXPENSES AND PROVIDING AN EFFECTIVE DATE WHEREAS, TXU Lone Star Pipeline (LSP) filed a statement of Intent with the Railroad Commission (designated as GUD 9292) on April 5, 2002, to surcharge residential and commercial gas customers who are residents of the City of Grapevine to cover costs associated with a new pipeline to serve the Metroplex; and WHEREAS, the requested surcharges of .37 cents per month and $2.10 per month on the residential and commercial customers, respectively, will adversely impact the City of Grapevine and its residents; and WHEREAS, cities served by TXU have a history of cooperation in gas rate matters and such cooperation in GUD 9292 will be efficient and cost effective in evaluation whether the proposed pipeline is reasonable and necessary and whether associated costs should be recovered in piecemeal ratemaking through a surcharge; and WHEREAS, pursuant to Utilities Code § 103.023, municipalities have standing to intervene in this case; and WHEREAS, pursuant to Utilities Code § 103.022, municipalities are entitled to reimbursement of their reasonable costs of participation. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: Section 1. That the City Council of the municipality of Grapevine, Texas authorizes the City Manager or his designee to represent the City on the Steering Committee of affected cities (hereinafter called "Steering Committee") and authorizes the Steering Committee of which the City is a participating member, to retain legal counsel and engage consultants, and to intervene on behalf of the City in related dockets and appeals. Section 2. That the Steering Committee formed to oversee this effort on behalf of cities is authorized to take all reasonable steps before the Railroad Commission and before the Courts as may be necessary in an appeal of a Commission Order. Section 3. That LSP is hereby directed to promptly pay cities' rate case expenses as they are incurred. Section 4. That the City Secretary shall cause copies of this resolution to be sent to the TXU representative: Autry Warren, Rate Manager TXU Gas Distribution 1601 Bryan Street Dallas, TX 75201-3402 Jay B. Doegey City Attorney City of Arlington PO Box 231 Arlington, TX 76004-0231 For forwarding to the Steering Committee. Section 5. That this resolution shall become effective from and after the date of its passage. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS on this the 7th day of May, 2002. rAT•- -§l WJJOZTS M ATTEST: LAINU a § - a