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HomeMy WebLinkAboutItem 03 - Oncor Rate Increase Denial ����r� � ' MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: BRUNO RUMBELOW, CITY MANAGER�j� MEETING DATE: NOVEMBER 4, 2008 SUBJECT: ONCOR RATE INCREASE DENIAL RECOMMENDATION City Council to consider a resolution denying a rate increase request made by Oncor Electric Delivery. BACKGROUND Oncor Electric Delivery Company filed an application on or about June 27, 2008 with cities retaining original jurisdiction seeking to increase system-wide transmission and distribution rates by $275 million. The Company asks the City to approve a 17.6% increase in residential rates, a 9.1% increase in commercial rates, and a 5.8% increase in street lighting rates. According to Oncor, annual rates would increase by approximately $60 for an average residential customer. The resolution denies the Company's requested rate increase and requires that the Company's current rates be maintained for all customers within the City. The City has exclusive original jurisdiction over the electric rates charged by the Company. In accordance with that authority, the City suspended the August 8th effective date for 90 days to review the Company's requested rate increase. The City's review of Oncor's rate increase request is coordinated by the Oncor Cities Steering Committee. The City is a member of the 145-city Steering Committee. The Steering Committee has been the primary public interest advocate before the Public Utility Commission, the Courts, and the Legislature on electric utility regulation matters for the last 20 years. To conduct the review and any necessary litigation of Oncor's requested rate increase, the Executive Committee of the Steering Committee retained lawyers and consultants with expertise in regulatory rate making issues. Legal efforts are being directed by Geoffrey Gay, Kristen Doyle and Thomas Brocato with the law firm of Lloyd Gosselink Rochelle & Townsend. All reasonable consulting and legal fees incurred by the Steering Committee are reimbursable by the Company. � October 29, 2008 (10:52AM) The major components underlying Oncor's requested $275 miliion increase includes an increase for depreciation expense ($131 million), a substantial increase to the Company's storm reserve ($81 million) and additional costs for pension and post retirement benefits ($36 million). Based upon the analysis of the Company's filing and review of discovery responses, the Steering Committee's consultants have determined that the Company's increase cannot be substantiated by evidence. In particular, Steering Committee experts have identified problems with the evidence offered by the Company supporting its requested rate of return, cash working capital, depreciation expense, consolidated taxes, federal income taxes, storm damage reserve and pension and post retirement benefits. The preliminary analysis indicates that Cities will likely be proposing cumulative reductions to the Company's requested rate increase in excess of$200 million. In addition, Cities' experts will file testimony regarding the rate design and cost allocation proposals made by Oncor. The action taken by the City to deny Oncor's rate increase will be appealed by the Company to the Public Utility Commission of Texas. The Steering Committee will file testimony challenging the Company's support for the rate increase. The hearing regarding Oncor's requested rate increase will begin January 13, 2009 and is expected to last three weeks. In an effort to avoid litigation if at all possible, parties to the proceeding have scheduled meetings with the Company to investigate the possibility of settlement. This item was discussed at a Utility Committee meeting on October 21St and the members of that committee recommend approval. October 29,2008(10:52AM) '\ l'-�� N� � RESOLUTION NO. A RESOLUTION OF THE CITY OF GRAPEVINE, TEXAS FINDING THAT ONCOR ELECTRIC COMPANY'S REQUESTED INCREASES TO ITS ELECTRIC TRANSMISSION AND DISTRIBUTION RATES AND CHARGES WITHIN THE CITY SHOULD BE DENIED; FINDING THAT THE CITY'S REASONABLE RATE CASE EXPENSES SHALL BE REIMBURSED BY THE COMPANY; FINDING THAT THE MEETING AT WHICH THIS RESOLUTION IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW; REQUIRING NOTICE OF THIS RESOLUTION TO THE COMPANY AND LEGAL COUNSEL AND PROVIDING AN EFFECTIVE DATE WHEREAS, pursuant to § 33.001 of the Public Utility Regulatory Act ("PURA"), the City has exclusive original jurisdiction over the electric rates, operations, and services provided within city limits; WHEREAS, on or about June 27, 2008, Oncor Electric Delivery Company ("Oncor" or "Company"), pursuant to PURA §§ 33.001 and 36.001 filed with the City of Grapevine ("City") a Statement of Intent to increase electric transmission and delivery rates by $275 million on a system-wide basis within its service area effective August 8, 2008; and WHEREAS, pursuant to PURA § 36.108, the City lawfully suspended the August 8, 2008, effective date by resolution to provide time to study the reasonableness of the Company's application to increase rates; and WHEREAS, the City is a member of the Oncor Cities Steering Committee (Steering Committee) and has cooperated with 145 similarly situated city members to conduct a review of the Company's application, to hire and direct legal counsel and consultants, to prepare a common response to the filing, to negotiate with the Company and to direct any necessary litigation appealing final city action; and WHEREAS, the City, in a reasonably noticed meeting that was open to the public, considered the Company's application; and WHEREAS, the consultants who were retained by the Steering Committee to evaluate the merits of the Company's application have determined that the Company's requested $275 million increase in revenues for its transmission and distribution system is not supported by evidence; and WHEREAS, PURA § 33.023 provides that reasonable costs incurred by cities in ratemaking activities are to be reimbursed by the regulated utility. RES. NO. 1 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: Section 1. That the rates proposed by Oncor Electric Delivery Company, to be recovered through its electric transmission and distribution rates charged to customers located within the City limits, are hereby found to be unreasonable and shall be denied. Section 2. That the Company shall continue to charge its existing rates for transmission and distribution services to customers within the City. Section 3. That the City's reasonable rate case expenses shall be reimbursed by Oncor. Section 4. That it is hereby officially found and determined that the meeting at which this Resolution is passed is open to the public as required by law and the public notice of the time, place, and purpose of said meeting was given as required. Section 5. That a copy of this Resolution shall be sent to Oncor, care of Debra Anderson, Oncor Electric Delivery Company, 1601 Bryan St., Suite 23-055C, Dallas, Texas 75201 and to Geoffrey Gay, General Counsel to the Oncor Cities Steering Committee, at Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767-1725. Section 6. That this resolution shall take effect from and after the date of its passage. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS on this the 4th day of November, 2008. APPROVED: RES. NO. 2 ATTEST: ._ APPROVED AS TO FORM: RES. NO. 3