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City Council |
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Agenda Request |
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Agenda Of: |
April 1, 2008 |
Agenda Request No: |
IX A and XII A |
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Initiated By: |
Joe morris, city attorney |
Responsible Department: |
city attorney’s office |
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Presented By: |
joe morris |
Department Head: |
joe morris |
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Additional Department. Head (s): |
n/a |
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Subject / Proceeding: |
centerpoint energy gas rate increase |
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Exhibits: |
Resolution 08-12, CenterPoint Information |
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Clearances |
Approval |
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Legal: |
joe morris, city attorney |
Executive Director: |
n/a |
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Purchasing: |
n/a |
Asst. City Manager: |
n/a |
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Budget: |
n/a |
City Manager: |
Allen Bogard |
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Budget |
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Expenditure Required: $ |
n/a |
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Current Budget:
$ |
n/a |
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Additional Funding:
$ |
n/a |
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Recommended Action |
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Approve Resolution No. 08-12. |
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Executive Summary |
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CenterPoint Energy Gas has filed an application with cities retaining original jurisdiction over rates and services to increase rates within their Texas Coast Division by $7.36 million. The Company's application was filed with the City on March 6, 2008. This resolution suspends the effective date of the Company's rate increase for the maximum period permitted by law to allow the City time to evaluate the filing. The law provides that a rate request made by a natural gas utility cannot become effective until 35 days following the filing of the application to change rates. The law permits the City to suspend the effective date for 90 days. If the City does not take action to suspend the filing, CenterPoint may begin charging increased rates after April 10, 2008. According to CenterPoint, annual rates would increase by approximately $42 for residential customers. We have invited Doug Ward, CenterPoint’s District Manager for the Texas Coast Division to speak to you on CenterPoint’s filing for an increase in gas rates. He has also provided the attached information for your consideration. After Mr. Ward makes his presentation, Thomas Brocato of the Lloyd Gosselink lawfirm, the City’s utility consultants on legal matters, will meet with you in executive session to brief you on this matter, answer your questions, and make recommendations. |
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Exhibits |
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RESOLUTION NO.
08-12
A RESOLUTION
OF THE CITY COUNCIL OF THE CITY OF SUGAR LAND, TEXAS, SUSPENDING THE APRIL 10, 2008, EFFECTIVE DATE OF CENTERPOINT ENERGY
RESOURCES CORP., D/B/A CENTERPOINT ENERGY ENTEX AND CENTERPOINT ENERGY TEXAS
GAS (CENTERPOINT) REQUESTED RATE CHANGE TO PERMIT THE CITY TIME TO STUDY THE
REQUEST AND TO ESTABLISH REASONABLE RATES; APPROVING COOPERATION WITH THE GULF
COAST COALITION OF CITIES AND OTHER CITIES IN THE CENTERPOINT AREA TO HIRE
LEGAL AND CONSULTING SERVICES AND TO NEGOTIATE WITH THE COMPANY AND DIRECT ANY
NECESSARY LITIGATION AND APPEALS; RATIFYING THE SELECTION OF LLOYD GOSSELINK AS
LEGAL COUNSEL; REQUIRING REIMBURSEMENT OF CITIES’ RATE CASE EXPENSES; FINDING
THAT THE MEETING AT WHICH THIS RESOLUTION IS PASSED IS OPEN TO THE PUBLIC AS
REQUIRED BY LAW; AND REQUIRING NOTICE OF
THIS RESOLUTION TO THE COMPANY AND LEGAL COUNSEL.
WHEREAS, on or about March 6, 2008,
CenterPoint Energy Resources Corp., d/b/a CenterPoint Energy Entex and
CenterPoint Energy Texas Gas (CenterPoint or Company), pursuant to Gas Utility
Regulatory Act § 104.102 filed with the City of Sugar Land a Statement of
Intent to change gas rates in all municipalities exercising original
jurisdiction within its Texas Coast Division service area effective April 10,
2008; and
WHEREAS, it is reasonable for the City of Sugar Land to maintain its involvement in the Gulf Coast Coalition of Cities (GCCC) and to cooperate with the other similarly situated city members in conducting a review of the Company’s application and to hire and direct legal counsel and consultants and to prepare a common response and to negotiate with the Company and direct any necessary litigation; and
WHEREAS, the Gas Utility Regulatory Act § 104.107 grants local regulatory authorities the right to suspend the effective date of proposed rate changes for 90 days; and
WHEREAS, the Gas Utility
Regulatory Act § 103.022 provides that reasonable costs incurred by cities
in ratemaking activities are to be reimbursed by the regulated utility; and
WHEREAS, on or about March 6, 2008
simultaneous with the filing with the City, CenterPoint filed a Statement of
Intent to change gas rates for the Texas Coast environs with the Railroad
Commission of Texas referred to as Gas Utility Docket ("GUD") No.
9791; NOW, THEREFORE;
BE IT RESOLVED BY
THE CITY COUNCIL
OF THE CITY OF SUGAR LAND, TEXAS:
Section 1. That the April 10, 2008, effective date of the rate request submitted by CenterPoint on or about Mach 6, 2008, be suspended for the maximum period allowed by law to permit adequate time to review the proposed changes and to establish reasonable rates.
Section 2. That the City is authorized to cooperate with GCCC and its member cities in the Texas Coast Division service area to hire and direct legal counsel and consultants, negotiate with the Company, make recommendations to the City regarding reasonable rates and to direct any necessary administrative proceedings or court litigation associated with an appeal of a rate ordinance and the rate case filed with the City or Railroad Commission.
Section 3. That the selection of the law firm of Lloyd
Gosselink to represent the GCCC and its members in this matter is ratified.
Section 4. That the City is authorized to intervene and paticipate in GUD No. 9791, Statement of Intent of CenterPoint Energy Resources Corp. D/B/A CenterPoint Energy Entex and CenterPoint Energy Texas Gas to Increase Rates in the Unincorporated Areas of CenterPoint's Texas Coast Division, in order to protect the interests of the City.
Section 5. That the City’s reasonable rate case expenses shall be reimbursed by CenterPoint
Section 6. 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 7. That a copy of this resolution shall be sent to CenterPoint, care of Denise Hardcastle, Director of Regulatory Activities and Compliance, CenterPoint Energy, P.O. Box 2628, Houston, Texas 77252-2528 and to Thomas Brocato, at Lloyd Gosselink, P.C., 816 Congress, Avenue, Suite 1900, Austin, Texas 78701.
Section 8. That the provisions of this resolution are severable and the invalidity of any part of this resolution will not affect the validity of the remainder of the resolution. Notice of the enactment of this resolution will be given by publishing the resolution or its descriptive caption and penalty in the City's official newspaper one time within thirty days of passage.
APPROVED on _______________________________, 2008.
_________________________
David G. Wallace, Mayor
ATTEST: Reviewed for Legal Compliance:
_____________________________
Glenda Gundermann, City Secretary
HOW ARE RATE CASE EXPENSES RECOVERED
FROM CUSTOMERS IN RATE PROCEEDINGS?
1. The Gas Utility Regulatory Act (“GURA”) allows a utility to recover from customers both the reasonable rate case expenses the utility directly incurs to put on its case, as well as any reimbursement to the municipality for its costs.[1]
2. The regulatory authority (either the municipality having original jurisdiction over the utility’s rates or the Railroad Commission of Texas on appeal) only has the authority to order the recovery of rate case expenses from customers whose rates will change as a result of the case pending before the regulatory authority.
WHAT DOES THIS MEAN?
In Texas, a city gets the exclusive right to determine whether a rate request is reasonable for customers in that city. It is only if the utility appeals a city’s decision on rate relief to the Railroad Commission that the Commission gains the authority to set rates for those city’s customers. In contrast, if a city approves the requested rates or lets them go into effect, the Railroad Commission has no authority to change the rates for that city. This also means that on appeal, the Railroad Commission cannot order a surcharge on rates for recovery of rate case expenses associated with the appeal for city customers whose rates are not at issue on appeal.
WHY?
Because the Railroad Commission does not have authority to change the rates of customers in those cities that are not participating in the appeal case.
WHAT IS THE
CONSEQUENCE OF THIS?
The consequence is that the Railroad Commission can only order the recovery of rate case expenses from those customers who live in the cities that deny the rate change and end up in an appeal before the Railroad Commission.
WHY HAVE ALL
CUSTOMERS OF ATMOS MID-TEX PAID FOR RATE CASE EXPENSE IN THE PAST?
Because in past cases (GUD No. 9400 and GUD No. 9670) every city served by Atmos Mid-Tex participated in the appeal at the Railroad Commission.
HAS THE RAILROAD
COMMISSION REJECTED SURCHARGING RATE CASE EXPENSES ON A CITY NOT PARTICIPATING
IN AN APPEAL?
Yes. In GUD No. 9465, the utility settled with the City of Port Arthur, Texas, agreeing to give that city most favored nation treatment from any resulting appeal. Three other cities denied the proposed rates and litigated an appeal at the Railroad Commission. Over those three cities’ objections, the Railroad Commission surcharged rate case expenses only on the three cities involved in the appeal and not on the settling city.
IS THERE ANY
GUARANTEE THAT THE RAILROAD COMMISSION WILL ALLOW THE CITY TO RECOUP ITS RATE
CASE EXPENSES?
No. A city's recovery of rate case expense is not guaranteed. The Railroad Commission has become tougher on the recovery of rate case expenses by both cities and utilities.