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Home My WebLink AboutCC Minutes 1994-10-24 Special 561 I SPECIAL MEETING ) ( � FRIENDSWOOD CITY COUNCIL ) ( OCTOBER 2� , 199� ) � MINUTES OF A SPECIAL MEETING OF THE FRIENDSWOOD CITY COUNCIL THAT WAS HELD ON MONDA�� Q�,�Q$,�g �� 199�} ,g� 6 : 00 �• M • AT � F�I,�ND�WOOD CITY HALL , COUNCIL ,�.jjAMBERS . 1pq WILLOWICK.� FRIEND��jQQp� ��, WITH THE FOLLOWING PRESENT CONSTITUTING A QUQRUM: � MAYOR EVELYN B . NEWMAN MAYOR FRO-TEM TOM MANISON COUNCILMEMHER KITTEN HAJECATE COUNCILMEMBER MEL MEASELES ( ARR . AT 7 : 00) COUNCILMEMBER ED STUART COUNCILMEMBER ALINE AICKEY COUNCILMEMBER JANIS L�WE CITY ATTORNEY TODD STEWART CITY MANAGER RON COX CITY SECRETARY DELORIS MCKENZIE MAYOR NEWMAN CALLED THE MEETING TO ORDER . MAYOR NEWMAN CALLED A PUBLIC HEARING TO ORDER TO RECEIVE TESTIMONY REGARDING HOUSTON LIGHT & POWER RATE CASE . MS . GEOGIANA NICHOLS , DISTRICT MANAGER OF HOUSTON LIGHT & POWER APPEARED BEFORE COUNCIL AND READ AND FOLLOWING STATEMENT INTO THE RECORD AND PROVIDED COPIES OF THE WRITTEN STATEMENT TO MEMBERS OF COUNCIL . "PUBLIC HEARING PRESENTATION TO GULF COST COALITION OF CITIES" HL&P HAS BEEN SERVING THE HOUSTON AREA FOR 112 YEARS PROVIDING RELIABLE , SAFE , AND REASONABLY-PRICED ELECTRIC SERVICE . � AS YOUR KlJOW , OUR COMPANY HgS MAINTAINED VERY STRONG RELATIONSHIPS WITH THE COMMUNITIES WE SERVE . THIS IS WHERE OUR EMPLOYEES ANA THEIR FAMILIES LIVE , SO WE HAVE MORE THAN JUST BUSII�ESS INTERESTS AT STAKE . AT THE TEXAS PUBLIC UTILITY COMMISSION ' S REQUEST , HL&P FILED AN EXTENSIVE RATE FILING PACKAGE WITH THE COMMISSTON ON JULY 13 , 199� . THIS FILING SHOWS THAT QUR CURRENT RATES ARE JUST AI3D REASONABLE AND SHOULD NOT BE CHANGES , EVEN THOUGH, WE COULD Si3PPORT A BASE RATE INCREASE OF MORE THAN $247 MILLION . IN LETTERS TO ALL CITIES IN OUA SERVICE AREA , HL&P � S PRESIDENT , STEVE LETBETTER , MAAE A COMMITMENT THAT EVERY CITY WILL AUTOMATICALLX RECEIVE REDUCED RATES IF THE PUC ULTIMATELY LOWERS RATES . HE FURTHER PROMISEA THAT IF IT IS DETERMINED THAT HQSE RATES SHOIILD HAVE BEEIJ IMPLEMENTED AT A DATE EgRLIER THAN THE PUB FINAL ORDER , ALL CUSTOMERS WTLL GET THE BENEFIT OF THE LOWER RATES BASED ON THE EARLIER DATE . AS YOU KNaW , WE HAVE MET WITH REPRESENTATIVES OF YOUR CITY ON SEVERAL OCCASIONS DURING RECENT MONTHS TO CLARIFY POINTS MADE IN THESE 562 LETTERS AND TO ADDRESS ANY OTHER ISSUES OF CONCERN . THE CONCEPT � , OF RETROACTIVE RATES WAS REPEATEDLY DISCUSSED , AND IT WAS OUR UNDERSTANDING THAT THIS WAS THE PRIMARY ISSUE - NOT COST OF SERUTCE . THEN , AFTER THE GULF COAST COALITION OF CITIES ( COALITION} RETAINED COUNSEL , COUNSEL CHOSE TO HIRE A CONSULTANT TO DO A COST OF SERVICE STUDY . UNFORTUNATELY , THIS STUDY , PREPARED BY REED-STOWE AND ASSOCIATES , REPRESENTS ONLY A CURSORY REVIEW OF HL&P ' S RATE FILING PACKAGE AND IS INCOMPLETE AND INACCURATE . THE COALITION ' S INVESTIGATION HAS NOT PROVIDED A ' DETAILED ANALYSIS OF THE COMPANY ' S EXTENSIVE RATE FILING PACKAGE , ANU IT DOES NOT ADDRESS ALL THE ISSUES THAT MUST BE REVIEWED BEFORE A TRUE DETERMINATION OF THE REASONABLENESS OF RATES CA� BE �1ADE . HOWEVER , SUCH AN INVESTIGATION IS CURRENTLY UNDERWAY AT THE PUC . THE REED-STOWE ANALYSIS , WHICH RECOMMENDED A $ 147 MILLION BASE RATE REDUCTION , DIA NOT APPLY THE BASIC RATEMAKING PRINCIPLES CONSISTENTLY USED BY THE PUC IN UTILITY RATE CASES . INSTEAD , REED-STOWE , WITHOUT SUPPORTING STATISTICAL EVIDENCE , SIMPLY CONCLUDED THAT HL&P "FAILED TO MEET ITS BURDEN OF PROOF" IN MAPJY INSTANCES . THIS CONCLUSZON WAS REACHED DESPITE THE FACT THAT HL&P SUPPLIED THOUSANDS OF PAGES OF TESTIMONY AND SCHEDULES TO SUPPORT ITS CASE . IF FORCED TO IMPLEMENT A $ 1 �7 MILLION BASE RATE REDUCTION , HL&P ' S FINANCIAL INTEGRITY WOULD BE JEOPARDIZED UNLESS OPERATIONAL CHANGES WERE MADE THAT COULD IMPACT THE QUALITY OF SERVICE THAT WE HAVE BEENPROUD TO PROVIUE THOUGHOUT OUR HISTORY . FOR THIS AEASON , WE BELIEVE THAT ALL MEMBERS OF COUNCIL SHOULD UNDERSTAND WHY THE PROPOSED RATE DECREASE IN UNFAIR AND UNREASONABLE . AS YOU EXECUTE YOUR RESPONSIBILITY FOR SETTING RATES , IT IS IMPORTANT THAT ALL MEMBERS OF COUNCIL UNDERSTAND THE BASIC RATE MAKING PRINCIPLES USED BY THE PUB WHICH HAVE EITHER BEEN IGNORED OR MISUNDERSTOOD BY REED-ST4WE . OUR FILED REBUTTAL TESTIMONY ADDRESSES EACH OF THESE AREAS IN GREAT DETAIL . THERE ARE NUMEROUS EXAMPLES OF PUB POLTCY WHICH HAVE BEEN UPHELD BY THE PUC TIME AFTER TIME THAT REED-STOWE WAS EITHER UNAWARE OF OR CHOSE TO IGNORE . I ' D LIKE TO CITE JUST A FEW CASES IN THIS REGARD . REED-STOWE DID NOT CONSISTENTLY USE THE ' TEST YEAR " CONGEPT WHICH IS A STANDARD FOR ALL PUC RATE MAKING PROCEEDINGS . IN MANY INSTANCES , REED-STOWE NOT ONLY FAILED TO USE TEST YEAR DATA BUT INSTEAD CHOSE TO BASE RECOMMENDATIONS ON OUTDATED INFORMATTON . UNDER THE TEST YEAR CONCEPT , PUBLIC UTILITY REGULATORY ACTAND THE COMMISSION ' S RULES ALLOW THE PUC TO PERMIT ADJUSTMENTS TO TEST XEAR EXPENSES , BASED ON KNOWN AND MEASURABLE CHANGES THAT WILL BE INCURRED AFTER THE TEST YEAR BECAUSE OF NORMAL ONGOING OPERATIONS . AEED-STOWE FAILED TO DO THIS IN A NUMBER QF INSTANCES WHICH UNREASONABLY REDUCED THE COST OF SERVICE ON WHICH REASONABLE RATES SHOULD BE BASED . ANOTHER EXAMPLE HAS TO DO WITH WELL ESTABLISHED REGULATORY POLTCY REGARDING REVENUES AND EXPENSES WHICH ARE NOT RECURRING . JUST AS NONRECURRING EXPENSES ARE EXCLUDEB FROM THE COST OF SERVICE , NONRECURRSNG REVENUES SHOULD ALSO BE EXCLUDED . REED-STOWE RECOMMENDED A BASE RATE DECREASE OF $32 MILLION RELATING TO A ONE-TIME STATE FRANCHISE REFUND THAT HL&P RECEIVED DUING THE TEST YEAR . , SINCE THIS WAS A ONE-TIME OCCURRENCE , IT SHOULD BE REFLECTED IN THE COMPANY ' S OVERALL COST OF SERVICE . A THIRD EXAMPLE HAS TO DO ��ITH WEATEHR ADJUSTMENTS . SINCE NO ONE CAN CONTROL WEATHER , ADJUSTMENTS ARE TYPICALLY MADE TO TAKE INTO 563 ACCOUNT WHETHER THE EXPERIENCE IN THE RATE YEAR CONSTITUTES NORMAL WEATHER PATTERNS FOR THE SERVICE TERRITORY . HL&P ' S ADJUSTMENTS , BECAUSE THE SUMMER OF 1993 WAS HOTTER THAN NORMAL , WERE THE SAME KINDS OF ADJUSTMENTS CONSISTENTLY APPLTED BY THE PUC IN THE PAST . HOWEVER , REED-STOWE MADE NO ADJUSTMENTS TO NORMALIZE WEATHER IN THI5 RECOMMENDATION . AND FINALLY , IT TS ESSNTIAL TO DISCUSS THE RATEMAKING CONCEPT OF "RETURN ON EQUITY . " RETURN ON EQUITY IS THE RETURN ON THE COMPANY ' S INVESTED CAP�ITAL , WHICH INVESTOAS REQUIRE IN ORDER TO IIVEST IN THE COMPANY ' S STOCK . IT IS TYPICALLY CALCULATED THROUGH A COMPANY-SPECIFIC A�ALYSIS BY ECONOMISTS WHO PRESENT DETAILED STUDIES FOR THE PUB ' S CONSIDERATION . REED-STOWE DID NO SUCH STUDY . IT SIMPLY MADE A COMPARISON BETWEEN HL&P ' S LAST AUTHORIZED RETURN ON EQUITY ` APPROVED BY THE PUC AND THE RETURN ON EQUITY APPROVED FOR TEXAS UTILITIES COMPANY IN THEIR LAST RATE CASE AND SUGGESTED THAT THEIR NUMBER IS APPROPRIATE FOR HL&P . GIVEN RECENT INTEREST RATE INCAEASES AND THE FACT THAT TO AND HL&P HAVE DIFFERENT COST STURCTURES , WHICH MUST BE TAKEN INTO ACCOUNT IN DETERMINING A REASONABLE RETURN ON EQUITY , REED-STOWE ' S ANALYSIS IS FLAWED . AS A RESULT , REED-STOWE SIGNIFICANTLY UNDERESTIMATED HL&P ' S COST OF SERVICE . AGAIN , IT APPEARS THAT REED-STOWE WAS EITHER UNAWARE OF IGNORED BASIC PRINCIPLES ON WHICH FAIR AND REASONABLE RATES ARE ESTABLISHED IN THE STATE OF TEXAS . THE PROPOSED RATE REDUCTION IS SO FAR OUT OF LINE , IF IMPLEMENTED , IT WOULD JEOPARDIZE OUR ABILITY TO PROVIDE QUALITY ELECTRIC SERVICE . HL&P TRIES TO ACT IN THE BEST INTERESTS OF OUR CUSTOMERS . AS ELECTED OFFICIALS , YHOU DO YOUR BEST TO ENSURE THAT THE CITIZENS OF YOUR CITY GET THE BENEFITS OF SOUND JUDGEMENTS . OBVIOUSLY , THE MOST ACCURATE INFORMATION IS ESSENTIAL TO THIS PROCESS . WE BELIEVE THE REED- STOWE STUDY IS NOT ACCURATE , AND DECISIONS MADE IN THE PUBLIC INTEREST SHOULD NOT BE BASED ON ITS CONCLUSIONS . COUNCILMEMBER LOWE STATED FOR THE RECORD , THERE WERE OVER 28 VOLUMES OF TESTIMONY AND 36 WITNESS DOCUMENTS REGARDING THE RATE INCREASE AND THAT BASED ON INFORMATION GIVEN BY THE CONSULTANTS , REED-STOWE HAS DETERMINED THERER IS AN OVERCHARGE OF $147 MILLION DOLLARS . HEARING NO FURTHER COMMENTS , THE PUBLIC HEARING WAS CLOSED AT 6 : 15 PM . �**�*#**�*�***�*****�*�*****��*******��*�*�*�*��*�**�*�*��a 7 : 00 - ADJOURN TO ��,�jyp��Q,� �yNIO� �.�j S�H00� �AFETERI$ 402 LAUREL �r*��t�t*�t�t�t#*�t�t�t�t��t**��t*�t�t*�*��t�t***�t�t*��*�*�t**�r*�*�t��t�*�t�t�t�t�t*��t**�t�t* T 0 W N .�.��,Y� MAYOA NEWMAN CALLED THE TOWN MEETING TO ORDER WITH ALL COUNCILMEMBERS PRESENT WITH CITY MANAGER AND CITY SECRETARY IN ATTENDENCE . MAYOR NEWMAN REPORTED THERE WERE FOURTEEN SUBDIVISIONS FLOODED WITH APPROXIMATELY 1 �8 HOMES FLOODED WITH THE RECENT RAIN . MAYOR b64 � ; NEWMAN REPORTED THAT RED CROSS SET UP SHELTERS IMMEDIATELY , COMMUNITY APPEARANCE BOARD HAD TWENTY FOUR VOLUNTEERS TO HELP THE FLOOD VICTIMS AND REPORTED A FLOOD CENTER HAS BEEN SET UP AT THE ACTIVITIES BUILDIG AND WILL BE MANNED BY VOLUNTEER LUCY WOLTZ AND REPORTED EARLY VOTING IS BEING CONDUCTED AT CITY HALL AND 354 VOTERS HAVE ALREADY VOTED . DISCUSSION WAS HELD REGARDING JUVENILE CURFEW ISSUES WITH COUNCILMEMBERS LOWE AND MEASELES PRESENTZNG INFORMATION ON CURFEW WITH COUNCILMEMBER LOWE PRESENTING THE HISTORY OF A EARLY CURFEW IN THE 70 ' S , THE DRUG ADVISORY COUNCIL THAT ADOPTED A ZERO TOLEAANCE PROGRAM , THE NEW FOCUS PROGRAM TO TRAIN ADULTS AND STUDENTS REGAADING DRUG AND ALCOHOL ABUSE , RED RIBBON WEEK IN SUPPORT ON DRUG AND ALOCHOL AWARENESS AND COUNCILMEMBER MEASELES PRESENTING STATISTICS FROM OTHER AREA CITIES THAT HAVE ADOPTED CURFEW ORDINANCES . POLICE CHIEF STOUT PRESENTED INFORMTION ON ARREST ACTIVITIES WITH 56 YOUTH BETWEEN THE AGES OF 14 TO 16 BEING ARRESTED , 69 ARRESTED BETWEEN 17 AND 18 AND 72 ARRESTED FROM 19 YEARS OF AGE AND STATED THE STEPS TAKEN IN THIS CITY HAS BEEN PREVENTATIVE MAINTENANCE . SEVERAL STUDENTS AND PARENTS SPOKE IN OPPOSITION OF THE CURFEW AND SEVERAL STUDENTS AND PARENTS SPOKE IN FAVOR OF THE CURFEW , CITING MANY REASONS AND EXAMPLES . MOTION MADE AND APPROVED FOR ADJOUR,j�1�� AT 9 : 00 PM. _�� _`;��r��-, MAYOR VELYN B . NEWMAN AT T • � DELORIS MCKE ZIE , TRMC CITY SECRETARY