HomeMy WebLinkAboutOrdinance No. 98-12 ' , � , 9 .. .. .... . i
' • �
ORDINANCENO. g8-12
AN ORDINANCE APPROVING CERTAIN BASE RATE CREDITS AND A
CHANGE IN ACCOUNTING PROCEDURES FOR HOUSTON LIGHTING &
POWER COMPANY; PROVIDING AN EFFECTIVE DATE THEREFOR;
APPROVING A MOST FAVORED NATION PROVISION; FINDING AND
DETERMINING THAT THE MEETING AT WHICH THIS ORDINANCE IS
PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW; AND
PROVIDING FOR SEVERABILITY.
* * * * * :� * *
WHEREAS, Houston Lighting & Power Company ("HL&P") filed a petition with the
City on December 12, 1997, seeking approval of a change in accounting procedures and certain
base rate credits contained in a Settlement Agreement; and
WHEREAS, if approved, the requested orders and the Settlement Agreement would be in
effect during 1998-1999 and possibly thereafter; and
WHEREAS, the City approved the change in accounting procedures and the
implementation of certain base rate credits on an interim basis for HL&P by ordinance; and
WHEREAS, the City, through the Gulf Coast Coalition of Cities, retained a consultant to
provide a preliminary analysis of HL&P's filing; and
WHEREAS, a full revenue requirement review of HL&P's rates would support rate
reductions which more fully reflect load growth, cost reductions, declining rate base and
declining cost of capital, all of which have occurred since base rates were last reviewed in PUC
Docket No. 12065 and would eliminate as much as $110,000,000 in excessive revenues that will
not, under the Settlement Agreement, be captured by the proposed earnings measurement and
sharing mechanism for the benefit of ratepayers; and
WHEREAS, the notion of providing customers with base rate credits instead of actual
base rate reductions when current rates yield excessive revenues is generally contrary to the
public interest; and
WHEREAS, the Settlement Agreement calls for shifting depreciation from transmission
and distribution assets to nuclear production assets, which, among other things, will require
future ratepayers to fund the cost recovery of and a return on assets which were utilized in
providing service during current periods; and
WHEREAS, the proposed rate relief is less than what current conditions would warrant
and depreciation shifting appears to be inconsistent with sound regulatory and public policy; and
FWD\HL&P-Final\04/I S/98
WHEREAS, the Public Utility Commission and the Texas Legislature should generally
oppose the use of depreciation shifting which disproportionately shifts the burden to residential
and small commercial ratepayers for recovery of stranded investment; and
WHEREAS, the Settlement Agreement contains provisions that (i) freeze base rates
without regard to overearnings that may occur through HL&P's changed circumstances; (ii)
requires signatories to endorse or not oppose HL&P's recovery from ratepayers of approximately
$507,184,000 in costs associated with uneconomic assets; and (iii) requires signatories to
endorse or not oppose a high rate of return on equity should any party, in good faith, attempt to
review the reasonableness of HL&P's rates or challenge HL&P's overearnings; and
WHEREAS, if HL&P disagrees with the final action of the City with regard to the
matters presented by HL&P's filing, then HL&P may appeal the City's ordinance to the Public
Utility Commission of Texas; the Commission will consider the appeal contemporaneously with
HL&P's original filing and will address precisely the same issues raised by the City at or near the
same time as the City must act and the Commission would most likely set rates within the
municipal limits of the City to conform with the Commission's order in HL&P's original filing;
and
WHEREAS, the various components of HL&P's filing, including the individual
components of the Settlement Agreement, do not appear to result in just and reasonable rates and
do not appear to avoid unreasonable discrimination; and
WHEREAS,the City recognizes that HL&P's proposal is for only two years and provides
for a full rate case in 1999 and that pursuit of a full rate case at this time would lead to
contentious, expensive and inefficient litigation that would not provide rate payers with benefits
in the form of reduced rates for a year or more; and
WHEREAS, the City recognizes that the Texas Legislature during the next legislative
session will consider proposals to make competition in electricity a reality in Texas and any such
action by the Legislature, given the timing of HL&P's filing, would largely preempt the City's
decisions in a full rate case; and
WHEREAS, the City has fully considered HL&P's filing, the Settlement Agreement and
the City's obligations to protect ratepayers; now, therefore,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FRIENDSWOOD, STATE
OF TEXAS:
Section l. That the facts and matters set forth in the preamble of this Ordinance are
hereby found to be true and correct and are adopted in their entirety.
- 2 -
FWD\HL&P Final\04/IS/98
Section 2. Although much of the information provided to the City preponderates
against approval of the filing made by HL&P, the City finds that a reasonable basis exists for
approval of HL&P's request as filed.
Section 3. HL&P's request to implement certain base rate credits and for certain
changes in accounting procedures, all as more fully set forth in HL&P's December 12, 1997,
filing with the City, is hereby APPROVED.
Section 4. The change in rates and accounting procedures approved by this
Ordinance shall be effective as of January 1, 1998.
Section 5. The Texas Legislature is hereby encouraged to reject depreciation shifting
as a means for recovering uneconomic investment in generation plant.
Section 6. The City Secretary is hereby authorized and directed to serve a copy of
this Ordinance on HL&P by certified United States Mail, return receipt requested.
Section 7. Nothing contained in this Ordinance shall be construed now or hereafter as
limiting or modifying in any manner the right and power of the City Council of the City of
Friendswood, Texas, under the law to regulate the rates, operations, and services of HL&P.
Section 8. Notwithstanding any other provision of this Ordinance to the contrary, the
rates authorized for electric service within the City of Friendswood, Texas, shall not exceed the
lowest rates available to residential and commercial customers of any other municipality served
by HL&P.
Section 9. It is hereby officially found and determined that the meeting at which this
Ordinance is passed is open to the public and that notice of the time, place, and purpose of said
meeting was given as required by law.
Section 10. In the event any clause,phrase, provision, sentence, or part of this Ordinance
or the application of the same to any person or circumstance shall for any reason be adjudged
invalid or held unconstitutional by a court of competent jurisdiction, it shall not affect, impair, or
invalidate this Ordinance as a whole or any part or provision hereof other than the part declared to
be invalid or unconstitutional; and the City Council of the City of Friendswood, Texas, declares
that it would have passed each and every part of the same notwithstanding the omission of any such
part thus declared to be invalid or unconstitutional,whether there be one or more parts.
PASSED AND APPROVED on first reading this 6th day of April ,
1998.
PASSED, APPROVED, and ADOPTED on second and final reading this 20th
day of April , 1998.
- 3 -
FWD\HL&P Final\04/15/98
�
r
Harold L. Whitaker
Mayor
ATTEST:
. �
Deloris McKenzie, RM
City Secretary
D![otion: Kitten Ha�ecate
2nd: Tc+nr P��anison
6-6 /�sel ^"e�.seles out o.f
the room.
- 4 -
FWD\HL&P Final\04/15/98