HomeMy WebLinkAboutPO 5886: TEXAS GAS SERVICE - RATES FOR COST OF SERVICE ADJUSTMENTinteroffice
MEMORANDUM
To: Mayor, City Council, and. City Manager -_
From: Mark Sokolow, City Attorney /~h~,[
Date: April 30, 2008 ~ ~°_~
Subject: P. 0. No. 5886; Council Meeting May 7, 2008
Attached is P. 0. No. :5886 approving a cost of service
adjustment ("COSA") of $94,070 to be charged by Texas Gas Service
("TGS") for gas service for customers in the South Jefferson County
area; requiring reimbursement of municipal rate case expenses
associated with the review of the COSA calculations; finding that
the meeting complies with the Open Meetings Act; and declaring an
effective date for this ordinance. This was recommended by Dan
Lawton.
MTS:ts
Attachment
cc: VIA FACSIMILE (512) 474-2507
Dan Lawton
THE LAWTON LAW FIRM
816 Congress Avenue, Suite 1120
Austin, Texas 78701
VIA FACSIMILE: (409) 963-7133
Danny White
TEXAS GAS SERVICE
z.po5886_memo.
P. O. NO. 5886
04/29/08 GT
ORDINANCB NO.
AN ORDINANCE OF THE CITY OF PORT ARTHIIR, TSSAS
SETTING-THE JIIST AND REASONABLE RATES FOR THE COST
OF SERVICE ADJIISTMENT ("COSA") OF $94,070 TO BE
CHARGED BY TEXAS GAS SERVICE ("TGS") FOR GAS
SERVICE FOR CIISTOMERS IN THE SOD'TH JEFFERSON COIINTY
AREA; REQIIIRING REIMBIIRSEMENT OF MIINICIPAL RATE
CASE EXPENSES ASSOCIATED WITH THE REVIEW OF THE
COSA CALCIILATIONS; FINDING THAT THE MEETING
COMPLIES WITH THE OPEN MEETINGS ACT; AND DECLARING
AN EFFECTIVE DATE FOR THIS ORDINANCE.
WHEREAS, on or about April 1, 2008, TGS filed the initial Cost
of Service Adjustment ("COSA") Rate Schedule, as denoted in Exhibit
"A", with the City of Port Arthur, Texas requesting an annual rate
increase of $94,070 for the South Jefferson County Service Area; and.
WHEREAS, TGS requested an effective date for the new rate
schedule to go into effect with meters read on and after July 31,
2008; and
WHEREAS, in order to exercise its exclusive original
jurisdiction and properly review the requested rates, it is
necessary for the City to make a decision within 90 days of the
April 1, 2008 filing or June 30, 2008; and
WHEREAS, the City retained the Lawton Law Firm, P.C. to review
TGS' rate request and make necessary rate recommendations to the
City; and
WHEREAS, on April 30, 2008, the Lawton Law Firm, P.C. filed a
report with the City on this matter outlining the options available.
and making recommendations to the city; and
WHEREAS, the Lawton Law Firm has recommended that the _ City
z.po5886
approve the requested. COSA annual rate increase as stated in the
April 30, 2008 letter from the Lawton Law Firm, attached hereto as
Exhibit "B".
NOW THEREFORE, SE IT ORDAINED BY THE CITY COIINCIL OF THE CITY
OF PORT ARTHIIR:
SECTION 1. That the statements set out in the preamble to
this ordinance are adopted herein as if set forth here.
SECTION 2: That TGS' proposed $94,070 requested System
annual rate increase is approved, reflecting-the South Jefferson
County $94.,070 annual rate increase.
SECTION 3: That as recommended by the Lawton Law Firm and
stipulated by TGS ,;the Company's authorized return on equity shall
be 1.0..85°s.
SECTION 4: That as .recommended by the Lawton Law Firm and.
stipulated by TGS, the Company's authorized overall after tax rate
of return shall be 8.58%.
SECTION 5: That the Company shall promptly reimburse the
City's rate case expenses and may collect such expenses through.
surcharge.
SECTION 6: That the meeting at which. this resolution was
approved was in all things conducted in compliance with the Texas
Open Meetings .Act, Texas Government Code, Chapter 551.
SECTION 7: That-this ordinance shall be effective immediately
z_po5886
on passage and shall apply to the residents of Port Arthur, with
meters read on or after July 31, 2008.
Section 8. That a copy of the caption of this
Resolution be spread upon the Minutes of the Corporation.
READ, ADOPTED AND APPROVED on this day of ,
A.D., 2008, at a Council Meeting of the City Council of the City
of Port Arthur, Texas, by the following vote:
AYES:
City Council
NOES:
MAYOR
ATTEST:
ACTING CITY SECRETARY
APPROVED AS TO FORM:
1~ ~e~-
CITY ATTORNEY
APPROVED FOR ADMINISTRATION:
CITY MANAGER.
z.po5806
EXHIBIT "A"
TEXAS GAS SERVICE
April 1, 2008
A DIVISION OF ONEOK
Honorable Mayor and Members
of the Port Arthur City Council
City of Port Arthur, Texas
Dear Mayor and Members of the City Council:
REC~lVE~
APR .~ ~! 2008
EG~~ vE~'~RTM~N~
Texas Gas Service Company, a division of ONEOK, Inc. ("Company"), hereby respectfully submits
its 2008 (initial) filing pursuant to the Cost of Service Adjustment Clause ("Clause"), Rate Schedule
No. 1-1 for the South Jefferson County Service Area and applicable to the incorporated areas of Port
Arthur, Port Neches, Nederland and Groves, Texas.
This year, increases primarily in plant additions and associated depreciation expense result in a small
increase to rates. The attached Schedules 1 through 4, prepared according to the Clause, reflect a
necessary increase in the Company's revenues of $94,070.- This results in an increase to the
customer charge and volumetric rates (per the table below) for all general service rate schedules (see
attached gas sales Rate Schedules 10, 20, and 40 and transport Rate Schedule Tom) of Texas Gas
Service Company currently in force in its South Jefferson County Service Area. The City's share of
the increase is approximately $ 51,343. As demonstrated in the table below, a residential customer
using an average of 33 Ccf of gas per month would experience an increase of $ 0.23 per month.
Average
Monthly Monthly
Customer Volumetric C ustomer Bill
Customer Class Ch ar e Increase (Ccf) Increase Increase
RESIDENTIAL $ 0.16 $ 0.0021 $ 0.23
COMMERCIAL $ 0.45 $ 0.0009 $ 0.64
PUBLIC AUTHORITY AND
SCHOOLS $ 0.88 $ 0.0011 $ 1.27
TRANSPORTATION $ 39.26 $ 0.0004 $ 57.78
This proposed rate change is to become effective with meters read. on and after July 31, 2008.
Pursuant to the terms of the Cost of Service Adjustment Clause approved by the City in 2007, Che
City has until June 30, 2008 (ninety days) to take affirmative action to approve the proposed annual
rate adjustment. If no action is taken within the ninety days, the proposed rate adjustment will be
considered to have been denied. Texas Gas Service Company appreciates your consideration of the
requested Cost of Service Adjustment filing.
singly-~~'/`~ "'~Z"-
J /~ c
Danny D. White j/
Area Manager -South Jefferson County Service Area
Attachments
42oP 39th Sweet • Pon Arthur, TX 77642-2229
www.texazgasservice.com.
SCHEDULES 1 THROUGH 4
TEXAS GAS SERVICE COMPANY Schedule 1
SOUTH JEFFERSON COUNTY SERVICE AREA Page 1 of 2
COST OF SERVICE CLAUSE ADJUSTMENT
12 MONTHS ENDED 12/07
SUMMARY OF RATE ADJUSTMENT
12 Months
Ended
Description 12107
1 Rate Base $21,985,317
2 Rate of Return 8.5800%
3 Required Return $1,886,340
4 Depreciation and Amortization 927,263
5 Taxes Other Than FIT 302,031
6 Distribution Expenses 1,823,163
7 Customer Related Expenses 1,014,726
8 Administrative & General 1,433,848
9 Interest on Customer Deposits 23,782
i0 Fede211ncomeTax - 621,725
11 Revenue Requirement $8,032,878
12 Prior Revenue Requirement 7,938,808
13 Cost of Service Adjustment Amount $94,070
TEXAS GAS SERVICE COMPANY
SOUTH JEFFERSON COUNTY SERVICE AREA
COST OF SERVICE CLAUSE ADJUSTMENT
12 MONTHS ENDED 12/07
SUMMARY OF RATE ADJUSTMENT
NOTES TO SCHEDULE 1:
Note on calculation of limitation on adiustment:.
(A) Revenue Requirement from current year
(B) Revenue Requirement from prior year
(C) Total Change in Return and Expenses
(D) Total Retum and Expense Change Percentage [should not exceed (E) below]
(E) % Change in Consumer Price Index (prior yr. Dec to current yr. Dec)
(FJ Revenue impact of current year's adjustment
(G) % share of revenue increase based on current volumes:
Groves
Nederland
Port Neches
Port Arthur
Environs
Total
Schedule 1
Page 2 of 2
$8,032,878
7,938,808
$94,070
1.18%
4.08%
$94,070
share of
current % share of
volumes revenue impact
15.49% $14,574
14.07% $13,234
13.009'° $12,225
54.58% $51,343
2.86% $2,694.
100.00% $94,070
TEXAS GAS SERVICE COMPANY
SOUTH JEFFERSON COUNTY SERVICE AREA
COST OF SERVICE CLAUSE ADJUSTMENT
12 MONTHS ENDED 12/07
ALLOWABLE EXPENSES
Description
1 Depreciation and Amortization
2 Taxes Other Than FIT
3 Distribution Expenses
4 Customer Related Expenses
5 Administrative & General
6 Interest on Customer Deposits
7 Total
Account
Schedule 2
12 Months
Ended
Numbers 12107
40305 $927,263
408 302,031
870-894 1,823,163
901-916 1,014,726
920-932 1,433,848
(Except 928)
431 23,782
$5,524,813
' Based on last city-approved depreciation methods and lives.
" Excludes City Franchise, Gross Receipts, and any other revenue-based taxes.
TEXAS GAS SERVICE COMPANY
SOUTH JEFFERSON COUNTY SERVICE AREA
COST OF SERVICE CLAUSE ADJUSTMENT
12 MONTHS ENDED 12/07
RETURN ON INVESTMENT
Schedule 3
12 Months
Ended
Description
1 Net Plant in Service
2 Other Rate Base Items
3 Customers Deposits (Acct. 235)
4 Customer Advances (Acct.252)
5 Deferred Income Taxes
6 Rate Base
7 Rate of Retum
8 Retum on Investment
12/07
$24,726,656
124,921
(586,453)
(67,074)
(2,212,733)
$21,985,317
8.580%
$1,886,340
` Amount from most recent rate case for Materials and Supplies inventories and'
prepayments and cash working capital
" Rate of return from most recent rate case
TEXAS GAS SERVICE COMPANY Schedule 4
SOUTH JEFFERSON COUNTY SERVICE AREA
COST OF SERVICE CLAUSE ADJUSTMENT
12 MONTHS ENDED 12/07
FEDERAL INCOME TAXES
12 Months
Ended
Description 1 y07
1 Taxable Income (Schedule3, Line 8) $1,886,340
2 Interest On Long Term Debt (Schedule 3, Line 6 x 3.05%) ` (670,552)
3 Investment Tax Ctedd (21,4D4)
4 Net Taxable Income $1,194,384
5 Taxes before Investment Tax Credit (0.53846 times line 4) "` $643,128
6 Investment Tax Credit (21,404)
7 Federal Income Taxes $621,725.
` Interest on Long Term Debt is the Detit Cost Component of Return (3.05% from the most
recent general rate case) multiplied by rate base
" Remaining unamortized credit
"` Tax factor of 0.53846 is the income tax rate of 35% divided by (1 minus the 35% tax
rate).
PROPOSED
.RAH SCHEDULES
TEXAS GAS SERVICE COMPANY
South Jefferson County Service Area
RATE SCHEDULE 10
RESIDENTIAL SERVICE RATE
APPLICABILITY
Applicable to residential consumers for all purposes.
TERRITORY
Incorporated areas served in Jefferson County, Texas including Port Arthur, Nederland, Groves and
Port Neches, Texas.
COST OF SERVICE RATES
During each monthly billing period:
A Customer Charge of $12.18 plus
All Ccf @ $ 0.17780 per Ccf
OTHER ADJUSTMENTS
Cost of Gas Component: The basic rates for cost of service set forth above shall be increased. by
the amount of the Cost of Gas Component for the billing month computed in accordance with the
provisions of Rate Schedule 1-1-INC.
Weather Normalization Adiustment: The billing shall reflect adjustments in accordance with the
provisions of the Weather Normalization Adjustment Clause, Rate Schedule WNA.
Taxes: Plus applicable taxes and fees (including franchises fees) related to above.
CONDITIONS
Subject to all applicable laws and orders, and the Company's rules and regulations on file with the
regulatory authority.
Supersedes Same Rate Schedule dated'. .Meters Read On or After
October 30.2007 Julv 31.2008
TEXAS GAS SERVICE COMPANY
South Jefferson County Service Area
RATE SCHEDULE 20
COMMERCIAL SERVICE RATE
APPLICABILITY
Applicable to commercial consumers for all purposes and all other consumers not otherwise specifically
provided for.
TERRITORY
Incorporated areas served in Jefferson County, Texas including Port Arthur, Nederland, Groves and Port
Neches, Texas.
COST OF SERVICE RATES
During each monthly billing period:
A Customer Charge of $32.25 plus
The First 250 Ccf @ $ 0.11540 per Ccf
All Over 250 Ccf @ $ 0.08780 per Ccf
OTHER ADJUSTMENTS
Cost of Gas Comnonent: The basic rates for cost of service set forth above shall be increased by, the
amount of the Cost of Gas Component for the billing month computed in accordance with the
provisions of Rate Schedule 1-1-INC.
:Weather Normalization Adjustment: The billing shall reflect adjustments in accordance with the
provisions of the Weather Normalization Adjustment Clause, Rate Schedule WNA.
Taxes: Plus applicable taxes and fees (including franchises fees) related to above.
Subject to all applicable laws and orders, and the Company's rules and regulations on file with the
regulatory authority.
Supersedes Same Rate Schedule dated. Meters Read On or After
October 30, 2007 July 31', 2008
TEXAS GAS SERVICE COMPANY
South Jefferson County Service Area
RATE SCHEDULE 40
PUBLIC AUTHORITY AND SCHOOLS SERVICE RATE
APPLICABILITY
Applicable to all public and parochial schools and colleges, and to all facilities operated by
Governmental agencies not specifically provided for in other rate schedules or special contracts. This
rate is only available to full requirements customers of Texas Gas Service Company.
TERRITORY
Incorporated areas served in Jefferson County, Texas including Port Arthur, Nederland, Groves and
Port Neches, Texas.
.COST OF SERVICE RATES
During each monthly billing period:
A Customer Charge of
The First 250 Ccf @
All Over 250 Ccf @
$33.53 plus
$ 0.18290 per Ccf
$ 0.15710 per Ccf
OTHER ADJUSTMENTS
Cost of Gas Component: The basic rates for cost of service set forth above shall be increased by the
amount of the Cost of Gas Component for the billing month computed in accordance with the
provisions of Rate Schedule 1-1-INC.
Weather Normalization Adjustment: The billing shall reflect adjustments in accordance with the
provisions of the Weather Normalization Adjustment Clause, Rate Schedule WNA.
Taxes: Plus applicable taxes and fees (including franchises fees) related to above.
CONDITIONS
Subject to all applicable laws and orders, and the Company's rules and regulations on file with the
regulatory authority.
Supersedes Same Rate Schedule dated Meters Read' On or After .
October 30, 2007 July 31, 2008.
TEXAS GAS SERVICE COMPANY RATE scxEnuLE T-a
South Jefferson County Service Area -Gulf Coast Region Page 1 of 1
COMMERCIAL TRANSPORTATION SERVICE RATE
APPLICABILITY
Service under this rate. schedule is available to any commercial customer and to Qualified Suppliers
supplying natural gas to 6e transported, pursuant to Rate Schedule T-GEN (General Charges,
Provisions and Conditions) for the transportation of customer owned natural gas through the
Company's South Jefferson County distribution system for use by customers within the Company's
South Jefferson County Service Area. The customer must arrange with its gas supplier to have
the customer's gas delivered to one of the Company's existing delivery receipt points for
transportation by the Company to the customer's facilities at the customer's delivery point.
The receipt points shall be specified by the Company at its reasonable discretion, taking into
consideration. available capacity, operational constraints, and integrity of the distribution
system.
TERRITORY
Incorporated areas served in Jefferson County, Texas including Port Arthur; Nederland, Groves and
Port Neches, Texas.
RATE
This rate shall be the sum of Part A, Part B, and Part C as described below.
Part A:
Part B
Part C:
A customer chazge of $339.26 per meter per month.
All volumes of natural gas transported during each month in accordance with this
schedule shall be billed at the following Ccf charge:
The First 250 Ccf @
All Over 250 Ccf @
$0.11490 per Ccf.
$0.08730 per Ccf
"Additional Charges to Cost of Service Rate" pursuant [o Rate Schedule T-GEN
(General Charges, Provisions and Conditions).
CONDITIONS
See the "Special Provisions" and "Conditions" pursuant to Rate. Schedule T-GEN (General
Charges,. Provisions and Conditions)
Supersedes Same Rate Schedule dated Meters Read On and Afrer
October 30,.2007 Julv 31, 2008
EXHIBIT "B"
THE LAWTON LAW FIRM
Sr6 Congress Ave, Suite uzo • Ausrin, Texas ~8~or • 5rz/3zz-oor9 • Fax: 5i2~474-z5o7
Apri129, 2008
Mr. D. E. Sosa
City Manager - City of Groves
P.O. Box 3286
Port Arthur, TX 77643
409-963-3388 (fax)
Mr. Andre Wimer
City Manager -City of Nederland
P.O. Box 967
Nederland,. TX 77627
409-723-1550 (fax)
Mr. A. Randall Kimler
City Manager - City of Port Neches
634 Ave C
Port Neches, TX 77651
409-719-4302 (fax)
Mr. James Black
City Attomey -City of Groves
P.O. Box 3286
Port Arthur, TX 77643
409-982-0657 (fax)
Mr. Richard Hughes
City Attomey -City of Nederland
3120 Central Mall Drive
Port Arthur, TX 77642
409-724-7585 (fax)
Mr. Pete Steele
City Attorney - City of Port Neches
3120 Central Mall Dr.
Port Arthur, Texas 77642
409-724-7450 (fax)
Mr. Steve Fitzgibbons Mr. Mark Sokolow
Port Arthur -City Manager City Attomey -City of Port Arthur
Post Office Box 1089 ~ P.O. Box 1089
Port Arthur, Texas 77641-1089 Port Arthur, Texas 77641
409-982-6743 (fax) 409) 983-8]24 (fax)
Re: Texas Gas Service Cost of Service Adjustment Clause Increase Proposal
Gentlemen:
On Apri] 1, 2008 you received from Texas Gas Service ("TGS" or "Company") an initial
filing of the Company's Cost of Service Adjustment Clause ("Clause") requesting a $94,070 annual
revenue increase in the South Jefferson County Service Area. The average monthly increase on a
residential or small commercial customer bill is 23 cents and 64 cents respectively.
As.you may recall, in TGS' last rate case (which was resolved pursuant to a settlement) it was
agreed that the Company would file (on April 1 of each yeaz) a Cost of Service Adjustment
("COSA") which could be presumed not approved unless the municipality has taken affirmative
action to approve the request. If the municipality does not make a final determination on the COSH
request within 90 days, the proposed annual rate adjustmentwill be considered denied.
Given that the Company filed the COSA rate increase request on April I, 2008, the City has
until June 30, 2008, to act on his matter or the request is deemed not approved. Again, the overall
impact of the Company's COSA proposal is a $94,070 annual revenue increase or 1.2%.
We have reviewed the terms of the settlement from the previous case, the Company's
calculations and supporting workpapers and conclude that the Company's calculations are con-ect
and consistent with the terms of the settlement of the previous case. Also we have reviewed the
Company's proposed revenue spread to each customer class and final rate design and conclude that
those calculations are consistent with the terms of the settlement and the COSA tariff In addition, as
discussed below, we tested the proposed $94,070 COSA increase to an estimated increase under the
allowable "Interim Adjustment for Changes in Investment" which is a ratemaking vehicle available
to gas utility companies to recover annual incremental changes in investment. Based on these
analyses we conclude that the Company's calculations are correct.
The COSA filing assumes an authorized return to shareholder equity of 10.85% and an
overall return on investment (includes both debt and equity) of 8.58%. These are the return levels
approved by the Cities in the settlement of TGS' last general rate case. The parties agreed that the
last approved return levels would be employed as part of any future COSA filing made by TGS.
Absent the proposed cost of service adjustment the Company has the statutory authority to
implement an Interim Adjustment for Changes in Investment (hereinafter referred to as a "GRIP
Adjustment") under the Gas Utility Regulatory Act (GURA) § 104.301. Such adjustments are
authorized annually and reflect rate schedule changes associated with the investor return, taxes and
depreciation on annual changes in investment. ~ The incremental investment change since the last
case is about $916,000. Applying a return, income tax, depreciation and ad valorem carrying cost
factor of 12% to the incremental investment change of $916,000 results in an annual increase of
about $109,920. The proposed $94,070 annual increase under the Company's April 1, 2008 COSA
filing is less than the annual increase which could be justified under a GURA § 04.301 filing.
The difference between the Company's proposed cost of service adjustment (a negotiated
adjustment provision in the Company's last case) and a GURA § 104.301 filing - is that the COSA
requires that the Company recognize additional investment reductions and other cost reductions
along with requested cost increases.
Based on a review of the Company's analysis, calculations and the above discussions,
approval of the Company's requested $94,070 annual COSA increase is reasonable. Moreover,
approval of the Company's request minimizes the likelihood of TGS filing for a major rate increase
in the service areas in the near future. Also, given the recent rate review just last year, there is no
need for a major review of Company costs at this time.
I Where the value of investment is equal [o the original cost of the investment less accumulated depreciation. See
GiIRA § 104~.301(b):
If the City decides to approve the Company's request we have attached an Ordinance for your
review.
If you have any questions, please call.
Sincerely,
Daniel J. Lawton
DJL/bss
Enclosure
