HomeMy WebLinkAboutMIN DEC 11 1986 SPECIAL SESSION
CITY COUNCIL - CITY OF BEAUMONT
HELD DECEMBER 11, 1986 - 12:00 NOON
BE IT REMEMBERED that the City Council of the City of Beaumont, Texas, met in
regular session this the 11th day of December, 1986, with the following
present:
HONORABLE: Maurice Meyers Mayor
Bob Lee, Jr. Councilman At Large
Andrew P. Cokinos Councilman At Large
Nell Pruitt Weisbach Councilman, Ward I
Mike Brumley Councilman, Ward II
Audwin Samuel Councilman, Ward III
David W. Moore Councilman, Ward IV
Albert E. Haines City Manager
Lane Nichols City Attorney
-000-
MAYOR MEYERS:
On or about November 18, 1986, Gulf States Utilities Company filed with the
City of Beaumont a petition for authority to change rates and request for
emergency interim rate relief and proposed new tariffs for interim and
permanent rates. Such petition and request included separate pleas for
permanent and interim rate relief. The petition and request was supported by
a filed statement of intent. Gulf States Utilities Company also filed an
identical petition to change rates and request for emergency interim rate
relief along with the statement of intent with the Public Utility Commission
of Texas. In its petition request and statement of intent, Gulf States
Utilities Company made separate and distinct pleas seeking permanent and
emergency interim rate relief. Gulf States Utilities Company requested a
permanent rate increase of $144,000,000.00 and, in case of suspension of
rates, emergency interim rate relief in the amount of $82,000,000.00.
This public hearing which I will now declare open is to offer all of those
present an opportunity to voice any expression that they would so choose
relative to this rate request made upon our City by Gulf States Utilities
Company. I am going to ask if I may that for the record, and we must keep
this on the record, that anyone who . . everyone who wishes to make any comment
will have opportunity. And, so, our aisles are narrow and be patient and
until everybody has had an opportunity to make any comment that they choose,
why you can feel confident that you will have opportunity to make your
statement. I would ask if you would, for the record, to always give us first
your name and address and, while we will not set a time Limit on statements,
it perhaps would be in everybody's best interest if in fact your statements
could be brief. And, now, with this public hearing officially opened, I will
first ask Mr. Lynn Draper, the president and chief executive officer of Gulf
States Utilities to code forward and crake a comment, please.
-277- December 11 , 1986
DR. LYNN DRAPER:
Thank you, Mayor Meyers, members of the Council. We very much appreciate the
opportunity to appear before you today and speak to the issue that is before
you. This is a very important issue for Gulf States Utilities. We have asked
this city and the other cities that we serve as well as the Public Utilities
Commission which has jurisdiction over the rates to our customers in rural
areas to consider emergency rate relief for Gulf States Utilities. This is an
extraordinary request on our part because the times are extraordinary. We
recognize that the situation in South East Texas and South Louisiana is one of
great economic difficulty. These are difficult times for the citizens that
you represent and the citizens that we serve as customers. Having said that,
however, Gulf States is also in grave difficulty. Our rates, both in Texas
and Louisiana, now are at the levels that were established in 1982. Our rates
in Texas are some $219,000,000 less than they were as recently as a year and a
half ago. That's in part because the price of natural gas, a major boiler
-fuel for Gulf States; has declined in the market place. It's in part because
our base rates were rolled back some six months ago in the State of Texas. As
we look forward to 1987, we can compare the revenues that will come in at
current rates from our customers and on a system-wide basis for the calendar
year 1987, the revenues coming in are less than the expenses we expect to
occur, even paying no dividend to our common shareholders, by on the order of
$400,000,000. As we go into 1987, we will have a cash carryover or marketable
security in the vicinity of $100,000,000, leaving a cash shortfall in the
vicinity of $300,000,000. It is clear that unless we get emergency rate
relief sometime during the first quarter or very early in the second quarter
of 1987, our cash resources will be exhausted. We believe that that will be a
tragedy not only for Gulf States but the customers and the area that we
serve. What we are asking for on an emergency basis is $82,000,000. That's
$82,000,000 of the reduction of $219,000,000 that we have experienced in the
last year and a half. Despite the tough economic times, we believe that it is
in the best interest of our customers and your constituents that we be granted
that emergency rate increase of $82,000,000. The 1,475 employees of Gulf
States that live in the Beaumont city limit, the taxes that we pay to the City
are all important considerations to you and I know that you will weigh those
issues carefully in your considerations. I urge you to act promptly on this
issue. It is a matter of extraordinary importance to us. Thank you, Mayor.
I'd be pleased to respond to any questions if there are any.
MAYOR MEYERS:
Are there any questions?
COUNCILMAN MOORE:
Dr. Draper, you stated there's 1,475 employees. Is that in Beaumont proper or
is that in the region?
Dr. Draper:
Yes. That's in Beaumont proper.
—278- December 11, 1986
MAYOR MEYERS:
Dr. Draper, is there anyone else that wants to add any statement from Gulf
States? (Dr. Draper indicated no. ) Okay, at this time, then, I would ,just
suggest that anyone who would want to come to the microphone, please do so and
as stated just please be sure and give us, for the record, your name and
address.
MR. TOMMY LAMB:
Thank you, my name is Tommy Lamb. I live at 855 Central Drive here in
Beaumont. Thank you, Mayor and City Council, for giving us the opportunity to
speak today. As a resident of Beaumont, I feel like everyone else we don't
want to pay any higher utility bills than we have to; but as a businessman in
Beaumont, I realize the importance that Gulf States Utilities - the role that
they play in the development and particularly the economic development of our
community. They -are- -very instrumental in attracting riew business and I view
our monthly checks to Gulf States more as an investment in our area in
addition to paying our utilities rate but more as supporting a very important
asset to our community. Therefore, I am asking the City Council and Mayor of
City of Beaumont to support the rate increase for Gulf States Utilities.
Thank you very much.
MR. JAMES C. YARBROUGH:
Mayor Meyers, members of the Beaumont City Council. My name is James C.
Yarbrough. My address is post office box 3608, zip 04. I am here wearing two
hats this morning or this afternoon. First of all as the president of
American Valve and Hydrant Manufacturing Company, employing 470 people in this
City and then as Chairman of the Beaumont Economic Development Council.
First, let me address my interest from my company's standpoint. We operate a
foundry, machine shop operation, assembly, and all supporting departments to
manufacture valves and fire hydrants for the water works industry. In our
operation in our foundary, we melt 100 tons of molten cast iron per day. At
any given time in our plant, we will have 20 tons of molten metal in various
ladels or holding mechanisms, all operated, transported by electrical
apparatuses - overhead cranes, hoists, and so forth. Any time we have an act
of God that shuts off our power, we are at the mercy of Gulf. States Utility
Company to immediately get that power back on stream. In our Birmingham,
Alabama, plant we melt a hundred tons per hour. We have lost power in that
plant and had 100 tons of molten metal to solidify in our holding furnaces
and, if you wonder what that causes, it is loss of time off the job. We have
actually brought in contractors to dynamite those chunks of metal from our
holding furnaces. In Beaumont, we have never experienced that situation.
Since 1969, we have operated that foundary. Many, many times our power has
gone off in a hurricane or a storm or for whatever mason and Gulf States
Utility Company has always restored our power before we lost one ton of molten
metal, without a loss of any jobs or any lost time by our people. What I am
saying to you is that we consider in our company that Gulf States Utility
Company is our partner.
- 2;9- December 11 , 1986
MR. YARBROUGH continued:
Now, let me address the economic development situation briefly. In our
marketing strategy for the area, we think that, number one, we must retain the
jobs we have and, then, secondly, to go out and bring in new jobs.
Implementing that plan has included going to visit the corporate headquarters
of many, many of our major manufacturers in our area. We visited Mobil
Corporation, Mobil Chemical Corporation, duPont Corporation, Goodyear, A.
Schulman and Company, Dresser, N. L. Industries and others. And, in 1987, we
will make at least eight more corporate visits. I'd like to share the
comments from two CEOs during two of those visits. In Wilmington, Delaware,
in meeting with the officers of duPont and thanking them for having two plants
in our area and employing a lot of people and encouraging enlarging those
facilities, the duPont people made the statement, "We probably will never
build another grassroots installation in the United States during this century
and we will only expand plants in communities that want to be partners with us
in business." At-Goodyear-in Akron, Mr. Bob Mercer, the CEO of Goodyear, said
to us, "Goodyear operates in "x" number of states. We do not operate in this
state, this state, this state because the business climate is not inducive to
making a profit but we like Texas and, because you have taken the time to
bring your committee to say thank you and what can we do to help, you can be
sure that Goodyear at least will be looking at the Beaumont area for the
future investment of capital dollars to create jobs. " The message is clear.
Corporate America is watching what the state of Texas and this community
does. We cannot afford to let Gulf States Utility Company bankrupt. It would
send a message across this country that Southeast Texas is not a good place to
do business, and, not only that, but the state of Texas is not a good place to
do business and I would finally close in saying that if we allow Gulf States
to go bankrupt then you can kiss goodbye our economic development effort. So,
I urge this Council to take whatever action is necessary to expedite this
decision. Thank you.
MRS. ROSEMARY JACKSON:
My name is Rosemary Jackson. I live at 660 Chamberlin Drive here in Beaumont
and have lived in this area for 39 years. My husband is Basil Jackson. He
has been a resident of Beaumont for 53 years and has been employed by Gulf
States Utilities for 33 years. I would like to speak out in behalf of Gulf
States, not only because it is our livelihood, but also I feel that Gulf
States is a very, very important part this community.
First of all, I would like to let you know some facts that I found out that
were of interest to me that I thought I would pass on to you. Did you know
that the GSU service area covers over 28,000 square miles of Texas and
Louisiana and serves 300 towns and communities, with a population of over 1. 5
million people, now, about 500,000 customers in this area and 87 percent of
those people are residents just like you and I? GSU was incorporated in 1925
and acquired its electrical properties in Beaumont in 1926 and for the past 60
years has tried to be a good neighbor and good friend to this area.
- 2$0- December 11, 1986
MRS. JACKSON continued:
GSU's business is very different from most businesses. They do produce a
product but it cannot be seen or handled but if it's ever missed or you don't
have your lights, it certainly is missed. All GSU employees are taught early
on that they are in a position of trust and they must never forget it. We as
customers use Gulf States' products not because we have to but because we want
to and we all take electricity for granted and possibly the only time we
really think about it is when we flip a switch and nothing happens or it's
time to pay the bill, then electricity becomes a high priority and we remember
there are lights burning all over the house. The TV is playing and no one is
watching; the stereo is blaring and no one is there to hear it and we realize
that a lot of our problems are due to wastefulness on our own part; but,
still, we don't like to pay high bills. No one does. We seldom stop to think
that our electric company not only provides us with the necessary product and
maintains it - often at the customer's request, but ;they also provide many
services for our c6mmuftities and other areas. `
During Hurricane Bonnie, GSU worked around the clock and restored service as
quickly as possible. They have cooperated with their customers and dealt with
down lines and other outages in a courteous and professional manner, often
seeing to the needs of their customers while their own homes were still
without power. The company also provided dry ice to their customers at no
charge while others were profiteering and preying on the needs of the people.
Also, during the recent heavy rain, the residents of Pinewood were flooded out
of their homes and asked the Department of Public Safety and Civil Defense to
help them to get back and forth to their homes. Both of these organizations
were unable to help these folks out and they turned to Gulf States for help.
The company provided three vehicles and six men to ferry school children to
and from their homes and working people who would have been stranded without
their help. The problem was handled with the utmost safety and care for these
people and their families.
Gulf States has always worked to try to encourage new business and industries
into this area. They keep abreast of any and all entrepreneurs that show an
interest in establishing their firms in this area. These companies may be
located on the west coast, in the central United States or on the east coast;
but if they express a desire to locate in this area, they are immediately
given vital statistics concerning schools, roadways, railways and waterways to
and from this area. Also, the availability of land and rental property is
given to them as well as the availability of power to meet their needs. All
this information is kept in the company's computers and is readily available
to be distributed to anyone who is interested in locating in this area. Gulf
States tries very hard to promote the growth in this area. In recent months,
GSU's ability to provide many necessary items was prevalent in Boeing's
decision to move to the Lake Charles area.
GSU is the building block for all new industries and is a vital link in the
chain that will cause this area to be able to make a comeback. If this
company is allowed to go bankrupt, I feel it would be a disaster for this area
and the long term damage that will result will be evident for many years to
come.
-281- December 11, 1986
MRS. JACKSON continued:
Remember the recent commercial that just came out - the cost of two flashlight
batteries, about $2.60 will operate a child's toy for seven hours. That same
cost in electricity will operate an average home for nearly twenty-four
hours. Electricity is a real bargain and I can only be thankful that it
didn't go up like the price of meat, milk and bread did. Also, keep in mind
that electricity is one of the few necessary commodities that is still
manufactured in the United States and is still operated by American citizens.
If you are unable to pass this request for interim relief, please do not delay
it. Send it on to the PUC for a final decision. Thank you.
MR. DICK PONTIOUS:
Mayor Meyers, City Council. I am Dick Pontious. I live at 6380 Falsworth in
Beaumont. I happen _to have the privilege of being the United Wqy Executive
Director in the community and wanted to make a few comments in that regard in
relating to Gulf States. Beaumont has been very fortunate in its support of
human service agencies. We stand in top of the communities across the State
of Texas and it's something that we share in that kind of pride. One of the
organizations that has been giving leadership over the years, not only in the
United 'Way, but in the many agencies we support, has been Gulf States. You
see very little of this on the surface but it is an extremely meaningful kind
of contribution made to this community and so I am here today speaking in
support of Gulf States, urging the Council to make a decision, hopefully in
favor of the rate increase, but certainly to move this question to PUC where
it can be operated or it can be dealt with effectively and timely. We would
certainly, in our field, feel a serious problem if we did not have the full
support of Gulf States in the United Way and in our agencies. They are great
to us and they are great to this community. Thank you.
MR. GENE DARST:
Gene Darst, 585 Iowa Street, Beaumont Southend. Mayor, Councilmen, fellow
citizens. Listening to all this, it sounds real good. I followed the
newspaper real close and my questions are or you can think about them:
Lumberton, Silsbee, Kountze, Sour Lake, recently voted to suspend the rate
increase. Everybody wants it to go to the PUC immediately. There again, my
question is how's the PUC going to react as far as the will of the majority of
the different cities? Now, here again, I follow construction. They've had
problems at Riverbend. I know they had problems at Bridge City power plant
over that way. Number one, I don't think they've got people in their
organization that know construction. I know over here they even sent people
over to find out what was wrong and it was cost overrun due to the contractor
which they selected. Hey, we paid for that. Now, we paid . . . we've been
paying for Riverbend for eight years that Louisiana has not paid for. There
again, Gulf States asked for the decrease they got last year. The PUC didn't
order it. They volunteered to accept the rate decrease. Here, again, that
put us pretty well on line with Louisiana. Louisiana came along and cuts it
again. Hey, and then here recently they got their rate request over there
first and they haven't done anything about it yet so Texas is going to wind up
we are going to be paying again and the add on tv. They were detrimental in
locating Boeing over there.
-282- December 11 , 1986
MR. BARST continued:
Just like Al Price said last year here. We'll never get industry in Texas if
we've got higher rates than Louisiana. Believe me, we are not going to do
it. For years, I preached about lowering taxes to get industry in here. I
believe last week or so everybody's formed a tax abatement to encourage more
industry. I begged for this years ago. I come up on the short end of the
stick every time. Now, the nice thing I like about bankruptcy, and I am
familiar with it, is the fact that the government will appoint to administer
the business to where it will survive. Now, I know several companies in this
town that have lost money on account of they were working for people that went
bankrupt. Eventually they'll get their money. If bankruptcy happens with
Gulf States, these bankers or whoever give them the money is still going to
get their money. It's going to be prolonged; so will the City. Hey, we lost
$20.0 million. We are coming out of that. If we lose Gulf States tax money,
we're going to come out of it eventually. What's the end of it? Now, here
again, everybody -in -this town, you've got three restaurants closiclg; Dryden's
closing. Beaumont Well Works has been in this town for 40 some years.
They're shutting down the 18th. They are down to about 15 people and those
men that worked those foundaries don't have no other way to go. They're going
out and they don't know what they are going to do. I heard this last Saturday
night. . It's not even out in the papers. There's many a business going under
that can't even afford to declare bankruptcy. Now, nobody feels sorry for
anybody when they go bankrupt or when you repo your car, your boat, whatever,
your home. That just . . . it's tough on you. Well, hey, everybody's in the
same boat. We're all in a state of emergency. I'm in a 60 percent reduction
in wages. I can't even live off what I'm making. I've got to go out an
hustle something else. That's fine. I'm lucky I've got everything paid for
where I've got to feed myself; but, we are looking at right now a 25 percent
rate increase. Bey, I don't burn any more lights than what I have to, yet I
don't want to go to candle light because I think out in the north end a couple
of fires resulted from candles in peoples' homes that could not pay their
light bill. They couldn't pay their light bill, a couple of them died. The
newspaper, media won't bring all this out. I don't understand it. You know,
why and I think I'm speaking for the average citizen in Beaumont - not the
wealthy person and not the person in politics - not the person in civic life
that depends on somebody else to get something. I make my own - I've got to.
Nobody gives me nothing, never have. I've made my own way since I've been 12
years old and I've managed. And, I'm asking you to suspend it and go along
with the rest of the cities. Bo the will of the majority of the other
cities. One vote to reject, and I studied this here to, one vote to reject,
the PUC might not act on the other cities. What are we going to do? Wind up
paying excessive rates in Beaumont? Silsbee, Kountz might have a lower rate.
Now, up in Buna area, they're negotiating to buy their own power plant to get
out from under this and I know there's talk. Red China is thinking about part
of this power plant behind Mobil Oil. They are trying to arrange
transportation now. They've already talked with people about going over and
supervising and build that plant with Red Chinese labor. We don't hear about
this here. They might get a $100 million out of that plant or $50.0 million
out of this plant out here they are going to sell. Hey, it's in the
workings. I know what the wild goose knows on a lot of this stuff but I'd get
shot if I brought it out. Thank you kindly.
- 283- December 11 , 1986
MR. ABOLFAZL BARADAR:
My name is Abbi Baradar, 5345 Fannett Road. I am the manager and president of
the Mobile Manor RV Park. I am in this business since 1978 and I am trying my
best to improve my business and this community. Since about 1980, all these
businesses we have in Beaumont area started slowing down and also my
business. I am looking for these people coming to this town as an RV, park it
overnight or weekly to work in this area manage my business. My overhead of
the business right now, the highest one is the Gulf States. I drop my rate,
the lowest one in Beaumont. If I can make it even to survive. I lost my
car. Me and my wife has to walk every time. We have a baby. Cut all our
expenses. We cannot go out but we have to pay for all these bills. I made
some mismanagement in my business, too; but I am going to ask Gulf States did
they come out and pay me one month rent free? Bid they help me to cut off my
electricity to half? Then why should I have to pay for their mismanagement?
Texas Air, if you look at it, more than a couple years ago, they filed for
bankruptcy. Right now they are one of the largest carriers in r_he' United
States. They reorganized their management. They increased their income and
they survived. If we have to pay for the mismanagement of this company in the
United States then every day we have to listen to this company come to us and
pay us and pay us and pay us. Who's going to pay me? Right now in Beaumont
my park is empty. We don't have no facility - no nothing to offer to the
people who stay here but the advertising I paid for $6.00 a night and that's
the only way I can get . . attract some people to stay here 'til I can make it
even to pay my note and also the utility bill. I would like to ask you, Mayor
and City Council, reject this and also suspend it to 120 days as you wish it.
Let the other cities look at it, then you come up with a better decision.
Thank you.
REVEREND GREGORY:
Honorable Mayor and City Council. I'm Reverend Gregory. I live in Beaumont
and I'm retired from the South Park School ,District. I have listened to
everybody say all them good things about Gulf States and it reminds me of a
man, a real bad man; he beat his wife and children all the time and he died.
And they were saying so many good things about him, every now and then a lady
would get up and look at the casket. They asked her, "What do you keep doing
that for?" She said, "I just wanted to see if they had the right man. " Gulf
States have built these fine buildings around town. We've been taxed to pay
for them. They've got a great big hunting and fishing club down here
somewhere in South Jefferson County, Orange County. We were taxed to pay for
it. Then, you go down there and fish and they'll call the game warden and
arrest you and make you pay a big fine when you come out. Gulf States is not
near about fair about nothing. Now, they should have to make their money like
we make ours, make it in volume and manage. Now, supposing the Police give in
in to everybody that catch somebody and holds a gun to his head. Suppose they
give in? The police just give in to every crook that comes by - all of us
would be held hostage today. That's another thing. I support the police of
Beaumont for their promotion and I reject Gulf States offer, that great rate
increase they are trying to force down our neck. People are responsible for
paying their own bill, I realize that; but the price should be fair.
- 284- December 11 , 1986
REVEREND GREGORY continued:
I cut my use of electricity down in my home from 28 100-watt bulbs to 28 22-
watt bulbs. The bulbs cost a lot of money but they are guaranteed for 8 years
and the government will not allow them to put something on the market and sell
it that won't work. On 28 100-watt bulbs to 28 22-watt bulbs and my light
bill is 4 times higher than it used to be. That tells me there's something
wrong with the whole thing. We should have some good way to check and
investigate and find out whether they keeping or taking or what they are doing
and I've been in the biggest homes, the richest homes to the poorest homes.
Poor people are not able to pay but it is not the richest fault. And, let's
don't do like Robinhood - take from the poor and give it to the rich. Let's
be like Robinhood. Let's keep prices where we all can pay it. I'm going to
say this and I'll be through. Three ministers died one time and all three of
them went to Heaven. When the first one got there, they gave him a
Volkswagon. He took it and drove it and drove it. After while, another one -
a priest - died and gave him a cadillac. He said, "Why'd you give that priest
that cadillac?" He said, "Well, he didn't have a wife and family. He gave up
everything. He's worth a little something better. After while, another
minister died and they gave him a Rolls Royce. He said, You gave that man a
Rolls Royce. Why he had a family and everybody like me. " He said, "He's kin
to the boss. " Everybody that spoke in behalf of Gulf States today is kin to
the boss or else they've got some interest in it or getting something under
the table like they offered me. They're kin to the boss. So, I ask you to
reject that rate. Let them get their money like you got yours.
MR. BILL WORMLEY:
Mayor, Councilmen, I just want to take 5 minutes to say something in support
. . .Bill Wormley; I reside at 6920 Shanahan. I don't want to make an emotional
statement and I don't want to make a personal one. I think we have to look
much further and I think you have a responsibility in this instance to
transcend the political issue, , the personal interest. We must look at our
area as a whole and I think Gulf States must survive this if we are going to
grow. I think other people are looking at us beyond our local residents and
our neighboring residents in Buna and what have you. I can understand their
viewpoints but this is an issue that goes !>--yond that. To counter some of
those remarks, I'd like to remind those present here I think this year the
Fair took in more money than any year in recent history; I think we can spend
our money where we have to and I think in this instance we need to support
Gulf States so that we can grow and other industries will come here and we'll
recover; it'll be long and slow, but we have to give them our support. Thank
Vou.
MR. ANDRES PRITCHARD:
Mr. Mayor, Councilmen. My name is Andres Pritchard, 5555 Dellwood, Beaumont.
I cane to Beaumont a few years ago. I am a professional because of Gulf
States Utilities. Just a few words about it. I believe the City should do
anything we can do to support this corporation based in Beaumont. We heard
about the electric bills and I hate to pay as anybody else but they are one of
the lowest in the State.
' 285- December 11 , 1986
MR. PRITCHARD continued:
Gulf States going bankrupt, which is a possibility, would discourage business
in the area and I don't know that Beaumont can afford that. There is many
business that do business with Gulf States that will suffer. Yet, we could
reject it; we could suspend it; but, if the rates don't get to a level where
it is acceptable, if Gulf States had to go bankrupt, they will have less
possibilities of negotiating fuels - more than likely, we are going to be
paying more fuels, and it is going to increase our rates in that sense. And,
I heard the other citizens talk about the rates. I am concerned too but it
may be that because fuels, because the inability of borrowing money at low
interest and other factors. Our rates may go up anyways. I hope that the
City government would decide by accepting hopefully but doing a complete
decision today. Thank you.
MR. MIKE DURHAM:
Mayor Meyers and City Council. My name is Mike Durham and I reside at 4615
Arthur Lane here in Beaumont and up front I will have to tell you that I'm kin
to the boss and that I work for Gulf States Utilities. I am their manager of
Health and Safety at Gulf States and I just want to say something primarily
about the employees and their dedication to their jobs and to service to those
who consume electricity. Being in the health and safety end of our business,
I've worked with our employees pretty closely throughout the service area and
I want to say that they are dealing with a very dangerous product, both in our
power plants and in our transmission and distribution facilities. They handle
bare handed 500,000 volts by using high technology work procedures; they
rubber glove 34-1/2 thousand volt lines, more or less putting their lives on
the line every day; but their dedication goes beyond just doing quality work
from ghat I have seen. Their dedication lies more in providing good service
to the customers. In the ice storms - which it almost feels like we've got
one today - but the hurricanes, the day-to-day thunder storms and other
activities, my observations have been they really get the greatest pleasure
out of getting the lights back on. As a matter of fact, we have to kind of
restrain them from time to time to protect their own safety.
Gulf States is at the position that they are in today primarily because of
their desire to provide service to our area. As some of you may know, the
federal government outlawed the use of natural gas in boilers several years
ago and Gulf States then moved to provide other sources of power for our
service area and it took some bold decisions at that time to build new power
plants. We had a choice of building nuclear or coal and as our ad has said on
tv, I think everyone has seen it, we elected to do both. There were some
agonizing decisions made along the way. We ended up having to cancel nuclear
units; we cancelled one after it had gotten started. We cancelled coal units,
so we've taken a lot of steps throughout the period of time to try to do
things in a prudent fashion and yet maintain service for our customers in the
way of capacity. "how, a few years ago, I guess about 1982 or '83, the federal
government backed off on their law about using natural gas but at that time it
was really too late for Gulf States to adjust. But, today, at least we've got
the capacity.
- 286' December 11 , 1986
MR. DURHAM continued:
We don't have to tell industrial customers that're locating here that they are
going to have to pay money up front for us to build a power plant for them.
We've got it so I think it is a two sided issue. We've got more than we
actually need today but we've certainly got the power that might useful in
attracting industry to this area. So, with that, I would like to urge you,
being kin to the boss of course, but for the good of our service area, to not
force Gulf States into bankruptcy but to act expediently to move this matter
along so that we can get some relief. Thank you very much.
MAYOR MEYERS:
If there is no one else wishing to make public comment, I am going to declare
this public hearing closed and we would return now to that portion of our City
Council meeting and before I would make a statement I would ask Council if
they had any specific questions, any matters they would care td discuss or
address?
COUNCILMAN COKINOS:
Mr. Mayor, I have no questions but I'd like to make a few comments that . . in
behalf of Gulf States that if the federal government had not decided to gain
control over our natural gas industry with the Carter Fuel Use Act of 1978,
Gulf States would not be in a no win situation that it finds itself in today.
This act gave Gulf States up to 1989 to make this reconversion and, after that
time, every kilowatt of electricity had to be manufactured either by coal or
nuclear fuel. This was done in spite of the tremendous gas resources we had
on the Gulf Coast area. And, like was mentioned, it was either coal or
nuclear power for Gulf States and they chose for both. As a member of the
Beaumont City Council, I am willing to exert every effort to help Gulf States
out of this straight ,jacket the federal government put them in. Bankruptcy is
not the answer for Gulf States. The shock waves would be a disaster - high
unemployment, reduced city revenues, higher taxes, reduced property values,
rejection of our area for new industry, electric rates that would be extremely
high. The continuation of Gulf States Utilities and the benefit it provides
for this area and this City outways the few dollars that we have to pay for
extra fuel, electric bill. We as concerned citizens cannot afford to allow
Gulf States Utilities to go under for any reason.
MAYOR MEYERS:
Thank you, Councilman. I have a statement that I would like to make at this
time for Council and to Council in the form of a motion. It is the opinion of
the Beaumont City Council that Gulf States Utilities Company is in fact facing
financial crisis and the potential for result in bankruptcy is real. Beaumont
City Council is elected to represent the best interests of its citizens. This
responsibility is primary to every issue that comes before us. Every judgment
we make every day should always be preceded by the question, "Is this in the
best interest of our citizens?" It is based on the interest, health and
welfare of our citizens that we deny the emergency request before us today.
-287- December 11, 1986
MAYOR MEYERS continued:
This strategy will allow for the quickest opportunity for the Public Utilities
Commission to hear the case for emergency rate relief submitted by Gulf States
Utilities Company. The limited options available suggest that we must examine
all potential and do what will expedite the hearing process. It is our
considered opinion that any strategy that could have a potential to delay
getting the request to the Public Utilities Commission would not, in fact, "be
a Council acting in the best interest of its citizens." This action provides
that quick hearing process for Gulf States Utilities. This motion offers
opportunity to help avoid what we feel would be a devastating result should
GSU file for bankruptcy. Not since the pre-depression days have we seen such
a bankruptcy and the consequences to our City and region could be severe and
they are without precedent. I make that in the form of a motion.
COUNCILMAN WEISBACH: Second.
MAYOR MEYERS:
I have a motion and a second. Attorney, is it necessary that we read anything
at this time to act upon this motion.
CITY ATTORNEY LANE NICHOLS:
Is this the ordinance delaying . . . then the caption must be read.
CITY_ MANAGER ALBERT HAINES: The short title of the ordinance:
ORDINANCE NO. 86-120
ENTITLED AN ORDINANCE DENYING THE PETITION
FOR AUTHORITY TO CHANGE RATES AND THE
REQUEST FOR EMERGENCY INTERIM RATE RELIEF
FILED BY GULF STATES UTILITIES COMPANY
WITH THE CITY OF BEAUMONT, TEXAS, ON
THE 18TH DAY OF NOVEMBER, 1986.
,MAYOR MEYERS:
Thank you. We have a motion and a second. I would again offer any members of
Council if they choose to make any comments if they choose.
COUNCILMAN MOORE:
I simply have one and we heard it. It is directed to Gulf States management.
No one wants to pay high utility rates. We all understand that and we know
the price we have to pay for progress but I am sure the thing that is resting
in the minds of a lot of citizens is where do we go from here. And, I am sure
that is something that you all are contemplating and working through as far as
whatever management style you have in place; but the concern a lot of people
have and I have is what will be the safeguards and what will protect Gulf
States from getting into some other crisis management situation at a later
date?
-288- December 11 , 1986
COUNCILMAN MOORE continued:
I understand very well the implications. I understand how great a corporate
citizen you have been to the City of Beaumont; but that is something that a
lot of citizens would like to know and I am sure it is something that you are
working on because our future rests along with your future sure enough; but,
there has to be a point in time when we understand where it's all going. We
understand your decision about Riverbend and the projected growth we have but
we also need to understand where will we be five or ten years from today and
those are some questions I think this Council in our discussions would also
like to know.
COUNCILMAN LEE:
Mayor, I would only say that because of ownership of stock by a relative of
GSU, I am going to have to abstain from voting.
MAYOR MEYERS:
Thank you, Councilman. If there are no other comments, we do have a motion
and a second and I will call for that vote. Those in favor signify by saying
Aye. (Ayes: Mayor Meyers, Councilmen Cokinos, Weisbach, Brumley, Samuel and
Moore) Gpposed: (None - Abstained: Councilman Lee) Thank you. At this
time, I would like to continue our meeting and ask the City Manager to make
some comments and address a press release which he has distributed.
CITY MANAGER:
Thank you, Mayor. You are receiving a memorandum per your request relative to
this meeting. I would like to read it: (Memorandum directed from City
Manager Raines to the Mayor and City Council concerning Gulf States Review. )
"The staff has spent many hours discussing the issues before us today relative
to the interim rate request. We concur with the City Council's decision to
deny the interim rate request and refer the matter to the Public Utility
Commission. We recognize and fully support an expeditious resolution to this
issue.
"At the direction of the City Council, I initiated a review of the
circumstances surrounding GSU's interim rate request. First, I received and
analyzed the transcripts from the Louisiana Public Service hearings. Second,
I requested and received a response from GSU to four general topics of concern
that had been discussed with City Council and GSU's top management. (I would
like to thank Mr. Draper and his staff for being responsive to that request)
These included finance, management and structure, economic impact, and some
long term issues affecting the electric power industry. Finally, I obtained
and analyzed a copy of the third quarter Securities and Exchange Commission's
Report. As I learned more about GSU's financial situation, the possibility of
bankruptcy became more than a passing interest. Consequently, I met with
financial advisors and bankruptcy experts who substantiated the critical
financial condition of GSU. It became obvious that we should do nothing which
might exacerbate the possibility of a bankruptcy by delaying the hearing with
the Texas PUC.
-289- December 11 , 1986
CITY MANAGER continued:
"We must, however, stipulate that our evaluation of the materials we have been
reviewing suggests that there are issues secondary to the rate increase that
need to be addressed. Although you have received our support to refer the
interim rate request to the PUC as quickly as possible, we do not believe this
represents a final remedy for GSU's financial difficulties. We are willing to
work with GSU, but we want to be assured that they immediately take some
aggressive management initiatives to prevent the reoccurrence of the
conditions which precipitated this "eleventh hour presentation. " We feel they
should reassess their company's sensitivity and accountability to this City
Council and, more importantly, to this community.
"We recognize that there are two major factors that have contributed to Gulf
States Utilities' current economic "crisis. " The regional downturn in the
economy has been beyond its control. The world oil glut 'has contributed to
the softening of the 7 demand for its services. Consequently, GSt has lost a
large part of its customer base while, at the same time, has increased the
availability of its power sources.
"On the other hand, the circumstances surrounding the way this interim rate
relief has been approached reflects, in our opinion, some serious concerns
relative to the financial, planning, and management credibility of GSU's
organization. Nothing contained in the information presented to us dispels
our concerns about GSU's long term viability. We were confused by GSU's
reluctance to directly respond to many of the Louisiana PSC's and several of
our direct questions. For example, GSU had detailed daily cash flow analysis
presented in their documents, yet they did not respond to our question
pertaining to rate needs beyond 1987. We encountered instances of
inconsistencies throughout the data. We saw no concrete long term financial
or contingency plans, should the rate request be denied or even moderated.
There was nothing presented that convinced us that GSU has addressed the
future implications of the following issues - cogeneration, the transition
from a highly regulated to a more competitive industry, the effects of the new
tax law, and a continuing decline in customer base.
"It certainly (and should be emphasized) that it is in the best interest of
the City that GSU survives. In fact, we should do what we can to assist the
corporation. Yet, as any prudent company would, the City must prepare and
plan for the possible bandruptcy of the largest tax-paying corporation within
its jurisdiction. We have sought the financial consultation to help us
examine the economic and financial ramifications inherent with such an
occurrence. GSU, as well, has portrayed a very bleak financial picture which
may or may not improve enough, even with a rate increase, to ensure its
continued existence as a viable business entity.
"Our conclusion at this point, based on our review and analysis of the
situation, is that the City must further pursue the reality of bankruptcy as
it may impact the City of Beaumont. To that end, we endorse Mayor Meyers'
decision, along with Mayor Sumpter of Sulphur, Louisiana, to call a meeting of
the chief elected officials throughout the GSU service area on December 18,
1986. The purpose of this meeting will be to review in a much detail as
possible the ramifications of a potential bankruptcy.
- 290- December 11 , 1986
CITY MANAGER continued:
(At this point, I think it is . . . I would like to interject something here.
Bankruptcy of a regulated utility represents a totally different scenario than
a pure for-profit kind of a bankruptcy situation, that much we have been able
to gather and it's not just simply a matter of reorganizing and going back
into business and paying off creditors. It is a great deal more and a great
deal more complicated that that. )
"The consequences of bankruptcy to this City, the states of Louisiana and
Texas, the electric utility industry, and the financial institutions involved
with GSU have far reaching implications which we can only begin to
comprehend. There is an obvious impact on city government involving both
revenues and long term financing capabilities. For example, the City of
Beaumont receives approximately $4. 5 million from GSU through taxes and
various fees. Within this region, there could be a major adverse impact on
employment, public morale, property values, the regional image, and any future
economic development efforts.
"Obviously, these are issues that go far beyond a routine rate request which
can be viewed in the usual "should they" or "shouldn't they" context. We find
ourselves in an enormously serious situation. Although it does not benefit
anyone to cast blame for the current crisis, the solution to this problem must
come from a concerted effort of GSU's management to reexamine its overall
commitment to whatever long term goals may be necessary to ensure its survival
as a major corporation. Having determined those goals, GSU must provide
leadership capable of accomplishing them. We cannot be asked to participate
as partners when we were not informed until three months ago that GSU was on
the verge of bankruptcy. The lack of candid discussions and timely disclosure
of information necessary to initiate earlier action may result in the demise
of GSU, and should such a turn of events occur, we will be confronted with an
economic shock wave that has ominous implications for the future economic
activity in this area. "
You have also distributed to you a copy of a letter that is going to the chief
elected officials of the cities served by Gulf States together with a copy of
the distribution listing itself. Mayor, that concludes our report to you and
the Council.
MAYOR MEYERS:
Thank you, very much. I would want to share the information relative to that
letter signed by myself and Mayor Sumpter of Sulphur, Louisiana, calling for a
meeting here in Beaumont on December 18, 1986, at 2:00 p.m. :
"As communities being served by Gulf States Utilities Company, we share a
common interest concerning its potential bankruptcy. While much is being
talked about and written about the rate increase requests in our States, very
little is being done to examine the expected results such a bankruptcy would
bring.
-291 - December 11 , 1986
MAYOR MEYERS continued:
"On Thursday, December 18, 1986, at 2:00 P.M. at the Beaumont Civic Center,
next to City Hall at Main and College, we are inviting you to join the Mayors
of all cities in Texas and Louisiana served by Gulf States Utilities Company.
"We have taken the initiative to invite experts in the area of regulated
utilities and public debt finance. We believe, based on preliminary meetings
that we have held, bankruptcy could have a significant impact upon our
cities. Although we are not expressing an opinion relative to Gulf States
interim rate increase, we are nevertheless convinced that a GSU bankruptcy
could happen. Our interest in calling this meeting is to have laid out for us
an understanding of the various contingencies that cities could have to deal
with in light of such an event.
/s/ Maurice Meyers, Dennis Sumpter
Mayor of Beaumont Mayor of Sulphur, Louisiana"
With that, I don't know if we have any other business to discuss, but I would
offer that opportunity once again to Council.
COUNCILMAN BRUMLEY:
The only thing I would want to say, Mayor, that has been mentioned before as
far as following and leadership. I would never want another city in Southeast
Texas or any city to let Beaumont dictate to them what action they may take;
but more important to me personally, I would never want an action of a city
outside of Beaumont to dictate to me as a Councilmember what I should do or
what I feel is in the best interest of the City. The one thing that I would
do is that I would encourage all cities that are addressing this issue to take
advantage of the tremendous amount of work that this group of people have done
- this group of people being the Councilmembers, the work that we have done in
arriving or getting to our position of expediting the handling of this GSU
rate request. To me, that is most important to take information from fellow
elected officials that are in the same position that I'm in. I am genuinely
concerned that people of similar positions as I am in do not use everything
that is available to them to reach their decision. That's of the most concern
to me and I would hope that other cities would look at what we have available
and the information we have available and render the same position as the City
of Beaumont in expediting this particular rate case.
MAYOR MEYERS:
Thank you. If there is no other business, I truly appreciate those of you who
have taken time on a workday to come to this hearing. We genuinely need to
get your input and we appreciate that. We are adjourned.
-000-
I, Rosemarie Chiappetta, Secretary in the City Clerk's Office, certify that
the above is a true copy of the Minutes of the special City Council session
held December 11 , 1986.
Rosemarie Chiappetta
Secretary
- 292- December 11, 1986