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HomeMy WebLinkAboutMIN MAY 30 1986 M I N U T E S CITY COUNCIL MEETING May 30, 1986 After an Executive Session in which the Gulf States rate litigation was discussed, the City Council reconvened in Open Session and received a recommendation from Lane Nichols, City Attorney, as follows: The City Attorney should be authorized to enter into a settlement with all parties concerning the pending GSU rate case containing these elements: 1. A base rate reduction of eighty million dollars ($80,000,000) associated with GSU's request for a rate increase. Also, rate reductions associated with the reduction in the cost of fuel should be determined by the staff of the PUC and Gulf States and provided to the rate payers. 2. The parties may continue to litigate, before the Public Utilities Commission, the question of the inclusion of expenses associated with the "Southern Companies contract. " Any change in rates by the final decision of the PUC on this issue shall be effective at the time of such final decision. GSU shall dismiss all other pending litigation concerning rate matters. 3 . The City should agree to certain "accommodative accounting treatment" of expenses related to River Bend when it commences commercial operation with the exception that a cap of approximately $106 million shall be placed on the first year' s _ cost of the buyback of capacity from Cajun Electric Power Cooperative, Inc. This accounting treatment will allow GSU to continue to capitalize the carrying costs of construction of the River Send Plant. 4. GSU agrees not to attempt to recover its rate case expenses in the current rate case, but may attempt to recover such expenses in future rate cases. 5 . The return on common equity should be set at 15. 25% . 6. The Company agrees to an AFUDC audit to determine whether AFUDC on the River Send Plant has been treated appropriately ., Minutes City Council May 30, 1986 7 . The Company agrees to make refunds associated with this reduction to those cities who enacted roll-back ordinances effective with the effective date of such roll-back ordinances, which for the City of Beaumont will be March 4, 1986. This recommendation by the City Attorney was approved by the City Council by a 2 to 1 vote with an abstention by Councilman Bob Lee. ON SPECIAL SESSION CITY COUNCIL - CITY OF BEAUMONT HELD MAY 30, 1986 - 3:00 P.M. BE IT REMEMBERED that the City Council of the City of Beaumont, Texas, met in Special Session this the 30th day of May, 1986, with the following present: HONORABLE: Maurice Meyers Mayor Bob Lee, Jr. Councilman At Large Andrew P. Cokinos Councilman At Large Mike Brumley Councilman, Ward II Absent: Nell Pruitt Weisbach Councilman, Ward I Audwin Samuel Councilman, Ward III David W. Moore Councilman, Ward IV Albert E. Haines City Manager Lane Nichols City Attorney Tyrone Cooper Asst. City Attorney -000- Mayor Meyers called an Executive Session, pursuant to Section IIe of the Open Meetings Act, to discuss pending litigation, specifically the Gulf States Utilities request for a rate increase. -000- The session was reconvened: CITY ATTORNEY NICHOLS: On May 20th, the Council adopted, really by motion, the acceptance - what was characterized as the acceptance of a settlement of the Gulf States . . pending Gulf States request for rate increase. There were, however, some moderations to their offer that were somewhat different and it left the question unsettled as to whether or not we ,had an agreement or could reach an agreement. Since that time, attorneys representing the *City of Beaumont and other cities have been in negotiations; in Austin concerning this matter and last night were able to come to a firm understanding of Gulf States offer. It is another offer; it is slightly different than any that you have seen before and this we believe is the best offer,' that Calf States can make - can afford to make. And, I would like to present it to you and once I am through presenting it, answer questions and make 's recommendation. I will work off of the counter offer, in describing it, the counter offer that the cities had made on May the 20th. The major portion of the offer was that cities, that rate payers would receive an $80.0 million Vase rate reduction. -112- May 30, 1986 ,CITY ATTORNEY continued: For purposes of comparison, if you compared an $80.0 million reduction at the Texas retail level, the residential rate payers to similarly situated people in Louisiana, it would mean that the rate would be approximately $4.00 less than the Louisiana residential rate per 1000 kilowatt hours of usage and that's comparing the present rate in Louisiana which is a summer rate to the $80.0 million reduction rate. Even if you annualized it, it would still be lower than Louisiana rates by about $1.00. That is to say the difference in winter and summer rates in Louisiana would still be about $1.00 lower. Also, on top of that would be any reduction in rate related to fuel savings that Gulf States has made since the last rate case. We don't know what that number would be but it has been talked about at $46.0 million and we will assume for purposes of this discussion that it is approxmately that level. So,� wa are talking about an $80.0 million boo* cats cadwction plum foal related reductions. Additionally, the City has requested that Gulf States cease to litigate its continuing litigation., over the Southern Company contract which is about a $56.0 million item. We were asking that they walk away from that until next year. Their counter offer is as follows: We will continue to litigate the Southern Company contract and, to the extent that Public Utilities Commission makes the final determination concerning how much or all of that contract should be allowed as an expense, when that decision is made the rate, the utility rate would be changed to reflect whatever that decision was. That differs from the original offer because they had originally proposed that decision be retroactive to the date of the settlement. So, now, we should have a firm '$80.0 millioarate reduction for some period, we would estimate through the summer until the PUC makes a final decision concerning the Southern Company contract. The major change there being it is no longer retroactive and the $80.0 million will be firm until that time that the PUC acts. Additionally, they have agreed to dismiss all other litigation. We had some pending litigation of the '84 rate case. Gulf States has agreed to dismiss that which was part of our original request. Gulf States had requested, and we had agreed to in our counter offer, certain accommodative accounting treatment which is very important to the Company, to the health of the Company. We would continue to agree to that, the only change being a cap on the 'portion of that that we call the Cajun Buy Back that would limit their ability to defer expenses associated with the Cajun Buy Back to $106.0 million. That number would have been approximately $11.0 million higher or $117.0 'million, so that cap will provide about $11.0 savings in the future on the cost of Riverbend. The rate case expenses - our offer was basically that Gulf States would pay those and never pass them on to the rate payers. They have agreed not to try to get them included in this pending rate case or settlement but have not agreed not to. get them paid in future rate cases so they are going to defer an attempt to collect their rate case expenses. They will, however, pay the City's rate case expenses - that's not a change, that's required by statute but they have not been paid to this point and they have agreed to pay them within 30 days of invoice. -113- May 30, 1986 CITY ATTORNEY continued: We had an issue concerning what the return on common equity should be in this case. The cities had proposed 15%, Gulf States had proposed 16.25%. They have offered 15.25% as the return on common equity figure. That's important in terms of what the revenue requirements are for the Company and the rate at which they can defer costs on Riverbend. There will be a refund. As you recall, certain cities in the service area of Gulf States in Texas had rolled back residential rates to Louisiana levels. They did them at different times, some in February, some in March and some in April. We had proposed that refunds associated with those rollbacks be made to all customers in the Texas area effective to February 3rd. Their counter offer is to refund .. make that refund but make them only to the cities that enacted rollbacks and to make them effective the date of those rollbacks - which for Beaumont would be March the 4th of '86. That is the substance of the counter offer and is different from the offer that we were looking at in the treatment of the Southern contract; the return on equity is slightly higher and there's some dollars taken out of the accomodative accounting, about $11.0 million; but it does in fact firm up, Mayor and Council, the $80.0 million decrease for a period of time and I can feel comfortable, I think, in recommending it to you as the settlement of this case. Obviously, it is not everything perhaps the rate payers would like or certainly everything Gulf States would like but we must remember they requested $133.0 million increase in rates and this proposal will result in a reduction in rates through the summer and it will result in a reduction of rates even past that - no matter what is determined on the Southern Company contract and then that reduction will remain in place until some future rate case that we understand will be filed in the fall. I will try to answer any questions that you might have. MAYOR MEYERS: Does. Council have any questions of Lane Nichols? COUNCILMAN BRUMLEY: I don't believe I do. MAYOR MEYERS: We do have a quorum and being such, I would ask for a motion at this time. COUNCILMAN BRUMLEY: Mayor, I would move that we would, as a Council, accept this proposal as it was discussed by Attorney Nichols. -114- May 30, 1986 MAYOR MEYERS: Do we have a second? I'll second that motion. In light of the motion for approval, I would appropriately want to state that Gulf States is a significant corporate neighbor within our City, the only New York Stock Exchange company headquartered in our City, employees about 1,200 people in our City, I believe, has the largest number of retirees living in our City and is also, I think, facing some difficult times and I am very pleased that they've seen fit to offer what I think is a very reasonable settlement on behalf of the rate payers, even in times that are difficult. But, I am very proud that we were able to make this decision to at least vote on this issue and I am supportive of that company as a very important tenant in our City and I offer that as a personal comment. Are there any other questions or comments before we would take a vote? COUNCILMAN COKINOS: Mayor, I would like to say before we do vote it, is my opinion, and it has always been until it is changed otherwise, that this is a short-term maneuver on the part of Gulf States Utilities to place themselves in a more superior bargaining position to obtain a raise in the future and, in my opinion, there is no long-term benefits to the citizens of Beaumont and that I feel that Gulf ` States is dangling a carrot in front of the people of Beaumont for political purposes. MAYOR MEYERS: Do we have any other comments that anyone would care to make? I have a motion and a second, if not then, I would state also that the quorum satisfies our requirements to bring this to a vote, yet we have an exempt member of Council who has to abstain. Is that correct? CITY ATTORNEY: � a That is correct. END OF EXCERPT. Question. Ayes: Mayor Meyers Nay: Councilman Cokinos Councilman Brumley Abstained: Councilman Lee -000- There being no further business, the session was adjourned. I, Rosemarie Chiappetta, Deputy City Clerk of the City of Beaumont, Texas, s certify that ' the above is a true copy of the Minutes of the Special City Council Session held May 30, 1986. Rosemarie Chiappetta Deputy City Clerk -115- May 30, 1986