R2008-072 2008-05-12RESOLUTION NO. R2008-72
A RESOLUTION DENYING THE RATE INCREASE
PROPOSED BY CENTERPOINT ENERGY RESOURCES
CORP., DBA CENTERPOINT ENERGY ENTEX AND
CENTERPOINT ENERGY TEXAS GAS, TEXAS COAST
DIVISION ("CENTERPOINT"); AUTHORIZING
PARTICIPATION IN A COALITION OF CITIES KNOWN AS
TEXAS COAST UTILITIES COALITION ("TCUC");
AUTHORIZING THE HIRING OF LAWYERS AND RATE
EXPERTS; REQUIRING THE REIMBURSEMENT OF
MUNICIPAL RATE CASE EXPENSES; FINDING THAT
THE MEETING COMPLIED WITH THE OPEN MEETINGS
ACT; MAKING OTHER FINDINGS AND PROVISIONS
RELATED TO THE SUBJECT; AND DECLARING AN
EFFECTIVE DATE.
WHEREAS, CenterPoint Energy Resources Corp., d/b/a CenterPoint Energy
Entex and CenterPoint Energy Texas Gas, Texas Coast Division ("CenterPoint") filed a
Statement of Intent with the City of Pearland, Texas ("City") on or within a few days after
March 6, 2008 to increase its division-wide, annual revenue requirement, by
approximately $7.36 million; and
WHEREAS, the City is a regulatory authority under the Gas Utility Regulatory Act
("GURA") and under § 103.001 of GURA has exclusive original jurisdiction over
CenterPoint's rates, operations, and services of a gas utility within the municipality; and
WHEREAS, CenterPoint has not filed a general rate case in over thirty years.
Over that time period there has not been a thorough review of the reasonableness of
the expenditures of the gas utility or the prudence of its capital additions; and
WHEREAS, CenterPoint is seeking to significantly increase rates for residential
customers by substantially raising the customer charge in this proceeding and
continuing or expanding a rate mechanism which will cause all rate increases in the
future to solely impact the customer charge; and
WHEREAS, in order to maximize the efficient use of resources and expertise in
reviewing, analyzing and investigating CenterPoint's rate request and its changes in
RESOLUTION NO. R2008-72
tariffs it is prudent to coordinate the City's efforts with a coalition of similarly situated
municipalities; and
WHEREAS, a coalition of cities has been formed which is known as the Texas
Coast Utilities Coalition ("TCUC") in order to work together in helping its members to
carry out their fiduciary responsibilities as regulatory authorities.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS:
Section 1. The statements and findings set out in the preamble to this
ordinance are hereby in all things approved and adopted.
Section 2. The City hereby denies CenterPoint's request to increase rates and
in support thereof finds that:
a) The Statement of Intent fails to provide sufficient information to justify the
requested increase in rates or to justify the changes set forth in the
attached tariffs;
b) The requested increase in rates puts more of the cost for the base rate
increase on low-use residential customers who often are in the worst
position to absorb such cost increases; and
c) The request asks that a rate mechanism to be continued or expanded
which provides a disincentive to reducing costs and becoming more
productive or efficient and does not provide for meaningful review of
annual rate requests.
Section 3. The City is authorized to join with other cities in a coalition of cities
known as the Texas Coast Utilities Coalition ("TCUC") with the understanding that the
steering committee of TCUC is to provide direction and guidance to the lawyers who are
representing said cities.
RESOLUTION NO. R2008-72
Section 4. The City authorizes the City Manager or his designee to act as the
City's representative to the TCUC Steering Committee.
Section 5. The City retains its right to withdraw from TCUC at any time without
any financial obligation to the remaining coalition members or to the experts or lawyers
hired by the coalition.
Section 6. The City employs Herrera & Boyle, PLLC as Special Counsel to
represent the City with regard to the requested increase in rates by CenterPoint before
local and state regulatory authorities and any court of law and authorizes special
counsel to employ such rate experts as are recommended by the TCUC Steering
Committee.
Section 7. The City hereby authorizes Special Counsel to take such actions as
are appropriate, whether in court or before any regulatory authority, to prohibit
CenterPoint from charging for expenses which are not reasonable and necessary, or
capital expenditures which have not been prudently incurred, or rates which are not just
and reasonable.
Section 8. The City, in coordination with the Steering Committee, shall review
the invoices of the lawyers and rate experts for reasonableness before submitting the
invoices to CenterPoint for reimbursement.
Section 9. CenterPoint shall reimburse the City, through the designated city
representative for the Steering Committee, the City of Baytown, Texas, for the
reasonable costs of attorneys and consultants and expenses related thereto, upon the
presentation of invoices reviewed by the Steering Committee.
Section 10. The City Secretary shall notify CenterPoint of this resolution by
sending a copy of same to Denise Hardcastle, Director of Regulatory Activities,
CenterPoint Energy, P.O. Box 2628, Houston, Texas 77252 and TCUC shall be notified
by sending a copy of this resolution to Mr. Kelvin Knauf, Assistant City Manager, City of
Baytown, Texas by fax to (281) 420-6586.
RESOLUTION NO. R2008-72
Section 11. The meeting at which this resolution was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government
Code, Chapter 551.
Section 12. This resolution shall become effective from and after its passage.
PASSED, APPROVED and ADOPTED this the 12th day of May, A.D., 2008.
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TOM REID
MAYOR
ATTEST:
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APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
AGENDA INFORMATION SHEET
ITEM NO.
DENIAL OF CENTERPOINT RATE
INCREASE REQUEST
BACKGROUND
On March 6th or within a few days thereafter, CenterPoint filed a Statement of
Intent with the City Secretary of those cities located in the Texas Coast Division
to increase rates by approximately $7.36 million. According to CenterPoint, the
average residential customer will see an increase of $3.71/month or $43.00 per
year. All of the increase will be placed in the customer charge which is a fixed
charge paid monthly even if the customer does not use any gas. The requested
customer charge is the among highest in Texas. It penalizes low use customers
and it works against the conservation of natural gas.
CenterPoint is also requesting the approval of an annual rate filing which could
cause rates to go much higher without any meaningful review. The annual rate
mechanism is known as the Cost of Service Adjustment ("COSA"). Some cities
in the Texas Coast Division have a mechanism of this sort in place today. There
is no COSA in CenterPoint's South Texas Division, East Texas Division,
Texarkana Division or its Houston Division. Some cities in the Texas Coast
Division do not have this mechanism. The COSA requested for the Texas Coast
Division does not provide for meaningful review of CenterPoint's expenses or
capital additions.
TEXAS COAST UTILITIES COALITION ("TCUC")
Recently, a number of cities located in the Texas Coast Division have come
together to form the Texas Coast Utilities Coalition ("TC UC") in order to
effectively and efficiently direct and coordinate the effort in responding to
CenterPoint's rate i ncrease request and tariff proposals. Each city will designate
a city official to serve on the Steering Committee of TCUC. The Steering
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Committee will direct special counsel and rate experts. By law, CenterPoint is
obligated to pay reasonable municipal rate case expenses. The City of Baytown
will act as the administrative coordinator for TCUC.
DENIAL OF RATE INCREASE IS MOST APPROPRIATE AT THIS TIME
The requested increase in rates should be denied. There are a number of reasons
why this is appropriate. In part, it is appropriate to deny the rate request
because:
❖ The COSA filed by CenterPoint does not provide for meaningful
review of the gas utility's expenses and capital additions;
❖ CenterPoint is requesting an 11% return on equity which is
excessive;
❖ CenterPoint's rate request in based upon projections and estimates,
which are not permitted under Texas law.
❖ CenterPoint filed a rate filing package with the Railroad Commission
of Texas on March 6, 2008 in order to increase rates in the environs
areas for the Texas Coast Division. The Commission will be
making rulings which will impact the Statement of Intent filed with
the cities located in the Texas Coast Division. It is important that
the City, as part of TCUC, participate in the proceeding before the
Commission. Only a denial of the increase will get the City before
the Commission in a timely manner.
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