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Home My WebLink AboutR2010-097 2010-07-26RESOLUTION NO. R2010-97 A RESOLUTION BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, RESPONDING TO THE APPLICATION OF CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC (CENTERPOINT) FOR AUTHORITY TO CHANGE RATES AND ADOPT CERTAIN RATE RIDERS; AUTHORIZING THE CITY TO PARTICIPATE IN A COALITION OF CITIES KNOWN AS TEXAS COAST UTILITIES COALITION OF CITIES (TCUC); AUTHORIZING THE CITY'S INTERVENTION IN PUC DOCKET NO. 38339 AND ANY RELATED PROCEEDINGS AS PART OF TCUC; AUTHORIZING THE HIRING OF COUNSEL AND EXPERTS THROUGH TCUC; REQUIRING THE REIMBURSEMENT OF COSTS; DETERMINING THAT THE MEETING COMPLIED WITH THE TEXAS OPEN MEETINGS ACT; MAKING SUCH OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, on or about June 30, 2010, CenterPoint Energy Houston Electric, LLC (CenterPoint) filed with the City Secretary an application for authority to change rates and to adopt certain rate riders ("the application"); and WHEREAS, simultaneously with the filing of the application with the City Secretary, CenterPoint filed a similar if not identical application with the Public Utility Commission of Texas ("PUCT" or "Commission") which has been docketed as Docket No. 38339; and WHEREAS, CenterPoint is requesting an increase its retail transmission and distribution rates of approximately $76 million, and wholesale transmission rates of about $18 million; and WHEREAS, as part of CenterPoint's application, CenterPoint also requests approval of several rate riders, including the "Rider DCRF" (distribution cost recovery factor); and WHEREAS, CenterPoint's request for approval of its Rider DCRF and other riders raises several legal, policy, and substantive issues, and RESC�LUTION NO. F�2010-97 WH��EAS, the City has been pa�ticipating as a merG of tk�e Texas Coast Utilities Coalition of �Cities (TCUC), a coali#ion ef similariy situated municipalities; and WHER�AS, the Ci�y has be¢�efitted from its partacipation in the coalition through the sharing of �asts and expert�se; and WHEREAS, given the camplex��y ir� cietermining the reasonableness �f CenterPoint's current and praposed rates and prc�posed rate riders, it is necess�ry to particspate with TCUC in order ta hi�� special counsel and experts for the p�arpase of assisting the City an its role as a re�ulatory authority und�r the Public Utility Reg�latory Act {"PU�A'"); and WHEREAS, the applicatian filed by Center�oint with the Gity and at the Commission is a request for a change in rates, the C�#y is entitled to h�ve its reasonab9e rate case expenses reirr�bursed by the electric utility in ratemaking proceedings; now therefore, BE IT RES�LVED BY THE CITY ��I�NCIL OF TH� CITY �F PEARLAND, TE,'�AS: Section 1. That the statements and findir�gs set out in the preambie to this resolutior� are hereby in all things appraved ar�d adopted. Section 2. T�e City authc�rizes #he �aw f�rrt� af Her�rera & Bay��e, PLLC #o #ile an intervention in Dacket fJo. 38339 and related proceedings at the Cammission on behalf o# t�e City as a member af the Texas Coast Utilities Goalition of Git�es (TCUG). Sec#ior� 3. The City is authorized to participate as a me�n�er of TCUC and ta re�ain the law firm of Herrera & Boyle, PLLG #o represent its interests related to CenterPaint's application and to retain such experts as are apprQpr�ate for such a procee�ing. Sectian 4. The City retains its right to withdraw from TGUC at any time without a�y financial abligafiion to the remairuing coalition members or to t�e experts or lawyers hired by th� coalit+on after Ets withdrawal. � RESOLUTION NO. R2010-97 Sect�on 5. Ce�r�erPain� is ordered to pay the City's reast�nab4e rate case expenses �recurred i� response to CenterPaint's appiication in a timely manner. Section fi. The meeting at which this resol�tion was approved was in all #hin�s cpnducted in strict compliance with t�e Texas �pen Meetings ,�,ct, T�xas C�overnment Code, Chap�er 5�'�. Section 7. This resofution shail be effecti�ve immediately upon passage. PASSED, APPR�VED and AQOPTED #his #he 2�6 day of Ju9y, A.D., f�_I1�[�l . �" � . ,�.//� �-�'',.�.A� #� •� a'"'` - �; / �� ,- � APPROVED AS T+� FORM: �� ,�-�. �.-� DARRIN M. COKER CITY ATTOR�JEY � � T�M V�EID MAY(� F� ; ��;�Ar��Riy�.: °�` :� `�- �.�: `r--.. ;�= .:�•. _... ��= , � • AGENDA INFORMATION SHEET ITEM NO. NOTICE OF INTENT TO INCREASE RATES SUBMITTED BY CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC ON JUNE 30, 2010 BACKGROUND On June 30, 2010 CenterPoint Energy Houston Electric, LLC (CenterPoint) filed an application with the City and with the Public Utility Commission of Texas (PUCT) to increase its retail transmission and distribution rates by approximately $76 million, and wholesale transmission rates by about$18 million. CenterPoint's proposed increase in base-rate revenue represents the following increases for the following major classes of customers: REVENUE CHANGES PER CUSTOMER CLASS Residential Small Comm. Large Comm. Industrial St. Lighting +26.47% +13.10% -3.64% -6.39% +14% As part of CenterPoint's request, CenterPoint also requests approval of several rate riders, the more prominent of which is the"Rider DCRF" (distribution cost recovery factor). The Rider DCRF is a mechanism that allows the Company to increase rates annually with minimal to no review of the underlying costs. The Company contends that this annual review process will (1) ensure more timely regulatory oversight over the Company's expenditures, (2) enhance.the Company's ability to respond to regulatory initiatives, and (3) reduce the protracted and expensive rate proceedings that would otherwise result. However, the Rider DCRF will also severely minimize, if not eliminate, the regulator's ability to review the merits of the increases. In CenterPoint's application the Company asserts that no review for reasonableness of expenditures should occur until some time later, and that approval of any changes under its proposed Rider DCRF are to be implemented within 90 days from the date of a request under that rate rider. CenterPoint's proposed Rider DCRF is very similar to the cost-of-service adjustment (COSA) tariff it implemented on its gas-utility side of its business. At the Railroad Commission of Texas the City opposed CenterPoint's COSA tariff and a the District Court in Travis County found the COSA tariff to be illegal and that the Railroad Commission could not impose the COSA tariff on cities exercising original jurisdiction and that the Railroad Commission could not adopt a COSA tariff in those areas outside the cities' limits. Thus, at a minimum, the legality of CenterPoint's Rider DCRF is questionable. 1 CenterPoint has also asked the PUCT for an expedited ruling on the validity of its Rider DCRF. The PUCT is likely to hold a prehearing conference within the next week or two to address CenterPoint's request for an expedited ruling on the legal validity of its Rider DCRF. TEXAS COAST UTILITIES COALITION OF CITIES The City has been an active participant in a coalition of cities referred to as the Texas Coast Utilities Coalition (TCUC) in regulatory matters before the PUCT regarding CenterPoint, and has been represented by the law firm of Herrera & Boyle, PLLC. Member cities of TCUC have been the Cities of Angleton, Baytown, Clute, Freeport, League City, Pearland, Shoreacres, West Columbia, and Wharton. Directions to counsel and regulatory consultants are accomplished through a Steering Committee for TCUC and are arrived at through consensus. Experts or attorneys selected by TCUC are paid for by reimbursement from the affected utility pursuant to state law. RATE CASE EXPENSES Under the Public Utility Regulatory Act (PURA), the City's reasonable rate case expenses to participate in ratemaking proceedings are reimbursable by the utility. CenterPoint's application constitutes a ratemaking proceeding and therefore, the City's reasonable rate case expenses to participate in ratemaking proceedings are reimbursable by the utility RECOMMENDATION In addition to the increase in rates CenterPoint requests, the issues presented by CenterPoint's rate application present novel issues and a new regulatory paradigm that is of questionable legality. In particular, CenterPoint's proposed Ride DCRF raises several legal, policy, and substantive issues that the PUCT may address on an expedited basis. Thus, in order to have a voice in the proceedings, early intervention is necessary. Therefore, in consultation with the law firm of Herrera& Boyle, it is recommended that the City continue its participation in TCUC and that the City intervene in the rate proceeding pending at the PUCT regarding CenterPoint's application to increase rates. 2