R2010-097 - 2010-07-26RESOLUTIO� NO. R2010-97
A RESOLUTION BY THE CITY Ct7UNCIL OF TH� CI�'Y OF
PEAI�LAND, TEXAS, RESPONDING TO TFiE APRLICATIQN OF
CENTERF�OINT �NERGY HOUST{3N ELEC7RlC, LLC
{CENTERPOIN�`) FOR �AUTHORITY TO CH/�N+GE RATES AND
AD4PT CERTAIN RATE RIDERS; AUTHORIZING THE CITY �'(3
PARTfGIPATE �I� A COALITI�7N OF CITIES KNOVIlN AS TEXAS
Ct)AST UTILITIES CQALITI�N O� CITIES {TCUC)y
A,UTH�QRIZING THE GITY"S Ih1TERVENTION IN PUG QOCKET
iVO. 38339 AfVD ANY RELATED PROCE�C76NGS AS PART aF
�CUC; AUTHOE�lZII�G THE �iiRING UF CQ�JNS�L AN�
EXPERTS T�iRi7UGH TGUC; REG2UIRING THE
REIN'IBURSEMENT OF COSTS; DETE�.MINING �HAT THE
MEETING COMPLIED W�TH TH� TEXAS C1PEN MEETINGS
ACT9 M}�KING SUCH flTF�ER FINDiM1#GS AND P�tOVISIO�IS
RELATE� TQ THE SUBJECT; AND D�CLAFiI�1G AN
EFFECTIVE �AT�.
WHEREAS, on or about June 30, 2010, C�nterPoint Energy Houston Electric,
LLC (CenterPoir,t) filed with the City Secretary an application for authority to change
ra�es and to adflpt cert�in rate riders ("the ap�licati�n"); and
WHER�AS, simuftaneously with #he fildng of the application with the City
Secretary, CenterPoint filed a similar if nat identical application with the Pubfic Utility
Commissior� of Texas ("P�7CT" or "Commission") which �as beer� docketed as Docket
�lo. 38339; and
WHEREAS, CenterPoia�t is r€�questing an ir�cre�se its �etail transmission and
distrib�t�on rates of appraxirnately $76 miClion, and whalesale transmissio� rates of
about $1$ rnillion; and
VIlHEREAS, as part of CenterPoint's app1ic�tion, CenterPoint alsa reques�s
approval o� several rate r�ders, including the "Rider DCRF'° (distributian cost recovery
factor); and
WHEf�EAS, CenterPoint's request fQr approval of its Rider �GRF and other
riders raises seve��l legal, policy, and su9�st��tive 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.
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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
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APPROVED AS T+� FORM:
���� ,�-�. �.-�
DARRIN M. COKER
CITY ATTOR�JEY
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T�M V�EID
MAY(� F�
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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.
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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.
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