R78-25 07-24-78RESOLUTION NO. R78-25
A RESOLUTION OF THE CITY OF PEARLAND, TEXAS,
SUSPENDING RATE CHANGES HERETOFORE FILED BY
HOUSTON LIGHTING & POWER COMPANY; PURSUANT
TO SECTION 43(d) OF THE PUBLIC UTILITY REGU-
LATORY ACT, ARTICLE 1446C, TEXAS REVISED
CIVIL STATUTES.
WHEREAS, on July 14, 1978, the Houston Lighting & Power
Company (HL&P) filed a Statement of Intent to change its rates
for electric service within the City of Pearland, Texas and has
requested that said changes become effective on August 21, 1978;
and
WHEREAS, HL&P has filed revised Tariff Schedules togethe
with statements specifying in detail each proposed change, a rate
filing package, and supporting testimony; and
WHEREAS, Section 17(a) of the Public Utility Regulatory
Act, Article 1446C, Texas Revised Civil Statutes, gives the
governing body of each municipality exclusive original jurisdic-
tion over electric rates within its municipal boundaries; and
WHEREAS, Section 43(d) of the Public Utility Regulatory
Act authorized the governing body of any municipality acting as a
Regulatory Authority to suspend the operation of any proposed chang
in rates for a period not to exceed 120 days beyond the date on
which the scheduled rates would otherwise go into effect, which
period may be further extended for an additional 30 days; and
WHEREAS, HL&P's proposed rate changes and the detailed
material supporting those changes require comprehensive evaluation
and study;
THEREFORE BE IT RESOLVED by the City Council of the City
of Pearland, Texas: That the changes in rates for electric service
within the City of Pearland, Texas proposed by Houston Lighting &
Power Company to become effective on August 21, 1978 should be,
and are, hereby suspended for a period of 120 days beyond said
proposed effective date, until December 19, 1978, subject to an
additional suspension of up to 30 days beyond said date upon furth
er resolution of this Council.
INTRODUCED, READ AND PASSED by the affirmative vote of
the City Council of the City of Pearland, Texas, on this the Q/
day of July, 1978.
ATTE
City Clerk
APPROVED:
et:y
CITY OF PEARLAND! TEXAS
By. dY/Z
MAYOR
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(41116)
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DOCKET NO. 2001
RE: THE APPLICATION OF HOUSTON X PUBLIC UTILITY COMMISSION
LIGHTING & POWER COMPANY FOR I
AUTHORITY TO CHANGE RATES X OF TEXAS
FINAL ORDER
Procedural Statement
On July 14, 1978, Houston Lighting & Power Company (HL&P) filed an
application for authority to change rates in its unincorporated areas. The effect of
this application and similar applications filed with municipalities exercising original
jurisdiction over - HL&P would be an increase in systemwide base rates of
.,$235,158,606,.calculated by adding the $174,528,039 stated by HL&P in its original
application and $60,630,567 which represents its proposed bringing forward into.
base rates of costs that would otherwise be recovered through its cost of service
adjustment clause (TR 147-48). A prehearing conference was held on July 31, 1978,
at which various preliminary matters relating to final hearing herein were resolved.
At said conference and subsequent thereto, intervenor status was granted to the
following entities:
1. The combined cities of Baytown, Houston, Lake Jackson, and the Texas
Municipal League on behalf of those member cities served by HL&t,
representing ratepayers in their respective cities;
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2. Chambers County, Texas; .
3. The Association of Community Organizations for Reform Now
(ACORN);
4. Armco, Inc.;
5. Dow Chemical Company;
6. St. Regis Paper Company;
7. Stauffer Chemical Company;
8. United States Steel Corporation; -
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9. Coastal Industries Group composed of Monsanto Company; Air Products
& Chemicals, Inc.; E. I. DuPont deNemours & Company; Anheuser-
Busch, Inc.; Celanese Chemical Company; Crown Central Petroleum
Corporation; ' Diamond Shamrock Corporation; Olin Corporation;
Pennwalt Corporation; Reynolds Metals Company; Rohm & Haas Texas,
Inc.; Shell Oil Company; Soltex Polymer Corporation; Union Carbide
Corporation; and U. S. Industrial Chemicals Company;
10. Community Public Service Company.
At the prehearing conference, the proposed effective date of the rate change
was suspended for 120 days pursuant to art. 1446c, Section 43(d), V.A.C.S. The
hearing on the merits was convened on September 18, 1978, and recessed until
• October 3, 1978. The hearing was adjourned on October 16, 1978.
After public hearing, the Commission, based upon the evidence, the law and
matters officially noticed, makes the following conclusion, supported by the
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reflect the cost of service and to produce the revenues required to eliminate such
deficiency. The underlying Findings of Fact and Conclusions of Law supporting this
conclusion are as follows: .
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Findings of Fact
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1. Jurisdiction. HL&P is an investor-owned electric utility operating
under a Certificate of Convenience and Necessity issued by the
Commission. The Commission has jurisdiction to consider the matters
presented in this docket.
2. Original Cost. The original cost of electric plant of HL&P, as of
March 31, 1978, including plant construction completed but not
classified, is $2,553,461,151 as claimed by the company and as shown on
Staff Exhibit 16 (Exhibit B-2, p. 1), which amount the Commission finds
to be reasonable. The corresponding- provision for accumulated
depreciation, proposed by the company, $464,717,626, is increased by
$10,478,371 to $475,195,997 to properly reflect the recovery of dollars
attributable to increased depreciation by HL&P from its customers on a
monthly basis. Staff Exhibit 17, pages 10-12 (as amended).
3. Invested Capital. The invested capital of HL&P is $2,175,513,603,
which is calculated in the following manner:
Net Electric Plant in Service (FOF#2) $2,078,265,154
Construction Work in Progress
and Nuclear •Fuel in Process (FOFff4 & 5) 179,155,839
Plant Held for Future Use (FOF116) 4,228,089
Working Capital (FOFff7) 93,920,373
Deferred Federal Income Taxes (FOFtt8) (135,941,462) -
Reserves for-Property Insurance i
and Injuries (FOF#8)
(8,481,655)
Customer Deposits and Advances (FOFn8) (25,379,298)
Unamortized Pre-Job Development
Investment Tax Credits (FOF#8) (10,253,437)
$2,175,513,603
4. Construction Work in Progress. The amount of $156,287,426 allowed
for construction work in progress (CWIP) consists of forty (40%) percent
of the cost of the projects set forth in Schedule C of the HL&P Rate
Filing Package. The Commission finds that this amount should be
allowed in invested capital in order that HL&P's financial integrity will
be maintained due to the capital intensive nature of the electric
industry and in order that it remain capable of attracting the large
amounts of additional capital necessary to continue its program of
construct-ion of new generation facilities capable of both meeting the
future energy demands of its customers and utilizing more abundant
fuels than natural gas or oil. Staff Exhibit 16, page 5.
5. • Nuclear Fuel in Process. Nuclear fuel in process represents forty
(40%) percent of the amount claimed by FIL&P, excluding $8,919,321,
which represents funds advanced by HL&P to Conoco in connection with
a joint exploration project. Noting that Federal Power Commission
Order No. 561 (February 2, 1977) allows electric utilities to accrue an
allowance for funds used during construction (AFUDC) on nuclear fuel
in process, this. Commission finds that the inclusion of nuclear fuel in
process is subject to the same standards for inclusion in rate base as
construction work in progress under the Public Utility Regulatory Act,
Section 41(a). With respect thereto, it is determined that the inclusion
of C99 PPR All .,f .,., l O.. , :- --
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(4116)
6. Plant Held for Future Use. In Southwestern Bell Telephone Company
v. Public Utility Commission of Texas, S.W. 2nd (Tex.
1978), the Supreme Court mandated that this Commission specifically
set forth criteria in evaluating plant held for future use as a potential
component in rate base. The inclusion of such plant in rate base will
therefore be limited to that plant which is not considered by HL&P to
be "excess property to be sold," and which is currently scheduled to be -
placed in service within ten (10) years from date hereof, which period of
time the Commission finds to be reasonable in this case. Staff Exhibit
10.
7. Working Capital. Working capital in the amount of $93,920, 73 is -
included in invested capital which represents an amount sufficient to
• allow HL&P to meet its normal business needs. Said allowance includes
$18,220,105 for materials and supplies, $51,492,308 for fuel stock,
_$4,045,698 for prepayments, and $20,162,262 as cash working capital.
The above levels of materials and supplies and prepayments constitute a
thirteen month average of said items, while fuel stock is based upon
year end levels, since fuel oil increased throughout the test period.
Cash working capital is computed as one-eighth of adjusted operation
and maintenance expenses excluding prepayments, fuel expense and
materials and supplies as expensed during the test year. Rate Filing
Package, Schedule G1 and Staff Exhibit 16 (Exhibit B-2, page 2 of 2).
• 8. Deferred Federal Income Taxes, Reserves for Property Insurance and
Injuries, Customer Deposits and Advances, and Unamortized Pre-Job
Development Investment Tax Credits. Deferred federal income taxes
in the amount of $135,941,462, reserves for property insurance and
injuries in the amount of $8,481,655, customer deposits and advances in
the amount of $25,379,298, and unamortized pre-job development
investment tax credits in the amount of $10,253,437 are excluded from
invested capital, since each such item represents funds either supplied
by ratepayers or for which there are no related capital costs. Staff
Exhibit No. 17B (Exhibit-B-2, page-1).
9. Affiliated Companies. Houston Lighting & Power Company, Utility
Fuels, Inc. (UFI), and Primary Fuels,. Inc. (PFI) are wholly owned
subsidiaries of Houston Industries, Inc. (HII) with HL&P accounting for -
approximately 98% of HII consolidated assets and 99% of HII common
. stock equity. Houston Industries, Inc. files a consolidated return for tax
purposes. . -
10. Affiliate Transactions. There have been no transactions between
HL&P and PFI. UFI was incorporated to acquire and deliver fuels to
HL&P generation facilities. To date the only transactions between
HL&P and UFI are: (1).UFI has contracted to sell and deliver coal to
the W. A. Parish generation facilities, and (2) HL&P has provided UFI
with uranium to be resold to a third party, which uranium will be
returned in kind to l-IL&P and for which UFI is paying interest to HL&P
based upon the value of the uranium sold. The Commission finds that
the agreement for sale and delivery of coal to the W. A. Parish units is
reasonable, and further that the uranium transfer by HL&P to UFI is
equitable provided that said interest rate is not less than the prime rate
charged by banks in Houston, Texas.
11. Net Current Cost. The net current cost of plant of HL&P is
$3,070,100,000, as computed by the Staff and reflected in Staff Exhibit
No. 12 (Lee Exhibit 31). The Handy-Whitman Index is used as the most
appropriate method of trending utility plant to determine current cost.
W. A. Parish Generating Unit No. 6 is included in the determination of
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Commission finds to be $1,228,000,000, as-shown on Staff Exhibit No. 12
• (Lee Exhibit 3). The adjustment for age and condition and depreciation
expense, including accumulated depreciation on original cost as
proposed by the Staff, is consistent with each other inasmuch as each is
calculated on a straight line basis and estimate a useful service life
from the date the plant is placed in service. Accordingly, deduction of .
the adjustment for age and condition from the current cost of plant in
service results in a net current cost amount of $3,070,100,000.
12. Adjusted Value of Invested Capital. The adjusted value of invested
capital used and useful in rendering service to the public is
$2,500,339,515 which is composed of the following elements:
Net Plant - Original Cost $2,078,265,154
(see FOF 1,712)
Percentage Mix - 67.25% $1,397,633,316
Net Plant - Current Cost 3,070,100,000
(see FOF #11) 32.75% 1,005,457,750
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Construction Work in Progress
and Nuclear Fuel in Process (FOF#4 & 5) 179,155,839
Plant Held for Future Use (FOF#6) . 4,228,089
Working Capital (FOF#7) 93,920,373
Deferred Federal Income Taxes (FOF#8) (135,941,462)
Reserve for Property Insurance and -
Injuries (FOF#8) (8,481,655)
Customer Deposits and Advances (FOF#8) (25,379,298)
Unamortized Pre-Job Development
Investment Tax Credits (FOF#8) (10,253,437)
Adjusted Value of Invested Capital $2,500,339,515
The percentage mixes applied to original and current cost of plant are
as computed by the Staff in Staff Exhibit No. 13 (Exhibit WEA-12).
These percentages adequately reflect inflation, quality of service,
service area growth rate and the need to attract new capital-, as
required by art. 1446c, Sec. 49(a), V.A.C.S.
13. Capitalization. The capitalization of HL&P at the end of the test
year, adjusted to reflect all known and measurable changes, as shown on
Staff Exhibit 13 (Exhibit WEA-11), is derived as follows:
a. Long term debt of $1,233,000,000, representing 48.30 percent of
total capital, with an embedded cost of 7.34 percent;
b. Preferred stock of $213,945,340, representing 8.35 percent of
total capital, with an embedded cost of 8.10 percent;
c. Common stock equity of $988,700,4 7 4, representing 38.58 percent
of total capital, upon which a reasonable rate of return is 13.80
percent.
d. Job development investment tax credits of $122,344,443,
representing 4.77 percent of total capital, upon which a
reasonable rate of return of 10.02 percent is allowed.
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Component
Percent Component Weighted •
Source Amount of Total Cost . Average Cost
Long Term Debt $1,238,000,000 48.30% 7.34% 3.54%
Preferred Stock 213,945,340 8.35% 8.10% .68% '
• Common Stock 988,700,474 38.58% 13.80% 5.32%
Job Development '
• Investment Tax Credit 122.344,443 4.77% 10.02% .48%
Totals $2,562,990,257 100.0096 • 10.02%
15. Debt. The annual interest requirement on long term debt capital is
$90,869,200 representing a cost of 7.34% on 48.3096 of HL&P's
capitalization structure resulting in a weighted average cost of 3.54%.
16.- -Preferred Stock: - The annual dividend requirement on preferred stock
is $17,329,573 representing a cost of 8.10% on 8.35% of HL&P's
capitalization structure resulting in a weighted average cost of .6896.
17. Return on Equity Capital. The annual return allowed on equity
capital of 13.896 on 38.58% of HL&P's capitalization structure is fair
and reasonable and is sufficient to assure confidence in the financial
• integrity of HL&P so as to maintain its credit and to attract additional
capital and is comparable to those returns of similar companies having
• • comparable risk and results in a weighted average cost of 5.32%.
18. Investment Tax Credit. HL&P is allowed to earn the composite cost
of capital of 10.02% on the unamortized job development investment
tax credit in the amount of $122,344,443. No reduction in rate base has
been made by this amount or for any portion of said unamortized
investment tax credit.
19. Bond Rating. The return on common equity permitted herein will
result in a pre-tax times interest coverage of 3.78 which would support
the bond rating of HL&P, thus indicating that the company will continue
its ability to attract capital at the lowest ultimate cost to •the
ratepayer. The amount of allowance for funds used during construction
as a percentage of earnings for common equity is 13.73%, which is
reasonable under the circumstances of this case.
20. Return on Adjusted Value of Invested Capital. A reasonable return on
the adjusted value of invested capital is 8.718%. Such a rate will not
yield more than a fair return on the adjusted value of invested capital,
as required by art. 1446c, Sec. 45(a), V.A.C.S.
21. Cost of Service. The adjusted cost of service and revenue
requirement of HL&P for the test period is $1,435,345,489 and is
composed of the following elements:
Fuel $ 751,191,669
Depreciation 87,229,379
Operation and Maintenance Expenses • 184,959,877
Taxes other than Federal Income Taxes 67,619,017
Federal Income Taxes 125,763,255
• • Amortization of Cancellation Charges 278,424
Interest on Customer Deposits 317,405
Return 217,986I 463
Total Cost of_Service $1,435,345,489
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risk)
$751,191,669 to properly recognize an increase of $2,381,794 in total
kwh sales as of the end of the test period, and a decrease of $6,972,211
in kwh sales due to the weather normalization adjustment by the
Commission herein. Rate Filing Package, Schedule N-3.1, page 2.
23. 'Depreciation. HL&P's current composite depreciation rate is 3.20
• percent and is composed of the following elements:
Gas/Oil 2.61%
Coal 2.63%
Other - 5.0%
• Production Composite 2.96% • •
Transmission 2.77%
Distribution 3.28%
General 5.56%
System Composite 3.20%
The company has proposed that the gas/oil production depreciation rate
be increased from 2.61 percent to 4.10 percent in order to reflect the
anticipated early retirement of various gas/oil generation units in 1996,
which is the termination date of HL&P's Exxon gas contract. The
Commission finds that there is insufficient evidence at this time to
conclude that oil, as a boiler fuel, will be unavailable after 1996 either
because of scarcity or prohibition by law. The Commission further finds
• that service lives of thirty (30) years proposed by Staff witness Lee for
accounts 355 (poles and fixtures), 365 (overhead conductors and
devices),-and 368 (line transformers) are reasonable and proper. Staff
Exhibit 12, page 7. The above adjustments, hereby adopted by the
Commission, produce the following functional depreciation rates:
Gas/Oil 3.266%
Coal . ' 2.857%
Other 5.00096
Production Composite 3.460% •
Transmission 2.892% '
Distribution 3.737%
General 5.453%
System Composite 3.605%
24. Operation and Maintenance Expenses. A reduction in the amount of
$8,311,255 to HL&P's proposed operation and maintenance expenses of
$193,271,132 is reasonable, as set out below, and results in an allowable
total of $184,959,877. The specific adjustments are as follows:
• a. A reduction in the company's proposed level of wages in the amount of $513,044 to reflect: (1) HL&P's initial overstatement
of that portion of wages attributable to the monthly payment of
supplemental retirement checks (Staff Exhibit 16, page 7); and (2)
an overage in the utility's projected level of overtime expense.
• The Commission finds that the use of a five year average of
overtime as a percentage of base wages is reasonable, however,
the exclusion of any year from said average because of abnormal
results must be based upon known events or occurrences in said
year which skewed those results.
b. A reduction of $497,889 of employee benefit expense, since
increases in the administrative portion of such expense is more
• properly a function,of increases in the number of employees than
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c. A reduction of $92,033 in legal fees from cost of service, since
• such fees were expended for legislative advocacy. Staff Exhibits
9 and 9A.
d. A reduction of $283,663 for nonrecurring legal expenses
associated with litigation between HL&P and Westinghouse
Electric Corporation involving the delivery of uranium for use at
the South Texas Nuclear Project. The Commission finds that
given the nature of this litigation and the magnitude of said fees,
the most appropriate means of recovery is the amortization of
such fees over a five-year period.
e. A reduction in rate case expense of $32,338 which constitutes the
amount expended by HL&P for an observed depreciation study.
The Commission finds that the cost of the observed depreciation
study in this docket is excessive in comparison with other
_ . ,.... _ .reasonably accurate methodologies for determining an adjustment -
for age and condition of plant. Staff Exhibit 16, pages 8 and 9.
f. A reduction of $951,226 in "other" operation and maintenance
expenses, since there is insufficient evidence in the record to
conclude that HL&P's proposed increase in the test year level of
expenses is reasonable (TR 1284-85.).
g. A- reduction of $400,000 in the amount of HL&P's proposed
• property insurance reserve accrual. Noting that HL&P has not
charged_any losses against said reserve for seventeen (17) years
and that the current level of said reserve will effectively provide
more than $15,000,000 of loss protection, the Commission finds
that annual increases of $100,000 to the current level of the
reserve are reasonable and proper.
h. A reduction in uncollectibles of $93,155, in city franchise fees of
$2,938,323, and in the Public Utility Commission- assessment of .
$2,509,584 to reflect a reclassification of the Public Utility
Commission assessment from Operation and Maintenance expenses
to other taxes, and the reduced cost of service for HL&P as set
forth in this Order. '
25. Taxes other than Federal Income Taxes. The Commission finds that
an adjustment to HL&P's proposed-expense for taxes other than federal
income taxes of $66,316,662 in -the amount of $1,302,355 should be
made, resulting in an allowable expense of $67,619,017. The adjustment
made reflects a reclassification of the Public Utility Commission
Assessment to taxes other than federal income taxes. Additional
differences from the company's proposal result from the lower revenue
requirement determined herein.
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26. Federal Income Taxes. An adjustment of $49,835,364 to the
company's claimed federal income tax expense of $175,598,619 is found
to be proper, resulting in an allowable expense of $125,763,255. The-
adjustment generally reflects the tax effects of changes in the cost of
service of HL&P as set forth herein.
27. Amortization of Cancellation Charges. The Commission finds that
HL&P's proposed amortization of cancellation charges associated with
the discontinuance of the Allen's Creek No. 2 Nuclear Unit is
unreasonable, in that no return should be earned on the unamortized
portion of such charges. The Commission therefore finds that HL&P is
permitted to recover said $1,392,120 in charges over five years at the
rate of $278,424 per annum.
tam,
weather experienced within the utility's service area during the test
year ended March 31, 1978. Said amount is equal to one-half of the
adjustment proposed by HL&P and is determined to be reasonable in this
proceeding, since the normalization procedure used by the company
herein is not as fully developed as alternative methodologies adopted in
other Commission proceedings.
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30. Revenue Deficiency. The Commission finds the test year cost of
. service or revenue requirement of $1,435,345,489 will permit HL&P to
• .recover its operating expenses together with a reasonable return on its
invested capital, as required by art. 1446c, Sec. 39, V.A.C.S. HL&P's
_recovery of revenues from the fuel adjustment clause and sources other
than base rates is $7 60,126,816. The base rate revenue requirement of
HL&P is $675,218,6 7 3. Adjusted test period base rate revenues for
HL&P are $545,743,252. This amount also reflects an adjustment for
kilowatt hour sales due to the weather normalization adjustment
_discussed above.-- The revenue deficiency of HL&P for the test period is
$129,475,421.
31. Cost of Service Allocation. To allocate production facilities for this
proceeding, HL&P has proposed utilization of the Loss of Load
Probability Method (LOLP), which is a variation of the peak
responsibility allocation methodology. Noting that the allocation
factors derived from said method are similar to the results obtained
from other traditionally accepted methodologies, the Commission finds
the LOLP method to be reasonable for use in this proceeding. . Staff
Exhibit 15 (Exhibit GLG-2). The Commission likewise finds that the
methodologies proposed by HL&P for allocating transmission,
distribution, and general plant are fair and reasonable.
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32. Revenue Requirement by Customer Class. The Commission finds that
the company shall file revised rates to reasonably reflect the following
relative rates of return by customer class.
- - Customer Class Target Relative Return
Residential .70
Miscellaneous General Service 1.27
Large General Service 1.02
LOSA 1.47
'LOSB 1.23
Public Utility 1.00
• Contract Service 794 1.89 •
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Street Lighting .16
33. Fuel Adjustment Clause. The Commission further finds that the
volatility in the price of fuel requires that a cost of fuel adjustment be
allowed HL&P in order to protect the financial integrity of the
company. The fuel adjustment clause in the tariff shall provide for a
fuel adjustment for the actual fuel consumed in generating each
kilowatt hour of electricity sold and for the fuel component of each
• kilowatt hour of purchased power bought and resold. The Commission
additionally finds that said fuel adjustment clause shall recognize the
line loss differentials between customer groups as recommended by the
Staff, the company, and various intervenors herein. The use of such a
clause is conditioned on the elimination of all handling, storage, and
transportation costs directly incurred by HL&P. Further the clause
shall include neither revenue related taxes nor gains or losses on the
sale of fuel and must otherwise comply with the Commission's -
Substantive Rules. The above notwithstanding, HL&P is hereby allowed
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to recover through its fuel adjustment clause the full cost of economy
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34. Cost of Service Adjustment Clause. The proposed continuance by
HL&P of a cost of service adjustment clause as previously authorized by
the City of Houston and various other cities served by HL&P is found to
be unreasonable by the Commission. _ Denial of said proposal is
consistent with sound regulatory practice in various respects including:
(1) Implementation of such an adjustment clause is contradictory to the
Commission's intention to move toward a more cost-based rate design; _
(2) Full recovery of the expenses set forth in the clause would require-
fourteen months from date of incurrence, while regulatory lag before
the Commission has generally been less than five months; and (3) The
record in this proceeding clearly reflects that investors do not expect
the continuance of the cost of service adjustment clause.
35. Rate Structure. In general, the rate structures proposed by HL&P are
based.on sound rate-making principles and are compatible with the rate .
design philosophy adopted by the Commission in earlier cases, and such
- • rate- structures are sufficient, equitable, consistent in application to
each class of customers, are not unreasonably preferential, prejudicial
or discriminatory, and will produce the proportionate part of the
required revenues to eliminate HL&P's revenue deficit. As a result, the
final rates filed in compliance with this Order shall be structured as
proposed with the following exceptions:
a. Customer charges as hereinafter set forth are found to be fair and
equitable to those classes affected thereby:
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(1) A $4.50 customer charge for both rural and urban residential -
ratepayers which is to include 30 kwh of energy.•
(2) A $9.30 customer charge for all miscellaneous general
service customers which will provide no energy usage.
(3) A $25.00 customer charge for all existing direct current ..
service customers which likewise will provide no energy
usage.
b. The Commission further finds that the definition of peak months
as proposed by HL&P'is improper, and that the peak months for '
billing purposes shall include June through October in order to
reflect customer consumption from May through September.
c. In accordance with the National Energy Act recently passed by
Congress, the Commission finds that all off-peak usage by
residential consumers be priced lower than the rate for peak
usage, and that HL&P, as proposed, provide recognition of the
difference in costs between high and low volume, off-peak,
residential customers by implementing a two block off-peak
residential rate.
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d. With regard to the measurement of on-peak kva and off-peak kva
for industrial customers, HL&P shall continue to measure such
energy demand upon fifteen (15) minute periods of maximum use.
e. The Commission finds that the rates charged by HL&P to Dow
Chemical Company for interruptible service shall be equal to
• eighty (80(,'6) percent of' the firm rates charged by the company
under its amended tariff as filed herein.
36. Additional Rate Design Analyses. Given the relatively low reserve
margin that llL&P has currently and expects to have through 1985 and
further noting the large industrial load served by the utility, the
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b. The design of marginal cost based rates for such customers, and
c. A cost/benefit analysis of interruptible rates.
Conclusions of Law
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1. The Commission has jurisdiction over the subject matter in this case
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pursuant to art. 1446c, Secs. 16, 37, 43, V.A.C.S.
•° 2. The intervenor cities have a justiciable interest as regulators, and all
other intervenors have a justiciable interest in this proceeding, in that
each represents a different class of customer and is concerned as to
issues .of unreasonable discrimination, if any, of rates as between
classes of customers.
3. HL&P has the burden of proof to establish its revenue deficiency under
its present rates and the amount of such revenue deficiency which will
be collected. under its proposed rates, pursuant to art. 1446c, Sec. 40(b),
V.A.C.S.
4. HL&P has proven that it has a revenue deficiency of $129,475,421 in the
test year.
5. The present rates for service in the 'unincorporated areas and in any
cities served by HL&P over which this Commission has original
jurisdiction are insufficient to provide HL&P with the revenues
• approved in this Order and should be adjusted to conform to the rates
established herein for each class of ratepayers.
6. The rates prescribed in this Order will allow HL&P to recover its
operating expenses with a reasonable return on its invested capital
pursuant to the requirements of art. 1446c, Sec. 39, V.A.C.S.
7. The rate of return granted herein is sufficient to assure confidence in
the financial soundness of HL&P and is adequate, under efficient-and
economical management, to maintain and support its credit and enable -
it to raise the money necessary for the proper discharge of its public •
duties; is comparable to those returns of other similar companies having
comparable risk; and is sufficient to assure confidence in the financial
integrity of HL&P so as to maintain its credit and to attract capital.
(Federal Power Commission v. Hope Natural Gas Company, 320 U. S.
591, 88 L. Ed. 333; and Bluefield Water Works and Improvement Co. v.
Public Commission of West Virginia, 262 U. S. 679, 67 L. Ed. 1176.) .
8. The Commission has the authority and duty to set proper rates in all
instances whether such action requires increasing, decreasing, or
changing the rate pattern with respect to any or all rates contained in
the proposed tariff, regardless of whether the rates in the proposed
tariff are different from old rates or not, and no prior' notice by the
Commission to the applicant is required for such action.
9. The rate design as set out in the Findings of Fact is reasonable and non-
discriminatory and shall be adopted in this Order.
Order
• NOW' THEREFORE, :it is hereby ORDERED that IHL&P shall file a revised
tariff in accordance with the conclusion, findings of facts, and conclusions of law
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'a. T C
. raw) . •
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• the revised tariff to review it for approval or rejection. The tariff shall be deemed
•
to be approved and shall become effective upon the expiration of twenty (20) days
after filing or sooner upon notification by the Commission Secretary. In the event -
of rejection, HL&P shall be notified and a copy sent to all groups of the intervening
parties herein by the Commission Secretary, and IIL&P shall have fifteen (15) -
additional days to file an amended tariff and the same procedure shall be repeated
herein. The revised and approved rates shall be charged. by HL&P for electricity -
consumed. after the tariff approval- date and may not be charged for electricity
• consumed prior to such date. This Order is deemed to be final on the date of its
effectiveness either by operation of this Order or by notification by the -
-. . -Commission Secretary, whichever occurs first.
All motions, requests, applications and requests for Findings of -Fact and
Conclusions of Law not expressly granted herein are denied for want of merit. .
RENDEERED.:AND.SIGNED--AT AUSTIN;,.TEXAS,- on this the- -. • day-of
, 1978. .
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PUBLIC UTILITY COMMISSION OF TEXAS •
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SIGNED:
• - - - - GEORGE M. COWDEN
SIGNED:
GARRETT MORRIS
SIGNED:
ALAN R. ER WIN
ATTEST: •
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PHILIP F. RICKETTS
COMMISSION SECRETARY
AND DIRECTOR OF HEARINGS