HomeMy WebLinkAboutR10-237394
RESOLUTION R10-237
A RESOLUTION DENYING THE RATE INCREASE PROPOSED BY THE
SOUTHWESTERN PUBLIC SERVICE COMPANY; REQUIRING THE
REIMBURSEMENT OF MUNICIPAL RATE CASE EXPENSES; FINDING
THAT THE MEETING COMPLIES WITH THE OPEN MEETINGS ACT;
MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE
SUBJECT; AND DECLARING AN EFFECTIVE DATE
WHEREAS, Southwestern Public Service Company (SPS) filed a Statement of
Intent with the City of Plainview, Texas ("City") on or about May 17, 2010 to increase its
system -wide, annual revenue requirement, by approximately $62 million excluding
franchise fees, and to reconcile its fuel cost for the years of calendar years 2008 and
2009; and
WHEREAS, the City is a regulatory authority under the Public Utility Regulatory
Act ("PURA") and under Chapter 33, §33.001 et seq. of PURA has exclusive original
jurisdiction over SPS' rates, operations, and services of a utility within the municipality;
and
WHEREAS, the original effective date for the SPS rate increase request was
June 21, 2010, the City suspended the effective date for the City to take final action until
September 19, 2010, and SPS voluntarily agreed to extend the time for the City to take
final action on SPS' proposed increase to December 31, 2010; and
WHEREAS, the City, acting in concert with other cities known as the Alliance of
Xcel Municipalities ("AXM"), has employed rate experts to review the testimony,
schedules, workpapers and other documents provided by SPS in its Statement of Intent
and in response to discovery requests; and
WHEREAS, the City's rate experts have reviewed the books and records of SPS
and additional voluminous data provided by SPS and the review is on-going; and
WHEREAS, based upon the review of the rate experts the request to increase
rates should be denied.
NOW THEREFORE, BE IT RESOLVED By the City Council of the City of
Plainview that:
SECTION 1. FINDINGS
(A) On or about May 17, 2010, SPS filed a rate -filing package with the City
based on a test year ending December 31, 2009, seeking to increase base rates
by approximately $62 million with a proposed effective date of June 21, 2010,
which the City suspended, to September 19, 2010.
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(B) SPS also proposed to recover franchise fees through a separate surcharge
applicable only to in -city ratepayers, and when franchise fees are included in
base rates, SPS' base increase is approximately $71 million.
(C) To allow the City and other interested parties the opportunity to review the
effect of the sale of certain distribution -plant assets by SPS to Lubbock Power &
Light, SPS agreed that the City would have until December 31, 2010 to take final
action on SPS' proposed increase in rates.
(D) SPS' requested increase represents an increase in base -rate revenue of
approximately 17%.
(E) The City has exclusive original jurisdiction under the Public Utility Regulatory
Act, Texas Utilities Code Chapter 33, §33.001 et seq. to evaluate SPS' proposed
rate increase.
(F) The City has joined a coalition of cities, known as the Alliance of Xcel
Municipalities ("AXM").
(G) AXM has hired experts to evaluate and make recommendations regarding
the proposed rate increase.
(H) Based on the procedural schedule agreed to by SPS and all the parties in
the SPS' rate case before the Public Utility Commission of Texas (PUCT) in
Docket No. 38147, AXM's experts' final report and recommendations, including
their recommendations regarding fuel expenses will not be concluded until
January 18, 2011. Nonetheless, based on information received and evaluated to
date, AXM's experts believe that SPS is not entitled to its requested increase in
rates. These experts' preliminary analysis shows that the base rate increase
proposed by SPS is not just and reasonable based upon, but not limited to, the
following factors:
(1) SPS has failed to reasonably calculate its consolidated tax savings
adjustment, thereby significantly overstating its asserted revenue
requirement.
(2) SPS' request includes excessive amounts of payroll expense and
executive incentive compensation that should be removed from its
operations and maintenance (O&M) expenses.
(3) SPS has overstated its asserted cost of equity by seeking an
excessive return on equity of 11.35%.
(4) The request seeks an excessive level of depreciation expenses in
rates and understates the net salvage value of its production plant.
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(5) The request proposes a marked departure from SPS' historic rate
design by directly assigning and surcharging all municipal franchise fees
to in -city ratepayers only, which change is unreasonable.
(6) SPS' proposed amortization of its gain on sale of assets to Lubbock
Power & Light should be shortened to provide existing ratepayers with the
benefits of that sale. A longer amortization period for gain on the sale of
these assets has the effect of understating its revenue.
(7) SPS has understated the on-going savings associated with the sale of
assets to Lubbock Power & Light, which has the effect of overstating its
on-going O&M expenses.
(1) 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 II. Based upon the foregoing findings the rate increase proposed by SPS
and filed with the City on or about May 17, 2010, is denied.
SECTION III. SPS is directed to reimburse all municipal rate case expenses incurred
by the City in relation to the filing and to continue to do so in the event SPS appeals the
City's actions on SPS' rate application, or appeals the PUCT's final order in Docket No.
38147 on a monthly basis.
SECTION IV. A copy of this Resolution shall be sent to Mr. James Bagley, Manager,
Regulatory Administration, Xcel Energy, P.O. Box 1261, Amarillo, Texas 79105, and to
Mr. Marcus W. Norris, City Attorney, City of Amarillo, 509 E. 7th, P.O. Box 1971,
Amarillo, Texas 79105-1971.
SECTION V. This resolution shall become effective from and after its passage.
PASSED AND APPROVED this 14th day of
0
Belinda Hinojosa, City�Sebretary
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