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ORDINANCE NO. 06-3467
AN ORDINANCE 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 May 31, 2006 to increase its system-
wide, annual revenue requirement, by approximately $47.9 million; and
WHEREAS, the City is a regulatory authority under the Public Utility Regulatory
Act ("PURR") and under Chapter 33, §33.001 et seq. of PURA has exclusive original
jurisdictior} 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 July
5, 2006, the City has suspended the effective date for the City to take final action until
October 3, 2006; 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 reviE;wed tens of thousands of pages of
the books and records of SPS and the review is on-going; and
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WHEREAS, based upon the review of the rate experts the request to increase
rates should be denied.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PLAINVIEW, TEXAS
THAT:
PART 1. FINDINGS
(A) On May 31, 2006, SPS filed crate-filing package with the City based on a
test year ending December 31, 2005, seeking to increase rates by $47.9 million with a
proposed effective date of July 5, 2006, which was suspended, to October 3, 2006.
(B) Based on company-provided information, SPS' proposal would result in
an average monthly increase per customer within the City for the following sample of
rates:
Current Proposed
Total Total Dollar Percentage
Charges Charges Increase Change
Residential Lighting-Energy
Summer $88.55 $93.85 $5.30 5.99%
Winter $84.55 $88.44 $3.89 4.60%
Residential Space
Heating
With Water Heating
Summer $74.18 $92.25 $18.07 24.36%
Winter $72.18 $86.84 $14.66 20.31%
Residential Heat
Pump
With Water Heating
Summer $76.53 $92.25 $15.72 20.54%
Winter $74.13 $86.84 $12.71 17.15%
Residential Space
Heating
Summer $85.72 $91.54 $5.82 6.79%
Winter $68.72 $86.13 $17.41 25.33%
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Residential Water
Heating
Summer $75.35 $92.89 $17.54 23.28%
Winter $73.35 $87.48 $14.13 19.26%
Residential Heat
Pump
Summer $86.65 $93.13 $6.48 7.48%
Winter $72.25 $87.72 $15.47 21.41
General Service-
Energy
Summer $104.46 $102.21 -$2.25 -2.15%
Winter 99.46 92.;8 -$7.08 -7.12%
(C) 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.
(D) The City has joined a coalition of cities, known as Alliance of Xcel
Municipalities ("AXM").
(E) AXM has hired experts to evaluate and make recommendations regarding
the proposed rate increase.
(F) While AXM's experts will conclude their investigation no earlier than
October 24, 2000 for cost allocation and rate design issues, and October 31, 2006 for
revenue requirements, including fuel reconciliation issues, based on current information,
AXM's experts believe that SPS is not entitled to its requested increase in rates.
(G) These experts have determined that 1:he rate increase proposed by SPS
is not just and reasonable based upon, but not limited to, the following factors:
The request seeks an excessive return on equity of 11.60%;
The request seeks an excessive equity ratio of 51.13%;
The request seeks excessive level of depreciation in rates; and
The request proposes a marked departure from SPS' historic rate design
by directly assigning and surcharging municipal franchise fees and
consolidating 36 different rate schedules into 8 rate classes;
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SPS proposed changes to its line-loss factors which impact calculation of
SPS' fuel-adjustment factors and jurisdictional and customer-class
allocation factors; and
SPS quality of service including its timeliness for installations of new
service (including service to new subdivisions); delays in fulfilling requests
for relocation of service; the frequency of outages; delays in disconnection
of service in emergency situations and the lack of adequate levels of local
customer service representatives;
(H) The 11.60% return on equity proposed by SPS is materially higher than
the return on equity considered to be reasonable in SPS' affiliate's most recent rate
cases before the regulatory commissions of Wisconsin (11.00%) and Minnesota
(10.64%), and materially higher than recommended by the staff of the regulatory
commission of Colorado (9.50%).
(I) SPS' proposal does not appear to include short-term debt in calculating its
overall rate of return, thereby increasing the overall return on investments and making
the rate increase request considerably larger than reasonably justified.
(J) SPS' proposal requests an unreasonable equity ratio of 51.13%, thereby
increasing the overall return on investments and making the rate increase request
considerably larger than justified.
(K) SPS has proposed a rate design that shifts recovery of its costs by
increasing its Service Availability Charges, for example, from $4.65 to $12.75 for
residential consumers, and reducing its usage charges, each change which brings into
question such changes' consistency with energy conservation measures. -
(L) SPS' proposal to directly assign recovery of municipal franchise fees and
surcharge such fees is unreasonable.
(M) The failure of SPS to provide sufficient cost information related to its
affiliate transactions has made it difficult to analyze the components and the
reasonableness of the requested costs and expenses related to SPS' affiliate
transactions.
(N) The meeting at which this ordinance was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government
Code, Chapter 551.
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PART 2. Based upon the foregoing findings the rate increase proposed by SPS and
filed with the City on May 31, 2006, is denied.
PART 3. SPS is directed to reimburse all municipal rate case expenses incurred by the
City in relation to the filing.
PART 4. A copy of this ordinance 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.
PART 5. This ordinance shall become effective frorrl and after its passage.
PASSED AND APPROVED on first reading this 12th day of September, 2006.
PASSED AND APPROVED on secoryfi r~yayiing this 26th day of September, 2006.
~~-
n C. Anderson, ayor
ATTEST:
~~
Belinda Hinojosa, City Secr ary
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