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HomeMy WebLinkAbout1998-442Note Amendment I is attached. ORDINANCE NO V — _ AN ORDINANCE AUTHORIZING THE CITY MANAGER TO ENTER INTO A PROFES- SIONAL SERVICES CONTRACT WITH DIVERSIFIED UTILITY CONSULTANTS, INC TO REVIEW LONE STAR GAS COMPANY'S REQUEST TO INCREASE RATES IN THE CITY OF DENTON SERVICE AREA, AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR, AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City Council, by Ordinance No 98-397, at their regularly scheduled meeting of November 17, 1998, suspended the proposed rate increase of Lone Star Gas Com- pany for 90 days, or until February 25, 1998, and WHEREAS, the City Council authorized the City Manager to seek a qualified rate con- sultant to assist the City in reviewing Lone Star Gas Company's request to increase rates in the Denton service area, and WHEREAS, the City Council deems it in the public interest to enter into a Professional Services Contract with Diversified Utility Consultants, Inc , NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS SECTION I, That the City Manager is hereby authorized to enter into a Professional Services Contract with Diversified Utility Consultants, Inc , substantially in the form of the at- tached contract, which is made a part of this ordinance for all purposes, to review Lone Star Gas Company's request to increase rates in the City of Denton service area SECTION II. That the City Manager is hereby authorized to make the expenditures as outlined in the attached contract SECTION III That this ordinance shall become effective immediately upon its passage and approval PASSED AND APPROVED this the day of 1998 JA ILLER, MAYOR ATTEST JENNIFER WALTERS, CITY SECRETARY nn BY kd /j l/1 .��+ APPROVED AS TO LEGAL FORM HERBERT L PROUTY, CITY ATTORNEY i 5 \Our Documents\0sdlnencw\98\mte cmuultnnt dco Page 2 PROFESSIONAL SERVICES AGREEMENT FOR PROFESSIONAL SERVICES REGARDING LONE STAR GAS COMPANY'S REQUEST FOR A RATE INCREASE STATE OF TEXAS § COUNTY OF DENTON § THIS AGREEMENT is made and entered into as of the J`� day of December, 1998, by and between the City of Denton, Texas, a Texas municipal corporation, with its principal office at 215 East McKinney Street, Denton, Denton County, Texas 76201, hereinafter called "OWNER" and Diversified Utility Consultants, Inc, with its corporate office at 7800 Shoal Creek Boulevard, Suite 246 South, Austin, Texas 78757, hereinafter called "CONSULTANT," acting herein, by and through their duly authorized representatives WITNESSETH, that in consideration of the covenants and agreements herein contained, the parties hereto do mutually agree as follows ARTICLE I EMPLOYMENT OF CONSULTANT The OWNER hereby contracts with the CONSULTANT, as an independent contractor, and the CONSULTANT hereby agrees to perform the services herein in connection with the Project as stated in the sections to follow, with diligence and in accordance with the highest professional standards customarily obtained for such services in the State of Texas The professional services set out herein are in connection with the following described project The Project shall include, without limitation, investigation and analysis of Lone Star Gas Company's request for a rate increase to make a determination of the reasonableness of that rate increase, based on an analysis of that rate base, expenses, investment, and rate of return of Lone Star, along with any additional factors which would bear on the reasonableness of Lone Star's request ARTICLE II SCOPE OF SERVICES The CONSULTANT shall perform the following services in a professional manner A The CONSUL TANT shall perform all those services as necessary and as, escnbed in the OWNER's Rccquest for Proposal for Professional Service.. to Assist the ;ity of Denton, Texas in Analyzing Lone Star Gas Company's Rate Regri-st for the Denton Distribution System, which ie attached hereto and made a part herett as Exhibit "A" ,ts if written word for word herein B To perform all those services set forth in CONSULTANT's Proposal to Review Lone Star Gas Company's Request for Rate Increase dated November 30, 1998, which proposal is attached hereto and made a part hereof as Exhibit `B" as if written word for word herein C CONSULTANT shall perform all those services set forth in individual task orders, if any, which shall be attached to this Agreement and made a part hereof for all purposes as separate agreements D CONSULTANT will meet with and submit status reports to the Assistant City Manager for Finance, City Attorney, and their staffs, will be avail 1 at least two City Council meetings, and shall provide belch a nar final report indicating its recommendations as set forth in Section B "Scope of Work" of Exhibit "A' E If there is any conflict between the terms of this Agreement and the exhibits attached to this Agreement, the terms and conditions of this Agreement will control over the terms and conditions of the attached exhibits or task orders ARTICLE III ADDITIONAL SERVICES Additional services to be performed by the CONSULTANT, if authorized by the OWNER, which are not included in the above-descnbed Basic Services, are described as follows A Appeanng before regulatory agencies or courts as an expert witness in any litigation, including, without limitation, testimony in rate proceedings before the Texas Railroad Commission, as set forth in Section E "Expert Testimony" of Exhibit "A", with third parties or condemnation proceedings arising from the development or construction of the Project, including the preparation of engineering data and reports for assistance to the OWNER B Any other additional services specifically requested by the OWNER not included within the scope of this Agreement and its exhibits ARTICLE IV PERIOD OF SERVICE This / greement shall become effective upon execution of tI, s Agreement by the OWNER and the CONSULTANT and upon issue of a notice to procee," by the OWNER, and shall remain in force for the period which may reasonabl i be required for the completion of the Project, including Additional Services, if any, and any required extension s approved by the OWNER This Agreement may be sooner terminated in accordance with the provisions hereof Time is of the essence in this Agreement The CONSULTANT shall make all reasonable efforts Page 2 to complete the services set forth herein as expeditiously as possible and to meet the schedule established by the OWNER in Exhibit "A", acting through its City Manager or his designee ARTICLE V COMPENSATION A COMPENSATION TERMS 1 "Subcontract Expense" is defined as expenses incurred by the CONSULTANT in employment of others in outside firms for services 2 "Direct Non -Labor Expense" is defined as that expense for any assignment incurred by the CONSULTANT for supplies, transportation and equipment, travel, communications, subsistence, and lodging away from home, and similar incidental expenses in connection with that assignment B BILLING AND PAYMENT For and in consideration of the professional services to be performed by the CONSULTANT herein, the OWNER agrees to pay, based on the cost estimate detail at an hourly rate shown in Exhibit "B", Part II, Price Proposal, which is attached hereto and made a part of this Agreement as if written word for word herein, a total fee, including reimbursement for direct non -labor expenses not to exceed twenty thousand dollars ($20,000) Partial payments to the CONSULTANT will be made on the basis of detailed monthly statements rendered to and approved by the OWNER through its Assistant City Manager for Finance and its City Attorney or his designee, however, under no circumstances shall any monthly statement for services exceed the value of the work performed at the time a statement is rendered The OWNER may withhold the final five percent (5%) of the contract amount until completion of the Project Nothing contained in this Article shall require the OWNER to pay for any work which is unsatisfactory, as reasonably determined by the City Manager or his designee, or which is not submitted in compliance with the terms of this Agreement The OWNER shall not be required to make any payments to the CONSULTANT when the CONSULTANT is in default under this Agreement It is specifically understood and agreed that the CONSULTANT shall not be authorized to undertake any work pursuant to this Agreement which would require additional payments by the OWNER for any charg ;, expense, or reimbursement above the maximum not to exceed fee ac stated, without first having obtained written authorization from the OWNER The CONSULTANT shall not proceed to perform the services lister' in Article III "Additional Seivices," without obtaining prior written authorization from the OWNER Page 3 C ADDITIONAL SERVICES For additional services authorized in writing by the OWNER in Article III, the CONSULTANT shall be paid based on the Schedule of Charges at an hourly rate shown in Exhibit `B", Part II, Price Proposal Payments for additional services shall be due and payable upon submission by the CONSULTANT, and shall be in accordance with subsection B hereof Statements shall not be submitted more frequently than monthly D PAYMENT If the OWNER fails to make payments due the CONSULTANT for services and expenses within sixty (60) days after receipt of the CONSULTANT's undisputed statement thereof, the amounts due the CONSULTANT will be increased by the rate of one percent (1%) per month from the said sixtieth (601h) day, and, in addition, the CONSULTANT may, after giving seven (7) days' written notice to the OWNER, suspend services under this Agreement until the CONSULTANT has been paid in full all amounts due for services, expenses, and charges, provided, however, nothing herein shall require the OWNER to pay the late charge of one percent (1%) set forth herein if the OWNER reasonably determines that the work is unsatisfactory, in accordance with this Article V, "Compensation " ARTICLE VI OBSERVATION AND REVIEW OF THE WORK The CONSULTANT will exercise reasonable care and due diligence in discovering and promptly reporting to the OWNER any defects or deficiencies in the work of the CONSULTANT or any subcontractors or subconsultants ARTICLE VII OWNERSHIP OF DOCUMENTS All documents prepared or famished by the CONSULTANT (and CONSULTANT's subcontractors or subconsultants) pursuant to this Agreement are instruments of service, and shall become the property of the OWNER upon the termination of this Agreement The CONSULTANT is entitled to retain copies of all such documents The documents prepared and furnished by the CONSULTANT are intended only to be applicable to this Project, and OWNER's use of these documents in other projects shall be at OWNER's sole risk and expense In the event the OWNER uses any of the information or materials developed pursuant to tlus Agreement in another project or for other purposes than specified herein, CONSULTANT is released from any and all liability relating to their use in that project ARTI LE VIII INDEPENDENT CONTRACTOR CONSULTANT shall provide services to OWNER as an independent contractor, not as an employee of the OWNER CONSULTANT shall not have or claim any right ansmg from employee status Page 4 ARTICLE IX INDEMNITY AGREEMENT The CONSULTANT shall indemnify and save and hold harmless the OWNER and its officers, agents, and employees from and against any and all liability, claims, demands, damages, losses, and expenses, including, but not limited to court costs and reasonable attorney fees incurred by the OWNER, and including, without limitation, damages for bodily and personal injury, death and property damage, resulting from the negligent acts or omissions of the CONSULTANT or its officers, shareholders, agents, or employees in the execution, operation, or performance of this Agreement Nothing in this Agreement shall be construed to create a liability to any person who is not a party to this Agreement, and nothing herein shall waive any of the parties' defenses, both at law or equity, to any claim, cause of action, or litigation filed by anyone not a party to this Agreement, including the defense of governmental immunity, which defenses are hereby expressly reserved ARTICLE X INSURANCE During the performance of the services under this Agreement, CONSULTANT shall maintain the following insurance with an insurance company licensed to do business in the State of Texas by the State Insurance Commission or any successor agency that has a rating with Best Rate Carriers of at least an A- or above A Comprehensive General Liability Insurance with bodily injury limits of not less than $500,000 for each occurrence and not less than $500,000 in the aggregate, and with property damage limits of not less than $100,000 for each occurrence and not less than $100,000 in the aggregate B Automobile Liability Insurance with bodily injury limits of not less than $500,000 for each person and not less than $500,000 for each accident, and with property damage limits of not less than $100,000 for each accident C Worker's Compensation Insurance in accordance with statutory requirements, and Employers' Liability Insurance with limits of not less than $100,000 for each accident D Professional Liability Insurance with limits of not less than $1,000,000 annual aggregate E The CONSULTANT shall furnish insurance certificates of insurance po' cies at the OWNER's request to evidence such coverages The msurai-�e policies shall name the OWNER as an additional insured on all such policies, and shall contain a provision that such insurance shall not be canceled or modified without thirty (30) days' prior written notice to OWNER and CONSULTANT In such event, the CONSULTANT shall, prior Page 5 to the effective date of the change or cancellation, serve substitute policies furnishing the same coverage ARTICLE XI ARBITRATION AND ALTERNATE DISPUTE RESOLUTION The parties may agree to settle any disputes under this Agreement by submitting the dispute to arbitration or other means of alternate dispute resolution, such as mediation No arbitration or alternate dispute resolution ansing out of or relating to this Agreement, involving one party's disagreement, may include the other party to the disagreement without the other's approval ARTICLE XII TERMINATION OF AGREEMENT A Notwithstanding any other provision of this Agreement, either party may terminate by giving thirty (30) days' advance written notice to the other party B This Agreement may be terminated in whole or in part in the event of either party substantially failing to fulfill its obligations under this Agreement No such termination will be affected unless the other party is given (1) written notice (delivered by certified mail, return receipt requested) of intent to terminate and setting forth the reasons specifying the non-performance, and not less than thirty (30) calendar days to cure the failure, and (2) an opportunity for consultation with the terminating party prior to termination C If the Agreement is terminated prior to completion of the services to be provided hereunder, CONSULTANT shall immediately cease all services and shall render a final bill for services to the OWNER within thirty (30) days after the date of termination The OWNER shall pay CONSULTANT for all services properly rendered and satisfactorily performed and for reimbursable expenses to termination incurred prior to the date of termination, in accordance with Article V "Compensation " Should the OWNER subsequently contract with a new consultant for the continuation of services on the Project, CONSULTANT shall cooperate in providing information The CONSULTANT shall turn over all documents prepared or furnished by CONSULTANT pursuant to this Agreement to the OWNER on or before the date of termination, but may maintain copies of such documents for its use ARTICLE XIII RESPONSIBILITY FOR CLAIMS AND LIABILIT [ES Approval by the OWNER shall not constitute, nor be deemed a release of the responsibility and liability of the CONSULTANT, its employeeq, associates, agents, subcontractors, and subconsultants for the accuracy and competency of their designs or other work, nor shall such approval be deemed to be an assumption of such responsibility by the Page 6 OWNER for any defect in the design or other work prepared by the CONSULTANT, its employees, subcontractors, agents, and consultants ARTICLE XIV NOTICES All notices, communications, and reports required or permitted under this Agreement shall be personally delivered or mailed to the respective parties by depositing same in the United States mail to the address shown below, certified mail, return receipt requested, unless otherwise specified herein Mailed notices shall be deemed communicated as of three (3) days' mailing To CONSULTANT Jack Pous Diversified Utility Consultants, Inc 7800 Shoal Creek Blvd, Suite 24®South Austin, Texas 78757 To OWNER City of Denton Herbert L Prouty, City Attorney 215 East McKinney Denton, Texas 76201 All notices shall be deemed effective upon receipt by the party to whom such notice is given, or within three (3) days' mailing ARTICLE XV ENTIRE AGREEMENT This Agreement, consisting of 10 pages and 2 exhibits, constitutes the complete and final expression of the agreement of the parties, and is intended as a complete and exclusive statement of the terms of their agreements, and supersedes all prior contemporaneous offers, promises, representations, negotiations, discussions, communications, and agreements which may have been made in connection with the subject matter hereof ARTICLE XVI SEVERABILITY If any provision of this Agreement is found or deemed by a court of competent jurisdiction to be invalid or unenforceable, it shall be considered severable from the remainder of this Agreement and shall not cause the remainder to be invalid or unenforceable In such event, the parties shall reform this Agreement to replace such stricken provision with a valid and enforceable provision which comes as close as possible to expressing the intention of the stricken provision Page 7 ARTICLE XVII COMPLIANCE WITH LAWS The CONSULTANT shall comply with all federal, state, and local laws, rules, regulations, and ordinances applicable to the work covered hereunder as they may now read or hereinafter be amended ARTICLE XVIII DISCRIMINATION PROHIBITED In performing the services required hereunder, the CONSULTANT shall not discriminate against any person on the basis of race, color, religion, sex, national origin or ancestry, age, or physical handicap ARTICLE XIX PERSONNEL A The CONSULTANT represents that it has or will secure, at its own expense, all personnel required to perform all the services required under this Agreement Such personnel shall not be employees or officers of, or have any contractual relations with the OWNER CONSULTANT shall inform the OWNER of any conflict of interest or potential conflict of interest that may arse during the term of this Agreement B All services required hereunder will be performed by the CONSULTANT or under its supervision All personnel engaged in work shall be qualified, and shall be authorized and permitted under state and local laws to perform such services ARTICLE XX ASSIGNABILITY The CONSULTANT shall not assign any interest in this Agreement, and shall not transfer any interest in this Agreement (whether by assignment, novation, or otherwise) without the prior written consent of the OWNER ARTICLE XXI MODIFICATION No waiver or modification of this Agreement or of any covenant, condition, or limitation herein contained shall be valid unless in writin , and duly executed by the party to be charged therewith, and no evidence of an , waiver or moo ification shall be offered or received in evidence in any proceeding ansng betw:Yn the parties hereto out of or affecting this Agreement, c i the rights or obligations of the patties hereunder, an3 unless such waiver or modification ,s in writing and duly executed, and the parties further agree that the provisions of this section will not be waived unless as set forth herein Page 8 ARTICLE = MISCELLANEOUS A The following exhibits are attached to and made a part of this Agreement A — Request for Proposal for Professional Services to Assist City of Denton, Texas in Analyzing Lone Star Gas Company's Rate Request for the Denton Distribution System, and B — Consultant's Proposal to Review Lone Star Gas Company's Request for Rate Increase B CONSULTANT agrees that OWNER shall, until the expiration of three (3) years after the final payment under this Agreement, have access to and the right to examine any directly pertinent books, documents, papers, and records of the CONSULTANT involving transactions relating to this Agreement CONSULTANT agrees that OWNER shall have access during normal working hours to all necessary CONSULTANT facilities and shall be provided adequate and appropriate working space in order to conduct audits in compliance with this section OWNER shall give CONSULTANT reasonable advance notice of intended audits C Venue of any suit or cause of action under this Agreement shall lie exclusively in Denton County, Texas This Agreement shall be construed in accordance with the laws of the State of Texas D For the purpose of this Agreement, the key persons who will perform most of the work hereunder shall be Jack Pons, Dan Lawton, Ruth Runyon Wenzel, and Sara Coleman However, nothing herein shall limit CONSULTANT from using other qualified and competent members of its firm to perform the services required herein E CONSULTANT shall commence, carry on, and complete any and all projects with all applicable dispatch, in a sound, economical, and efficient manner and in accordance with the provisions hereof In accomplishing the projects, CONSULTANT shall take such steps as are appropriate to ensure that the work involved is properly coordinated with related work being carried on by the OWNER F The OWNER shall assist the CONSULTANT by placing at the CONSULTANT's disposal all available information pertinent to the Project, including previous reports, any other data relative to the Project, and arranging for the access thereto, and make all provisions for the CONSULTANT to enter in or upon public and private property as required for the CONSULTANT to perform services under this Agreement G The captions of thi, Agreement are for informational purposes only, and shall iot in any way affect the substantive terms or conditions of this Agreement IN WITNESS HEREOF, the City of Denton, Texas has caused this Agreement to be executed by its duly authorized City Manager, and CONSULTANT has execut this A eement thro h its duly authorized undersigned officer on this the &�— day of 19 Page 9 CITY OF DENTON, TEXAS ATTEST JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM HERBERT L PROUTY, CITY VIM ATTORNEY/ DIVERSIFIED UTILITY CONSULTANTS, INC J&K POUS, PRINCIPAL WITNESS UCH LGL\VOLI\shua W\LGL\Ow Dmutnanu\Cmtmu\9BWivmdicdwditywnsulunudm Page 10 EXHIBIT A Request For Proposal For Professional Services to Assist the City of Denton, Texas In Analyzing Lone Star Gas Company's Rate Request for the Denton Distribution System Table of Contents 1 Request for Proposal for Assistance in Analyzing Lone Star Gas Company's Rate Request for the Denton Distribution System 2 Lone Star Gas Company's Statement of Intent to Change Gas Rates 3 Lone Star Gas Company's Gas Rate Request Summary 4 Denton Ordinance Suspending the Effective Date of the Rate Request 5 Sample Professional Services Agreement Request For Proposal For Professional Services to Assist the City of Denton, Texas In Analyzing Lone Star Gas Company's Rate Request for the Denton Distribution System You are requested to submit a Proposal to provide professional services to assist the City of Denton, Texas in investigating and analyzing Lone Star Gas Company's rate request for the Denton Distribution System A. BACKGROUND AND PURPOSE On October 23, 1998, Lone Star Gas Company ("Lone Star") filed its Statement of Intent to increase rates charged for natural gas service in the Denton Distribution System Lone Star's Statement of Intent indicates that its proposed rate increase would result in an increase in annual revenue by $476,095, or an overall 6 24% rate increase At its regular meeting of November 17, 1998, the Denton City Council suspended the effective date of the rate increase for ninety days from November 27, 1998 to February 25, 1999 A copy of that ordinance is attached to this RFP The purpose of the investigation and analysis of Lone Star's rate increase is to make a reasonable determination of the reasonableness of that rate increase, based on an analysis of the rate base, expenses, investment, and rate of return of Lone Star, along with any additional factors which would bear on the reasonableness of Lone Star's request The consultant will be required to make a recommendation to the Denton City Council with regard to the approval, dental, or alteration of the proposed rate increase, in accordance with applicable provisions of the Utilities Code, Vernon's Tex Civ Stat Ann B. SCOPE OF WORK The consultant will be required to assist the City staff, primarily the Finance Department, acting through its Assistant City Manager for Finance and her staff, in analyzing the reasonableness of the Lone Star rate request This will include, without limitation, making a reasonable determination of rate base, expenses, investment, and rate of return within the Denton Distribution System within the municipal boundaries of Denton, Texas The consultant will be expected to review Lone Star's revenues, expenses, cost accounting documentation, and other matters which relate to Lone Star's rate request The consultant will also analyze all documentation to support the request by Lone Star to determine if the available financial information and other documentation presented i� sufficient to adequately provide the consuPant with the mformation it nee3s +c fully an ilyze the rate request and to make an inforr ed recommendation The consuitant will be required to meet with and provide status reports to he City Council, City Manager, Assistant City Manager for Finance, Cite Attorney, and tl ar staffs as necessary to fulfill the requirements of the scope of work It is anticipated that the consultant may have to be available in Denton for at least two City Council meetings The consultant will be expected to provide its recommendations regarding the Lone Star rate request, including a recommendation as to the action the City Council should take on the matter in the form of a final written report or recommendation Prior to the submission of the final written report or recommendation, the consultant will be expected to provide a prelimmary report indicating its findings and recommendations, which it will submit both to the City staff and to Lone Star for review and comment The consultant shall provide the City of Denton with twelve (12) copies of its final recommendation or report The final report and all correspondence shall be marled to Kathy DuBose, Assistant City Manager for Finance, Municipal Building, 215 East McKinney, Denton, Texas 76201 C QUALIFICATIONS OF CONSULTANT 1 Description of Consulting Firm The consultant shall provide in the proposal a complete and comprehensive description of the firm The proposal shall list the qualifications and background of the firm, particularly in the area of water and wastewater rate studies The proposal shall list the project manager and the staff support personnel to be assigned to the project, along with their respective resumes and utilization for the project If the consultant is submitting a proposal in combination with another consulting firm, the consultant should also submit this same information with regard to the other consulting firm Hours each individual are assigned to the project are forecasted to work on the project should be provided, and the various portions of the project they will be involved in should be indicated Total forecasted hours per employee for the project should be determinable from the documents submitted 2 List of Most Recent Clients The proposal shall provide a list of recent clients, including the name and telephone number of all references Consultant is encouraged to provide the names of municipalities and governmental entities it has provided similar consulting work for, and the name of any contact persons at those entities that Denton may contact D. PROFESSIONAL SERVICES AGREEMENT Attached to this RFP is a standard form Professional Services Agreement utilized by the City of Denton The consultant with the successful proposal will be expected to execute a Professional Services Agreement, similar to the attar hed Agreement Consultant should indicate in its proposal any concerns it may have with , egard to executing the attached Professional Services Agreement Consultant should submit, within their professional services te0macal proposal, any general terms ,and conditions for service, if any, which it deems necessary to include in the above - mentioned Professional Services Agreement The consultant should also submit a price proposal which should contain the standard hourly rates of consultant and its personnel and a not -to - exceed fee for performing the work proposed The proposal should include an estimate of the man hours required, including, as indicated, a not -to -exceed fee for consultant's work, including any reimbursement for out-of-pocket expenses, such as travel, copying, and long distance telephone calls E. EXPERT TESTIMONY The consultant may be requested, depending on the outcome of the rate case, to give expert testimony at any rate proceedings before the Texas Railroad Commission, other administrative proceedings, including mediation, arbitration, or other alternate dispute resolution proceedings, or any contested rate case in a court of competent jurisdiction Professional service fees for such testimony shall be considered to be in addition to the fees for this rate study, but consultant should indicate its willingness or unwillingness to provide such expert testimony if so requested F. PROJECT TIMELINE Due to the short length of time the City Council has to make a decision on this matter, the consultant will be requested to provide a project timeline or schedule so that all the work can be completed and consultant's recommendations to the City Council can be made in time for City Council to take action on this matter no later than their meeting of February 16, 1999 Denton would propose that consultant complete the study so that a preliminary report may be provided to the City Council, City staff, and Lone Star by January 15, 1999, and a final report be submitted by February 1, 1999 Earlier completion of the project is acceptable and welcome to Denton In order for the project to stay on or ahead of schedule, prompt planning should be done to account for the Christmas, New Year, and Martin Luther King Day holidays Selection of the consultant, approval of the City Council, and authorization to commence work is anticipated to be completed no later than December 15, 1998 G SUBMISSION OF TECHNICAL PROPOSAL AND PRICE PROPOSAL Each candidate should provide three copies of their technical proposal to include the qualifications, experience of consultant, and the other items set forth herein to Tom Shaw, Purchasing Agent, on or before 5 00 p in Central Standard Time Friday, December 4, 1998, by submitting same to the following address Tom Shaw, Purchasing Agent City of Denton, Texas 901B Texas Street Denton, Texas 76201 14. SELECTION OF PROPOISALS All aspects of the proposals submitted will be eva'uated for their ability to properly and fully address all issuos identified in the outlined Requests for Proposals proved ed herein The major areas for evaluation for selection of the technical proposal include (1) approach to provide requested services, (2) the consultant's experience and qualifications, especially with similar gas rate requests, (3) the total hours required to complete the request by consultant and the allocation of hours between the various members of the consultant's team, (4) the available resources of consultant to complete the work, (5) the consultant's proposed schedule for completion, (6) references, and (7) any other relevant issues Following the evaluation of professional services to be provided, a consulting firm may be contacted and negotiations will take place regarding consultant's fee and contract terms Denton will review and analyze any fee or price proposal submitted If the price proposal submitted and all of the terms and conditions requested by consultant are deemed acceptable by Denton, the consultant will be notified and a contract will be completed and forwarded to the City Council for approval prior to consultant beginning the work If, for some reason, the first consulting firm contacted and the City are unable to reach an agreement, another consulting firm may be requested to immediately negotiate an agreement with the City of Denton The City of Denton reserves the right to reject all proposals and to seek additional proposals in the event no adequate and fully responsible proposals are received or that negotiations fail to provide a mutually satisfactory agreement Finally, in the event the consultant desires additional information regarding this Request for Proposal, including the scope of the work and Lone Star's gate rate request, the consultant may contact Kathy DuBose, Assistant City Manager for Finance at (940) 349-8320 or Herbert L Prouty, City Attorney at (940) 349-8333 Pl RARBD Eff-ODOw D=c W\Mn-11-11 1986111 M.,F, dx EXHIBIT B DIVERSIFIED UTILITY CONSULTANTS, INC 7800 SHOAL CREEK BLVD SUITE 246 SOUTH AUSTIN TX 78757 TELEPHONE ,61614843500 slz�� November 30, 1998 Tom Shaw, Purchasing Agent City of Denton, Texas 901-B Texas Street Denton, Texas 76201 RE Proposal to Review Lone Star Gas Companv's Request for Rate Increase Dear Mr Shaw, Diversified Utility Consultants, Inc ("DUCI") is pleased to submit this proposal to the City of Denton ("City") relating to Lone Star Gas Company's ("LSGC" or "Company") request for a rate increase in the City of Denton DUCI is a Texas Corporation located in Austin, Texas, with a local as well as international client base The principals of DUCI, Messrs Pous and Lawton, have over forty (40) years of utility rate and regulation expenence In particulai, Messrs Pous and Lawton have testified and/or made formal presentations before federal, state and municipal, and provincial regulatory bodies, REA Cooperative boards and U S Environmental Protection Agency review boards on all aspects of utility cost of service, ratemaking, and rate design DUCI is qualified to perfoun the vauous senaces necessary to complete a thorough analysis of LSGC's requested base rate incicase on a timely basis DUCI's personnel have the extensive, current and relevant 'Texas gas utility rate regulation experience necessary to review the accounting, engineering and ecoiionuc issues reflected in the Company's request DUCI's relevant experienec specific to this assignment includes i review of LSGC's rate increase in Dociceu No 8664, ii review of gas rates of the four other major gas distribution companies in Texas for the cities of El Paso, Dallas, Arlington, Amarillo, Laredo, Lubbock, Midland, Odessa, as well as more than SO other cities in Texas, Ili testimony before the Railroad Commission of Texas ("RRCT") in almost every major gas case during the past 10 years including the prior Lone Star Gas case, and Iv having been involved in almost every case at the Public Utility Commission of Texas where a utility company has been brought in for a rate reduction without the utility initiating the process (i e , Gulf States Utilities Company (3 times) Central Power & Light Company, West Texas Utilities Company, and Southwestern Public Service Company) In addition, Messrs Pous and Lawton have been involved in more than 100 different utility rate regulation proceedings and, moreover, have been project leader, negotiator and/or expert witness for the vast majority of such engagements DUCI's prior experience is set forth in Part I of this proposal Based in part on this prior experience, DUCI has set forth in Part II of this proposal its understanding of the scope of work necessary for this case DUCI has further enumerated in Part II a detailed plan of action to complete the necessary tasks associated with a comprehensive rate review in a timely and cost efficient manner Based on our understanding of the Company's prior rate setting practices, DUCI has set forth in Part III an estimated price of $20,000 for the tasks listed in Part II of this Proposal This price includes all out-of-pocket expenses, but does not include the charges associated with any services or expenses for the defense of any appeal by LSGC to the RRCT Since DUCI does not, and cannot, know the actual level of current information that will be available or the degree of cooperation given by the Company in the rate review process the above noted amount represents a well informed estimate As can be seen from the resumes in Part I of this proposal, the personnel who will be available to the City for the analyses, negotiations and RRCT proceedings (should it be necessary) have substantial experience in the areas of cost of service for gas and other types of utilities These staff members also have experience in rate design analyses, cost allocations, corporate auditing, as well as substantial experience with regard to estimating return on inv, stment for a utility DUCI personnel have testified before various regulatory commissions and are very well experienced in working with gas utilities and tariffs 11 We would like to thank you for allowing DUCI to submit this Proposal We are prepared to commence work on this project immediately upon selection, and would complete the project in a timely and efficient manner Should you have any questions with regard to this proposal or other matters, please feel free to contact either Jack Pous or Dan Lawton at (512)454-3500 Sl)1c -lyt,, d Diversified Utility Consultants, Inc III PART QUALIFICATIONS DUCI is incorporated in the State of Texas with a local as well as international client base DUCI was formed on November 26, 1986, by the two principals of the firm, Mr Jacob Pous and Mr Daniel J Lawton Both principals of the firm have extensive utility regulatory backgrounds, having worked for a public service commission and an electric utility company, as well as an international utility consulting firm representing the public (non -investor owned) utility sector DUCI's clients are predominantly governmental entities Since its inception, DUCI has expanded its operation The current staff has obtained amongst them 7 undergraduate and graduate degrees in engineering, accounting, economics, business and law The firm has an extensive microcomputer system to assist it in the performance of tasks and communication with clients as necessary to complete any engagement where such capabilities are required PRIOR EXPERIENCE The relevant corporate experience of DUCI in analyzing a utility's rate filing is substantial During the last ten (10) years DUCI has been directly involved in the following rate cases or rate -related investigations (the figure within the "( )" indicates different engagements) PART QUALIFICATIONS Southern Union Gas Company (7) El Paso Electric Co (3) Engeres Company (4) West Texas Utilities (3) Indiana Gas Company Southwestern Public Service Co (7) Wester Gas Transmission Co Lower Colorado River Authority (3) Rio Grande Gas Company Louisiana Power & Light Co Entex Gas Company (3) Texas -New Mexico Power Co (2) Lone Star Gas Company (4) Texas Utilities Electric Co (2) United Cities Gas Company Southern California Edison Electric Contra Gas Limited Florida Power & Light Co City of Austin (5) Devers Canal System (2) Indianapolis Water Company Main Yankee Atomic Power Co City of Round Rock, Texas Water System Carolina Power & Light Co Scenic Oaks Water Supply Co Sierra Pacific Power Co (3) United Irrigation District Montana Power Company (3) Hidalgo,County Irrigation District Nevada Power Company (3) Canadian River Municipal Water Authority Indiana Michigan Power Company Southern Utilities Company Alberta Power Limited (2) El Paso County WCID-Westway TransAlta Utilities (2) Travis County WCID-#20 Magic Valley Electric Cooperative Central Power & Light Co (7) Northwestern Utilities Limited (2) Gulf State Utilities (10) Perdenales Electric Cooperative Mid Systems Energy Resources, Inc Public Service Company of Oklahoma Hawaiian Electric Company Southwest Gas Contra pas Alberta Inc Public Service Indiana City of North Little Rock Electric South Carolina Electric & Gas (3) United Irrigation District Nova Gas Transmissiun Limited Northwest Power Corporation Edmonton Power In almost all cases nsted above expert testimony was filed in the rate proceeding before a state, provincial, or Federal regulatory agency In particular many of the gas proceedings noted above were first prosecuted before a municipality and in certain instances resulted in cases on appeal before the RRCT In performing the analysis on behalf of Texas municipalities in gas proceedings DUCI has become intimately familiar with the Gas Utility Regulatory Act ("GURA"), the Cox Act, the Special Rules of Practice and Procedure and the Substantive Rules of the RRCT In performing the analysis in gas, electric, water and wastewater proceedings, DUCI and/or its personnel have relied upon their specific and general knowledge of the utility operation involved, including gas distribution systems The key personnel involved in the above cases are those assigned to this project INDIVI UAL EXPERIENCE The two project leaders, Messrs Pous and Lawton, have analyzed well in excess of 100 different rate filings of utility companies within the past 12 years In addition, the number of municipal, cooperative and/or state agency rate filings either developed and/or reviewed, substantially increases the number of rate -related engagements in which Messrs. Pous and Lawton have participated More important than the overall number of cases in which Messrs Pous and Lawton have been engaged is the type and level of Involvement The roles and duties of each of the project leaders in this proposal have been as project leader, actual negotiators and/or as expert witnesses in the vast majority of these cases, and exclusively in these roles and positions in all cases undertaken in the past ten (10) years Most of these cases involved the review and analysis of utilities' cost of service issues We believe that the above noted Information details DUCI's qualifications to analyze LSGC's requested base rate increase. Further confirmation of DUCI's qualifications can be obtained from a review of the following professional resumes and testimony listings of the key individuals assigned to this project, as well as by contacting the references included in this section of the proposal PART QUALIFICATIONS The professional personnel assigned to this project are as follows Jack Pous Dan Lawton Ruth Runyon Wenzel Sara Coleman The resumes of these individuals are provided at the end of this section In addition to the resumes, a listing of prior cases in which testimony has been presented is provided The primary work assignments for each individual are as follows Jack Pous, a principal in DUCI, with an undergraduate degree in engineering and a masters in management, will be responsible for directing analyses of engineering and accounting issues Dan Lawton, a principal in DUCI, with an undergraduate and graduate degree in economics and a law degree, will be responsible for directing analyses of economic, allocation, and accounting Issues Ruth Runyon Wenzel and Sara Coleman, Certified Public Accountants with undergraduate degrees In business administration, will be responsible for analyzing accounting and federal Income tax Issues JACOB POUS, P E PRINCIPAL, DIVERSIFIED UTILITY CONSULTANTS, INC B.S INDUSTRIAL ENGINEERING M S MANAGEMENT I graduated from the University of Missouri in 1972, receiving a Bachelor of Science Degree in Engineering, and I graduated with a Master of Science in Management from Rollins College in 1980 I have also completed a series of depreciation programs sponsored by Western Michigan University, and have attended numerous other utility related seminars Since my graduation from college, I have been continuously employed in various aspects of the utility business I started with Kansas City Power 8L Light Company, working in the Rate Department, Corporate Planning and Economic Controls Department, and for a short time in a power plant My responsibilities included preparation of testimony and exhibits for retail and wholesale rate cases I participated in cost of service studies, a loss of load probability study, fixed charge analysis, and economic comparison studies I was also a principal member of project teams that wrote, installed, maintained, and operated both a computerized series of depreciation programs and a computerized financial corporate model I joined the firm of R. W Beck and Associates, an international consulting engineering firm with over 500 employees performing predornmantly utility related work, in 1976 as an Engineer in the Rate Department of its Southeastern Regional Office While employed with that firm, I prepared and presented rate studies for various electric, gas, water, and sewer systems, prepared and assisted in the preparation of cost of service studies, prepared depreciation and decommissioning analyses for wholesale and retail rate proceedings, and assisted in the development of power supply studies for electric systems I resigned from that firm in November 1986 in order to co-found Diversified Utility Consultants, Inc At the time of my resignation, I held the titles of Executive Engineer, Associate and Supervisor of Rates in the Austin office of R W Beck and Associates As a principal of the firm of Diversified Utility Consultants, Inc, I have presented and prepared numerous electric, gas, and water analyses in both retail and wholesale proceedings These analyses have been performed on behalf of clients, including public utility commissions, throughout the United States and Canada I have been involved in over 100 different utility rate proceedings, many of which have resulted in settlements prior to the presentation of testimony before regulatory bodies I am registered to practice as a Profession; Engineer in the states of Florida, Texas, Mississippi, North Carolina, Arizona, New Mexico, Arkansas, Oklahoma, and Louisiana N Q y N F Y V N C O Od �q E 8 8 OJ J C 0y1 G O C O C O C O C O C O C O�1 C $ C? 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W W L` Z �yi y N ° z y w O o E; Y v U v U° 6U � �w O a QQ = o 4i Cg d V U ° ' d ro pOq y EIp E} �A E E y o� Y = y Ym� E E a�cg9 6/ 4J E a a, y a" �a 3 V1 V7 a Y Y Y FFFIIIa J A w3 A y Q uc W� ZZ s ri, A O vx i0z zF=f=¢ � £ § ) \ § \ cl CA \ 2aAƒ ƒ \\/ § 2 §f ] 2 Q §§§{ 0§�§ 2=0 $ a2 a :2 2 2] _ err/ k §kB Itkk CL ]))\ ) CN ( kk(71 cq § / 6 - )\ Go 00 CL \}& § ® \rA z \ § § rn rA § \ 4 § ! e § cn § 2 § § 7 & §§ Z § k■§ $ 0 0 § \\{ / j � e °° k ��`§ ■ J�■■ e / §) jjj\ 2)2� § �£� ■�°J/©$I �� 222j uj§ § \ z§°$ 0]])9J Q@® ®■$) f§°°J 2°§j2 �a§CNen =]§]e DANIEL L LAWTON PRINCIPAL, DIVERSIFIED UTILITY CONSULTANTS, INC B A ECONOMICS, MERRIMACK COLLEGE M A. ECONOMICS, TUFTS UNIVERSITY Prior to beginning his own consulting practice, Diversified Utility Consultants, Inc, in 1986, Mr Lawton had been in the utility consulting business with a national engineering and consulting firm In addition, Mr Lawton has been employed as a semor analyst and statistical analyst with the Department of Public Service of Minnesota Prior to Mr Lawton's involvement in utility regulation and consulting he taught economics, econometrics, statistics and computer science at Doane College Mr Lawton has conducted numerous financial and cost of capital studies on electric, gas and telephone Utilities for various intervenors before local, state and federal regulatory bodies In addition, Mr Lawton has provided studies, analyses and expert testimony on statistics, econometrics, accounting, forecasting, and cost of service issues Other projects in which Mr Lawton has been involved include rate design, analyses for electric, gas and telephone utilities Mr Lawton has developed software systems, data bases and management systems for cost of service analyses In addition, Mr Lawton has developed and reviewed numerous forecasts of energy and demand used for utility generation expansion studies as well as municipal financing Mr Lawton has represented numerous municipalities as a negotiator in utility related matters Such negotiations ranged from the settlement of electric rate cases to the negotiation of provisions in purchase power contracts A list of cases in which Mr Lawton has provided testimony is attached \ d q k f 7 | ! � a ] ] ! ! 2 u m 0 u | u 2 a 2 ■ k u, % | ƒ ] i \ ) � § ° ■ | | ■ ° k § m d§wi § § 6 6 6 k j B B) k§§ 6 z § b § § rn B o ] k § § § | | E o \ u § k)) 2 J z Go z z §Q 2 E Or 2 U M y O a V 0 Nl C m G U to om E UQ k m 1 T. 6 w D a u �U, gq U. <�`uU o q� Gl U o o In NO u `o U N ai u o m u O LY �iJ Y YY Y C O i3 p Y O U U U G OG Vl i+ U U U Q G Vl Q w� W U C T O � o z o Q � M y T U T o 5 Ci U� d a U UE° E E O E O E O E C E O £ 0 E 3 3 < r O U u U U U V lr a N W f% N '1 k gg }j g gg a $ 'a S C3 C3 C3 U W C7 C7 C7 (7 C7 C7 V CF7 S 5 .g y ! V6 c ! | J J 7 � | � © f ■ ■ < 7 i 0 ix , . ■ ; � e § 2 ' ! a ] ' ] a � ] } d k k ) j 2 K k 2 2 J!) 2 ƒ J k] k k/ J /� § @ � Go § § u J j j S ! u ! § ■ J/! ■ § q k k k § 2 . | | § � q d � � ! ! ) � � uu , 7 ■ ® ! � % § � � 2 k / ■ ■ k ) ) ) ) } \ \ } °wo } / J k ( , , z z z , e § 2 2 ; • § ! 2 ! 2 ! to2 ! % J 2 2 a d § � $ E § § § § \ � � § § § | ] 2 2 a 2 2 2 a k§ RUTH RUNYON WENZEL, C P.A. BBA, ACCOUNTING Ms Wenzel received a Bachelor of Business Administration degree with a major in Accounting from the University of Texas at Austin in 1981 She is a Certified Public Accountant licensed to practice in the State of Texas and has attended continuing professional education courses sponsored by the Texas Society of Certified Public Accountants In January, 1982, Ms Wenzel began employment with the public accounting firm of Gibson, Johnson & Co She was involved in areas of taxation, auditing and management advisory services In 1986 she joined the firm of Gibson, Melvin & Paddock where she continued her public accounting practice In 1987 Ms Wenzel was employed by the Public Utility Commission of Texas as a regulatory accountant. Her responsibilities with the Texas Commission included preparation and analyses of studies involving cost of service issues related to rate proceedings of electric utilities She served as a testifying witness on behalf of the Commission through 1994 Ms Wenzel began employment with Diversified Utility Consultants, Inc in June, 1994 where she has participated in the analysis of numerous utility rate proceedings before both state and federal regulatory authorities A list of cases in which Ms Wenzel has provided testimony is attached UTILITY RATE PROCEEDINGS IN WHICH TESTIMONY HAS BEEN PRESENTED BY RUTH RUNYON WENZEL Junsdiction/Company, Docket No Testimony Topic PUBLIC! UTILITY COMMISSION OF TEXAS Sabme River Authority of Texas 7870 COS and Rate Base El Paso Nlectric Company 8018 Rate Case Expenses Guadalupe -Blanco River Authority 8031 COS and Rate Base Lower Colorado River Authority 8032 COS and Rate Base Texas -New Mexico Power Company 8095 COS El Paso Electric Company 8363 COS Central Power and Light Company 8646 COS and Rate Base Texas -New Mexico Power Company 8928 FIT and ADFIT Southwestern Electric Service Company 9040 FIT and ADFIT Panola-Hamson Electric Cooperative 9214 COS and Rate Base Texas -New Mexico Power Company 9491 FIT, ADFIT and Rate Base Central Power and Light Company 9561 FIT and ADFIT Houston Lighting and Power Company 9850 FIT and ADFIT Texas -New Mexico Power Company 10200 FIT, ADFIT, and Life Cycle Analysis Gulf States Utilities Company 10894 Affiliate Status Northwest Texas Electric Cooperative 11384 COS and Rate Base Texas Ufi4ties Electric Company 11735 FIT, ADFIT and Franchise Taxes DIVERSIFIED UTILITY CONSULTANTS, INC. Gulf States Utilities Company 13170 Fuel Reconciliation SARA E. COLEMAN, C.P.A. DIVERSIFIED UTILITY CONSULTANTS, INC. B.B.A. - ACCOUNTING I graduated from the University of St Thomas in 1990, receiving a Bachelor of Business Administration in Accounting I am a Certified Public Accountant licensed to practice in the State of Texas I am a Diplomate of the American Board of Forensic Examiners I have also attended utility related seminars including the "Annual Regulatory Studies Program" sponsored by the National Association of Regulatory Utility Commissioners and administered by Michigan State University's Graduate School of Business I began working for the public accounting firm of Arthur Andersen & Company in Houston, Texas in July 1990 During my employment with Arthur Andersen & Company, I provided financial and audit services to public and private corporations My responsibilities included all aspects of financial reporting, financial statements and footnote preparation This included evaluation of compliance with technical requirements and the Security Exchange Commission's reporting regulations At the time of my resignation, I was an Experienced Senior Auditor In July 1993, I joined the Public Utility Commission of Texas as a Regulatory Accountant While employed at the Public Utility Commission of Texas, I reviewed and analyzed various utility applications as they related to accounting issues My responsibilities also included preparing and testifying on accounting issues in various utility hearings I resigned from the Public Utility Commission of Texas in December 1996 I have been involved in several rate proceedings, many of which have resulted in settlements prior to the presentation of testimony before regulatory bodies I joined the firm of Diversified Utility Consultants, Inc as a Senior Consultant My responsibilities include analyzing regulatory issues in various utility rate proceedings A list of cases in which I have provided testimony is attached UTILITY RATE PROCEEDINGS IN WHICH TESTIMONY HAS BEEN PRESENTED BY SARA COLEMAN JURISDICTION/COMPANY Docket No Testimony Topic PUBLIC UTILITY COMMISSION OF TEXAS Tex -La Electric Cooperative 12289 Rate Case Texas Utilities Electric Company 13313 Fuel Surcharge West Texas Utilities 13369 Cost of Service Central Power & Light Company 14965 Rate Base Texas -New Mexico Power Company 15560 Community Choice DIVERSIFIED UTILITY CONSULTANTS, INC. Southwestern Public Service Company 17410 Fuel Surcharge Southern Union Gas Company 8878 Cost of Service, Rate Base GTE Southwest, Inc 19173 Rate Case Expenses PART QUALIFICATIONS The following list of references is comprised of individuals thoroughly familiar with DUCI's professional qualifications and capabilities Each of these individuals can attest to our ability to meet tight deadlines while��,s�'tiil�ll providing a superior work product n .r (/// Mr Merril Nunn City Attorney City of Amarillo P O Box 1971 Amarillo, Texas (806)378-3000 Mr Harry Wrigh City Attorney City of Port Nec 1221 Duncanvilid OutlnL Port Neches, Texas 77651 (409)722-0486 Mr Dave Cook City of Dallas City Controller's Office Revenue and Taxation Division 1500 Marilla 2BS Dallas, Texas 75201 (214)670-3442 Mr Norman Gordon Diamond Rash 300 E Main Street 7th Floor El Paso, Texas 79901 (915)533-2277 Mr Jim Boyle -Law Offices of Jim Boyle 1005 Congress Ave 0 Ste 550 Austin, Texas 78701 (512)474-1492 John Michael Adrogna, Esq Miller, Balis & O'Neil, P C 1101 14th Str, , N W #1400 Washington, D C 20005 (202)789-1450 PART II WORK PLAN The City of Denton, like all cities in Texas, has original regulatory jurisdiction on rate requests by gas utilities providing service to customers located within the corporate limits of the municipality The City has the right to review LSGC's requested base rate increase in an unbiased manner and determine the appropriate revenue requirements the Company is entitled to receive The scope of services necessary to properly investigate the numerous and complex financial, engineering and accounting issues requires a consultant that has previously and successfully performed many similar analyses This concept of extensive prior specific experience is crucial in this particular situation due to the regulatory expertise on the part of LSGC and the limited time available for a review of the request The series of tasks delineated in this section of the proposal reflect what DUCT believes is necessary to comply with a review of LSGC's rate request and to make recommendations to the City regarding appropriate regulatory positions It must be noted however, that our proposal and work plan does not include an extensive analysis of LSGC's affiliate transactions Such an analysis would require far more time than the City has to prosecute this matter Further, such an analysis would involve many more man hours than are included in our price proposal Also, the proposal is a limited review, concentrating in the key area's of LSGC's request, due to the limited discovery time and time constraint to issue a report to the City DUCI will provide the City with a report setting forth all recommendations in sufficient detail so as to allow the City adequate information to make an unbiased review and make regulatory decisions predicated on the facts and data available To review the Company's request, receive and analyze data responses, DUCI will be able to issues it's report to the City by February 1, 1999 Unfortunately, due to the very short discovery time, further reduced due to the holidays, DUCI will only be able to issue one report to the City Council, City staff, and Lone Star PART II WORK PLAN Once notified of selection by the City, a detailed review of LSGC's rates and available current financial information will be conducted and discussed with the staff and officials of the City The following is set forth as a general outline and synopsis of the major tasks that we anticipate in performing a comprehensive analysis of the requested gas rate increase by LSGC TASK DESCRIPTION 10 Review of Current Base Rates and Data Collection 20 Determination of Appropriate Direct Expense Levels 30 Determination of Appropriate Revenue Levels 40 Determination of Appropriate Rate Base so Determination of Appropriate Allocated Direct Expense Levels and Rate Base Levels 60 Rate of Retum/Ca ital Structure Analysis 70 Preparation of Report 80 Possible Settlement Ne ottatlons 90 Presentation of Rsp2rt Review of LSGC's current base rates, identification of pubiically available information, and development of initial data requirements will commence and be completed within 10 days An initial data request will be provided to LSGC within 5 working days and, upon review of the various responses, supplemental data requests may be required On - site data collection is anticipated The LSGC O&M expenses for the designated test period will be analyzed to determine their appropriateness for ratemaking purposes Regulatory adjustments based nn current statutes, RRCT precedent and ratemaking principles will be made to reflect the .ippropnate level of expenses The impact of each adjt stment identified will be quantified separately. The assignment of DUCI 3:aff to review and analyze the various expense Items will be based upon their technical expertise and edLcational discipline The issues of losses, depreciation, and allocation will be reviewed from an engineering standpoint issues such as uncoilectibles, FAS No 106, payroll, taxus and others will be analyzed from an accounting -finance -management discipline A thorough review of the Company's proposed cost of service adjustment clause and plant investment cost adjustment clause will be performed The revenues that LSGC has reported will be analyzed to determine their appropriateness for ratemaking purposes The Company's weather adjustment and cost of gas adjustment clauses will also be reviewed to determine if they comply with normally accepted ratemaking standards The rate base that LSGC has reported will be analyzed to determine the appropriateness of each of the individual components Rate base categories that are not normally identified (e g , cash working capital) line will be investigated to determine an appropriate level Due to LSGC's multi junsdictional operation it will be necessary to allocate common costs and investments among the various components of the Company Affiliates will be included, as appropriate, in all allocations An analysis of the appropriate rate of return and capital structure will be performed including a return on common equity The cost of capital will reflect current conditions Once all of the analyses and resulting adjustments have been performed, a preliminary report will be prepared and provided to the City detailing the basis upon which these adjustments are predicated on February 1, 1999 The report will also reflect the overall level of base rate revenue requirements that are determined to be appropriate and the overall Impact on the system Upon completion of the preliminary report and dependent upon the City staffs direction, DUCI will enter into possible settlement negotiations with LSGC PART II WORK PLAN After negotiations, if any, and review of the preliminary report by the City the report will be finalized and DUCI will make a final presentation of the findings to the City Council and attend a public hearing in order to answer any questions regarding our report and recommendations DUCI will provide additional services as requested by the City Additional services may include, but are not limited to. additional analyses, additional copies, attendance at additional public hearings, settlement negotiations which exceed 8 man-hours, and testimony and/or testifying before the RRCT Charges for these services are not Included in the cost estimate set forth herein Additional service will be charged at the hourly rates for the individual personnel set forth in Part III, plus out-of-pocket expenses Requests for additional services of any member of DUCI should be made in written form, if time constraints permit PART III PRICE PROPOSAL DUCI proposes to be compensated on an hourly fee basis plus reimbursement for all out-of-pocket expenses reasonably Incurred DUCI proposes to invoice the City on a monthly basis for services rendered and all out-of-pocket expenses incurred during that month The table at the end of this Part sets forth the personnel, hourly fees and estimated number of hours for each individual who will participate in this project DUCI recognizes the City's need to schedule public hearings and DUCT will attend such hearings at a mutually agreed to time and date The table at the end of this Part lists the various non -labor related costs anticipated to be incurred in the prosecution of this project PART III PRICE PROPOSAL MANPOWER AND COST REQUIREMENTS TO PROVIDE REVIEW OF LONE STAR GAS COMPANY'S REQUEST FOR A RATE INCREASE ON BEHALF OF THE CITY OF DENTON TASK POUS (125/HR) LAWTON ($125/HR) WENZEL/ COLEMAN ($100/HR) TOTAL HOURS 1 6 10 24 40 2 16 8 51 75 3 0 2 0 2 4 0 0 4 4 5 0 8 8 16 6 0 3 0 3 7 4 5 5 14 8 4 4 0 8 9 0 4 1 5 Hours Dollars 30 44 93 167 $3,750 00 $5,500 00 $9,300 00 $18,550 CATEGORY Printing/Computer $1,300 00 Phone/Delivenes $150-00 TOTAL EXPENSES Sl-450-00 GRAND TOTAL $20_o00Ao FIRST AMENDMENT TO PROFESSIONAL SERVICES AGREEMENT FOR PROFESSIONAL SERVICES REGARDING LONE STAR GAS COMPANY'S REQUEST FOR RATE INCREASE This First Amendment to that certain Agreement dated December 15, 1998 by and between the City of Denton, Texas, a Texas municipal corporation, with its principal office at 215 East McKinney Street, Denton, Denton County, Texas 76201 (hereinafter called "Owner'), and Diversified Utility Consultants, Inc, with its corporate office at 12113 Roxie Drive, Suite 110, Austin, Texas 78729 (hereafter called "Consultant'), acting herein by and through their duly authorized representatives WHEREAS, due to the intensity of the negotiations with Lone Star Gas Company, the Consultant attended more City Council meetings and more meetings with Lone Star than originally anticipated, provided a prelumnary report, and provided other services that were not anticipated in the original Agreement, and the Consultant has agreed to discount its actual bill of $32,000 to $25,000; and WHEREAS, the City Manager deems it in the public interest to increase the contract by $5,000 and to execute this amendment as a change order to that contract to increase the total fees from $20,000 to $25,000 in accordance with the City Manager's administrative authority regarding change orders and the approval of contracts as delegated to him by the City Council, NOW, THEREFORE, the parties hereto agree to the following amendment to the terms and conditions of the original Agreement That the first paragraph under subsection B of Article V "Compensation" is hereby amended to read as follows B Billing and Payment For and in consideration of the professional services to be performed by Consultant herein, the Owner agrees to pay, based on the cost estimate detail at an hourly rate shown on Exhibit B, Part 11, Price Proposal, which is attached hereto and made a part of this Agreement as if written word for word herein, a total fee, including reimbursement for direct non -labor expenses not to exceed $25,000 II That save and except as amended her, by, all the terms, conditions, sentences, cl-uses, and phrases of the original kgreement shall remain in full force and effect IN 'WITNESS HEREOF, the City of Denton has caused this Agreement to be executed by its duly authorized City Manager, the Consult nt had executed this Agreement through its duly authorized undersigned officer on this the ,M day of 11999 ATTEST JENNIFER WALTERS, CITY SECRETARY BY APP90VED AS TO LEGAL FORM HERBERT L PROUTY, CIT AT ORNEY BY WITNESS BY UPI F P\ehurnd\dn MWOur Dmumen4\Contr cw\99\drverel6ed amendment d99 CITY OF DENTON, TEXAS W JEZICP(VY MANAGER DIVERSIFIED UTILITY CONSULTANTS, INC 14 pdua J K POUS, PRINCIPAL Page 2