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Lone Star Gas
Lone Star Gas Company
DIVISION OF DISMOUTION
319 Wesl Oak Streel
Denton, Texas 76202
October 5, 1976
Honorable Mayor and City Council
City of Denton
Denton, Texas
As you are aware, Lo*.e Star Gas Company continues to operat9 in a
highly competitive environment ,.°.s we attempt to acquire, and to make
available, adequate natural gas supplies for our custom`s of doing the
cost of gas has continued to rise, the accompanying
business have also escalated. Lone Star's average cost of gas continues
to be one of the lowest average costs among intrastate gas purchasers in
Texasf Lone Star oleo has one of the lowest average operating costs per
customer. Even so, the increasing cost of gas and the rising costs of
operation continue to have a detrimental effect upon the earnings of
Lone Star Gas Company in the City of Denton. As a result of these two
factors, the rate of return on the fair value of our investment here in
• Denton is 7.19%.
Any public utility must earn an adequate rate of return upon its
investment if it is to maintain its ability to serve its customers. I
am requesting# therefore, yo='% favorable consideration of the attached
rate schedule whi^.h is proposed to go into effect on tMwiamber 10, 1976.
When implemented, this rate schedule will produce an 8% return on the
fair value of our investment in Denton.
Accompanying this letter is the formal statement of intent to change
rates that provides information as required b;r the Texas Public Utility
Regulatory Act of 1975• Also enclosed are a rate ordinance and a series
of exhibits which will serve to substantiate our request. It is antio-
ipoted that, upon review of these matoriala, our request will meet with
your approval.
As your local manager for Lone Saar Gas Company, let me assure you
that I stand ready to assist in ovary possible way as you go about the
task of evaluating this proposal. If any additional information is
desired, please honor me with your request.
Respeocfully,
00e
Manager
STATEMENT OF 10ENT TO CHANGE RATES
(Article 1446# . 43(c) V.A.C.S.)
Sat. 13(01 No utility may make changes in Ill roles eotapt by filing 0 1101emenr of Wool with the regulatoy authority heving
original iurisdiction of 1#611 3$ days polar to the elfactive data of the proposed change. The stelemant of Intent shall include
apesed revisions of tariffs end schedules and a 11atement specifying In delaii each proposed change, the effect of propel!! change
ropectad to hove on the revenues of the company, the cleltu and numbers of utility coolumers effected, aria such erl,at infor.
Orion as may be required by the regulatory authority's rules and rogulatisos. A copy of the slaternant of intent shell be maiad a
delivered Is, the appropriate 01FIcor of each effected municipality, and notice shall b• given by publication in conspicuous form and
place of a notice to the publlt of such proposed change once In each week for four succeutvs wools In a newspaper having general
circulation in each county containing Writery affected by the proposed change, and to such other affected persons as may be required
by the regulatory authority's rules and regulations.
1) Nome of Utility 2) Nome of Municipality
Lone $too Gas Company Denton, Texas 1 11 3) proposed Revisions of Tariffs & Schedules
A.
First 1000 Cu. Ft, or Fraction Thereof $3.00
Over 1000 Cu. Ft. @ $1.91 Per Mcf
B. Clfr gate cost adjustment with 1.348 base city got, rate.
The amount of each net ntonlhly hill computed of the above.sta'ed sales shall be subject to the following
adjustments: Plus or minus the amount of any increase or decrease, respectively, above or below the $1.3488
per Mcf level in the Intracompany city gale charge as authorized by the Railroad Cornmisslon of the State of
Tetras or other regulatory body having jurisdiction for got delivered to Lone Sfar Gas Company's distribution
system lot sole to residential and commercial consumers where such changes Off Caused by Increases or
decreases In the cost of got purchased by the company.
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C. Adjust eat for fax reimbursement offer July 1, 1916
(See paragraph 3 of proposed ordinance for complete clause governing tax adjustment.)
D. Air conditioning rider
1) Residential - Regular general service rate shall apply to the first $,G00 cubic feat consumption.
Beginning with the first step, the regular general service rate less $ .25 shall be applied to all
gas used In excess of 8,000 cubit loot.
2) Commercial - The regular general service role shall apply to gas consumed for all purposes other
than for summer all conditioning. Beginning with the first step, the regular penerol service rate
less S .25 shall be applied to the air conditioning consumption.
3) Adjustments - The gas cost adjustment will be applied to the total consumption Including go%
consumed for purposes other than air conditioning. Any other billing adjustments applicable to
the regular totes sholl also apply to billing under this rate.
4) Sfolement of Changes
Monthly bill jot Residential and Commercial Customers using 8 Mcls
Pmoyff Rotf Proposed Rate fncteose
$15.84 $16.37 $0,53
51 Effect of Proposed Changes
Estimated 10101 increase In annual revenue 964.126
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6) Class of Customers Aliened 7) Number of Customers Affetled
Residential and Commercial 11668
Effective Dote 61 Pr.iaso1 Change
November 10, 1976
flgnaWr• 1 Hie Date
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• AN ORDINANCE FIXING AND DETERMINING THE GENERAL SERVICE RATE
TO BE CHARGED FOR SALES OF NATURAL GAS TO RESIDENTIAL AND
(;01t'4F.RCIAL CONSUMERS WITHIN THE CITY LIMITS OF
_paAtnn , Denton COUNTY,
TEXAS, AND PROVIDING FOR THE MANNER IN WHICH SUCH RATE MAY
BE CHANGED, ADJUSTED AND AMENDED.
BE IT ORDAINED BY THE City Council of the City of Denton, Texas
SECTION 1. Effective with the first gas bills rendercd from and
after thirty (30) days from the date of final passage of this ordinance, the
maximiun general service rate for salon of natural gas randored to residential
and commercial consumers within the city limits of Denton
by Lono Star Gas Company, its successors and assigns, is hereby fixed and deter-
mined as fcilowsr
First 1000 Cu. Ft. or Fraction Thereof $3.00
Over 1000 Cu. Ft. @ $1.91 Per Mcf
. No gas bill will be rendered to any residential or commercial consumer served
under the above rate not consuming any gas during any monthly billing period,
except that where customer's only use for gas service is in an outdoor grill
and/or a fireplace starter, the amount shown for the first consumption block
shall constitute a minimum monthly bill.
ADJUSTMENTS
The amount of each monthly bill computed at the ouove-stated rates
shall be subject to the following aSjustmentss Plus or minu!~ the amount of
any increase or decrease, respeetl.vely, above or below the $1.3488 per Mcf
level in the intracompany city gate charge as authorized by the Railroad
Commission of the State of Texas or other regulatory body having jurisdiction
for gas delivered to Lano Star Gas Company's distribution system for sale to
residential and rommereial consumers where such changes are caused by increases
or decreases in the cost of gas purchased by the Company; plus an amount equiv-
alent to the proportionate pat f any new tax, or increased tax, or any other
goverrunental imposition, rental, fee or charge (except state, county, city and
special district ad valorem taxes and taxes on net income) levied, assessed or
imposed subsequent to July 1, 1976, upon ost allocable to the Company's distribution
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operations, by any new or amended law, ordinance or contract. Company, at its
option, may forego the application of ar,y adjustment if such adjustment would
result in an increase in the monthly billy however, failure of company to apply
any adjustment shall not constitute a waiver of Company's right from time to
time, or at any time, to make any adjustment, in whole or in part, in any subse-
quent current monthly bill that may be applicable to such bill.
All bills shall be due and payable when rendered.
The above rate is applicable to each residential .nd commercial con-
sumer par meter per month or for any part of a month for w;,.eh gas is used at
the same location.
In addition to the aforesaid r3tos, Company shall have the right to
collect such reasonable charges as are necessary to conduct its business and to
carry out its reasonable rules and regulations in effect.
SECTION 2, The rate set forth in section 1 may be changed and
amended by either the City or Company ^urnishing gas in the manner provided by
law. Service hereunder is qubjeot to the orders of ro,-slatory bodies having
jurisdiction, and to the Ca..pany's Rules and Regulations currently on file in
the Company's office.
SECTION 3. It is hereby found and determined-that the meeting at
which this ordinance was passed 'oas open to the public, as required by Texan
law, and that advance public notice of the time, place and purpose of said meet-
ing was given,
PASSED AND APPROVED on this the day of ,
A. D. 19-.
ATTESTS
Secretary Mayor
City of - Denton , Texas
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• STATE OF TEXAS X
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NTY OF Denton _ X
I, _ , Secretary of the City of
Denton , Denton County,
Texas, hereby certify that the above and foregoing is a true and correct
copy of an ordinance passed and approved by the _ City Council
of the City of Denton at a session
held on the day of , 19 , as it
appears of record in the Minutes of said
in Book , Page
WITNESS MY HAND AND SEAL OF SAID CITY, this the day of
A.D. 19
Secretary
City of Denton Texas
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LONE STAR GAS COMPANY
DENTON, TEXAS DISTRIBUTION SYSTEM Exhibit 1
ORIGINAL COST LESS ACCUMULATED PROVISION FOR DEPRECIATION
AT DECFMBER 31,1975
Acc elated Original
Line Original Provision For Cost Less
No. Cost De ^iation Depreciation
Distribution Plant
1 Land $ 1 432 $ - $ 1 432
2 Land Rights 690 173 517
3 Structures And Improvements 15 366 3 860 11 506
4 Maine 2 445 986 614 518 1 831 468
5 Meas. And Reg. Station Equipment 33 740 8 471 25 263
6 Services 663 616 166 724 496 892
7 Meters 341 416 85 776 255 640
8 Meter Installations 118 717 29 826 88 891
9 House Pegulstors 59 686 14 995 44 691
10 Housa Regufntor Installations 29 116 7 315 21 801
11 Ocher Equipment 48 365 12 151 36 214
12 Total Distribution Plant 3 758 130 943 815 2 814 315
13 General Plant Allocated 261 968 108 290 153 678
14 Total 4 020 098 $ 1 052 105 $ 2 967 993
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LANE STAR GAS COMPANY
DENTON, TEXAS DISTRIBUTION SYSTEM Exhlbit 2
REPRODUCTION CUST NEW LESS ADJUSTMENT FOR AGE AND CONDITION
AT DECEMBER 31, 1975
Adjustment Reproduction
Line Reproduction For Age And Coat Nerw Less
No. Cost New Condition 2/ Ad uutTent
Distribution Plant
1 Land $ 1 432 $ - $ 1 432
2 Land Rights 11 690 173 517
3 Structures 6 Improvements l/ 15 366 3 860 11 506
4 Maine 3 669 662 550 449 3 119 213
5 Mesa. 6 Reg. Station Equipment 54 981 8 247 46 734
6 Services 894 472 134 171 760 301
7 Meters 587 225 88 084 499 141
8 Meter Installations 209 036 31 355 177 681
9 House Regulators 55 440 8 316 47 124
10 House Regulator Installations 21 133 3 t70 17 963
11 Other Equipment 1/ 48 365 12 151 36 214
12 Total Distribution Plant 5 557 803 839 976 4 717 926
13 General Plant Allocated It 261 968 108 290 153 678
14 Total $ 5 819 770 $ 948 266__ $ 4 871. 5.04
l/ Per books
2/ Plant Accounts other than those taken at Original Coat are
assumed to be in 85% condition new.
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1.ONF STAR GAS COMPANY
DENTON* 'TEXAS DISTRIBUTION SYSTEM Exhibit 3
FAIR VALUE RATE BASE
AT DECEMBER 31, 1975
(A) (B) (C)
Original Cost Reproduction
Line Lers Accum. Cost New Less
No. Prov. For Depr. AdJustment Fair Value 11
Distribution Plant
1 Land $ 1 432 S 1 432 $ 1 432
2 land Rights 517 517 517
3 Structures and Improvements 11 506 11 506 11 5116
4 Mains 1 831 468 119 zts 2 346 566
5 Hess. b Reg. Station Equipment 25 263 46 734 33 851
6 Services 496 892 760 301 602 256
7 Meters 255 640 499 141 353 040
0 8 Meter Installations 88 891 177 681 124 407
9 House Regulators 44 691 47 124 45 664
10 House Regulator Installations 21 801 17 963 20 266
11 Other Equipment 36 214 36 214 36 214
1?w General Plant Allocated 153 678 153 678 153 678
13 Total Plant 2 967 993 4 871 504 3 729 397
14 Fr.+•rchL,es and Consents - - -
tic- i:o::: n n. 190 33c 129 335 17Q, Ili
l.~ C~..t. ..Cs.
16 Retirement Work in Progreso, 3 476 3 476 3 476
17 Worsting Capital 107 950 107 950 107 950
18 Total S 3 20F 754 $ 5 112 265 $ 3 970 158
l/ (C) a 60% (A) plus 402 (B)
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LONE STAR GAS COMPANY
DENTON, TEXAS DISTRIBUTION SYSTEM Exhibit 4
REVENUES, EXPENSES, NET INCOME AND ADJUSTMENTS FOR KNOWN CHANGES
TWELVE MONTHS ENDED DECEMBER 31, 1975
Line
No. Per Books Ad usted
Revenues
Gas Sales
1 Residential and Cnmmercial $ 2 407,609 $ 3 278 094
2 Industrial 4 667 852 5 030 619
3 Total Gas Salca 7 075 461 8 308 713
4 Other Gas Revenues 38 536 38 536
5 Total Revwwes 7 113 997 8 347 249
Expenses
Gas Purchased
6 Residential 873 208 1 40z 625
7 Commercial 642 334 951 177
8 Industrial 4 371 705 4 705 476
9 Company used 2 912 4 162
10 Unaccounted-For 102 413 6"94
it Total Gas Purchased 5 992 572 7 126 534
12 Distribution Operations - Labor 95 068 103 954
13 Distribution Operations - S & E 35 le9 35 189
14 Distribution Maintenance - Labor 33 295 36 407
15 Distribution Maintenance - S & E 26 630 26 630
16 Customer Accounts - Labor 66 043 72 216
17 Customer Accounts - S & E 36 501 41 072
lA Ralna Fvnonen In1.nr Z6 351
14 ;59
19 Sales Expense S & E 11 952 13 952
20 Admits, and General - Labor 38 558 42 162
21 Admin. and General - S & E 70 167 72 023
22 Uncollectible Accounts 6 755 6 755
23 Taxes Other Than Federal Income 216 709 258 920
24 Provision for Depreciation 108 008 108 008
25 Total Expenses (Excluding FIT) _ 6 754 406 7 960 179
26 Net Income Before Federal Income Tax. 359 X91 387 070
27 Provision For Federal Income Tax 88 281 10L7Q
28 Net Operating Income 271 310 285 600
. 29 Return on Rate Base of $ 3 970 158 6,832 7.19%
LONE STAR GAS COMPANY Exhibit 5
DENTON, TEXAS DISTRIBUTION SYSTEM
DETAIL OF ADJUSTMENTS TO REVENUES AND EXPENSES
Adjustment No 1 - General Wee Increases of. June 1L 1975
and Jul 1 1976 $ b 886
Distribution Operattons - Labor
Distribution Maintenan:e - Labor 3 6 1112
12 73
Customer Accounts - Labor 1 398
Sales Expense - Labor
Administrative 6 General - Labor 3 604
1 604 856
Administrative 6 General - Supplies and Expenses $ 829
Total Expenses 12 014)
Provision for Federal Income Tax 13 OlS)
Adjustment to Net Income
Ad ustment No. 2 - Cit Gate Rate Effective March 20 1916 529 417
Residential Gas Purchased 309 443
Commercial Can Purchased 4 250
C,,apany-Used Gas 39 919
Unaccounted-For $ 800 191
Total Purchases 384 092)
Provision for Federal Income Tax 416 099)
Adjustment to Net Income
Ad ustment No. 3 - Industrial Rate Increase to N-Rate Level 3$ 62 767
Industrial Gas Sales $ 333 771
industrial Gas Purchased 4
Taxes Other Than Federal Income 7 104 2444
Provision for Federal Income Tax $ 310 441
Total Expenses and Federal Income Tax $ 11 311
Adjustment to Net Income
Adjustment No. 4_- Postal Rate Increase Effective December 3_1975 e 4 571
Customer Accounts - Supplies and Expenses
Provision for Federal income Tax 2 371
Adjustment to Net Income
Ad ustment No. 5 - FICA Tax Increase $ 174
Taxes Other Than Federal Income
Provision for Federal Income Tax $ 90)
Adjustment to Net Income
Ad ustment No. 6 - Annualize General Service Rate Increase $ 870x+85
Residential and Commercial Gas Sales 34 793
Taxes Other Than Federal Income 401 132
Provision for Federal Income Tax 435 915
Total Fxpenses and Federal Income Tax 435 4. 25 560
Adjustment to Net Income
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• LANE STAR GAS^.OMPANY
DENTON, TEXAS DISTRI11UTION SYSTEM Exhibit 6
REVENUE DEFICIENCY
Line
No.
$ 3 970 l58
1 Rate Base at December 319 1975 X .08
2 Rate of Return $ 317 613
3 Net Operating Income Required (Line 1 X Line 2) 285 600
4 Adjusted Net Operating Income $ 013
5 Net Operating Income Deficiency (Line 3 less Line 4) 49922
6 Ratio Incremental Net Income to Incremental Revenue 1/
7 Increase in Revenue Required (Line 5 divided by Line 6) $ 12
8 Increase in Revenue Required as Per Cent of Residential 1.962
and Commercial Revenue
$
1/ Incremental Revenue 1.00000
.01997
Incremental Occupation Tax 02990
Incremental Street and Alley Rental . ,96003
Incremental Taxable Income ,46081
Incremental Federal Income Tax at 482 : __22
Incremental Net Operating Income
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