1998-442 Note Amendment 1 is attached.
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 authonzed the City Manager to seek a qualified rate con-
sultant to assist the City m rewewmg Lone Star Gas Company's request to ~ncrease rates m the
Denton service area, and
WHEREAS, the City Council deems ~t m the public interest to enter into a Professional
Services Contract w~th Dlvermfied 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 w~th Diversified Utility Consultants, Inc, substantially ~n 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 servme area
TI~v_G.!!_Q.]S._~ That the City Manager is hereby authorized to make the expenchtures as
outhned m the attached contract
SECTION m That thru ordinance shall become effective immediately upon ~ts passage
and approval
PASSED AND APPROVED thru the /~-~/~ day of ~~ 1998
JACk, fILLER, MAYOR
ATTEST
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM
HERBERT L PROUTY, CITY ATTORNEY
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 ~s made and entered ~nto as of the /~7~t day of December, 1998,
by and between the C~ty of Denton, Texas, a Texas mumc~pal corporation, w~th ~ts pnnelpal
office at 215 East McKanney Street, Denton, Denton County, Texas 76201, here~naiter called
"OWNER" and D~versified Utlhty Consultants, Inc, w~th its corporate office at 7800 Shoal
Creek Boulevard, State 246 South, Austin, Texas 78757, hereinafter called "CONSULTANT,"
acting hore~n, by and through their duly authorized representatives
WITNESSETH, that in consideration of the covenants and agreements here~n contained,
the partxes hereto do mutually agree a~ follows
EMPLOYMENT OF CONSULTANT
The OWNER hereby contracts w~th the CONSULTANT, as an ~ndependent contractor,
and the CONSULTANT hereby agrees to perform the services hereto ~n connection w~th the
Project as stated ~n the sections to follow, w~th d~hgence and ~n accordance w~th the h~ghest
professional standards customarily obtained for such services m the State of Texas The
professional serwces set out hereto are ~n connection with the following described project
The Project shall include, w~thout hmltat~on, ~nvest~gat~on and analys~s of Lone Star Gas
Company's request for a rate ~ncrease to make a deternnnat~on of the reasonableness of that rate
increase, based on an analysis of that rate base, expenses, ~nvestment, and rate of return of Lone
Star, along with any additional factors which would bear on the reasonableness of Lone Star's
request
SCOPE OF SERVICES
The CONSULTANT shall perform the following services in a professional manner
A The CONSUI-TANT shall perform all those servxces as neoessary and as, escnbed in the
OWNER's Re, quest for Proposal for Professional Servlce~ to Assist the ~.lty of Denton,
Texas m Analyzing Lone Star Gas Company's Rate Req~'~-st for the Denton Distribution
System, which ~, attached hereto and made a part herect as Exhibit "A' ,Is if written
word for word here~n
B To perform all those services set forth m CONSULTANT's Proposal to Revaew Lone
Star Gas Company's Request for Rate Increase dated November 30, 1998, which
proposal as attached hereto and made a part hereof as Exhibit "B" as if written word for
word hereto
C CONSULTANT shall perform all those services set forth in mdavldual task orders, if any,
wlueh shall be attached to flus Agreement and made a part hereof for all purposes as
separate agreements
D CONSULTANT will meet w~th and submat status reports to the Assistant City Manager
for Fananee, City Attorney, and thear staffs, wall be avafl~l~ at least two City Council
meetings, and shall provide ~ x ~rehmmary repe~ ~..~g~,~ · final report andacatmg its
recommendations as set forth m Section B "Scope of Work of~-'''- ~ ExhibIt ''A''
E If there as any conflict between the terms of this Agreement and the exhibits attached to
flus Agreement, the terms and eond~taons of thas Agreement will control over the terms
and eondataons of the attached exbablts or task orders
ADDITIONAL SERVICES
Addmonal servaces to be performed by the CONSULTANT, if authorized by the
OWNER, whach are not included m the above-described Basac Services, are described as
follows
A Appeanng before regulatory agencaes or courts as an expert witness in any htagatlon,
including, w~thout hmatataon, testamony in rate proceedangs before the Texas Railroad
Commission, as set forth m Section E "Expert Testamony" of Exhibit "A", wath third
part,es or eondemnataon proceedings arising from the development or construction of the
Project, including the preparataon of enganeenng data and reports for assastance to the
OWlqER
B Any other addmonal servaces specafieally requested by the OWNER not included wathan
the scope ofth~s Agreement and ats exhab~ts
PERIOD OF SERVICE
Tlus ! greement shall become effective upon executaon of ti, s Agreement by the
OWNER and the CONSULTANT and upon ~ssue of a n~tlce to proeee,~ by the OWNER, and
shall remain m force for the period whaeh may reasonabl ~ be required for the completxon of the
Project, mcludang Addataonal Sermces, ff any, and any required extens~or s approved by the
OWNER Tins Agreement may be sooner terminated m accordance with the provisions hereof
Time as of the essence m tbas Agreement The CONSULTANT shall make all reasonable efforts
Page 2
to complete the services set forth herem as expedltaously as possable and to meet the schedule
estabhshed by the OWNER m Bxbabat "A", actang through ~ts Caty Manager or has designee
COMPENSATION
A COMPENSATION TERMS
1 "Subcontract Expense" as defined as expenses mcurred by the CONSULTANT m
employment of others m outside firms for servaces
2 "D~rect Non-Labor Expense" ~s defined as that expense for any assagnment
recurred by the CONSULTANT for supphes, transportataon and eqmpment,
travel, commumcataons, subsastence, and lodging away from home, and samflar
mcadental expenses an connectaon wath that assignment
B BILLING AND PAYMENT For and m consideration of the professional servaces to be
performed by the CONSULTANT hereto, the OWNER agrees to pay, based on the cost
estimate detail at an hourly rate shown an Bxbabat "B', Part II, Price Proposal, wbach ~s
attached hereto and made a part of tbas Agreement as ff written word for word hereto, a
total fee, mclud~ng reambursement for darect non-labor expenses not to exceed twenty
thousand dollars ($20,000)
Part~al payments to the CONSULTANT wall be made on the basas of detailed monthly
statements rendered to and approvcd by the OWNER through ~ts Assastant C~ty Manager
for Finance and its C~ty Attorney or bas desagnee, however, under no carcumstances shall
any monthly statement for servaees exceed the value of the work performed at the tame a
statement ~s rendered The OWNER may w~thhold the final five percent (5%) of the
contract amount until completion of the Project
Nothing contained m tbas Article shall requare the OWNER to pay for any work wbach ~s
unsatasfaetory, as reasonably determined by the C~ty Manager or bas desagnee, or wbach ~s
not submatted m eomphanee w~th the terms ofthas Agreement The OWNER shall not be
reqmred to make any payments to the CONSULTANT when the CONSULTANT as an
default under thas Agreement
It as specafically understood and agreed that the CONSULTANT shall not be authorized
to undertake any work pursuant to th~s Agreement wbaeh would requare additional
payments by the OWNER ~'or any charg ~', expense, or reambursement above the
maximum not to exceed fee a,'. stated, w~thout first hawng obtained written authonzataon
from the OWNER The CO~,~SULTANT shall not proceed to perform the servxces hste~'
m Amcle HI "Addmonal Sexvaees," wathout ol~ta~mng prior written authonzataon from
the OWNER
Page 3
C ADDITIONAL SERVICES For addtttonal servmes authorized tn writing by the
OWNER tn Artmle III, the CONSULTANT shall be pa~d based on the Schedule of
Charges at an hourly rate shown m Exhibit "B", Part II, Price Proposal Payments for
additional servtces shall be due and payable upon subm~ssmn by the CONSULTANT,
and shall be m accordance with subseetton 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 wtthln sixty (60) days after receipt of the CONSULTANT's
undisputed statement thereof, the mounts due the CONSULTANT wall be increased by
the rate of one percent (1%) per month from the smd sixtieth (60th) day, and, in addttton,
the CONSULTANT may, after g~wng seven (7) days' written nottce to the OWNER,
suspend servmes under this Agreement until the CONSULTANT has been prod tn full all
mounts due for servtces, expenses, and charges, provided, however, notfung herein shall
reqmre the OWNER to pay the late charge of one percent (1%) set forth herem if the
OWNER reasonably determines that the work ~s unsatisfactory, ~n accordance wtth ttus
Article V, "Compensation"
OBSERVATION AND REVIEW OF THE WORK
The CONSULTANT will exercise reasonable care and due dthgence in d~scovenng and
promptly reportmg to the OWNER any defects or defic~enmes ~n the work of the
CONSULTANT or any subcontractors or subconsultants
OWNERSI-IIP OF DOCUMENTS
All documents prepared or fumashed by the CONSULTANT (and CONSULTANT's
subcontractors or subconsultants) pursuant to th~s Agreement are mstmments of service, and
shall become the property of the OWNER upon the termination of th~s Agreement The
CONSULTANT ~s entitled to ret~un 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 m other projects shall be at OWNER's sole risk and expense
In the event the OWNER uses any of the ~nformat~on or materials developed pursuant to flus
Agreement in another project or for other purposes than spemfied here~n, CONSULTANT ts
released from any and all habthty relating to thetr use tn that project
ARTICLE VIII
INDEPENDENI CONTRACTOR
CONSULTANT shall provide services to OWNER as an mdependent contractor, not as
an employee of the OWNER CONSULTANT shall not have or clatm any right arising from
employee status
Page 4
INDEMNITY AGREEMENT
The CONSULTANT shall lndemmfy and save and hold harmless the OWNER and ~ts
officers, agents, and employees from and agmnst any and all habdlty, claims, demands, damages,
losses, and expenses, including, but not hmlted to court costs and reasonable attorney fees
incurred by the OWNER, and including, without hm~tatlon, damages for boddy and personal
~njury, death and property damage, resultmg from the negligent acts or omissions of the
CONSULTANT or ~ts 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 tins Agreement, and nothing herein shall waive any of the parties' defenses, both at
law or equity, to any chum, cause of action, or ht~gatmn filed by anyone not a party to this
Agreement, mcluchng the defense of governmental ~mmumty, which defenses are hereby
expressly reserved
INSURANCE
Dunng the performance of the services under th~s Agreement, CONSULTANT shall
maintain the following insurance w~th 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 Careers of at least an A~ or above
A Comprehensive General Llablhty Insurance with bodily ~njury limits of not less than
$500,000 for each occurrence and not less than $500,000 m the aggregate, and with
property damage limits of not less than $100,000 for each occurrence and not less than
$100,000 m 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 w~th statutory requirements, and
Employers' Liability Insurance with limits of not less than $100,000 for each accident
D Professional Liability Insurance w~th limits of not less than $1,000,000 annual aggregate
E The CONSULTANT shall furnish insurance certificates el insurance po~ cies at the
OWNER's request to evidence such coverages The msura,~,e policies shall name the
OWNER as an addltmnal insured on all such pohmes, and shall contmn a provision that
such ~nsurance shall not be canceled or modified without thirty (30) days' prior written
notice to OWNER and CONSULTANT In such event, the CONSULTANT shall, prior
P~e5
to the effective date of the change or cancellation, serve substitute pohc~es fum~shmg the
same coverage
ARBITRATION AND ALTERNATE DISPUTE RESOLUTION
The part,es may agree to settle any d~sputes under t?ns Agreement by submitting the
d~spute to arb~tratton or other means of alternate d~spute resolution, such as medmt~on No
arbitration or alternate d~spute resolution arising out of or relating to thru Agreement, mvolwng
one party's d~sagreement, may include the other party to the d~sagreement w~thout the other's
approval
TERMINATION OF AGREEMENT
A Notwithstanding any other pmws~on of th~s Agreement, e~ther party may terminate by
g~wng tinny (30) days' advance written not,ce to the other party
B Tins Agreement may be tonmnated ~n whole or tn part ~n the event of e~ther party
substantmlly fmlmg to fulfill ~ts obhgat~ons under th~s Agreement No such tenmnat~on
will be affected unless the other party ~s g~ven (1) written notme (dehvered by cemfied
mml, return receipt requested) of intent to terminate and setting forth the reasons
specifying the non-performance, and not less than th~ny (30) calendar days to cure the
fmlure, and (2) an oppommlty for consultatton w~th the terminating party prior to
termination
C If the Agreement ~s tenmnatod prior to completion of the services to be prowded
hereunder, CONSULTANT shall ~mmedmtely cease all servmes and shall render a final
bill for services to the OWNER w~thm tlurty (30) days after the date of termination The
OWNER shall pay CONSULTANT for all servmes properly rendered and satisfactorily
performed and for reimbursable expenses to termination ~ncurred prior to the date of
termmat~on, in accordance w~th Artmle V "Compensation" Should the OWNER
subsequently contract with a new consultant for the continuation of servmas on the
Project, CONSULTANT shall cooperate ~n pmwd~ng mfonnat~on 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 mmntam copies
of such documents for ~ts use
RESPONSIBILITY FOR CLAIMS AND LIABILYI [ES
Approval by the OWNER shall not constitute, nor be deemed a release of the
responsibility and habfl~ty of the CONSULTANT, its employee% assocmtes, 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 ~n the design or other work prepared by the CONSULTANT, ~ts
employees, subcontractors, agents, and consultants
NOTICES
All not~ces, communications, and reports reqmred or permitted under this Agreement
shall be personally dehvered or mmled to the respective parties by depos~tmg same m the Umted
States m/ul to the address shown below, eemfied marl, return receipt requested, unless otherwise
specffied hereto Marled notmes shall be deemed commumcated as of three (3) days' mmhng
To CONSULTANT To OWNER
Jack Pous C~ty of Denton
D~versffied Utlhty Consultants, Inc Herbert L Prouty, C~ty Attorney
7800 Shoal Creek Blvd, State 245'South 215 East McY, anney
Austin, Texas 78757 Denton, Texas 76201
All notices shall be deemed effective upon receipt by the party to whom such notme ~s
g~ven, or w~th~n three (3) days' mmlmg
ENTIRE AGREEMENT
Th~s Agreement, consisting of 10 pages and 2 exhibits, constitutes thc complete and final
expressmn of the agreement of the part~¢s, and ~s ~ntended as a complete and exclusive statement
of the terms of their agreements, and supersedes all prior contemporaneous offers, promises,
representatmns, negotmtmns, d~scussmns, commumcatmns, and agreements which may have
been made ~n connectmn w~th the subject matter hereof
SEVERABILITY
If any prowsmn of th~s Agreement ~s found or deemed by a court of competent
junschctmn to be ~nvahd or unenforceable, ~t shall be considered severable from the remmnder of
th~s Agreement and shall not cause the remmnder to be mvahd or unenforceable In such event,
the part,es shall reform flus Agreement to replace such stricken prowsmn w~th a vahd and
enforceable prowsmn wluch comes as close as possible to expressmg the ~ntentmn of the stricken
provision
Page 7
COMPLIANCE WITH LAWS
The CONSULTANT shall comply w~th all federal, state, and local laws, rules,
regulations, and ordxnances apphcable to the work covered hereunder as they may now read or
hereinafter be amended
DISCRIMINATION PROHIBITED
In performing the servmes reqmred hereunder, the CONSULTANT shall not d~scnnnnate
against any person on the has~s of race, color, rehgmn, sex, nanonal ong~n or ancestry, age, or
physical handmap
PERSONNEL
A The CONSULTANT represents that ~t has or will secure, at xts own expense, all
personnel reqmrcd to perform all the services reqmrcd under th~s Agreement Such
personnel shall not be employees or officers of, or have any contractual relations w~th the
OWNER CONSULTANT shall ~nform the OWNER of any conflmt of interest or
potential conflict of interest that may arise dunng the term of tins Agreement
B All services reqmred hereunder will be performed by the CONSULTANT or under ~ts
supervision All personnel engaged ~n work shall be quahfied, and shall be authorized
and permitted under state and local laws to perform such servmes
ASSIGNABILITY
The CONSULTANT shall not assign any ~nterest ~n thru Agreement, and shall not
transfer any interest m th~s Agreement (whether by assignment, novation, or otherwise) w~thout
the prior written consent of the OWNER
MODIFICATION
No waiver or modfficat~on of th~s Agreement or of any covenant, condition, or hm~tat~on
here~n contained shall be vahd unless m wnt~n ~ and duly executed by the party to be charged
therewith, and no evtdence of an, wmver or moo ~cat~on shall be offered or received ~n ewdence
~n any proceeding arising betw.~-n the part,es hereto out of or affecting th~s Agreement, { ~ the
rights or obhgat~ons of the patties hereunder, an:l unless such waiver or modfficat~on ,s ~n
writing and duly executed, and the part, es furthe~ agree that the prowmons of th~s section will not
be wtuved unless as set forth hereto
Page 8
MISCELLANEOUS
A The following exhibits are attached to and made a part of this Agreement A - Request
for Proposal for Professional Services to Asstst Ctty of Denton, Texas tn 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, unttl the expiration of three (3) years after
the final payment under this Agreement, have access to and the right to examine any
dlrectly pertinent books, documents, papers, and records of the CONSULTANT
involving transactions relating to this Agreement CONSULTANT agrees that OWNER
shall have access dunng normal working hours to all necessary CONSULTANT faclhttes
and shall be provtded adequate and appropriate working space tn order to conduct audits
m comphance w~th thts section OWNER shall gtve CONSULTANT reasonable advance
notice of intended andtts
C Venue of any stat or cause of action under thts Agreement shall he exclusively tn Denton
County, Texas Th~s Agreement shall be construed in accordance wtth the laws of the
State of Texas
D For the purpose of thts Agreement, the key persons who wtll perform most of the work
hereunder shall be Jack Pous, Dan Lawton, Ruth Runyon Wenzel, and Sara Coleman
However, nothing here~n shall hmlt CONSULTANT fi.om umng other quahfied and
competent members of its firm to perform the services required herem
E CONSULTANT shall commence, can'y on, and complete any and all projects with all
applicable dispatch, m a sound, economical, and efficient manner and tn accordance wtth
the provisions hereof In accomphshmg the projects, CONSULTANT shall take such
steps as are appropriate to ensure that the work mvolved is properly coordinated wtth
related work bemg earned on by the OWNER
F The OWNER shall assist the CONSULTANT by placing at the CONSULTANT's
disposal all avmlable information pertinent to the ProJect, mcludmg prevtous reports, any
other data relattve to the ProJect, and arrangtng for the access thereto, and make all
provisions for the CONSULTANT to enter tn or upon public and private property as
reqmred for the CONSULTANT to perform services under thts Agreement
G The capttons of tht, Agreement are for reformational purposes only, and shall lot tn any
wa~ affect the subs*antlve terms or condlttons ofthts Agreement
IN VflTNESS HEREOF, the City of Denton, Texas has caused this Agreement to be
executed by its duly author.zed Ctty Manager, and CONSULTAI~T has executed this Aereement
thro)~ ~ts duly authorized undersigned officer on ttus the /5~-~~ day
19Xff_._
Pa~e 9
CITY OF DENTON, TEXAS
,, C~AGER
ATTEST
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM
HERBERT L PROUTY, CITY ATTORNEy,/..
DIVERSIFIED UTILITY CONSULTANTS,
INC
J~K POUS, PRINCIPAL
WITNESS
BY
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 Analymng Lone Star Gas Company's Rate Reques~
for the Denton D~stnbutlon 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 Dlstnbutlon System
A, BACKGROUND AND PURPOSE
On October 23, 1998, Lone Star Gas Company ("Lone Star") filed its Statement of Lntant to
increase rates charged for natural gas service tn the Denton Dlstnbutlon 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 xnvestigatlon 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 w~ll be reqmrcd to
make a recommendation to the Denton City Council with regard to the approval, demal, or
alteration of the proposed rate increase, in accordance vath applicable prowsions of the Utihtles
Code, Vernon's Tex Clv Stat Ann
B. SCOPE OF WORK
The consultant will be required to assist the City staff, pnmanly 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
detemunatlon of rate base, expenses, investment, and rate of return within the Denton
Distribution System vathin the municipal boundaries of Denton, Texas The consultant vail be
expected to re,aew Lone Star's revenues, expenses, cost accountmg documentation, and other
matters which relate to Lone Star's rate request The consultant vail also analyze all
documantation to support the request by Lone Star to determine if the avmlable financial
reformation and other documentation presented l, sufficient to adequately provide the consul*ant
with tho reformation it nee.is ~c fully an llyze the rate request and to make an lnfor~ ed
recommendation The consl~tant will be required to meet with and provide status repoits to ,he
City Coun[~ll, City Manager, ~.ssistant City Manager for Finance, Clt- Attorney, and fl ,:ir 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 letst two City Council meetings The consultant roll
be expected to provide its recommendations regarding the Lone Star rate request, including a
recomraendatlon as to the action the City Council should take on the matter in the form ora final
written report or recommendation Prior to thc submlsslon of the final written report or
recornmendatton, the consultant will be expected to provide a prelnmnary report mdlcatmg its
finchngs and recomntendatlons, 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 £mal recommendation or report The final report and all correspondence shall be mailed to
Kathy DuBose, Assistant City Manager for Finance, Mumclpal Building, 215 East McKmney,
Denton, Texas 76201
C QUALIFICATIONS OF CONSULTANT
1 Description of Consulting Finn
The consultant shall provide in the proposal a complete and comprehensive descnption of
the finn Thc proposal shall list the quahficatlons 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 subrmttmg a
proposal in combination with another consultmg finn, thc consultant should also subrmt
this same reformation with regard to the other consulting finn
Hours each individual are assigned to the project are forecasted to work on the project
should be provided, and thc various portions of thc project they will be involved m
should be indicated Total forecasted hours per employee for the project should be
detcrmmshlc from thc 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
mumclpahties and governmental entities xt 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 atta~ hed Agreement Consultant should lnthcate tn its
proposal any concerns it may have with, egard to executing the attached Profession,d Services
Agreement
Const~ltant should submit, within their professional services tec~mcal proposal, any general
terms ,and conditions for 5ervice, if any, which it deen-s necessary to include in the above-
mentioned Professional Services Agreement The consultant should also submit a pnce 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 estanate of the
man hours r~qmred, including, as m&cated, a not-to-exceed fee for consultant's work, including
any rolmburacment for out-of-pocket expenses, such as travel, copying, and long &stance
telephone calls
E. EXPERT TESTIMONY
The consultant may be requested, depending on the outcome of the rate case, to g~ve expert
testimony at any rate proceedtngs before the Texas Railroad Connmsslon, other admimstraUve
proceedings, mcludmg methauon, arbitration, or other alternate &spute resoluUon proceechngs,
or any contested rate case m a court of competent jurisdiction Professional service fees for such
testimony shall be considered to be tn addition to the fees for this rate study, but consultant
should indicate its willingness or unwflhngness to prowde such expert testunony ff 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 prowde a project t~mehne or schedule so that all the work can be
completed and consultant's recommendations to the City Council can be made m tune for City
Council to take action on th~s 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 prowded to
the City Council, City staff, and Lone Star by January 15, 1999, and a final report be submitted
by February 1, 1999 Earher completion of the project ~s acceptable and welcome to Denton In
order for the project to stay on or ahead of schedule, prompt ptanmng should be done to account
for the Christmas, New Year, and Martin Luther King Day holidays Selectmn of the consultant,
approval of the City Council, and authonzatmn to commence work ~s anticipated to be
completed no later than December 15, 1998
G SUBMISSION OF TECHNICAL PROPOSAL AND PRICE PROPOSAL
Each candidate should pmmde three copies of their techmcal proposal to include the
qualifications, experience of consultant, and the other ~tems set forth hereto to Tom Shaw,
Purchasing Agent, on or before 5 00 p m Central Standard Time Friday, December 4, 1998, by
submitting same to the following address
Tom Shaw, Purchasing Agent
City of Denton, Texas
90lB Texas Street
Denton, Texas 76201
H. SELECTION OF PROPOEAI.S
All aspects of the proposals submitted will be eva'uated for their ability to properly and fully
address all tssues ~dantffied in the outlined Requests for Proposals prowd ,'d herein The major
areas for evaluatlon for select,on of the techmcal proposal include (1) approach to provide
requested services, (2) the consultant's experience and qualifications, espaclally w~th snmlar 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 avmlable 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 ofprofeaslonal serwces
to be prowded, a consulting firm may be contacted and negotlat~ons will take place regarding
consultant's fee and contract terms Denton will review and analyze any fee or price proposal
subrmtted
If the price proposal subvmtted and all of the terms and condmons requested by consultant are
deemed acceptable by Denton, the consultant will be noufied and a contract will be completed
and forwarded to the C~ty Council for approval prior to consultant begmmng 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 ~mmed~ately negotiate an agreement with the C~ty of
Denton The City of Denton reserves the right to reject all proposals and to seek adchtmnal
proposals m the event no adequate and fully responsible proposals are received or that
negotiations fall to provide a mutually sat~sfuctory agreement
Finally, m the event the consultant desires additional mformat~on regarding tins Request for
Proposal, including the scope of the work and Lone Star's gate rate request, the consultant may
contact Kathy DuBose, Assistant Cgy Manager for Finance at (940) 349-8320 or Herbert L
Prouty, City Attorney at (940) 349-8333
EXHIBIT B
DUCI DIVERSIFIED UTILITY
CONSULTANTS. INC
?soo s~o~,r, CR'~EK re. VD ~UXTE ~46 SOUT. AVSTXN TX 7S7~
November 30, 1998
Tom Shaw, Purehaslng Agent
City of Denton, Texas
901-B Texas Street
Denton, Texas 76201
RE Proposal to Review Lone Star Gas Company's Request for Rate Increase
Dear Mr Shaw'
Diversified Utility Consultants, Ine ("DUCi") is pleased to subnur this proposal
to the City of Denton ("City") relating to Lone Star Gas Company's ("LSGC" or
"Company~') request for a rate increase m the City of Denton
DUCI ~s a Texas Corporauon located ~n Ausun, Texas, with a local as well as
mtemauonal client base The pnndpals of DUCI, Messrs Pous and Lawton, have over
forty (40) years ofunhty ra[e and regnlauon expenence In parUalla~, Messrs Pous and
Lawton have tesufied and/or made formal presentauons before federal, state and
mumclpal, and prowneaal regulatory bodies, REA Cooperauve boards and U S
Emaronmental Pro~ecuon Agen%w rewew boards on all aspects ol uuh[y cost of serwce,
ratemakmg, and rate design
DUCI is qushfied to perfoim the vanous ~en~¢cs necessary to complete a
thorough analysm of LSGCs requested base rate mclease on a timely bas~s DUCI's
personnel have fl%e e×tensive, curren~ and relevant Texas gas unht), rate regulation
expenence necessary to review die acco~ntmg, en~neenng and ecoitolmc issues reflected
~n the Company's request DUCrs relevant cxpenenc~ specific to th~s assignment
includes
rewew of LSGC's rate increase xn Docker No 8664,
n review of gas rates of the four other major gas distribution companies in
Texas for the c~tles of E1 Paso, Dallas, Arlington, Amarillo, Laredo,
Lubbock, Midland, Odessa, as well as more than 50 other cities in Texas,
iii testimony before the Railroad Comnussion of Texas ("RRCT") in almost
every major gas case dunng the past I0 years including the pnor Lone Star
Gas case, and
iv having been involved in almost every case at the Public Uuhty
Commission of Texas where a uuhty company has been brought in for a
rate reduction wathout the utility mmaung the process (l e, Gulf States
Uuhues Company (3 umes) Central Power & Laght Company, West Texas
Utilities Company, and Southwestern Public Sennce Company)
In addition, Messrs Pous and Lawton have been involved in more than 100
different utility rate regulauon proceedings and, moreover, have been pro~ect leader,
negotiator and/or expert w~tness for the vast malonty 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
detmled plan of acuon to complete the necessary tasks associated w~th a comprehensive
rate re,new 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 assocaated vath 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 avaalable to the City for the analyses, negouauons and RRCT proceedings (should it
be necessary) have substanual experience in the areas of cost of sevace for gas and other
types of uuhues These staff members also have experience in rate design analyses, cost
allocations, corporate auditing, as well as substantial experience w~th regard to
esumaung return on lnv, stment for a utility DUCI personnel have tesufle, t before
various regulatory commissions and are very well experienced in workang vath gas
uuhties and tariffs
I1
We would like to thank you for allowing DUCI to submit this Proposal We are
prepared to commence work on th~s prolect immediately upon selection, and would
complete the prolect in a umely and e£ficaent manner Should you have any questions
w~th regard to this proposal or other matters, please feel free to contact e~ther lack Pous
or Dan Lawton at (512)454-3500
~av~ Uuhty Consultants, Inc
111
PART I
QUALIFICATIONS
GI:NFRAL DF:~CRIPTI(~N
DUCI is ~ncorporated ~n the State of Texas w~th a local as well as ~ntemational client
base DUCI was formed on November 26, 1986, by the two pnnclpals of the firm, Mr
Jacob Pous and Mr Daniel J Lawton Both pnnc~pals of the firm have extensive utility
regulatory backgrounds, having worked for a public service commission and an electnc
ut~hty company, as well as an International ut~hty consulting firm representing the public
(non-investor owned) utility sector DUCI's clients are predominantly govemmental entities
Since ~t's ~ncept~on, DUCl has expanded its operation The current staff has
obtained amongst them 7 undergraduate and graduate degrees m englneenng,
accounhng, economics, business and law The firm has an extensive microcomputer
system to assist ~t ~n the performance of tasks and commumcat~on w~th clients as
necessary to complete any engagement where such capabilities are required
The relevant corporate experience of DUCl m analyzing a utlllty's rate filing ~s
substantial Dunng the last ten (10) years DUCl has been directly ~nvolved ~n the following
rate cases or rate-related investigations (the figure w~thln the "( )" ~ndicates different
engagements)
PART I
QUALIFICATIONS
Southern Union Gas Company (7) El Paso Electnc Co (3)
Engeras Company (4) West Texas Utilities (3)
Indiana Gas Company Southwestern Public Serwce Co (7)
Westar Gas Transmission Co Lower Colorado River Authority (3)
R~o 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
Centra 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 & L~ght Co
Scenic Oaks Water Supply Co Sierra Pacific Power Co (3)
United Irrigation District Montana Power Company (3)
Hidalgo,County Imgation District Nevada Power Company (3)
Canadian River Mumclpal Water Authority Indiana Michigan Power Company
Southern Utilities Company Albeda Power L~mited (2)
El Paso County WCID-Westway TransAlta Utihties (2)
Travis County WCID-~20 Magic Valley Electric Cooperative
Central Power & Light Co (7) Northwestern Utilities L~mited (2)
Gulf State Utilities (10) Perdenales Electric Cooperative
M~d Systems Energy Resources, Inc Public Service Company of Oklahoma
Hawaiian Etactri~ Company Southwest Gas
Centra Gas Alberta Inc Puhl~c Service Indiana
City of North Little Rock Electric South Carolina Electnc& Gas (3)
United Irrigation District Nova Gas Transm~sstun Lim;ted
Northwest Power Corporation Edmonton Power
In almost all cases ~sted above expert tesbmony was filed ~n the rate pro~:eed~ng
before a state, provincial, or Federal regulatory agency In particular many of the gas
proceedings noted above were first prosecuted before a mumc~pahty and ~n certain
~nstancas resulted m cases on appeal before the RRCT In performing the analysis on
behalf of Texas mumc~pahtles m gas proceedings DUCl has become ~nt~mately fam~har w~th
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 ~ts personnel have rehed upon
their specific and general knowledge of the utlhty operation ~nvolved, including gas
d~stnbution systems The key personnel involved m the above cases ara those assigned
to this project
INDIVIDUAL EXPERIENCE
The two project leaders, Messrs Pous and Lawton, have analyzed well ~n excess
of 100 d~fferant rate filings of utility companies w~thm the past 12 years In addition, the
number of mun~cipal, cooperative and/or state agency rate fihngs e~ther developed and/or
reviewed, substantially increases the number of rate-related engagements ~n 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 ~n this proposal have been as project leader, actual negotiators
and/or as expert witnesses ~n the vast majonty of these cases, and exclus,vely ~n these
roles and pos~t~ons ~n all cases undertaken ~n the past ten (10) years Most of these cases
involved the ravlew and analysis of utilities' cost of service ~ssues
We beheve that the above noted information details DUCI's quahflcat~ons to analyze
LSGC's requested base rate ~ncrease, Further confirmation of DUCI's quahflcat~ons can
be obtained from a review of the following professional resumes and testimony listings of
the key individuals assigned to th~s proJect, as well as by contacting the references
included in this section of the proposal
PART I
QUALIFICATIONS
The professional personnel asmgned to th~s 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 add~bon
to the resumes, a hsting of prior cases In which testimony has been presented ~s provided
The primary work assignments for each ~nd~wdual are as follows
Jack Pous, a pnnc~pal ~n DUCl, w~th an undergraduate degree ~n eng~neenng and
a masters In management, wdl be responsible for d~rect~ng analyses of eng~neenng and
accounting ~ssues
Dan Lawton, a pnnc~pal m DUCl, with an undergraduate and graduate degree ~n
economics and a law degree, wdl be responmble for d~rect~ng analyses of economic,
allocabon, and accounting issues
Ruth Runyon Wenzel and Sara Coleman, Certified Publ,c Accountants w~th
undergraduate degrees in bumness adm~mstratlon, wdl be responmble 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 Umverslty of Mlssoun in 1972, recmv~ng a Bachelor of Science Degree
In Eng~neenng, and I graduated w~th a Master of Science in Management from Rollins College in
1980 I have also completed a series of depreciation programs sponsored by Western MlcNgan
University, and have attended numerous other utility related seminars
Since my graduation from college, I have been continuously employed m various aspects
of the utlhty business I started w~th Kansas City Power & Laght Company, working in the Rate
Department, Corporate Planning and Economic Controls Department, and for a short ume m a
power plant My responsibilities included preparation of testimony and exhibits for retail and
wholesale rate cases I participated in cost of servme studies, a loss of load probability study, fixed
charge analysis, and econormc comparison studies I was also a pnnclpal member of prolect teams
that wrote, installed, mamtmned, and operated both a computerized series of depreciation
programs and a computerized financaal corporate model
I lomed the finn of R. W Beck and Assocaates, an lnternauonal consulting engmeenng firm
w~th over 500 employees perfonnlng predomanantly uuhty related work, in 1976 as an Engineer
m the Rate Department of its Southeastern Regional Office While employed wath that finn, I
prepared and presented rate studies for various elecmc, gas, water, and sewer systems, prepared
and assisted m the preparation of cost of serwce 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 m November
1986 in order to co-found Dlversafied Utility Consultants, Inc At the ume of my resignation, I
held the utles of Execuuve Engineer, Associate and Supervisor of Rates an the Austin office of R
W Beck and Associates
As a pnnclpal of the finn of Diversified Uuhty 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
1 am registered to practice as a Professlona~ Eng~ncer in the states of Florida, Texas,
M~sslsslppi, North Carolina, Arizona, New Memco, Arkansas, Oklahoma, an:l Louisiana
DANIEL J. LAWTON
PRINCIPAL, DIVERSIIq.~D UTILITY CONSULTANTS, INC
B A ECONOMICS, MERRIMACK COLLEGE M A. ECONOMICS, TUFTS UNIVERSITY
Pnor to be~nrung his own consulting practice, Diversified Utility Consultants, Inc, in 1986,
Mr Lawton had been m thc utihty consultmg business w~th a naUonal cngmccnng and consulting firm
In additlOI1, Mi' Lawton has been employed as a semor analyst and statistical analyst vath the
D~partment of Pubhc Service of Minnesota Pnor to Mr Lawton's involvement ~n utlhty regulation
and consulting he taught econormcs, econometrics, statistics and computer science at Doane College
Mr Lawton has conducted numerous financial and cost of capital studies on elecmc, gas and
telephone Utflmes for vanous mtervenors before local, state and federal regulatory bodies In adcht~on,
Mr Lawt0n has prowded studies, analyses end expert testimony on statistics, econometrics,
accounting, forecasting, and cost of service issues Other projects ~n whxch Mi' Lawton has been
involved molude rate des~gu, analyses for electric, gas and telephone utiht~es Mr Lawton has
developed software systems, data bases and management systems for cost of service analyses
In adcht~on, Mr Lawton has developed and re'aewed numerous forecasts of energy and demand
used for utility generation expansion studies as well as mumc~pal financing Mr Lawton has
represented numerous mumclpahties as a negotlator m ut~hty related matters Such negotiations ranged
fi'om the settlement ofelectnc rate cases to the negotiation ofprowsions in purchase power contracts
A hst of cases in which Mr Lawton has prowded testimony ~s attached
RUTH RUNYON WENZEL, C P.A.
BBA, ACCOUNTING
Ms Wenzel received a Bachelor of Business Adrmmstrauon degree with a malor
in Accounung from the University of Texas at Ausun in 1981 She Is a Cerufied Public
Accountant licensed to pracuee m the State of Texas and has attended conunmng
professional education courses sponsored by the Texas Society of Cerufied Public
Accountants
In January, 1982, Ms Wenzel began employment with the public accounting
firm of,Gibson, lohnson & Co She was involved in areas of taxauon, audmng and
management adwsory services In 1986 she lomed the firm of Gibson, Melwn &
Paddock where she continued her public accounung practice
In 1987 Ms Wenzel was employed by the Public Uuhty Commission of Texas
as a regulatory accountant. Her responsibilities vath the Texas Commission included
preparation and analyses of studies mvolwng cost of serwce issues related to rate
proceedings of electric uuliues She served as a tesuf3nng vatness 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 uuhty rate
proceedings before both state and federal regulatory authonues
A list of cases in which Ms Wenzel has prowded testimony is attached
UT~,ITY RATE PROCEEDINGS IN WHICH TESTIMOI~/
HAS BEEN PRESENTED BY RUTH RUNYON WENZEL
guns/hct~on/Company Docket No Tesmnony Topic
PUBLIC, UTILI'I'~ COMMISSION OF TEXAS
Sabme River Authority of Texas 78']0 COS and Rate Base
El Paso t~lecmc Company 8018 Rate Case Expenses
Guadalupe. Blanco River Authonty 8031 COS and Rate Base
Lower Colorado River Authonly 8032 COS and Rate Base
Texas-New Mexico Power Company 8095 COS
El Paso Elecin¢ Company 83/13 COS
Ceniral Power and Light Company 8646 [ COS and Rate Base
Texas-New Mexico Power Company 8928 FIT and ADFIT
Southwestern Elecmc Service Company 9040 FIT and ADFIT
Panola-Harnson Eleclnc Cooperauve 9214 COS and Rate Base
Texas-New Mexico Power Company 9491 FIT, ADFIT and Ra~e Base
Central POwer and Light Company 9561 FIT and ADFIT
Houston 14ghlmg and Power Company 9850 FIT and ADFIT
Texas-New Mexico Power Company 10200 FIT, ADFIT, and L~fe Cycle Analys~s
Gulf State? Ut/htlas Company 10894 Affiliate Siatus
Northwas~ Texas Eleclnc Coopaml~ve 11384 COS and Rate Base
Texas U~h~as Elacmc Company I 1735 FIT, ADFIT and Franchise Taxes
DIVER~tlqiIiD UTILITY CONSULTANTS~ INC.
Gulf State? Utdltles Company 13170 Fuel Reconcglanon
SARA E. COLEMAN, C.P.A.
DIVERSIFIED UTILITY CONSULTANTS, INC.
B.B.A. - ACCOUNTING
I graduated from the University of St Thomas an 1990, receiv~ng a Bachelor of
Business Adrmnmrauon in Accounung I am a Certified Public Accountant licensed to
practice m the State of Texas I am a Dlplomate of the American Board of Forensic
Examiners I have also attended utility related seminars lndudlng the "Annual
Regulatory Studies Program" sponsored by the National Association of Regulatory
Utility Commissioners and admimstered by Michigan State University's Graduate
School of Business
I began workang for the public accounting firm of Arthur Andersen & Company
in Houston, Texas in July 1990 Dunng my employment w~th Arthur Andersen &
Company, I provaded financial and audit sennces to public and private corporations My
responsibilities included all aspects of financaal reporting, financial statements and
footnote preparation This included evaluation of compliance w~th 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 lomed the Public Uuhty Commission of Texas as a Regulatory
Accountant While employed at the Public Uuhty Commission of Texas, I revaewed and
analyzed various utility apphcauons as they related to accounting issues My
responsibilities also included prepanng and tesuf3nng on accounting issues m various
utility heanngs 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 lolned the finn of Diversified Utility Consultants, Inc as a Senior Consultant
My responsibihues include analyzing regulatory issues in various utility rate proceedings
A list of cases in which I have prowded testimony is attached
UTILITY RATE PROCEEDINGS IN WHICH
TESTIMONY HAS BEEN PRESENTED BY SARA COLEMAN
JURISDICTION/COMPANY Docket No Testimony Topic
PUBLIC D'l'tt. ITY COMMISSION OF TEXAS
Tcx-La Elecmc Cooperative 12289 Rate Case
Texas Utihttes Elecmc Company 13313 Fuel Surcharge
West Texas Uttht~es 13369 Cost of Service
Central Power & LIght Company 14965 Rate Base
Texas-Now Mexico Power Company 18~60 Community Chmce
DIVEI~I~'I/~D U'I'IL,ITY CONSULTANTS, l~C.
Southwestern Pubh¢ Service Company 17410 Fuel Surcharge
Southern Umon (}as Company 8878 Cost of Sarv~ce, Rate Base
(}TE Southwest, In¢ 19173 Rate Case Expenses
PaRt I
QUALIFICATIONS
The follow~ng list of references ~s compnsed of ~nd~wduals thoroughly familiar w~th
DUCI's professional quallflcabons and capabd~t~es Each of these ~nd~vlduals can attest to
our ability to meet bght deadhnes whde still providing a supenor work product
cCIItt °Aftt'~mmaenYll° ~"uu'~'~/"MryyMerril Nunn ~"~~~~/~ .~.~t/~ ~ Mr NormanMaln GordOnstreet Diamond Rash
7th Floor "~
Amarillo, Texas 79186 /~. v~7.,[~ El Paso, Texas 79901 ~
(806)378-3000 ~'/1~,~, ~.z/,- -~'A (915)533-2277 '~
City Attorney ~'~'.-~'~'~;~ ~lJ~ Law Offices of Jim Boyle ~ 1
C~ty of Port Neches ~'/~4,~4 ~ 1005 Congress Ave ~
1221 Duncanville Street '"" Ste 550
Port Neches, Texas 77651 Austin, Texas 78701
(409)722-0486 (512)474-1492
Mr Dave Cook John Michael Adrogna, Esq
City of Dallas M~ller, Bahs & O'Ned, P C
C~ty Controller's Office 1101 14th Str, N W #1400
Revenue and Taxation Division Washington, D C 20005 ~
1500 Marllla 2BS (202)789-1450
Dallas, Texas 75201
(214)670-3442
PART II
WORK PLAN
SYSTEM CONCEPT AND ~OLUTION
The City of Denton, like all cities m Texas, has ongmal regulatory junsdict~on on rate
requests by gas utilities prowd~ng service to customers located w~thm the corporate hm~ts
of the mumc~pahty The C~ty has the nght to rewew LSGC's requested base rste ~ncrease
~n an unbiased manner and determine the appropriate revenue requirements the Company
~s entitled to receive
The scope of services necessary to properly mvesbgate the numerous and complex
financial, eng~neenng and accounting ~ssues requires a consultant that has prewously and
successfully performed many similar analyses Th~s concept of extensive pnor specific
expenence ~s crucial in th~s particular situation due to the regulatory expertise on the part
of LSGC and the limited time available for a rewew of the request
The series of tasks delineated in th~s section of the proposal reflect what DUCl
believes ~s necessary to comply w~th 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 ~nclude an extensive analys~s of
LSGC's affiliate transactions Such an analysis would require far more time than the C~ty
has to prosecute th~s matter Further, such an analys~s would revolve many more man
hours than are ~ncluded ~n our price proposal Also, the proposal ~s a I~m~ted rewew,
concentrating ~n the key area's of LSGC's request, due to the [~m~ted d~scovery bme and
t~me constraint to ~ssue a report to the City
DUCl w~ll prowde the C~ty with a report setting forth all recommendations ~n sufficient
detail so as to allow the C~ty adequate ~nformation to make an unbiased rewew and make
regulatory decisions pred~ceted on the facts and data available To rewew the Company's
request, receive and analyze data responses, DUCl will be able to ~ssues ~t's report to the
C~ty by February 1, 1999 Unfortunately, due to the very short d~scovery t~me, further
reduced due to the holidays, DUCl will only be able to ~ssue one report to the C~ty Council,
City staff, and Lone Star
PART Il
WORK PLAN
Once notified of select~on by the City, a detailed rewew of LSGC's rates and
available currant financial information will be conducted and d~scussed with the staff and
officials of the City The following is set forth as a general outhne and synops~s of the
major tasks that we anticipate ~n performing a comprahenslve analysis of the requested
gas rate increase by LSGC
TASK DESCRIPTION
1 0 Review of Current,Base Rates and Data Collection
2 0 Determination of ~ppropriate Direct Expense Levels
3 0 Determination of ,~pproprlata Revenue Levels
,4 0 Determination of ~pprnprtate Rate Base
5 0 Determination of Appropriate Allocated Direct Expense Levels and Rate Base Levels
,6 0 Rate of Return/Capital Structure Analysis
7 0 Preparation of Report
8 0 Possible Settlement Negotiations
,9 0 Presentation of Report
Rewew of LSGC's current base rates, ~dentlfication of publ~cally avadabie
information, and development of ~nitial data raqu~rements will commence and be completed
within 10 days An Imtlal data request wdl be provided to LSGC w~thln 5 working days and,
upon ravlew of the vanous responses, supplemental data requests may be required On-
s~te data collection Is anticipated
The LSGC O&M expenses for the designated test penod will be analyzed to
determine their appropriateness for ratemak~ng purposes Regulatory adjustments based
nn current statutes, RRCT precedent and ratemaklng pnnc~ples wdl be made to reflect the
.~ppropnate level of expenses The impact of each adj[ stment identified wdl be quantified
separately. The assignment of DUCl ,~:aff to rewew and analyze the vanous expense
itenls wdl be based upon their technical ~xpert~se and edL, cat~onal d~sclpllne The ~ssues
of losses, depreciation, and allocation wdl be rewewed from an englneenng standpoint
,ssues such as uncollect~bles, FAS No 106, payroll, taxus and others will be analyzed from
an ac(~ount~ng-finance-management d~scipl~ne A thorough rewew of the Company's
proposed cost of service adjustment clause and plant investment cost adjustment clause
w~ll 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 w~ll also be reviewed to determine ~f they comply w~th normally
accepted ratemaking standards
The rate base that LSGC has reported w~ll be analyzed to determine the
appropriateness of each ofthe ~ndlvldual components Rate base categories that are not
normally identified (e g, cash working capital) line w~ll be investigated to determine an
appropriate level
Due to LSGC's mult~-junsdictlonal operation ~t will be necessary to allocate common
costs and ~nvestments among the various components of the Company Affiliates w~ll be
included, as appropnate, ~n all allocations
An analys~s 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 cond~bons
Once all of the analyses and resulting adjustments have been performed, a
preliminary report will be prepared and provided to the City detailing the bas~s upon which
these adjustments are predicated on February 1, 1999 The report w~ll also reflect the
overall level of base rate revenue requirements that are determined to be appropnate and
the overall impact on the system
Upon completion of the preliminary report and dependent upon the City staff's
d~rect~on, DUCl will enter into possible settlement negot~ations w~th LSGC
PART II
WORK PLAN
After negotiations, ~f any, and review of the preliminary report by the C~ty the report
w~ll be finalized and DUCl w~ll make a final presentation of the findings to the C~ty Council
and attend a public heanng ~n order to answer any questions regarding our report and
recommendations
ADDITIONAL ~I~RVICI=R
DUCl w~ll provide additional services as requested by the C~ty Additional services
may include, but are not limited to. additional analyses, add~bonal 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
~n the coat estimate set forth here~n Additional service w~ll be charged at the hourly rates
for the ~ndlwdual personnel set forth in Part III, plus out-of-pocket expenses Requests for
additional services of any member of DUCI should be made m written form, ~f time
constraints permit
PART Ill
PRICE PROPOSAL
DUCl proposes to be compensated on an houdy fee basis plus reimbursement for
all out-of-pocket expenses reasonably incurred DUCI proposes to ~nvome the C~ty 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, houdy fees and estimated
number of hours for each ~nd~wdual who will participate in this project DUCl recognizes
the C~ty's need to schedule public heanngs and DUCl w~ll attend such heanngs at a
mutually agreed to time and date
MATERIALS: SUPPLIES AND OTHI=R ITEMIZED DIRECT COSTS
The table at the end of th,s Part hsts the various non-labor related costs anticipated
to be ~ncurred ~n 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
LABOR REO[JlREMENTS
WENZEL/
POUS LAWTON COLEMAN TOTAL
TASK (125/HR) ($1251HR) ($100/HR) 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 30 44 93 167
Dollars $3,750 00 $5,500 00 $9,300 00 $~55D
E~TIMATED EXPI=NSES
PnntinglComputer $1,300 00
Phone/Dellvenes $_tSDJ3D
TOTAL EXPENSES ~
GRAND TOTAL ~,DJ;ZOJ3J~
FIRST AMENDMENT TO PROFESSIONAL SERVICES AGREEMENT
FOR PROFESSIONAL SERVICES REGARDING
LONE STAR GAS COMPANY'S REQUEST FOR RATE INCREASE
Tins F~rst Amendment to that certain Agreement dated December 15, 1998 by and
between the City of Denton, Texas, a Texas mumclpal corporation, with its pnncipal office at
215 East McI~nney Street, Denton, Denton County, Texas 76201 (hereinafter called "Owner"),
and Diversified Ut~hty Consultants, l. nc, with its corporate office at 12113 Roxle Dnve, State
110, Austin, Texas 78729 (hereafter called "Consultant"), acUng herein by and through their duly
anthonzed 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
onglnally anticipated, provided a prehrmna~ report, and prowded other services that were not
anticipated in the onglnal Agreement, and the Consultant has agreed to chscount 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 fins 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 admlmstmtive authonty
regarding change orders and the approval of contracts as delegated to tnm by the City Council,
NOW, THEREFORE, the parties hereto agree to the following amendment to the terms
and conditions of the ongmal Agreement
I
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 Extnblt B, Part H, Price Proposal, wbach is attached hereto and made a part
of this Agreement as if wntten 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 herr by, all the terms, conditions, sentences, cl.,uses,
and phrases of the original ~,.greement shall remain in full force and eff~.t
III WITNESS HEREOF, the City of Denton has caused fins Agreement to be execated by
its duly anthonzed City Manager, the Consult .nt had executed this Agreement through its duly
anthonzed undersigned officer on this the ,--~fo~ day of .~//fd ,1999
CITY OF DENTON, TEXAS
ATTEST
JENNIFER WALTERS, CITY SECRETARY
BY . fi./ . _ _
APP&ED A{TO LEGAL FORM
HERBERT L PROUTY. CIT~ AT,ORNEY
/
DIVERSIFIED UTILITY
CONSULTANTS, INC
J~K POUS, PRINCIPAL
WITNESS
/
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