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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 / Page 2