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2005-208FILE REFERENCE FORM 2005-208 X Additional File Exists Additional File Contains Records Not Public, According to the Public Records Act Other FILES Date Initials Extension of Settlement Agreement - Ordinance No. 2006-160 06/06/06 ) R S:\Our Documents\Ordinances\05\TXU Elec Delivery.doc ORDINANCE NO. 2P~S-Z~g AN ORDINANCE OF THE CITY OF DENTON, TEXAS, AUTHORIZING THE CITY MANAGER TO EXECUTE A SETTLEMENT LETTER AGREEMENT WITH TXU ELECTRIC DELIVERY ACCEPTING THE SETTLEMENT BETWEEN TXU ELECTRIC DELIVERY AND THE STEERING COMMITTEE OF CITIES SERVED BY TXU ELECTRIC DELIVERY; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, TXU Electric Delivery Company ("Electric Delivery") and the Steering Committee of cities served by Electric Delivery ("Steering Committee") has settled all issues relating to existing and potential Show Cause Actions and other pending regulatory issues regarding municipal street lighting and other electric rates; and WHEREAS, although, the City of Denton was not a part of the coalition of cities and was not on the Steering Committee, Electric Delivery has offered the City benefits comparable to those reflected in the settlement in return for Denton's agreement not to initiate a Show Cause Action or similar proceeding concerning Electric Delivery's rates before July 1, 2006 or to otherwise not participate in any such Show Cause Action; and WHEREAS, Electric Delivery has written both Mayor Euline Brock and City Manager Mike Conduff offering the City comparable benefits of this Settlement Agreement and the offer expires on September 15, 2005; and WHEREAS, the City Council considers it in the public interest to accept this Settlement Agreement with Electric Delivery; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings set forth in the preamble of this Ordinance are incorporated by reference into the body of this Ordinance as if fully set forth herein. SECTION 2. The City Manager is hereby authorized and directed to execute and accept the Settlement Agreement dated June 22, 2005 of various outstanding and potential Show Cause Actions reached with the Steering Committee of cites served by TXU Electric Delivery in the form of the Letter Agreement, which is attached to and made a part of this Ordinance for all purposes. SECTION 3. The City Manager is hereby directed to return one executed original of the Settlement Agreement to Danny Hodges, Community Relations Manager, TXU Electric Delivery, 3100 S. Garrison Road, Corinth, TX 76210. SECTION 4. This Ordinance shall become effective immediately upon its passage and approval. S:\Our Documents\Ordinances\05\TXU Elec Dclivery.doc PASSED AND APPROVED this the 2&p /T day of 2005. EULINE BROCK, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY. APPROVED AS TO LEGAL FORM: EDWIN M. SNYDER, CITY ATTORNEY BY: Page 2 of 2 AA TXU ~ Electric Delivery TXU Electric Delivery Danny Hodges 3100 Garrison Rd. Community Manager Corinth, Tx. 76210 Tel: RECEIV Fax: 940-497-7517 ED JUL p 6 ~JG5 ON CITY OFD EP June 22, 2005 City of Denton 215 E. McKinney Denton, Texas 76201 Re: Settlement Between TXU Electric Delivery and the Steering Committee of Cities Served by TXU Electric Delivery Dear Mayor Brock, As you know, TXU Electric Delivery Company ("Electric Delivery") and the Steering Committee of Cities Served by TXU Electric Delivery ("Steering Committee") have concluded a settlement of all outstanding issues related to existing and potential Show Cause Actions and other pending regulatory issues. The purpose of this letter is to offer your city benefits comparable to those reflected in that settlement. A copy of that settlement is attached to this letter as Exhibit A. In consideration for your city's agreement not to initiate a Show Cause Action or similar proceeding concerning Electric Delivery's rates before July 1, 2006 and not to intervene in or participate in any manner in any Show Cause Action concerning Electric Delivery's rates initiated at the PUC or in any other jurisdiction prior to July 1, 2006, Electric Delivery will make a cash payment of $1,765.08 to your city. Starting March 31, 2006, and each March 31st thereafter, Electric Delivery will also make an annual cash payment of $1,680.72 to your city. Electric Delivery's obligation to make this payment ceases on (1) the date that your city initiates, intervenes in, or participates in a Show Cause Action or similar proceeding, (2) the date that Electric Delivery ceases to have any obligation to pay any amounts under paragraph 4 of Exhibit A, or (3) the date that the tariffs approved in Electric Delivery's next system-wide rate case at the PUC or in a city rate inquiry become effective on a temporary or permanent basis ("Termination Date"); provided, however, in the year the new tariffs become effective, the annual payment shall be prorated until the Termination Date. Your city's execution of this Letter Agreement signifies your city's agreement to the terms of this paragraph. June 22, 2005 -2- Electric Delivery and the Steering Committee have also agreed to pursue discussions concerning various subjects. Any improved processes or revised tariffs that result from Exhibit A will be made available to and will be applicable to your city. Your city's acceptance of this Letter Agreement also signifies that your city agrees that the amounts paid under this Letter Agreement are paid solely in consideration for your city's forbearance from filing, pursuing, or intervening in any Show Cause Action or similar proceeding against Electric Delivery and are not a rate reduction, refund, rebate, discount, preference, or privilege of any kind for services provided by Electric Delivery. Upon receipt of an executed original of this Letter Agreement, Electric Delivery will send you a check in the first amount specified above. If your city agrees to the provisions of this Letter Agreement, please have a properly authorized representative of your city sign in the space provided below and return the executed original to the undersigned. The offer reflected in this letter expires on September 15, 2005. Sincerely, AGREED TO AND ACCEPTED: n / By. Its. c fl filall Z L/ Date: 07 ~Z & 1105- . Exhibit A Settlement Agreement between TXU Electric Delivery Company and the Steering Committee of Cities Served by TXU Electric Delivery dated February 22, 2005 SETTLEMENT AGREEMENT This Settlement Agreement ("Agreement") is made and entered into between TXU Electric Delivery Company ("Electric Delivery") and the Steering Committee of Cities Served by TXU Electric Delivery Company on behalf of all cities listed on Exhibit A to this Agreement ("Cities"), hereinafter referred to jointly herein as "Signatories." WHEREAS, the city councils of 23 cities who are members of Cities passed resolutions in 2004 requiring Electric Delivery to file with those cities information that demonstrates good cause for showing that Electric Delivery's transmission and distribution rates should not be reduced (hereinafter referred to as "Show Cause Actions"); WHEREAS, other cities who are members of Cities are contemplating initiating similar Show Cause Actions against Electric Delivery; WHEREAS, Cities and Electric Delivery desire to resolve all outstanding issues related to the existing and potential Show Cause Actions and other regulatory issues; and WHEREAS, after extensive negotiations, Cities and Electric Delivery have reached a compromise and settlement to resolve those issues. NOW, THEREFORE, the Signatories, through their undersigned representatives, hereby agree to the following: 1. Electric Delivery agrees to propose and support in its next system-wide rate case or city rate inquiry one or more municipal rates, each without a demand ratchet, that together will cover all municipal accounts, including a street lighting rate and municipal pumping rate that will be lower than they otherwise would be. Cities agree to provide to Electric Delivery any information needed to design the rates described in this paragraph. 2. Electric Delivery agrees to file a system-wide rate case at the Public Utility Commission of Texas ("PUC") no later than July 1, 2006, based on a test year ending December 31, 2005 unless Cities and Electric Delivery mutually agree that such a filing is unnecessary. For those cities that do not have a City Council meeting in July, 2006, Electric Delivery will extend its effective date to accomplish suspension by August 31, 2006. However, if Electric Delivery files a system-wide rate case at the PUC on or before June 1, 2006, then Electric Delivery will not extend its effective date. 3. Cities agree that Electric Delivery is not required to respond to any pending Show Cause Action initiated by any city listed on Exhibit A to this Agreement prior to July 1, 2006. Cities further agree to abate or dismiss all pending Show Cause Actions, not to pursue any abated Show Cause Actions, and not to initiate similar actions before July 1, 2006, provided the provisions of this Settlement Agreement are honored. Cities agree not to intervene in, or participate in any manner in, any show cause action initiated at the PUC or in any other jurisdiction prior to the proceeding described in paragraph 2, or in any appeals of such show cause actions, except as necessary to protect the tariff or tariff-efforts associated with paragraph 1 or to protect the city or its residents from being prejudiced in any show cause action pending on appeal at the PUC. If Cities intervene in a show cause action pending on appeal at the PUC, then Cities agree not to take any position in that proceeding that is inconsistent with its obligations under this Settlement Agreement. 4. In consideration for Cities' obligations under this Agreement, Electric Delivery agrees to make a cash payment of $8.5 million to Cities by the later of March 31, 2005 or two weeks after receiving notice from Cities that (1) all cities listed on Exhibit B to this Settlement Agreement have abated or dismissed show cause actions pending against Electric Delivery, and (2) each city on Exhibit C to this Settlement Agreement has passed a resolution ratifiying this Settlement Agreement or provided to Cities a letter in substantially the same form as Exhibit D to this Settlement Agreement that has been signed by an authorized representative of the city. Starting March 31, 2006, and each March 31u thereafter, Electric Delivery will make an annual cash payment of $8 million to Cities. Electric Delivery's obligation to make this payment ceases on the date upon which Cities fail to comply with their obligations under this Agreement or the date upon which the tariffs approved in Electric Delivery's next system-wide rate case at the PUC or in a city rate inquiry become effective on a temporary or permanent basis ("Termination Date"); provided, however, in the year the new tariffs become effective, the annual payment shall be prorated until the Termination Date. 5. Electric Delivery agrees to work with Cities to improve the timeliness of streetlight maintenance and to develop a process so that every city-owned and Electric Delivery-owned street light is assigned an identifiable geographic location. Signatories agree to establish a task force of senior employees that will develop, by June 30, 2005, the process and planned rollout for the street light assignment project. Electric Delivery also agrees to provide to Cities a specific contact person (or persons) within Electric Delivery who will be responsible for handling all unresolved Cities' requests with respect to streetlights, including, but not limited to, billing, maintenance, installation, removal, and account initiation and closure. Signatories agree to diligently pursue resolution of the issues discussed in this paragraph; however, failure to reach an agreement with respect to these issues will not constitute a breach of this Settlement Agreement by either Cities or Electric Delivery. 6. Electric Delivery agrees to work with Cities to establish improved communication, coordination, and timing of construction concerning relocations of Electric Delivery's facilities in public right of way. Signatories agree to establish a task force of senior employees that will develop, by June 30, 2005, the process and planned rollout of an improved relocation process. Signatories agree to diligently pursue resolution of the issues discussed in this paragraph; however, failure to reach an agreement with respect to these issues will not constitute a breach of this Settlement Agreement by either Cities or Electric Delivery. 7. Electric Delivery agrees to discuss with Cities the payment of franchise fees on a quarterly basis regardless of whether the basis for a quarterly payment is historic or prospective and the standardization of a franchise renewal process that permits transition from a prospective basis to a historic basis where the franchise is up for renewal. Signatories agree to diligently pursue discussion of the issues discussed in this paragraph; however, failure to reach a resolution of these issues will not constitute a breach of this Settlement Agreement by either Cities or Electric Delivery. 8. Electric Delivery agrees to negotiate with Cities, and Cities agree to approve, a tariff that permits Cities to request undergrounding of new or existing distribution facilities. The tariff shall ensure full cost recovery by Electric Delivery through a surcharge in the requesting city in the event that no third party is required by Electric Delivery's tariff, or applicable city ordinance, to pay for undergrounding costs. That tariff will also allow Cities to request undergrounding of transmission lines to the extent Electric Delivery determines that (a) such undergrounding is feasible, (b) such undergrounding is consistent with the PUC's Substantive Rules and ERCOT's requirements, and (c) Electric Delivery can recover the costs of such undergrounding through a surcharge in the requesting city. Electric Delivery will not be obligated to file the tariff for city approval until after the expiration of the Price to Beat or the modification of the Price to Beat in a manner that allows pass through of tariff charges to the ultimate consumer. 9. Electric Delivery agrees to provide quarterly updates to representatives designated by Cities and their consultants concerning Electric Delivery's capital expenditure projects and affiliate transactions, the creation and regulatory treatment of a Pension and Health Benefits Reserve for Electric Delivery, possible workable parameters for performance based rates for Electric Delivery, and other topics as agreed upon by the Signatories. Electric Delivery will work with Cities to provide information requested by Cities concerning those topics. 10. Electric Delivery shall pay up to $10,000 per month in regulatory expenses directly to Cities' consultants, after receipt of appropriate documentation and invoices, provided said expenses may be deferred for recovery. Cities agree to support recovery of such costs in Electric Delivery's next rate case. Should recovery be denied by the PUC, then the payments will immediately cease. 11. Electric Delivery agrees to work with Cities to establish better communications between the Cities and Electric Delivery with respect to access to city meters for monthly reading. Each city shall provide in writing, by March 31, 2005, a contact person for inaccessible meters for city accounts, and shall promptly notify Electric Delivery of any change in the contact person. In months where a meter reader is unable to gain access to the premises to read the meter on regular meter reading trips, or in months when meters are not read, Electric Delivery agrees to provide the customer with a postcard and request the customer to read the meter and return the card to Electric Delivery. If the postcard is not received by Electric Delivery in time for billing, Electric Delivery may estimate the meter reading and issue a bill. Electric Delivery agrees that all municipal meters will be read at least once every three months by it or by the respective city. The failure of a city to designate a contact person for inaccessible meters affects only that city and does not adversely impact any other city or mitigate responsibilities and benefits otherwise inherent to this Agreement. 12. Electric Delivery agrees to reimburse Cities for the expenses incurred related to the Show Cause Actions in an amount not to exceed $100,000 after receipt of appropriate documentation and invoices, and Cities agree that those costs can be deferred for recovery in its next rate case and agree to support deferral and recovery in that case. Notwithstanding any provisions in existing applicable franchise agreements to the contrary, Electric Delivery agrees to reimburse Cities for reasonable and necessary expenses incurred in Electric Delivery's next rate case in an amount not to exceed $2,000,000. The rate case expense reimbursements will be made monthly, beginning with the first month after the consultants are hired. Cities further agree not to contest the recovery of Cities' rate case expenses and Electric Delivery's reasonable and necessary rate case expenses in Electric Delivery's next rate case. Electric Delivery further agrees to pay, and Cities agrees to accept, $150,000 in settlement of all previously disputed regulatory expenses. Electric Delivery will not seek reimbursement of that $150,000 amount in Electric Delivery's rates. 13. Electric Delivery agrees that, in franchise negotiations, it will not seek to extend the prohibition on reimbursement of municipal rate case expenses beyond June 2008. 14. Electric Delivery agrees that if the 2005 Texas Legislature considers the implementation of a nodal pricing system in ERCOT, then Electric Delivery will provide information to the Legislature concerning the importance of a vibrant electric transmission system and the benefits of the expansion of transmission facilities in helping to reduce congestion costs. 15. Signatories acknowledge that Electric Delivery intends to offer certain terms of this Settlement Agreement to cities served by Electric Delivery that are not listed on Exhibit A ("Negotiations"). Electric Delivery agrees that all cities listed on Exhibit A are entitled to Most Favored Nations protection during those Negotiations and that any benefits that Electric Delivery agrees to provide to any city during those Negotiations that are not already included in this Settlement Agreement will be offered to all cities listed on Exhibit A. Cities acknowledge and agree that to receive any additional benefits from Electric Delivery, additional consideration from Cities to Electric Delivery may be required. 16. The Signatories agree that the amounts paid by Electric Delivery to Cities pursuant to paragraphs 4, 10, and 12 of this Agreement are paid solely in consideration for Cities' abatement or dismissal of, and forbearance from filing or pursuing, Show Cause Actions against Electric Delivery and Cities' agreement to abide by the terms of this Agreement, and to reimburse Cities' expenses associated with the Show Cause Actions and other regulatory proceedings. To the extent that the amounts paid may be in excess of Cities' expenses, the excess is paid solely in order to settle the matters that are the subject of this Agreement. Signatories recognize and agree that the payments specified in this Agreement are not a rate reduction, refund, rebate, discount, preference or privilege of any kind for services provided by Electric Delivery or any of its affiliates or predecessors in interest under any tariff, whether in the past, now, or in the future. As such, the provision of electric delivery service to Cities by Electric Delivery or any affiliate or predecessor has been and will continue to be governed solely by the rates, terms, and conditions of the applicable tariffs. 17. Cities agree that for a ten-day period following the date this Settlement Agreement is executed, neither Cities nor the cities listed on Exhibit A will make any public statements or take any public action concerning the existence of a settlement or the terms of the Settlement Agreement. 18. This Agreement shall become effective only upon the execution of this Agreement and the entry of resolutions or orders abating or dismissing the Show Cause Actions. 19. Each person executing this Agreement represents that he or she is authorized to sign this Agreement on behalf of the party represented. 20. The Signatories expressly acknowledge and agree that oral and written statements made by any party or its representative during the course of the settlement negotiations that led to this Agreement cannot be used or portrayed as an admission or concession of any sort and shall not be admissible as evidence in any proceeding in any forum. Executed on this the 2.2- day of February, 2005, by the Signatories hereto, by and through their undersigned duly authorized representatives. TXU Electric Delivery Company Steering Committee of Cities Served by TXU Electric Delivery Company on behalf of all cities listed on Exhibit A to this Agreement Exhibit A City of Addison City of Highland Park City of Allen City of Honey Grove City of Alvarado City of Howe City of Andrews City of Hurst City of Archer City City of Hutto City of Arlington City of Irving City of Belton City of Jolly City of Benbrook City of Josephine City of Big Spring City of Justin City of Breckenridge City of Kaufman City of Bridgeport City of Keller City of Brownwood City of Kerens City of Buffalo City of Lakeside City of Burkburnett City of Lamesa City of Burleson City of Lindale City of Caddo Mills City of Little River Academy City of Cameron City of Luella City of Canton City of Malakoff City of Carrollton City of Mansfield City of Celina City of McKinney City of Centerville City of Midland City of Cleburne City of Milford City of Colleyville City of Murphy City of Collinsville City of Murchison City of Comanche City of New Chapel Hill City of Corinth City of North Richland Hills City of Crowley City of O'Donnell City of Dallas City of Oak Leaf City of Dalworthington City of Oak Point Gardens City of Odessa City of DeLeon City of Ovilla City of Denison City of Palestine City of Early City of Pantego City of Eastland City of Paris City of Edgecliff Village City of Plano City of Euless City of Ranger City of Farmers Branch City of Rhome City of Flower Mound City of Richardson City of Forest Hill City of Richland Hills City of Fort Worth City of Roanoke City of Frisco City of Robinson City of Frost City of Rockwall City of Glenn Heights City of Rosser City of Grand Prairie City of Rowlett City of Granger City of Sherman City of Grapevine City of Snyder City of Gunter City of Southlake City of Harker Heights City of Sulphur Springs City of Heath City of Sunnyvale City of Henrietta City of Sweetwater City of Hewitt City of Temple City of The Colony City of Tyler City of University Park City of Venus City of Waco City of Watauga City of White Settlement City of Wichita Falls City of Woodway Exhibit B City of Arlington City of Benbrook City of Brownwood City of Burleson City of Carrollton City of Dallas City of Dalworthington Gardens City of Denison City of Ft. Worth City of Harker Heights City of Heath City of Pantego City of Plano City of Richland Hills City of Robinson City of Rockwall City of Snyder City of Sulphur Springs City of The Colony City of Woodway Exhibit C City of Addison City of Allen City of Andrews City of Archer City City of Belton City of Big Spring City of Breckenridge City of Bridgeport City of Burkbumett City of Celina City of Cleburne City of Colleyville City of DeLeon City of Early City of Eastland City of Euless City of Farmers Branch City of Flower Mound City of Forest Hill City of Frisco City of Glenn Heights City of Grand Prairie City of Grapevine City of Henrietta City of Highland Park City of Howe City of Hurst City of Irving City of Keller City of Lakeside City of Lamesa City of Lindale City of Little River Academy City of Mansfield City of McKinney City of Midland City of Murphy City of North Richland Hills City of Oak Point City of O'Donnell City of Odessa City of Palestine City of Paris City of Richardson City of Roanoke City of Rowlett City of Sherman City of Southlake City of Sunnyvale City of Sweetwater City of Temple City of Tyler City of University Park City of Waco City of Watauga City of White Settlement City of Wichita Falls Exhibit D February 21, 2005 Mr. Geoffrey Gay suite 1800 111 Congress Avenue Austin, TX 78701 RE: Settlement Agreement between Steering Committee of Cities Served by TXU Electric Delivery and TXU Electric Delivery Company Dear Mr. Gay: I hereby acknowledge that the Steering Committee of Cities Served by TXU Electric Delivery has the authority to act on behalf of the City of in the negotiation and execution of a settlement agreement with TXU Electric Delivery Company. I also represent that I am duly authorized by the City of to sign this letter. Sincerely, [Name] [Position] 215 E. McKINNEY STREET • DENTON, TEXAS 76201 • (940) 349-8306 • FAX (940) 349-8596 OFFICE OF THE CITY MANAGER July 26, 2005 CERTIFIED MAIL No.: 60892026 Danny Hodges Community Relations Manager TXU Electric Delivery 3100 S. Garrison Road Corinth, TX 76210 RE: City of Denton's Acceptance of TXU Electric Delivery Settlement Agreement dated June 22, 2005 Dear Mr. Hodges: Please find enclosed one fully executed Settlement Agreement which is set forth in your letter of June 22, 2005 which we understand settles various outstanding potential Show Cause Actions in accordance with the Settlement Agreement reached with the Steering Committee served by TXU Electric Delivery. Also enclosed is a copy of the Ordinance of the City"Council of the City of Denton which the Council approved at its regularly called meeting of July 26, 2005. Your check in the amount of $1,765.08, and any subsequent checks, should be made payable to the City of Denton and sent to the City Manager's Office, 215 East McKinney, Denton, Texas 76201. Please do not hesitate to contact me at 940.349.8307 or Consulting Assistant City Attorney, Herb Prouty, at 940.349.7799 if you have any questions concerning this matter. Sincer . , Michael A. Conduff City Manager "Dedicated to Quality Service" www.cityofdenton.com mcond uff®cityofden ton.com