2002-106AN ORDINANCE SETTING A GAS UTILITY SERVICES RATE FOR ELECTRIC
GENERATION TRANSPORTATION SERVICE CUSTOMERS WITI-ffN THE CITY OF
DENTON, TEXAS; MAKING FINDINGS IN ACCORDANCE WITH THE SETTING OF
THIS RATE; PROVIDING FOR THE RECOVERY OF RATE CASE EXPENSES AND THE
PAYMENT OF RATE CONSULTANTS; PROVING FOR A REHEARING AND
RESERVATION OF RIGHTS; PROVIDING A SEVERABILITY CLAUSE; AND
PROVIDING AN EFFECTIVE DATE.
WHEREAS, on July 17, 2001, the City Council passed Ordinance No. 2001-251 ("Rate
Ordinance") establishing permitted rates and charges TXU Gas Distribution ("TXU-GD") may
assess residential and commercial customers within the City of Denton; and
WHEREAS, on or about April 2, 2001, TXU-GD filed a revised cost of service with the
City of Denton; and
WHEREAS, TXU Gas alleges that the distribution portion of the intra-company
allocation for Spencer, an electric generation transportation service customer, is the same 2 cents
that TXU Gas agreed would allow full cost recovery and allow TXU Gas to recover its revenue
requirement under its rate request and settlement; and
WHEREAS, TXU-GD's cost of service indicated that the just and reasonable rate for
electric generation transportation is 2 cents per mcf; and
WHEREAS, the Rate Ordinance did not approve rates for industrial customers requested
by TXU-GD, but approved rates for industrial customers established by the then current
contracts for industrial customers; and
WHEREAS, TXU-GD accepted the Rate Ordinance and did not appeal to the Railroad
Commission and the time for appeal expired; and
WHEREAS, on December 13, 2001, Spencer Station Generating Company, L.P.
("Spencer") filed a complaint against TXU Lone Star Pipeline ("TXU-LSP") and TXU-GD for
failure to provide gas utility service on reasonable terms stating it was unable to obtain just and
reasonable rates for gas utility service to the Spencer Electric Generat'mg Station ("Spencer
Station") as set out more fully in the complaint, and requested a public hearing on this issue and
interim rate relief from the City of Denton; and
WHEREAS, at its regular meeting of December 18, 2001, the City Council passed
Orcgmance No. 2001-482 after notice and a public hearing where Spencer, TXU-GD, and TXU-
LSP were given an opportunity to present evidence concerning allegations in the complaint. The
Ordinance ordered TXU-GD and TXU-LSP (hereinafter referred to as "TXU Gas") not to
change the rate to the Spencer Station under the then-existing agreement and further ordered
TXU Gas to continue to provide gas utility service to the Spencer Station on an interim basis
without interruption under the terms of the then existing agreement until the parties agreed on a
rate or a rate was set, and that after December 31, 2001 either:
TXU Gas file industrial rates with the City, demonstrating to the City Council that
the proposed rates for gas utility service to the Spencer Station are just and
reasonable and not preferential or discriminatory, and relevant facilities are
properly classified as distribution facilities and those facilities are useful in
providing utility service to the Spencer Station, and TXU Gas has these rates
approved by the City Council or the Raikoad Commission; or
TXU Gas and Spencer negotiate a just and reasonable rate pursuant to Tex. Util.
Code § 104.003(b); and
WHEREAS, as a result of the Ordinance No. 2001-482 and the complaint filed by
Spencer, the City Council undertook an investigation into the industrial/transportation rates for
the Spencer Station; and
WHEREAS, the City's rate consultant, Diversified Utility Consultants, Inc., (DUCI) has
tried to obtain information from both Spencer and TXU Gas in an attempt to determine a fair,
just, and reasonable rate for gas utihty transport service to the Spencer Station, and DUCI has
transmitted its report and recommendations concerning the rate under Complaint No. 2001-1 to
the City Council; and
WHEREAS, Spencer has responded to discovery requests in this matter, TXU has
refused to comply with any requests; and
WHEREAS, both Spencer and TXU Gas have been provided with a copy of the
consultant's report and have been given notice of the City Council's intent to hold another public
hearing on this matter and take action; and
WHEREAS, the public hearing on this matter was rescheduled from March 5, 2002 due
to a Motion to Resehedule the Public Hearing and Deliberations by TXU Gas to give them
adequate time to prepare for this matter; and
WHEREAS, after notice and a public hearing where both Spencer and TXU Gas were
given an opportunity to present evidence conceming the allegations in Spencer's complaint -
Complaint No. 2001-1 and additional evidence was submitted by the City's rate consultant,
DUCI, the Council deems it in the public interest to make the following findings and orders;
NOW, THEREFORE,
THE CITY COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1. FINDINGS. The City Council, pursuant to its exclusive original
jurisdictional authority over the rates, operations, and services of TXU Gas within Denton, and
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in the exemise of its sound legislative discretion after reasonable notice and hearing makes the
fo llowing findings:
1.1
Under Tex. Util. Code §103.001, Denton Charter §13.04, and Section 3
"Reservation of Rights" of the Rate Ordinance, the City Council has exclusive
original jurisdictional authority over the subject matter in Complaint 2001-1 and
the rate matter set forth herein.
1.2
The rate set forth in the April 2, 2001 cost of service for electric generation
transportation for the rate year beginning July 20, 2001 is just and reasonable.
1.3
Neither TXU Gas, nor Spencer has established that a rate, other than the rate set
forth in the April 2, 2001 cost of service, is just and reasonable.
1.4
The City Council adopts the findings of its rate consultant, Diversified Utility
Consultants, Inc., as follows:
4.
5.
6.
7.
TXU Gas represented, in its April 2, 2001 revised filing, that the charges
for transport service under its proposed rates for electric generating
companies like Spencer would be 2 cents;
TXU Gas represented in its 2001 rate filing to the cities, including Denton,
that a 2-cent charge for transport service to electric generating companies
like Spencer would allow TXU Gas to recover its costs;
TXU Gas agreed to settle its 2001 rate proceeding with all cities in the
Northwest Metro system, including Denton;
Under the settlement, TXU Gas represented that its rate for transport
service for electric generating customers like Spencer would be 2 cents;
The City approved the rate settlement for residential and commercial
customers and service charges in its July 17, 2001 Rate Ordinance;
In the Rate Ordinance, the City approved industrial rates consistent with
then-existing contracts;
The City specifically denied TXU Gas's requested tariff industrial rates
presented in TXU Gas's claimed Rate Ordinance compliance filings.
SECTION 2. ORDER. Based upon the findings of facts set forth in Section 1 above and
in accordance with previous findings and orders and the Rate Ordinance and Ordinance No.
2001-482, the City Council makes the following order:
2.1
The City Council finds that a just, reasonable, and fair gas utility services rate for
all electric generation transportation service customers within the City of Denton,
Texas is a rate of 2 cents per MCF. This rate shall be applicable to the Spencer
Station and any other customers who receive such electric generation
transportation service within the City of Denton. The City Council orders TXU
Gas and any other gas utility within the City of Denton to charge the 2 cents per
MCF rate for such electric generation transportation service. Provided, however,
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should TXU Gas and Spencer agree to a gas utility services rate for the Spencer
Electric Generating Station through mediation or otherwise, they shall
immediately notify the City Manager and that rate shall take the place of the rate
set forth herein.
2.2
TXU Gas is ordered to reimburse the City for all reasonable costs of the services
of rate consultants, attorneys, accountants, auditors, and engineers necessary in
accordance with Tex. Util. Code §103.022(b), including the fees of Diversified
Utility Consultants, Inc. and the Law Offices of Jim Boyle. It is hereby ordered
that if TXU Gas elects to recover, in whole or in part, the costs of this
reimbursement through a surcharge to its customers in Denton, it shall do so
through a surcharge designed for a 12 month nominal recovery period.
SECTION 3. RESERVATION OF RIGHTS. In order to ensure that rates and charges
assessed by TXU Gas or any other gas utility in Denton are just and reasonable to both TXU Gas
or any other gas utility and its customers, Denton reserves the right and privilege at any time to
increase, decrease, alter, change, or amend this ordinance or the rates established herein or to
enact any ordinance or adopt any rates and charges which would effectuate that purpose. In this
connection, Denton reserves the right and privilege to exemise any authority and power granted
to it under any applicable law, ordinance, or administrative rule or regulation.
SECTION 4. FILING OF TARIFF. TXU Gas shall file an Electric Generation
Transportation tariff, consistent with this ordinance, within five (5) working days of April 3,
2002 with the City Manager, along with a copy for the City Attorney.
SECTION 5. SEVERABILITY. If any portion, section, or part of a section of this
ordinance, or application thereof to any person or circumstance is held invalid by any court of
competent jurisdiction, such holding shall not affect the validity of the remaining portions of this
ordinance, and the City Council of the City of Denton, Texas hereby declares it would have
enacted such remaining portions despite any such validity.
SECTION 6. It is hereby found and determined that the meeting at which this ordinance
was passed was open to the public, as required by Texas law, and that advance public notice of
the time, place, and propose of the meeting was given.
SECTION 7. EFFECTIVE DATE. This ordinance shall immediately take effect and be
in full force and effect from and after the date of its adoption. The City Secretary is hereby
directed to deliver a certified copy of this ordinance to TXU Gas by sending the ordinance by
U.S. mail to TXU Gas's authorized representative, Autrey Warren, Regulatory Financial
Manager, TXU Business Services, 1601 Bryan Street, Dallas, Texas 75201-3411, and to Spencer
Station Generating Company, L.P. by sending the ordinance by U.S. mail to James A. Tramuto,
V.P. External Relations, West Region, PG&E Natural Energy Group, 1100 Louisiana, Suite
1650, Houston, Texas 77002.
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AS AND AP hi /22~
P SED PROVED t's the ~__~_~ day of ~/LL~
/
,2002.
RONI BEASLI~, MAJ~OR PRO TEM
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
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