HomeMy WebLinkAboutMinutes City Council - 10/21/1976 - SpecialPRESENT:
Mayor Jason Luby
Mayor Pro Tem Bill Tipton
Councilmembers:
Eduardo E. de Ases
Ruth Gill
Bob Gulley
Gabe Lozano, Sr.
Edward Sample
MINUTES
CITY OF CORPUS CHRISTI, TEXAS
SPECIAL COUNCIL MEETING
OCTOBER 21, 1976
4:00 P.M.
City Manager R. Marvin Townsend
City Attorney J. Bruce Aycock
City Secretary Bill G. Read
Mayor Pro Tem Tipton called the meeting to order in the Council Chambers of
City Hall in the temporary absence of Mayor Luby.
City Secretary Read called the roll; there was a quorum of the Council and
the necessary Charter officers present.
Mayor Pro Tem Tipton announced that the purpose of the public hearing is the
request of Central Power and Light Company for a rate increase.
City Manager Townsend explained that CP&L filed its intent to increase rates
on August 23; 1976. He stated that the public hearing is required by State law and
the City Charter. He stated that the task before the Council is to determine what
is a just and reasonable rate -- that the company must take in enough revenue to
recover operating expenses and provide a reasonable rate of return on their invested
capital.
(Mayor Luby arrived at this time.)
(A verbatim transcript of the public hearing is on file in the office of the
City Attorney.)
City Attorney Aycock swore in the witnesses who were going to testify.
Mr. Bill Woolsey, attorney for CP&L, stated they would review evidence
supporting their requested increase and answer any questions. He distributed to
the Council copies of excerpts from the rate filing package. He stated in his
presentation that he thought it would be "totally unreasonable to attempt to require
allocation of this company on a city -by -city basis."
Mr. S. E. Kelley, District Manager of the Corpus Christi District, stated that
CP&L's last base rate increase was granted in 1973. He cited increases in fuel, labor,
equipment, taxes, interest on long term debt, etc. since that time. He also described
ways the company reduced their operating costs and expenses.
Minutes
Special Council Meeting
October 21, 1976
Page 2
Councilmember de Ases asked for specific figures on their company's cost
reduction efforts. Mr. Kelley responded that he would be able to provide that
information for Mr. de Ases by the end of the meeting.
(Mayor Luby asked to be excused from the meeting temporarily. -- 4:45 p.m.)
Mr. Glen Churchill, Executive Vice President of Central Power and Light
Company, reviewed their operating income and expenses, rate base and return on
invested capital.
Attorney Woolsey next read an excerpt of the testimony of Mr., John B. Gillette
of a consulting engineering firm regarding the requested increase.
Attorney Woolsey then read an excerpt of the testimony of Mr. Merle L.
Borchelt, manager of Fuels Systems Planning of CP&L, dealing with that portion of
the company's operation.
Mr. S. B. Denton, Vice President of CP&L, outlined non -sales 'revenues and
other tables in their filing package. He also spoke against requiring the company
to allocate jurisdictions, saying it would take approximately 7,000 man hours and
$315,000. '
(Mayor Luby returned at this time. -- 5:50 p.m.)
Attorney Woolsey then read an excerpt of the testimony of Mr. Victor M. Prepp
of a consulting firm relative to the increase.
Mr. Francis Jeffries, Executive Vice President of Duncan Phelps Company, a
major independent research firm of Chicago, Illinois, made a presentation to the
Council and gave his qualifications as having served in an advisory capacity with
the Chicago firm as analyst in investments and securities, and had been employed
by Central Power & Light Company as a rate consultant to make a determination as to
the fair rate of return appropriate at this time.
Following a lengthy presentation of statistics, commensurate rates, percentages,
rising costs, new construction demands, bond market competition, consumer index, and
inflation, Mr. Jeffries concluded by stating it was his opinion that the fair rate
of return the company is seeking meets only minimum requirements and,without the
increase sought, the company could be facing the loss of its AA bond rating. He
maintained the company is entitled to a 1515 to 16 percent rate of return on common
equity.
Minutes
Special Council Meeting
October 21, 1976
Page 3
Attorney Wm. Woolsey presented the testimony in detail of Dr. John Langum,
utility rate consultant, which concluded that the company should have a 15 to 15.75
percent rate of return on common equity and 40.18 percent common equity increase.
Mr. Woolsey stated that the report of Dr. Langum had concluded Central Power
and Light Company's testimony.
Mayor Luby invited comments from those in the audience who wished to speak.
There was no response. Mayor Luby expressed surprise that Dr. Languor's report did
not mention that he had testified in defense of the City of Corpus Christi at a
similar hearing in 1972. Mr. Woolsey responded that this statement had been made
early in the written report.
City Manager Townsend gave notice that Central Power & Light Company's
testimony would be recorded but that there would be no reply, awaiting findings from
the City's own consultants' assessment of the request and testimony;
Mr. Townsend questioned Mr. Woolsey regarding the absence of.a city -by -city
breakdown of the utility rates and costs, and asked that the record reflect that the
company had not presented the breakdown of allocated rates as had been requested.
He further questioned CP&L representatives whether there would be more information
submitted pertaining.to the rate structure. Mr. Woolsey responded that there had
been ample information presented in the rate study; that they have no intention of
changing the rate structure; and that there is no way to provide a reliable cost and
usage breakdown of the 108 cities served by CP&L. Mr. Townsend also asked Mr. -
Woolsey to point out to the Council the company's subsidiary companies involved in
the report. Mr. Woolsey named three subsidiary companies.
Mr. Townsend further questioned Dr. Langum's report with regard to fair
value jurisdiction; i.e. if Dr. Languor had been asked to address any question
other than the fair rate of return, and what was the fee or cost of the report
presented. Mr. Woolsey responded that Dr. Langum would have to explain what he
had in mind regarding fair value jurisdictions; that he (Dr. Langum) had not been
asked to address anything other than the fair rate of return; and that the total
consultants' fee was estimated to be $250,000, with Dr. Langum's fee the same as
quoted to the City.
Minutes
Special Council Meeting
October 21, 1976
Page 4
Motion by de Ases, seconded by Tipton and passed, that the hearing be
recessed until November 24, 1976.
There being no further business to come before the Council, the Special
Meeting was adjourned at 7:40 p.m., October 21, 1976.