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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.