HomeMy WebLinkAboutMinutes City Council - 08/10/1983 - SpecialMINUTES
CITY OF CORPUS CHRISTI, TEXAS
SPECIAL COUNCIL MEETING
Calallen High School Auditorium
August 10, 1983
7:30 p.m.
PRESENT:
Mayor Luther Jones
Mayor Pro Tern Betty N. Turner
Council Members:
Bob Gulley
Herbert Hawkins, Jr.
Dr. Charles W. Kennedy, Jr.
Cliff Zarsky
ABSENT:
Council Member Jack Dumphy
Deputy City Manager Ernest Briones
City Attorney J. Bruce Aycock
City Secretary Bill G. Read
Mayor Luther Jones called the meeting to order at 7:30 p.m. and stated
that the purpose of the meeting was to conduct a public hearing on the rate
request of Nueces Electric Cooperative, Incorporated.
Mayor Jones explained that on June 10, 1983, Nueces Electric Cooperative
had filed a request for a rate increase on its area which is within the City
limits of Corpus Christi.
Mayor Jones continued by informing the audience that on June 29, the City
of Corpus Christi had suspended the proposed rates for 120 days, and the final
hearing before the Public Utilities Commission will be August 29, 1983. He
stated further that Corpus Christi has the regulatory authority to decide if the
rate increase is in order and the City Council will make that decision after the
decision is made by PUC.
Council Member Cliff Zarsky read the resolution passed earlier in the day
by the City Council urging Central Power & Light Company to apply to PUC for
dual certification of the area now served by Nueces Electric Cooperative.
case.
Mayor Jones invited Nueces Electric Cooperative, Inc. to present their
SEP 1 9 1984 MICROFILMED
Minutes
Nueces Electric Co -Op, Inc.
August 10, 1983
Page 2
Mr. Ernest Casstevens, representing the utility company, stated that they
have filed their testimony with the Public Utilities Commission and stated that
their company must receive an increase in rates. Mr. Casstevens stated that
their rate request is to increase the company's gross revenue by $744,536.00
annually or approximately 7.7% over revenues furnished by the existing rate
schedule.
Mr. Casstevens informed the Council that the reason for the additional
revenue is for physical facilities that have been constructed and are in place
throughout the cooperative system. He pointed out that the present rates were
established in 1981 and as of 1980, the Cooperative had $9,942,000.00
investment in facilities and at the end of 1982 the Cooperative had in place
facilities in the amount of $14,593,781.00 or an increase of over $4,000,000. He
explained that the amount of revenues to support the 1980 level was found to
be $3,756,800.00 annually and there is 47% more investment in 1982 but only 20%
more in revenue. He stated that this cannot support the investment necessary,
to provide service.
Mr. Casstevens then explained the debt service which is a part of their
operation, noting that the providers of capital require as a condition of
financing that the Cooperative hold its revenue to go with recovery. He stated
that the Cooperative cannot receive a recovery of 1.50 of the interest cost on
its investments at 1980 investment levels. He explained that facility plans are
submitted to the Rural Electrical Authority, which agency determines whether
there is a need for additional facilities, stating that that authority determines
whether the facilities are properly designed to meet the need and after they
have determined that there is a need and if the facilities are properly designed,
they approve the investment and facilities. He pointed out that they approve
the plans only but do not invest in the facilities. Mr. Casstevens then
explained the distribution costs for the Cooperative. He noted that there has
been discussion about the quality of their service and expressed the opinion
that any time a rate increase is requested, complaints are created. He
explained that in Wood River, the Cooperative only had eight outages and three
reports of flickering during the past year. He mentioned that there is a lot of
construction cccurring in. Wood River and if there is an underground system of
lines, their lines could be cut during construction thus creating the outages.
He stated that six of the outages reported were caused by the City of Corpus
Christi Wastewater Services Division and two others by plumbers working in the
area. He explained other outages that had occurred that were not the fault of
Nueces Electric Cooperative.
Mr. Casstevens then assured the Council that all of their material which
was presented as a part of their rate increase request is available for the
public or anyone to examine and they hope that the City will agree with the
rate increase that has been filed. He noted that the City's consultant has
recommended a certain rate increase which is somewhat less than they have
requested.
Mayor Jones inquired of Mr. Casstevens if their utility bills break down
the cost of electricity, the cost of service and the cost of gas.
Minutes
Nueces Electric Co -Op, Inc.
August 10, 1983
Page 3
Mr. Casstevens stated that their bills do not but they are not required to
by PUC. He stated that their bills do set out the cost of fuel but it does not
include the base rate cost.
Council Member Zarsky commented that Central Power & Light Company has
included construction work in progress in rate increase requests but he did not
know if all of their costs have been passed on to the consumer.
Mr. Casstevens stated that the Commission has allowed varying amounts to
be included in the rate base but stated that he could not really address CP&L
CMF costs. He informed the Council that Legislative action has been changed
to make it more difficult to charge CWIP to the rate payers.
Council Member Zarsky inquired of Mr. Casstevens if the company
anticipates that this will be a one-time rate increase, and Mr. Casstevens
replied that most Cooperatives in the state find relief through rate increases
every two years.
Council Member Kennedy noted that Mr. Casstevens had indicated that the
Cooperative had 40° increase in value of investment and inquired as to how
much is new investment, and Mr. Casstevens replied that it was 100%.
Council Member Hawkins referred to Mr. Casstevens' remark that most of
the rate increase was because of investments and stated that 30% was the
operating expenses.
Mr. Casstevens pointed out that the 30% includes their debt service and
operating costs. Mr. Casstevens further explained that of the $746,000
increase only 5100,000 relates to increase and expense for employee payroll,
etc. and all of the ether is for capital expense items and operating expense
items.
Mayer Pro Ter: Turner asked for Mr. Casstevens' opinion of dual
certification which the Council has suggested to CP&L.
Mr. Casstevens expressed the opinion that dual certification doubles the
amount of investment required in the service area and increases the operating
costs for beth companies involved. He stated that this situation has occurred
in the City of Lubbock.
Mayor Jones then called on the City's rate consultant to speak.
Mr. Cregory Tarsar stated that he is a partner of Touche-Ross & Company
and that 65% of his work is on rate cases which he has done for the past twelve
years.
Mr. Tarsar then referred to his report and noted that the scope of his
investigation included the following: (1) limited review of rate application,
including complexity of filing, cost/benefit and the PUC role; (2) issues to be
analyzed include salary adjustment, interest expense adjustment, non-recurring
Minutes
Nueces Electric Co -Op, Inc.
August 10, 1983
Page 4
expenses, time, irterest earned, ratio requirement, financial and operational
ratios; and (3) testimony due August 15, 1983, including participation in the
hearing.
Mr. Tarsar then explained his findings in the following categories: (1)
salary adjustment, including potential adjustment and base salary from $918,000
to $902,000 and potential adjustment in overtime factor from 18.182% to 15.92%;
(2) interest expense adjustment, including recognized debt balance at July,
1983 and debt increase in construction related and typical adjustment and ratio
proceedings. He stated that he recommended no adjustment for this item. (3)
nonrecurring expense, including Dalton & Associate fee for $48,000 and he
recommended removing this expense; (4) times, interest earned, ratio (TIER)
company requested 2.20 times indenture requires 1.50 times, median TIER 2.43
actual TIER 1982 1.82, CFC target for financing is 2.00. He stated that he
recommended no adjustment for this particular item.
Mr. Tarsar continued explaining his findings by referring to financial and
operational ratios on the following items: (1) company compares unfavorably to
norms. Mr. Tarsar stated that this company is higher than other companies.
(2) Management is aware of comparison. (3) CFC is aware of comparison. (4)
Management indicated they intend to improve financial and operational ratios.
He stated that he recommends no action on this.
Mr. Tarsar then made the following recommendations:
(1) Council delay action until PUC order.
(2) City should participate in PUC proceedings.
(3) Testimony to be filed on limited issues, including salaries and
nonrecurring expense.
(4) City should be advised of the Company's plan to reduce cost.
(5) City should reserve the option of requiring a management audit which
he said he did not recommend at this time.
Assistant City Attorney Jay Doegey informed the Council that the City is
already designated as an intervener or party to the rate case and he was of the
opinion that it would be well for the City to so file with the PUC.
A motion was made by Mayor Pro Tem Turner to accept the recommendation
from the City's consultant that the City participate in the PUC proceedings and
file testimony; seconded by Council Member Kennedy.
Mayor Jones then called for comments from the public on the rate increase
request.
Minutes
Nueces Electric Co-Cp, Inc.
August 10, 1983
Page 5
Mr. Malcolm Alexander, 114634 Wood River Drive, trustee of the
Association, urged that the City intervene In the rate hearings. He stated he
believed in a fair return on a fair investment. He expressed the opinion that
the Nueces Electric Cooperative rates should be higher in rural areas than in
density populated areas such as V:'ecd River.
Mr, W. C. Stewart noted that the company stated that they had had some
investment in capital improvements. He pointed out, however, that for the past
few years, this company has charged almost twice as much as Central Power &
Light; they have had 60 outages in a one-month period and they last as long as
four hours. He objected to the fact that they carrot use CP&L at one-half the
cost even though they are in the City limits. He expressed the opinion that
the company is inefficient and the residents of Wood Fiver prefer to be served
by Central Power & Light Company. He pointed cut that the power goes off
curing extremes in temperature and asked where the improvements have been
made.
Mr. Can Winship stated that he lives in Quail Valley in Robstown, Texas
and he had the following points to make: (1) he would like to submit that
Nueces Electric Cooperative was set up for rural areas and their area is no
longer rural; (2) Nueces Electric was designed to be a nonprofit organization
and he felt that they were making a tremendous profit; (3) in 1981, Nueces
Electric Cooperative requested an increase and PUC granted somewhat less than
the requested 18?,; (4) at the hearing in 1981, Nueces Electric stated that they
were aware that their operating costs was somewhat higher and they would try
to reduce these but they have not done so; (5) he stated that if there is any
way that it could he properly accomplished, he would like to encourage the
decertification of Nueces Electric Cooperative for these urban areas and urged
that the City Council assist them in these efforts.
Mayor juries reiterated that the Council did adopt a resolution urging that
Central Power F, Light Company apply for dual certification from PUC.
Mr. Cary Kennedy, 4014 River Drive, stated that he moved to this area
from Lubbock, Texas which has the cheapest electricity in the state. He
expressed the cpiricr that their area should be served by a company that can
provide a better service at a reasonable rate. He objected to the increase.
Mr. Janes Peed stated that he, too, lives in Robstown and he has been
served by Nueces Electric for over a year and they have had a large number of
outages tut the company does not seem to be concerned even though they are
without power for hours at a time. He stated that Nueces Electric Cooperative
rates are muco, more expensive than CP&L's and Nueces Electric service is
terrible. He urged that CP&l_ he encouraged to apply for the dual certification
so that they can serve V.'ocd River Subdivision.
Mr. Bill Ward, '4210 Wood River, referred to the comparative rate schedule
and stated that he had requested a financial statement for 1982 and he was sent
a copy cf c.ne from 1981. He questioned why they do not have a financial
report -;or 1982.
Minutes
Nueces Electric Cc-Cp, Inc.
August 10, 1983
Page 6
Mayor Jones called for the vote on the motion for the City to participate in
the PUC proceedings and it passed unanimously by those present and voting.
Mayor Jones expressed appreciation to School Officials for the use of the
facilities at CalaIlen High School.
There being no further business to come before the Council, on motion by
Council Member Zarsky, seconded by Mayor Pro Tem Turner and passed
unanimously, the Special Council Meeting Has adjourned at 9:28 p.m., August
10, 1983.
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