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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. * * * * * * * * * * * * * * * DZ/rr