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HomeMy WebLinkAbout022219 RES - 05/09/1995RESOLUTION APPROVING SETTLEMENT OF CENTRAL POWER & LIGHT COMPANY RATE CASES BEFORE THE PUBLIC UTILITY COMMISSION OF TEXAS, INCLUDING $73.6 MILLION IN REFUNDS TO CUSTOMERS, ABANDONMENT OF CLAIMS BY CPL FOR 567.3 MILLION OF ADDED FUEL COSTS DURING NUCLEAR PLANT OUTAGE, REDUCTION IN FUEL FACTOR SAVING CUSTOMERS 554.6 MILLION PER YEAR, REDUCTION IN REGULATORY ASSETS SAVING CUSTOMERS $16.5 MILLION, FACTORING BENEFITS TOTALING $26.6 MILLION, AND OTHER PROVISIONS AS IN THE ATTACHED AGREEMENT, AS RECOMMENDED BY THE CITIES STEERING COMMITTEE AND CONSULTANTS, AND AS AGREED TO BY OTHER PARTICIPATING PARTIES INCLUDING THE GENERAL COUNSEL OF THE TEXAS PUBLIC UTILITY COMMISSION, THE TEXAS OFFICE OF PUBLIC UTILITY COUNSEL, AND TEXAS INDUSTRIAL ENERGY CONSUMERS. WHEREAS, Corpus Christi has joined with other cities in the service area of Central Power and Light Company in participating in several proceedings involving CPL's rates for fuel and cost of service; and WHEREAS, a settlement has been proposed by the Cities Steering Committee and other parties of all issues in said cases, which settlement is fair and equitable to ratepayers. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS, THAT: SECTION 1. The City Manager is hereby authorized to execute on behalf of the City of Corpus Christi the Stipulation And Agreement for Public Utility Commission of Texas Dockets 12820, 13126, 13650, and 12154, substantially in the form attached hereto as Exhibit A and incorporated herein for all purposes. ATTEST: As, 9. Ci Secretary MAYOR THE CITY CORPUS CHRISTI APPROVED THIS 5TH DAY OF MAY, 1995: JAMES R. BRAY, JR., CITY ATTORNEY 072219 MI.CROf_ILMED CONSOLIDATED DOCKET NO. 12820 PETITION OF THE GENERAL COUNSEL § PUBLIC UTILITY COMMISSION FOR AN INQUIRY INTO THE § REASONABLENESS OF THE RATES AND § OF SERVICES OF CENTRAL POWER AND § LIGHT COMPANY § TEXAS PETITION OF OFFICE OF PUBLIC § UTILITY COUNSEL FOR AN INQUIRY § INTO THE REASONABLENESS OF THE § RATES AND SERVICES OF CENTRAL § POWER AND LIGHT COMPANY § APPEAL AND PETITION OF CENTRAL § POWER AND LIGHT COMPANY FROM § THE RATEMAKING DECISIONS OF § THE CITIES OF PHARR, EDINBURG, § MISSION, WESLACO, MCALLEN AND § ALTON, TEXAS § DOCKET NO. 13126 INQUIRY BY THE GENERAL § PUBLIC UTILITY COMMISSION COUNSEL INTO THE OPERATION § AND MANAGEMENT OF THE SOUTH § OF TEXAS TEXAS NUCLEAR PROJECT § DOCKET NO. 13650 APPLICATION OF CENTRAL § PUBLIC UTILITY COMMISSION POWER AND LIGHT COMPANY TO § RECONCILE FUEL COSTS § OF TEXAS DOCKET NO. 12154 PETITION OF CENTRAL POWER § PUBLIC UTILITY COMMISSION AND LIGHT COMPANY FOR § AUTHORITY TO SURCHARGE/ § OF TEXAS REFUND OVER/UNDER-RECOVERED § FUEL COSTS § T i ASM ATION AND A rREE117FrdT This Stipulation is entered into by CPL and the other entities whose authorized representatives have signed it. WHEREAS, on July 8, 1993, CPL filed a request to surcharge fuel under -recoveries, and to abate same, precipitated in part by the outage then in progress at STP, which request was assigned Docket No. 12154; and WHEREAS, on December 20, 1993, James O. Bryant filed with the PUC a complaint challenging the propriety of CPUs rates, which complaint was assigned Docket No. 12596; and WHEREAS, on March 3, 1994, the General Counsel and OPC filed petitions seeking examination of CPL's rates pursuant to PURA Section 42 and such petitions were assigned Docket Nos. 12820 and 12821; and WHEREAS, the municipalities in CPL's service area listed in Appendix 1 have taken action concerning CPL's rates, and those actions have been appealed to the Commission and consolidated as Docket No. 12835, and the rate changes ordered therein have been stayed by their own terms pending final disposition of the outcome of the consolidated city appeals and original jurisdiction actions at the Commission; and WHEREAS, on November 15, 1994, CPL filed its petition to reconcile fuel costs for the period March 1990 through June 1994, which petition was assigned Docket No. 13650; and WHEREAS, on June 16, 1994, the General Counsel initiated an inquiry into the operation and management of STP, assigned Docket No. 13126, for the purpose of issuing Findings and Conclusions concerning the management and operation of STP, such Findings to 2 be used in CPL's now-pending fuel reconciliation, Docket No. 13650, and other proceedings as may be appropriate; and WHEREAS, Docket Nos. 12820, 12821, 12835 and 12596 were all consolidated and styled as consolidated Docket No. 12820, with the purpose of considering whether CPL's existing base rates are just and reasonable; and WHEREAS, Docket No. 12596 was subsequently severed from consolidated Docket No. 12820 for the purpose of receiving Findings and Conclusions to be entered in Docket No. 13126; and WHEREAS, notice of these proceedings was provided consistent with all statutory and regulatory requirements; and WHEREAS, the Signatories desire to resolve consolidated Docket No. 12820, Docket No. 12154, Docket No. 13126, and, in part, Docket No. 13650 as specified herein; and WHEREAS, the public interest will be served by the adoption of orders consistent with this Agreement because it provides for the expeditious implementation of refunds and the continuation of just and reasonable rates; promotes the adequate and efficient provision of service; and is in accordance with applicable law; and WHEREAS, resolution on a stipulated basis of the matters set forth herein would conserve resources; avoid the uncertainties inherent in future litigation; and reduce rate case expenses now and in the future. NOW, THEREFORE, the Signatories through their undersigned authorized representa- tives, agree and stipulate as follows: 3 ARTICLE I Definitions A. AFUDC - The term "AFUDC" means allowance for funds used during construction. B. Agreement - The term "Agreement" refers to this Stipulation and Agreement, including all appendices hereto. C. Burgess - The term "Burgess" refers to L.E. Burgess Consultants, Inc. D. CPL - The term "CPL" refers to Central Power and Light Company. E. CPL Cities - The term "CPL Cities" means the municipalities listed in Appendix 1. F. Commission or PUC - The term "Commission" or "PUC" refers to the Public Utility Commission of Texas. G. Conclusions - The term "Conclusions" means Conclusions of Law necessary to the entry of an order under the Administrative Procedure Act. H. CSW - The term "CSW" refers to Central and South West Corporation and all of its subsidiary corporations. I. DSM - The term "DSM" means demand side management. J. Findings - The term "Findings" means Findings of Fact necessary to the entry of an order under the Administrative Procedure Act. K. General Counsel - The term "General Counsel" refers to the general counsel of the PUC. L. HL&P - The term "HL&P" refers to Houston Lighting & Power Company, its parent corporation and all affiliates. M. HL&P Factoring Margin - The term "HL&P Factoring Margin" means the after-tax portion of all revenues received by CSW Credit, Inc. from the factoring of HL&P accounts receivable, to the extent that such revenues exceed CSW Credit, Inc.'s cost of factoring determined as shown in Appendix 2. N. ISB Rate - The term "ISB rate" refers to CPL's Interruptible Service (B) - Rider 17. 0. NEIL - The term "NEIL" refers to Nuclear Electric Insurance Limited. 4 P. NUA - The term "NUA" refers to the non -unanimous stipulations in either Docket No. 8646 or Docket No. 9561, or both. Q. OPC - The term "OPC" refers to the Office of Public Utility Counsel. R. Out -of -Pocket Expenses - The term "Out -of -Pocket Expenses" includes postage, copying expense, facsimile transmission expense, overnight delivery charges, delivery service charges, airline travel expense, mileage charges, car rental expense, taxicab and other transportation expenses, out-of-town meals expense, lodging, telephone charges, court reporter and transcript fees, clerical overtime expenses, and on-line research charges. S. PURA - The term "PURA" refers to the Public Utility Regulatory Act of 1995, S.B. 319, 74th Leg., R.S. 1995, or its predecessor, TEX. REV. Cry. STAT. ANN. art. 1446c. T. Reorganization Costs - The term "Reorganization Costs" means all costs incurred by CPL, directly or indirectly, in the corporate reorganization of CSW announced in 1993. U. STP - The term "STP" refers to the South Texas Project. V. Signatories - The term "Signatories" means those parties which execute this Agreement, including any party that signs this Agreement as a non -opposing party. W. TIEC - The term "TIEC" refers to Texas Industrial Energy Consumers. X. UFW - The term "UFW" refers to United Farm Workers of America, AFL-CIO. ARTICLE II Nature of the Agreement This Agreement is the result of an extended and highly complex course of negotiations among the Signatories. It necessarily represents many compromises made by the Signatories on all of the issues involved. The Agreement covers several separate CPL proceedings pending at the PUC, each of which involves a number of discrete issues. In addition, this Agreement constitutes a compromise of issues that are likely to arise in future CPL proceedings at the PUC. The Signatories intend that the entire Agreement be viewed as a unitary, whole agreement, and not separate agreements on discrete issues or phases of any particular case. The resolution of 5 each issue is interrelated to the resolution of all other issues. The Signatories understand and agree that each term of this Agreement is in consideration and support of every other term. As a result, the Agreement is indivisible because of the comprehensive nature of the compromises made. ARTICLE III Resolution of Docket No. 12820; Resolution of All ca Issues in Docket No. 13126; Partial Resolution of Docket No. 13650; Resolution of Docket No. 12154 A. This Agreement is a compromise and settlement of various issues either in dispute now or potentially in dispute in the future among the Signatories. This Agreement is a compromise and settlement of all issues in Docket No. 12820. It is a compromise and settlement of all issues in Docket No. 13126 insofar as any issues in that docket pertain to CPL, either directly or indirectly. To the extent that the ultimate outcome of Docket No. 13650 will be determined by the resolution of any issues in Docket No. 13126, this Agreement is a settlement and compromise of those issues in Docket No. 13650. However, this Agreement does not purport to settle, compromise, or otherwise resolve any issues in Docket No. 13650 which are not within the scope of this Agreement. This Agreement also addresses the following issues arising out of the NUAs in Docket No. 8646 and Docket No. 9561: excess unprotected deferred income taxes, overearnings during the rate freeze period, and identification of costs as base or fuel related. This Agreement is also a settlement and compromise of all issues in Docket No. 12154. B. The Signatories agree to request that the Commission enter a final order resolving Docket No. 12820 in the manner provided in this Agreement. Signatories other than CPL agree 6 that the likely outcome of a decision from litigation would be a rate reduction. Signatories other than CPL further agree that an assumed rate reduction over a specific period has a present economic value to ratepayers. Since any conclusion regarding the reasonableness of CPL'S rates will depend in substantial part upon the amount of Mirror CWIP considered for ratemaking, and since the balance changes monthly during the period under review, the Signatories agree that preservation of CPL's existing revenue requirement and a finding that existing rates are just and reasonable is justified assuming CPL refunds $50 million in base rates and has a rate base of at least _ and a cost of service of at least _. The Signatories further agree that the maintenance of CPL's existing rates is reasonable given the base rate refund and other economic benefits that will inure to ratepayers under the terms of the Agreement. Signatories other than CPL also agree that the economic benefits that inure to ratepayers under the Agreement are equivalent to at least a $30 million base rate reduction. The Signatories agree that the rate base and cost of service assumed as a basis for this settlement are a compromise and that no party will be bound by this Agreement in CPL's next rate case by any assumptions, findings or conclusions regarding rate base, cost of service or rate of return, except as otherwise provided in this Agreement or Commission orders consistent with this Agreement. Appendix 3 attached hereto contains Findings and Conclusions which the Signatories agree support the preservation of the existing base rates in Docket No. 12820 consistent with the terms of this Agreement. If the Agreement is contested and any contesting party challenges the cost of service and rate base which underlies this Agreement, the Signatories agree to negotiate in good faith to develop a specific cost of service, rate base, and related Findings and Conclusions which will support the Agreement. 7 7 r C. The Signatories agree to request that the Commission enter an order, including appropriate Findings and Conclusions, resolving all issues pertaining to CPL in Docket No. 13126 in the manner provided in this Agreement, and that the record and order pertaining to those issues be severed from Docket No. 13126 and consolidated with Docket No. 13650 so that a final resolution of Docket No. 13650 can be reached. The Signatories further request that the severance of Docket No. 13126 be accomplished in such a manner as to preclude the relitigation in Docket No. 13650 of the issues contained in Docket No. 13126. The Signatories agree to use their best efforts to obtain timely orders from the Commission consistent with this Agreement and to develop proposed Findings and Conclusions which support the requested orders in those dockets. The Signatories further agree that in consideration of the benefits received under this Agreement that if any party to Docket No. 12820 or Docket No. 13126 introduces evidence in the proceeding which considers this Agreement that CPL was imprudent in the management of its ownership interest in STP through June 30, 1994, either in its capacity as an owner of a portion of STP or in its capacity as a member of the STP Management Committee, or otherwise seeks such Findings or Conclusions in the proceeding, the Signatories, other than CPL, agree not to take a position with respect to any evidence introduced regarding CPL's prudence or imprudence or with respect to the Findings or Conclusions requested by any party on that subject. 8 T ARTICLE IV Base Rate Refund A. CPL agrees to a one-time base rate refund of $50 million to Texas retail customers. Base rate refunds to Texas retail customers shall be made pursuant to the methodology set forth in Article XXVI. B. The Signatories agree to request that the Commission enter an interim order authorizing the above -referenced base rate refund to be applied to bills issued to all customers in the billing month of July 1995, assuming that the Commission has not issued all orders necessary to finally implement the requisite terms of this Agreement by June 29, 1995. The Signatories further agree that if the Commission issues orders which are materially inconsistent with the terms of this Agreement, each Signatory will support a request by CPL to recoup the above -referenced base rate refund plus interest through a surcharge to all classes of customers over a 12 -month period. C. The Signatories agree that the final order in Docket No. 12820 shall provide that there shall be no overall base revenue change for CPL and that there shall be no base revenue increase to any customer. ARTICLE V STP Performance Standards A. The Signatories agree that upon entry of Commission orders implementing the terms of this Agreement, they will negotiate in good faith for development of performance standards to be applied prospectively to CPUs interest in STP. The first meeting to negotiate such standards shall be held within 30 days after the filing of this Agreement with the 9 Commission. Failure of the participating parties to agree on appropriate performance standards for STP will not affect any of the other terms of this Agreement and will not be a breach of this Agreement. Notwithstanding any other provision of this Agreement, if an agreement concerning performance standards is not reached within 150 days of the filing of this Agreement with the Commission, the negotiations will cease unless the parties agree to continue them. The Signatories agree that no statements made during these negotiations can or will be used or referred to by another party in any pending or future proceedings. In the event that a proceeding to consider performance standards for STP is initiated at the Commission prior to the expiration of 150 days after the filing of this Agreement with the Commission, all Signatories are free to seek to participate in those proceedings. B. CPL, without prior Commission approval, will reimburse up to $50,000 of reasonable expenses incurred by CPL Cities related to participation in the negotiations for development of STP performance standards. This reimbursement is limited to expenses incurred within the 150 -day period referred to in Paragraph A of this Article. For purposes of this Agreement only, such expenses will be considered to be rate case expenses, and each Signatory agrees not to oppose the recovery of such expenses in CPL's next base rate proceeding. The Signatories agree that such expenses will be treated as rate case expenses in Docket No. 12820 and recovered under the provisions of Article XXII. ARTICLE VI Fuel Factor Filing CPL will file, and the Signatories agree to support, a petition with the Commission to reduce its fuel factors by $54.6 million on an annual Texas retail basis, to be effective no later 10 than the billing month of August 1995. Such petition shall be filed within ten days of the filing of this Agreement with the Commission. The revised fuel factors that CPL will propose are contained in Appendix 4. The Signatories recognize that CPL's petition will not be filed at a time specified by Subst. R. 23.23(b)(2)(C). The Signatories agree to support CPL's request for a good cause exception to consider the petition based on the circumstances of this Agreement, its interrelated provisions, and the issues that the Agreement was intended to resolve. ARTICLE VII Fuel Refund A. CPL agrees to absorb, and not require its retail customers to pay, $62.25 million of STP replacement power costs, plus related interest on the absorbed costs, incurred during the reconciliation period ending June 30, 1994. $60 million plus interest will be credited to Texas retail reconcilable fuel costs. In addition, there will be a billing adjustment of $2.25 million, plus related interest, to customers served under the Company's ISB rate. Attached Appendix 5 contains a schedule agreed to by the Signatories showing the months of the reconciliation period from which, for purposes of this Agreement, the absorbed replacement power costs are to be deducted from reconcilable fuel costs and adjusted from ISB billings, the amount of the reductions, and the calculation of interest on the absorbed costs pursuant to Subst. R. 23.23(b)(3)(C)(i). Appendix 6 shows the specific fuel contracts and purchased power resources that the Signatories agree, for reconciliation purposes, are deemed to have been used to provide the replacement power for STP that CPL has agreed to absorb. With respect to gas and coal purchase contracts and purchased power resources in Appendix 6, the Signatories agree that the terms of the contracts, including price, and the terms under which the purchased power 11 resources were obtained, including price and quantity, are deemed reasonable for fuel reconciliation purposes in Docket No. 13650. The Signatories agree to request Commission Findings consistent with this Article VII. A. B. The Signatories agree to support CPL's request for an interim order approving a $23.6 million fuel cost refund in the billing month of July 1995. CPL will file the request when it files its petition to reduce fuel factors as addressed in Article VI. Attached Appendix 7 shows the refunds to be made for each class and the refund tariff that will be filed by CPL and that is agreed to by the Signatories. The refund of $23.6 million has been determined by taking into account CPL's agreement to absorb STP replacement power cost, plus interest, and CPL's reported balance of fuel over/under recoveries at the end of the billing month of March 1995. The Signatories have not undertaken to verify CPUs reported balance of fuel over or under collections, including specifically the component elements of that balance, and the Signatories expressly retain their rights to challenge such matters in any other proceedings except as indicated in this Agreement. The Signatories agree that they will not oppose CPL amending its fuel refund request to include a refund of CPUs estimate of any additional over -recoveries that accumulate during the billing month of April 1995, provided such update uses the same method agreed to in this Article VII and in Article XXVII. The Signatories recognize that CPL's petition will not be filed at a time specified by Subst. R. 23.23(b)(2)(A)(iii) (II). The Signatories agree to support CPL's request for a good cause exception to consider the petition based on the circumstances of this Agreement, its interrelated provisions, and the issues that the Agreement was intended to resolve. 12 C. CPL also agrees to request that Docket No. 12154 be severed from Docket No. 13650 and then dismissed. The Signatories support dismissal of Docket No. 12154 but hereby recognize CPL's right to file a subsequent petition to surcharge or refund under/over-recoveries which may accumulate in the future, or in the event this Agreement is not implemented and CPL has a material balance of unrecovered fuel costs. ARTICLE VIII Regulatory Return on Common Equity The Signatories agree that a regulatory return on common equity of 11.75% will be adopted in Docket No. 12820 and used prospectively by CPL. ARTICLE IX Mirror CWIP Treatments A. The Signatories agree that CPL shall have the right to accelerate the amortization of a portion of its Mirror CWIP asset, in addition to the then -current Commission -approved Mirror CWIP amortization. CPL may elect to accelerate the amortization of Mirror CWIP during the period January 1, 1996 through December 31, 1999 by amounts not to exceed $25 million to the retail jurisdiction for any calendar year. CPL may not write up any other assets to offset such accelerated amortization. CPL may make its election for any calendar year at any time before, during or after the calendar year, but in no event after the date specified in Article IX.B., below. For purposes of earnings monitoring and any Section 2.211 proceeding during the period January 1, 1996 through December 31, 1999, the Signatories agree that any such accelerated amortizations will be treated as reasonable and necessary expenses with one -twelfth of the annual amortization being reflected in each month of the calendar year for which 13 accelerated amortization has been elected. The Signatories further agree not to oppose the treatment of any amortization elected by CPL as a known and measurable adjustment to test year cost of service or earnings monitoring reports for that portion of any amortization that has been elected and falls within the 12-month period immediately following the projected effective date for rates. For purposes of each earnings monitoring report and any Section 2.211 proceeding after January 1, 1996, and each future Section 2.212 proceeding, the Signatories agree that the portion of CPL's rate base attributable to Mirror CWIP shall be reduced by the amount of the accelerated amortizations actually taken or to be taken by CPL prior to the projected effective date for rates, if any, in addition to the then-current Commission-approved amortization. CPL will not use an accelerated amortization to justify a Section 2.212 rate increase, but may contend in response to a proposal for a rate reduction that the accelerated amortizations support retaining rates at their then-existing level. B. CPL shall make its elections by written notification to the Secretary of the Commission by March 31 of the year following the calendar year for which the election is being made, after which such election will be binding on and irrevocable by CPL. CPL agrees to request the initiation of a Commission project in which such elections shall be filed. The Signatories shall be provided with a copy of each notification that CPL makes to the Commission. C. Until the voluntary accelerated amortizations allowed in Paragraph A above equal or exceed $30 million to the retail jurisdiction, and except as provided in Article XV, CPL agrees to a temporary exclusion of $30 million of the Mirror CWIP asset from rate base, and the related amortization from cost of service, for the purpose of any rate increase filing made T 14 by CPL through December 31, 1999. In calculating the $30 million of Mirror CWIP temporarily excluded from rate base, amounts voluntarily amortized by CPL pursuant to Article IX.A above, shall be considered in arriving at the $30 million total. ARTICLE X Walker -Grimes Lignite Reserves The Signatories specifically reserve the right to oppose the inclusion of the Walker - Grimes lignite reserves in rate base as plant held for future use in any subsequent proceeding. In addition, CPL agrees not to use this Agreement as support for the inclusion of the Walker - Grimes lignite reserves in rate base as plant held for future use in any subsequent proceeding. ARTICLE XI Business Interruption Insurance A. In the event that CPL obtains coverage under its pending business interruption insurance claim submitted to NEIL, the Signatories agree that the customers of CPL shall be entitled to recover, as reconcilable fuel costs, one-half of all such proceeds, net of reasonable legal fees, third -party consultant and witness fees, and attendant Out -of -Pocket Expenses. The Signatories agree that the remaining one-half of such net proceeds shall be retained by CPL and that no claim for such proceeds shall be made by any Signatory in any regulatory or judicial proceeding involving CPL. CPL shall use reasonable business judgment in prosecuting the business interruption insurance claim, it being expressly recognized that in the exercise of that reasonable business judgment, it may be reasonable for CPL to elect not to pursue insurance coverage. 15 13. To the extent that reasonable legal fees, third-party consultant and witness fees, and attendant Out-of-Pocket Expenses incurred in pursuing the claim in paragraph A, above, exceed the proceeds from coverage, if any, and even if CPL elects to discontinue its claim for coverage, the Signatories further agree that CPL may seek recovery of up to one-half of its reasonable legal fees, third-party consultant and witness fees, and attendant Out-of-Pocket Expenses associated with the above-referenced claim in future CPL proceedings. CPL agrees that it will not seek recovery of such fees and expenses in any rate proceeding filed later than three years after the last of such expenses have been incurred by CPL. Nothing in this Agreement shall be construed to affect CPL's burden to prove the reasonableness of such requested fees and costs in future proceedings. ARTICLE XII Litigation Related to the STP Outage A. The Signatories agree that in the event that CPL initiates or becomes involved in proceedings against HL&P for damages related to the operation and management of STP occurring through June 30, 1994, and in the event such litigation results in compensation being paid to CPL or CSW by HL&P, CPL shall be entitled to retain the first $62,250,000 of such compensation, net of reasonable legal fees, third-party consultant and witness fees, and attendant Out-of-Pocket Expenses. The Signatories agree that they will not request recoupment of any portion of such amount on behalf of any CPL customers in any regulatory or judicial proceeding involving CPL. In the event that such litigation results in compensation being paid to CPL or CSW in an amount above $62,250,000, net of reasonable legal fees, third-party consultant and witness fees, and attendant Out-of-Pocket Expenses, the customers of CPL shall be entitled to 16 recovery of the next $15,000,000 of such recovery. The recovery of such amount by customers shall be treated as reconcilable fuel costs. The Signatories hereby agree that this division of the proceeds of such litigation is reasonable and appropriate, giving consideration to the resolution of issues and interrelated provisions contained in this Agreement. If CPL or CSW obtains compensation in excess of $77,250,000, net of reasonable legal fees, third -party consultant and witness fees, and attendant Out -of -Pocket Expenses, the Signatories expressly acknowledge that this Agreement does not purport to allocate or divide between CPL and its customers the amount in excess of $77,250,000, net of reasonable legal fees, third -party consultant and witness fees, and attendant Out -of -Pocket Expenses. B. The Signatories agree that any decision to initiate any form of litigation against HL&P referred to in Paragraph A, above, shall be made by CPL in its sole discretion. The conduct, control, and possible compromise of such litigation shall lie within the sole discretion of CPL. It is expressly recognized that CPL may decide not to pursue such claims. No Signatory will argue, in any current or future proceeding, that failing to pursue claims against HL&P for damages related to the operation and management of STP occurring through June 30, 1994 constitutes imprudent management by CPL. C. CPL agrees that all legal fees and other litigation costs associated with litigation initiated by CPL shall not be included in CPL's cost of service in any future base rate proceeding; provided that if such litigation results in the payment of compensation to CPL by HL&P, such litigation costs shall be initially deducted from the calculation of the amounts to which CPL or CPL's customers are entitled pursuant to Paragraph A of this Article XII. However, CPL reserves the right to request inclusion in cost of service in any future base rate 17 proceeding of any legal fees and other litigation costs incurred in any STP -related actions into which CPL is involuntarily joined as a party, to the extent such fees and costs are for the purpose of defending against such actions and not for the purpose of seeking recovery of damages. Signatories other than CPL reserve the right to take any position, in any future base rate proceeding, on CPUs request to include these legal fees and other litigation costs in cost of service. ARTICLE XIII Rate Filing Moratorium A. CPL agrees not to file any request to increase its retail base rates prior to September 28, 1995. Considering the 35 -day statutory suspension period and the minimum 150 - day additional suspension period allowed under PURA § 2.212, this Agreement is intended to produce an implementation date for permanent new rates of no sooner than March 31, 1996. The Signatories agree that CPL will not violate this provision by filing a rate increase application on or after September 28, 1995 and asking for the minimum 35 -day suspension in anticipation of the Commission exercising its right to suspend rates for an additional 150 days. B. CPL agrees not to seek interim rates to be effective prior to January 1, 1996. The Signatories agree not to contend that because CPL agreed to a rate filing moratorium, CPL's request for interim rate relief should be denied. However, the Signatories may oppose CPL's request for interim rate relief on any other grounds. 18 ARTICLE XIV Resolution of All Claims Related to STP Operating Performance Prior to June 30. 1994 The Signatories agree that the entry of appropriate Findings, Conclusions, and orders in Docket No. 12820, Docket No. 13126, and Docket No. 13650 consistent with the terms of this Agreement shall finally and permanently resolve any and all claims of any type related to CPL's responsibility or liability for the operating performance of STP through June 30, 1994. This resolution includes any type of claim, which, if successful, would result in the disallowance of a portion of CPL's rate base or a Finding that certain expenses are not reasonable and necessary or that CPL's rate of return should be adjusted pursuant to Section 2.203(b) of PURA due to the operating performance of STP prior to June 30, 1994. The Signatories expressly agree to seek the entry of appropriate Findings, Conclusions, and orders in Docket No. 12820, Docket No. 13126, and Docket No. 13650 consistent with this Article XIV. All Signatories reserve the right in future proceedings to introduce evidence pertaining to STP's performance or the conduct of STP's management prior to July 1, 1994 solely for purposes of establishing a pattern of performance or conduct. The Signatories also agree that although the future proceedings may consider a pattern of performance or conduct regarding STP that covers periods before July 1, 1994, no Signatory will sponsor or support, in future proceedings, a calculation of any disallowance of reconcilable fuel expense or of a component of base rates, including but not limited to an adjustment pursuant to Section 2.203(b) of PURA, that uses or relies upon measurements of STP performance covering periods before July 1, 1994. It is specifically agreed to by all Signatories that nothing in this Agreement is intended to require any parties to withdraw their appeals of the Commission final orders in Docket No. 8646 or Docket No. 9561. 19 ARTICLE XV Resolution of Claims Related to Excess Earnings During Freeze Period The Signatories agree not to make or support claims directly or indirectly in Docket No. 12820 or in future proceedings that CPL earned a regulatory return in excess of 14% during the rate freeze period as that term is defined in Article VII of the NUA in Docket No. 8646 and Article XXI, Section 2 of the NUA in Docket No. 9561. This Agreement is intended to provide economic value to resolve rate freeze excess earnings claims among the Signatories. Should CPUs earnings during the rate freeze period be contested in any future proceeding, and should a portion of such earnings be ordered to offset future rates or Mirror CWIP asset balances pursuant to Article VH of the NUA in Docket No. 8646 or Article XXI, Section 2 of the NUA in Docket No. 9561, CPL's obligation to reduce its Mirror CWIP balance as set out in Article IX.C. is modified. The amount of Mirror CWIP that CPL must remove from rate base under Article IX.C. will be reduced (but not below zero) by the amount necessary to achieve the same revenue requirements impact of any offset ordered by the Commission pursuant to the above NUA provisions. ARTICLE XVI Reorganization Costs The Signatories agree that CPL reorganization costs totalling $20.7 million should be recognized as a regulatory asset to be amortized to cost of service over six years, beginning on January 1, 1995. The Signatories further agree that no retum on the unamortized balance is to be included in rates. 20 -r ARTICLE XVII Excess Deferred Income Taxes A. The Signatories agree that the balance of $_ million of unamortized excess unprotected deferred income taxes existing on CPL's books at may be retained by CPL for the benefit of its shareholders. The $ million of unamortized excess unprotected deferred income taxes represents a net of tax amount. B. CPL agrees that in its first rate increase filing, it shall request rate treatment which will reduce its proposed increase by an amount identical to that resulting from application of Article XIII of the Docket No. 8646 NUA. An example of the operation of these restrictions is contained in Appendix 9. C. The Signatories agree that the provisions contained in this Article XVII should be interpreted so as to provide a treatment with the same economic value to customers as that contained in Article XIII of the Docket No. 8646 NUA and Article XXI, Section 7 of the Docket No. 9561 NUA. The Signatories hereby agree not to contend in any future proceeding that CPL has violated Article XIII of the Docket No. 8646 NUA and Article XXI, Section 7 of the Docket No. 9561 NUA so long as CPL complies with this Article XVII. ARTICLE XVIII Classification of Costs and Revenues The Signatories agree that the classification of costs and revenues as base or fuel that is specified for the rate freeze period in Article XI of the Docket No. 8646 NUA and Article XXI, Section 6 of the Docket No. 9561 NUA should continue until the effective date of any rate change ordered in CPL's next base rate filing following Docket No. 12820. Specifically, the 21 Signatories agree that the classification of revenues and costs as base and fuel -related set forth in Appendix 10 is consistent with prior CPL stipulations and maintains CPL base rates at their current levels. The Signatories agree that the circumstances of this Agreement, its interrelated provisions, and the issues it resolves constitute special circumstances supporting such continued treatment. The Signatories agree not to oppose in Docket No. 13650 the continued classification of costs and revenues as base and fuel that is set out in Appendix 10. In the next base rate filing referred to above, CPL agrees to seek to reclassify railcar depreciation, maintenance, ad valorem taxes and lease payments to be included in base rate revenue requirements, if such treatment is consistent with the then -existing statutory requirements and Commission rules. Nothing in this Agreement shall be construed to require the Signatories other than CPL to support or oppose any specific classification of costs or revenues as fuel or base in CPL's next base rate proceeding following Docket No. 12820 for purposes of prospective application beginning with the effective date of rates in that docket. Nothing in this Article XVIII is intended to interfere with or supersede orders applicable to CPL, or commitments made on behalf of CPL in connection with the merger of El Paso Electric Company with CSW, concerning the treatment of costs as base or fuel, the manner or amount of their recovery, or the need by CPL to justify recovery of those costs in future proceedings. ARTICLE XIX Depreciation Rates The Signatories agree that there should be no change to existing depreciation rates for CPL plant in Docket No. 12820. The Signatories agree to request the entry of appropriate Findings and Conclusions in the final order to be entered in Docket No. 12820 that CPL's 22 depreciation rates shall not be changed. Nothing in this Agreement shall be construed to prohibit CPL or any other Signatory from seeking changes in CPUs depreciation rates in any future base rate proceeding. ARTICLE XX Decommissioning Funding The Signatories agree that the decommissioning expense and funding for STP should remain at its currently -approved level. The Signatories agree to request appropriate Findings and Conclusions in support of that level in the final order in Docket No. 12820. CPL will request an updated level of decommissioning expense and funding in its next filing to change base rates. Nothing in this Agreement shall be construed to prevent any Signatory from requesting a different level of decommissioning expense funding in any future CPL base rate proceeding. ARTICLE XXI Factoring of HL&P Accounts Receivable For each annual period beginning January 1, 1996 and thereafter, CPL agrees to amortize its Mirror CWIP asset balance by an amount equal to the Texas retail jurisdiction allocation of the HL&P Factoring Margin received in that annual period. The Texas retail jurisdiction alloca- tion of the HL&P Factoring Margin shall be determined annually, using data from each year and applying a 4 Coincident Peak production plant allocation method. The Signatories support the entry of an order specifying use of the above accounting treatment to compensate customers for the proceeds from HL&P factoring in the future. The Signatories agree not to challenge the retention by CPL and CSW of the return on the HL&P factoring transaction in years prior to 23 1996 and the return on equity invested by CSW Credit, Inc. in years 1996 and thereafter. Further, the Signatories agree not to seek to include any of the proceeds from the factoring transaction in cost of service determinations for CPL, as long as CPL makes the annual Mirror CWIP amortizations prescribed above and reflects the resulting rate base levels in cost of service determinations. CPL agrees that the spinning reserve and wheeling benefits obtained under the HL&P settlement should be treated as reconcilable fuel costs and flowed through to CPL customers. The Signatories agree to request that the PUC enter Findings that this Agreement finally resolves any and all disputes pertaining to the December 30, 1992 settlement between CPL and HL&P. ARTICLE XXII Rate Case Expenses A. The Signatories agree that the reasonable rate case expenses incurred by CPL in connection with Docket No. 12820 and Docket No. 13126, including CPL Cities' reimbursed rate case expenses but excluding amounts paid by CPL to Burgess in connection with its audit performed for Docket No. 13126, shall be deferred and amortized over a three-year period beginning with the date of the Commission order in Docket No. 12820. B. The Signatories agree that the amount of $ , representing such rate case expenses submitted through , are reasonable and necessary expenses to be amortized over the three year period. Reasonable expenses submitted by CPL after may be added to the deferred amount, but are subject to review for reasonableness in subsequent rate proceedings and must be fully amortized over the remainder of the three-year period specified above. The Signatories agree that the deferred rate case 24 expenses, to the extent found reasonable, are appropriate for inclusion as a cost of service item in subsequent rate proceedings during the deferral period; however, the unamortized balance of such costs shall not be included in rate base or earn a return. C. The Signatories agree to support recovery of the amounts paid by CPL to Burgess in connection with its audit performed for Docket No. 13126 beginning with the implementation of CPUs next base rate change. To the extent that such costs are recovered over multiple years, the Signatories agree to not oppose a return on the unamortized balance. ARTICLE XXIII Demand Side Management Settlement On January 26, 1995, a Joint Motion for Approval of DSM Agreement was filed in Docket No. 12820 by the General Counsel, the Environmental Defense Fund, Texas Ratepayers Organization to Save Energy, the United Farm Workers Association, H. E. Butt Grocery Company, and CPL. The filed DSM agreement settled all DSM matters in Docket No. 12820 and proposed broad guidelines for CPL's future DSM efforts. The DSM agreement has not been opposed by any party to Docket No. 12820. The Signatories agree that each will either support or not oppose the pending DSM agreement and further agree that nothing in this Agreement is intended to alter or in any manner amend the filed DSM agreement. ARTICLE XXIV Agreement Between CPL and TIEC Concerning Docket No. 12820 On November 30, 1994, CPL and TIEC entered into a written agreement to resolve certain issues outstanding between CPL and TIEC in Docket No. 12820. The written agreement was filed with the Commission on November 30, 1994, as a part of the Supplemental Rebuttal 25 T T Testimony of CPL witness Donald R. Moncrief. The agreement between CPL and TIEC was not opposed by any party to Docket No. 12820 in either cross-examination or briefs. The Signatories agree that each will either support or not oppose the agreement between CPL and TIEC and further agree that nothing in this Agreement is intended to alter or in any manner amend the agreement between CPL and TIEC. The Signatories do not oppose the approval of tariffs, attached herein as Appendix 13, as proposed by CPL and TIEC. ARTICLE XXV High Load Factor/Low Income Rate Settlement(s1 A. CPL and UFW have entered into a settlement agreement for the purpose of resolving all issues in Docket No. 12820 between CPL and UFW. The CPL/UFW settlement agreement is attached to this Agreement as Appendix 14 and is fully incorporated into this Agreement for all purposes. The terms of the CPL/UFW settlement agreement are valid and binding on CPL and UFW only to the extent that this Agreement becomes and remains valid and binding on CPL and UFW. The Signatories agree that each will either support or not oppose the CPL/UFW settlement agreement. B. High Load Factor. [to be drafted at a later date] ARTICLE XXVI Base Rate Refund Methodoloev A. The Signatories agree that the base rate refund agreed to in Article W should be accomplished during the billing month of July 1995, by percentage reductions to each CPL tariffed rate class which represents an equal percentage refund by rate class based on base rate 26 billings between April 1994 and March 1995. The rate refund by class is set out in Appendix 11. B. The Signatories further agree that refunds for transmission voltage level customers and seasonal agricultural customers be accomplished by a lump sum bill credit or refund check during the month of July 1995, based on application of the class percentage rate reduction to each customer's contribution to class base rate revenues during the period April 1994 through March 1995. For all other retail customers, except those customers taking service under Commercial Space Heating Rider 3, the refund will be accomplished by applying the factors set out in Appendix 12 to billings during the billing month of July 1995. The refund to commercial space heating customers will be applied to billings in the billing month of November 1995, when service under such rider is normally delivered and will include interest from July 1995 to the refund month. C. After the end of the month of July 1995, CPL will provide all parties to Docket No. 12820 with workpapers showing the amount refunded and any over/under-refund balance. If the total amount of the over/under-refund balance is more than $500,000, the amount will be surcharged or refunded through true -up factors to be applied to billings in the billing month of October 1995. The Signatories agree to negotiate in good faith to develop a refund/surcharge true -up factor to be presented to the Commission and applied following Commission approval. Any balance that remains after refunds, including any true -ups, will be added or subtracted from the fuel balance and reconciled in CPL's next fuel reconciliation proceeding. D. The Signatories agree that should this Agreement not be implemented, and should the Commission find that no refund or a lesser refund is appropriate, they will support the 27 application by CPL for approval of surcharge factors appropriate to recover the amount of any excess refunds. ARTICLE XXVII Fuel Refund Methodology A. The Signatories agree that an interim fuel refund should be accomplished during the billing month of July 1995, using the tariff sheets attached as Appendix 7. B. The refund factors set out in Appendix 7 are based on the methodology prescribed by Subst. R. 23.23(b)(3)(C). The Signatories also agree that the fuel refund factor should be applied to commercial heating customers in the month of November 1995, when such customers are taldng service under that rider. ARTICLE XXVIII Other Post -Employment Benefits CPL agrees to include testimony concerning its compliance with PUC Subst. R. 23.21(b)(1)(H)(v) in the rate filing package for its next rate case, and will not oppose a provision to that effect in the final order to be issued in Docket No. 12820. ARTICLE XXIX Other Provisions A. The Signatories, after extensive negotiations, have reached a compromise and settlement to resolve Docket No. 12820, Docket No. 13126 as it relates to CPL, Docket No. 13650 as it pertains to the CPL -related issues in Docket No. 13126, and other matters discussed herein. The Signatories agree that this Agreement is in the public interest. The Signatories shall urge the Commission to adopt appropriate orders consistent with the terms of this Agreement. 28 If the Commission does not adopt appropriate orders consistent with the material terms of this Agreement, the Signatories agree that neither oral nor written statements made during the course of the settlement negotiations, nor the terms of this Agreement may be used as an admission or concession of any sort nor as evidence in any proceeding. This obligation shall continue and be enforceable, even if this Agreement is terminated as provided in this Article XXIX. B. This Agreement reflects a compromise, settlement and accommodation among the Signatories, and all Signatories agree that the terms and conditions herein are interdependent. If the Commission does not enter orders consistent with the material terms of this Agreement in Docket No. 12820 and Docket No. 13126 as it pertains to CPL, each Signatory has the right to withdraw from this Agreement by giving written notice to all parties to Docket No. 12820 and Docket No. 13126. In the event a Signatory exercises its right to withdraw from this Agreement under this Article XXIX.B., all obligations imposed on that Signatory under the terms of this Agreement are extinguished, except that in the event CPL exercises its right to withdraw from this Agreement under this Article XXIX.B., all Signatories, including any that may have withdrawn, remain obligated to support a request by CPL to recoup such interim refunds plus interest as set forth in Article IV of this Agreement. C. It is specifically recognized that the Signatories, except for CPL, will not submit pre -filed testimony regarding the merits of the Agreement and will forego cross-examination of the testimony that is submitted in support of the Agreement; provided, however, that any Signatory may submit rebuttal testimony in support of the rate design under this Agreement if the rate design is contested by a non -Signatory. 29 D. This Agreement is binding on each of the Signatories only for the purpose of settling the issues herein and for no other purpose. Specifically, by entering this Agreement, no Signatory admits to any wrongdoing or the absence of wrongdoing, imprudence or prudence, unreasonableness or reasonableness of any expenses, capital expenditures or rate design, or otherwise admits any liability. Further, no Signatory agrees to the propriety of any ratemaking theory or principle that may be said to underlie any of the issues resolved by this Agreement. The matters resolved herein are resolved on the basis of a compromise and settlement. Except to the extent that this Agreement expressly governs Signatories' rights and obligations for future periods, this Agreement shall not be binding or precedential upon such Signatories outside of this case. It is acknowledged that a Signatory's support of the matters contained in this Agreement may differ from its position taken or testimony presented in other dockets concerning matters not specifically addressed herein. To the extent that there is a difference, the Signatories are not waiving their position in other dockets. Because this is a stipulated agreement, the Signatories are under no obligation to take the same positions as set out in this Agreement in other dockets, whether those dockets present the same or a different set of circumstances, except as provided in this Agreement. E. The Signatories recognize that any orders consistent with the terms of this Agreement must be supported by record evidence satisfying the requirements of PURA. To support the foregoing, CPL shall prepare, file and defend appropriate testimony and supporting schedules. CPL and any Signatory submitting rebuttal testimony under Paragraph C of this Article XXIX will consult with other Signatories before making such direct or rebuttal filings. Signatories shall support such testimony solely as a compromise and not as acquiescence in any 30 ratemaking principle, valuation methodology, method of cost-of-service determination, method of revenue calculation, or cost allocation or rate design principle underlying such testimony or underlying the provisions and agreements contained in this Agreement or the attachments hereto. Any and all exhibits and testimony to be submitted in support of this Agreement will be offered for the limited purpose of supporting this Agreement. In the event any exhibits or testimony are admitted in this proceeding or in any other proceeding for any other purpose, then Signatories reserve their full rights to challenge such exhibits and testimony, including objections to admission, rights to file rebuttal testimony and the right of cross-examination. F. In the event that at any time after the Commission has entered appropriate orders which initially implement the terms of this Agreement, the Commission enters any order, makes any Findings or Conclusions, or otherwise takes any action which is inconsistent with any material term of this Agreement, all Signatories are relieved of any and all obligations that they have undertaken pursuant to Articles V, IX, XI, XII, XIII, XVI, XVII, and XVIII. G. The Signatories agree that they will use their best efforts to obtain expeditious implementation of this Agreement by the entry of appropriate orders in Docket No. 12820, Docket No. 13126, and Docket No. 13650, as called for in Article III above. H. This Agreement assumes the legality of the treatments and methodologies set out herein. Should any treatment or methodology used be declared illegal by either the Commission or a court, the Signatories agree to negotiate in good faith to substitute a treatment or methodolo- gy with the same economic effect of that declared illegal. 31 I. The titles assigned to each Article are for convenience only, are not part of this Agreement and shall not be considered in the resolution of any dispute or question arising with respect to this Agreement. J. Execution of this Agreement by representatives of a municipality constitutes a commitment to seek approval of the Agreement by the governing body of the municipality. K. Each person executing this Agreement represents that (s)he is authorized to sign this Agreement on behalf of the party represented. Facsimile copies of signatures are valid for purposes of evidencing the Agreement. L. Signatories represent that they have reached no agreements or understandings other than as set forth in this Agreement or disclosed to the Signatories in Docket No. 12820 or Docket No. 13126 prior to the date of execution of this Agreement. If prior to the entry of a final order in Docket No. 12820 or the entry of an order in Docket No. 13126 disposing of all issues pertaining to CPL, any Signatory enters into any other agreements for the purpose of settling or compromising those dockets, other than as set forth in this Agreement, then each component of the consideration granted by any Signatory shall be made known immediately to all Signatories; and any Signatory may in that Signatory's discretion freely withdraw from this Agreement and request reopening of hearings on the merits of the settlement. This Article XXIX.L. was agreed to by the Signatories as part of the overall consideration for other provisions of this Agreement and is based upon the unique conditions underlying this Agreement. M. Signatories agree that they have not resolved any issues in Docket No. 12820 or Docket No. 13126 as it pertains to CPL other than as addressed in this Agreement. N. This Agreement may be executed in multiple counterparts. 32 APPENDIX 3 Proposed Findings of Fact and Conclusions of Law A. Findings of Fact Background. Procedural History. and Notice 1. On July 8, 1993, Central Power and Light Company (CPL) filed a request to surcharge fuel recoveries, and to abate same, precipitated in part by the outage then in progress at the South Texas Project (STP), which request was assigned Docket No. 12154. 2. On December 20, 1993, James O. Bryant filed with the Public Utility Commis- sion of Texas (PUC or Commission) a complaint challenging the propriety of CPL's rates, which complaint was assigned Docket No. 12596. 3. On March 3, 1994, the General Counsel and Office of Public Utility Counsel (OPC) filed petitions seeking examination of CPL's rates pursuant to Section 42 of the Public Utility Regulatory Act (PURA), and such petitions were assigned Docket Nos. 12820 and 12821, respectively. 4. The municipalities in CPL's service area listed in Appendix 1 to the Stipulation and Agreement referenced in Finding of Fact No. 12 have taken action concerning CPL's rates, and those actions have been appealed to the Commission and consolidated as Docket No. 12835, and the rate changes ordered therein have been stayed by their own terms pending final disposition of the outcome of the consolidated city appeals and original jurisdiction actions at the Commission. 5. On November 15, 1994, CPL filed its petition to reconcile fuel costs for the period March 1990 through June 1994, which petition was assigned Docket No. 13650. 6. On June 16, 1994, the General Counsel initiated an inquiry into the operation and management of STP, assigned Docket No. 13126, for the purpose of issuing Findings of Fact and Conclusions of Law concerning the management and operation of STP, such Findings of Fact to be used in CPL's now -pending fuel reconciliation proceeding, Docket No. 13650, and other proceedings as may be appropriate. 7. Docket Nos. 12820, 12821, 12835 and 12596 were all consolidated and styled as consolidated Docket No. 12820, with the purpose of considering whether CPL's existing base rates are just and reasonable. 8. Docket No. 12596 was subsequently severed from consolidated Docket No. 12820 for the purpose of receiving Findings of Fact and Conclusions of Law to be entered in Docket No. 13126. 9. CPL provided notice of Docket No. 12820 by publishing notice once a week for four consecutive weeks in newspapers having general circulation in each county containing territory affected by this docket, by mailing notice to all its customers, and by notifying the appropriate officer of each affected municipality. 10. CPL is a public utility engaged in the distribution, transmission, and generation of electricity in Texas. 11. The hearing on the merits in Docket No. 12820 began on October 31, 1994, and adjourned on December 12, 1994. 12. CPL, the General Counsel, and all intervenors with the exception of , and , have entered into, executed, and submitted a Stipulation and Agreement (Agreement), which disposes of all issues in Docket No. 12820, those issues in Docket No. 13126 pertaining to CPL, and other issues among the parties, which Agreement is attached hereto as Attachment A. 13. The Agreement is supported by the additional testimony of CPL witnesses 14. By order dated , the Commission determined that a hearing should be held on the merits of the Agreement to determine if the Agreement would result in just and reasonable rates. 15. From to the merits of the Agreement. , hearings were conducted regarding 16. Each party opposing the Agreement was given the opportunity to file testimony, conduct cross-examination, and file briefs regarding the Agreement and regarding the reasonableness of CPL's current base rates and base revenues. -2- Revenue Requirement 17. CPL agreed not to seek or support an increase in its base revenues in this docket and has not done so. Therefore, it need only be determined whether CPL's invested capital, return on invested capital and reasonable and necessary expenses are at least enough to support existing rates. 18. CPL's total base rate revenue requirement necessary to permit CPL a reasonable opportunity to earn a reasonable return on invested capital over and above its reasonable and necessary operating expenses is at least $ 19. CPL's total invested capital that complies with Section 2.206 of the Public Utility Regulatory Act of 1995 is at least $ 20. A return on common equity for CPL of 11.75 percent is reasonable. An overall return on invested capital of 9.69% when applied to CPL's invested capital will permit CPL a reasonable opportunity to earn a reasonable return on that invested capital. 21. It is reasonable under the circumstances of the settlement that issues pertaining to CPL's STP deferred accounting balances are resolved for purposes of this Docket No. 12820 only. 22. It is reasonable for CPL to reimburse $50,000 of CPL Cities' reasonable expenses incurred participating in the negotiations for development of STP performance standards under Article V of the Agreement as rate case expenses to be properly recovered as specified in Finding of Fact No. 28. 23. The classification of costs and revenues as base- and fuel -related as set forth in Appendix 10 of the Agreement is maintained in this docket, is consistent with prior CPL stipulations, and maintains CPL's base rates at their current levels. 24. The existing depreciation rates for CPL plant are not changed in this docket. 25. The decommissioning expense and funding for STP are maintained at the previously -approved level in this docket. 26. It is reasonable for the rate case expenses incurred by CPL in connection with Docket No. 12820 and Docket No. 13126, including CPL Cities' reimbursed rate case expenses but excluding amounts paid by CPL to L. E. Burgess Consultants, -3- Inc. in connection with its audit performed for Docket No. 13126, to be amortized over a three-year period beginning with the date of the Commission order in this docket. 27. Rate case expenses of $ submitted through are reasonable and necessary expenses which should be amortized over the three- year period. 28. Reasonable rate case expenses in Docket No. 12820 and Docket No. 13126 submitted after shall be subject to review in future rate proceedings, but must be fully amortized over the remainder of the three-year period specified in Finding of Fact No. 26. 29. In light of the base rate revenue requirement found reasonable in Finding of Fact No. 18, and in further light of CPUs agreement not to seek or support an increase in its base revenues in this docket, it is reasonable to maintain CPL's existing base revenue unchanged. 30. No base revenue increase is produced for any customer as a result of the base rate revenue requirement contained in Finding of Fact No. 18. 31. All claims of any type related to CPL's responsibility or liability for the operating performance of STP through June 30, 1994, are resolved in this docket, including any type of claim which, if successful, would result in the disallowance of a portion of CPUs rate base or a finding that certain expenses are not reasonable and necessary or that CPL's rate of return should be adjusted pursuant to Section 2.203(b) of PURA due to operating performance of STP prior to June 30, 1994. It is reasonable and in the public interest to resolve these claims in view of the benefits and interrelated provisions of the Agreement. 31A. All parties retain the right in future proceedings to introduce evidence pertaining to STP's performance or the conduct of STP's management before July 1, 1994, solely for purposes of establishing a pattern of performance or conduct. 31B. Given the exchange of consideration under the Agreement, it is reasonable that although, under Finding of Fact No. 31A, future proceedings may consider a pattern of performance or conduct regarding STP that covers periods before July 1, 1994, no Signatory may sponsor or support, in future proceedings, a calculation of any disallowance of reconcilable fuel expense or of a component of base rates, including, but not limited to, an adjustment allowed under Section -4- 2.203(b) of PURA, that uses or relies upon measurements of STP performance covering periods before July 1, 1994. Base Rate Refund 32. A one-time base rate refund of $50 million to Texas retail customers is reasonable, based on the circumstances of the Agreement, its interrelated provisions, and the issues that the Agreement was intended to resolve. 33. The base rate refund addressed in Finding of Fact No. 32 was accomplished during the billing month of July 1995. 34. The base rate refund addressed in Finding of Fact No. 32 was reasonably accomplished by percentage reductions to each CPL tariffed rate class which represent equal percentage refunds by rate class based on base rate billings between April 1994 and March 1995. Excess Earnings During Freeze Period 35. Economic value has been provided in the Agreement in exchange for the right to claim that CPL earned a regulatory return in excess of 14 percent during the rate freeze period, as that term is defined in Article VII of the NUA in Docket No. 8646 and Article XXI, Section 2 of the NUA in Docket No. 9561, as set out in Articles IX.C. and XV. of the Stipulation and Agreement. HL&P Settlement 36. For each period beginning January 1, 1996 and thereafter, CPL shall amortize its Mirror CWIP asset balance by an amount equal to the Texas retail jurisdiction allocation of the HL&P Factoring Margin received in that annual period. The Texas retail jurisdiction allocation of the HL&P Factoring Margin shall be determined annually, using data from each year and applying a 4 Coincident Peak production plant allocation method. 37. CPL shall pass on to customers as a reduction to CPUs reconcilable fuel expense the wheeling and spinning reserve benefits received from the 1992 lawsuit settlement with HL&P. 38. The treatments addressed in Finding of Fact Nos. 36 and 37 finally resolve all issues and disputes pertaining to the December 30, 1992 settlement between CPL T— T -5- and HL&P and result in a reasonable allocation of all proceeds of the settlement with HL&P. Excess Unprotected Deferred Income Taxes 39. In consideration of the terms of the Agreement, and in light of CPL's commit- ment that in its next rate increase filing it will provide a treatment with the same economic values to customers as that contained in Article XIII of the Docket No. 8646 NUA and Article XXI, Section 7 of the Docket No. 9561 NUA, it is reasonable to allow the balance of $34.3 million of unamortized excess unprotect- ed deferred income taxes existing on CPL's books at March 31, 1995 to be retained by CPL for the benefit of its shareholders. These amounts are net of taxes. Reorganization Costs 40. In consideration of the terms of the Agreement, it is reasonable to recognize CPL reorganization costs totalling $20.7 million as a regulatory asset to be amortized to cost of service over six years, beginning on January 1, 1995, with no return on the unamortized balance to be included in rates. Demand Side Management 41. The Demand Side Management (DSM) settlement filed on January 26, 1995 by General Counsel, the Environmental Defense Fund, Texas Ratepayers Organiza- tion to Save Energy, the United Farm Workers Association, H. E. Butt Grocery Company, and CPL is reasonable and an order or orders consistent with it should be entered because it is unopposed by any party, it settles all DSM and conservation issues outstanding in Docket No. 12820, and proposes reasonable broad guidelines for CPUs future DSM efforts. TIEC Settlement 42. An order consistent with the November 30, 1994 agreement between CPL and TIEC resolving certain issues in this docket should be entered because that agreement is not opposed by any party and is supported by the November 30, 1994 Supplemental Rebuttal Testimony of CPL witness Donald R. Moncrief. The tariffs implementing that agreement, attached as Appendix _ to the Agreement, are reasonable. -6- High Load Factor Settlement 43. Low Income Settlement 44. It is reasonable for CPL and UFW to have entered into the CPL/UFW settlement agreement in order to resolve all low-income customer issues arising in Docket No. 12820. CPL Rates 45. In view of finding that CPL's existing level of revenues should not be reduced, it is reasonable that CPL's previously approved base rates be maintained, except as modified in Finding of Fact Nos. _ and _, and that such rates as modified constitute the just and reasonable rates of CPL. No Waiver to Result from Settlement 46. The provisions of the Agreement, as well as the operating expense, return and revenue requirement levels which result from the agreed reduction in rates, are the result of extensive negotiations and represent a compromise of various positions and, thus, the terms and conditions set out in the Agreement are interdependent. A Signatory's or non -opposing party's support for the settlement may differ from its position or testimony in other dockets. To the extent that there is a difference, the Signatories are not waiving their positions in other dockets. The Signatories are under no obligation to take the same positions set out in the settlement and Agreement in other dockets, whether these dockets present the same or a different set of circumstances. 11. Conclusions of Law 1. CPL is a public utility as defined in § 2.001 of PURA. 2. The Commission has jurisdiction over this docket pursuant to PURA §§ 1.101, 2.101(d) and (e), 2.108, 2.151, 2.211, and 2.212. 3. This docket was processed in accordance with the requirements of PURA and the Administrative Procedure Act, TEX. GOVT CODE ANN. § 2000.001, et seq. (Vernon 1995). -7- 4. CPL complied with the notice requirements of P.U.C. Proc. R. 22.51. 5. CPL has met the burden of proof imposed by Section 2.204 of PURA to show that, as modified by Finding of Fact Nos. _ and _, its current base rates and revenues are just and reasonable. 6. The base rate revenue requirement set forth in the Agreement will permit CPL a reasonable opportunity to earn a reasonable return over and above its reasonable and necessary operating expenses, as required by PURA § 2.203(a), and meets the requirements of PURA § 2.211. 7. CPL's invested capital is reasonable and in accordance with PURA § 2.206. 8. A return on common equity of 11.75 percent produces a reasonable return on invested capital as required by PURA § 2.203. 9. To the extent found reasonable and reimbursed by CPL, up to $50,000 of expenses incurred by CPL Cities as addressed in Finding of Fact No. 22 are properly recoverable by CPL as municipal rate case expenses under PURA § 2.106. 10. The circumstances of the Agreement, its interrelated provisions, and the issues it resolves constitute special circumstances supporting continued treatment of costs and revenues as base rate or fuel as set forth in Finding of Fact No. 23 under P.U.C. Subst. R. 23.23(b)(2)(B)(v). 11. CPL's rates and rate design are just and reasonable and are not unreasonably preferential, prejudicial, or discriminatory within the meaning of PURA § 2.202. 12. CPL's rates and rate design do not grant an unreasonable preference or advantage to any customer within a classification, subject any customer within a classifica- tion to an unreasonable preference or disadvantage, or establish unreasonable differences as to rates or services between localities or between classes of service within the meaning of PURA § 2.214. 13. CPL's rates are not anticompetitive and do not violate PURA § 2.216. 14. The base rate refund addressed in Finding of Fact Nos. 32 through 34 is reasonable and in the public interest. -8- 15. The allocation of base rate refunds addressed in Finding of Fact No. 34 is just; reasonable; not unreasonably preferential, prejudicial, or discriminatory; and does not grant any unreasonable preference or advantage to any customer, subject any customer to unreasonable preference or disadvantage, or establish unreasonable differences between localities or between classes of service. 16. All claims of any type related to CPL's responsibility or liability for the operating performance of STP through June 30, 1994, are resolved in this docket, including any type of claim which, if successful, would result in the disallowance of a portion of CPUs rate base or a finding that certain expenses are not reasonable and necessary or that CPUs rate of return should be adjusted pursuant to Section 2.203(6) of PURA due to operating performance of STP prior to June 30, 1994. 17. The Commission may adopt the terms of a non -unanimous settlement if it finds those terms to be supported by the record and in the public interest. 18. The Agreement represents a reasonable resolution of the contested base rate issues in this docket in that it results in just and reasonable rates, is supported by the record, and is in the public interest. The Agreement's terms as they apply to base rate issues in this docket should therefore be implemented as part of the Commission's order in this docket. 19. Deferred accounting issues have been resolved for Docket No. 12820 only. The order in Docket No. 12820 does not preclude CPL from proving, nor relieve CPL of its obligation to prove, that deferred accounting amounts are properly included in cost of service in any other proceedings where such proof is required by applicable law. -9- Corpus Christi, Texas day of , 19 The above resolution was passed by the following vote: Mary Rhodes Dr. Jack Best Betty Black Melody Cooper Tony Heldenfels Betty Jean Longoria John Longoria Edward A. Martin Dr. David McNichols 022219