HomeMy WebLinkAboutMinutes - City Council - Public Hearing - 1/19/197949
JAN 1 9 1979
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79-38-49-62A
*NOTICE OF HEARING
ON PAGE 50A.
Mayor Pro Tem Henry presiding.
Those present:
PUBLIC HEARING
Pioneer Natural Gas Burner Tip
(Residential -Commercial) Gas Rates
January 19, 1979
10:00 A.M.
For the City: Mayor Pro Tem Henry, Councilwoman Carolyn Jordan, Councilman Bill McAlister,
Councilman M. J. Aderton, City Attorney John C. Ross, Jr., City Manager
Larry Cunningham, City Secretary -Treasurer Evelyn E. Gaffga
For Pioneer: Mr. Tommy Stevens, Attorney
Mr. M. D. LaGrone, Vice President for PNG
Meeting was called to order by Mayor Pro Tem Henry. He outlined briefly the procedures to be
followed, which would be very similar to those procedures followed in the industrial gas rate
hearing.
Mr. Henry inquired of PNG what witnesses they would present, to which they responded they would
represent Pioneer; that there would be no witnesses presented, but they did have two exhibits to
submit into evidence, to -wit:
Company Exhibit No. I:
Company Exhibit No. II
Pioneer Natural Gas Company
West Texas Division
City Plant System
Cost of Service
12 Months Ended December 31, 1977
As Adjusted
Pioneer Natural Gas Company
West Texas Division
City Plant System
Cost of Service by Customer Class
12 Months Ended December 31, 1977
As Adjusted
Mr. Henry then inquired as to whom would represent the City. Mr. Robert McGinnis, Attorney, indicated
he would repesent the City at this hearing, and the City had three expert witnesses he wished to have
testify, to -wit:
Dr. Bill R. McMorries, Consulting Engineer
McMorries & Associates, Inc.
Amarillo, Texas
Dr. Jerry D. Miller, Consulting Economist
Professor of Business Administration
West Texas State University
Canyon, Texas
Mr. Wayne Brown, Consulting Accountant
Certified Public Accountant
Pampa, Texas
Drs. McMorries and Miller and Mr. Brown were sworn in by the City Secretary.
Mr. Henry requested that the hearing proceed expeditiously, with the hope that all testimony could
be completed by Noon.
Mr. LaGrone responded that in the interest of time, the Company would like for the City to present
its case, to which the Company would then respond.
Mr. McGinnis, Attorney for the City, prefaced the City's presentation with the remarks that the
Steering Committee, comprised of representatives from the 63 cities within the West Texas Distribution
System of PNG, had employed this consulting team, as well as himself, for the purpose of studying
PNG's application (statement of intent) for gas rate increase, to present their respective findings,
and to submit their respective opinions and recommendations.
The first consultant was Dr. Bill R. McMorries, Consulting Engineer, who in turn submitted into
evidence City Exhibit No. I entitled, "Prepared Testimony and Exhibits of Bill R. McMorries, Pioneer
Natural Gas Co., 1978."
Dr. McMorries indicated he had been involved in gas rate cases for the last fifteen to twenty years;
that his study was confined to the area of determining the true value of property in the Pioneer
system, both the distribution and the transmission systems, and to determine what rate of return
to be applied for revenue requirements; that two definitions should be kept in mind with respect to
his study, to -wit:
Original cost rate base: Amount on books after depreciation
Fair market value Method of determining valuation of property
Dr. McMorries then proceeded to explain in modified detail the content of his study referenced above,
reflecting his computations, the factors involved and the resultant recommendations.
Following Dr. McMorries' presentation, Mr. McGinnis submitted into evidence City Exhibit II entitled:
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50
J 4N 19 1979
A. An Ordinance Modifying the Obligation of Pioneer Natural Gas Company to
Extend Main Lines to Serve New Consumers Who Use Natural Gas Within
the City Limits of , Texas;
B. An Ordinance Establishing Fees to be Charged by Pioneer Natural Gas Company
for Setting, Turning on and Reconnecting Customer Meters within the City Limits
of , Texas;
C. An Ordinance Defining and Prescribing the Rates Applicable to the Sale of
Natural Gas and Natural Gas Service by Pioneer Natural Gas Company to Certain
of Its Customers Who Use Natural Gas Within the City Limits of
Texas; Providing for Monthly Adjustments, to the Nearest .014�, in such rates,
in Accordance with Increases or Decreases in the Average Monthly Cost to Pioneer
of Gas Purchased for Its West Texas Transmission System; Placing Certain Limits on
the Maximum Amount of Said Monthly Adjustments; Defining Cost of Gas; Establishing
an Effective Date; and Containing a Savings and Severability Clause.
Mr. McGinnis indicated this exhibit with its attachments would be presented to all of
the cities in the West Texas Distribution System, as recommended by the Steering
Committee. 0
Mayor Pro Tem Henry inquired whether or not there had been established a basis of how
much construction the Company would need to install prior to customer advances, to which
the Company responded that this did not appear in the original Statement of Intent,
but was brought out in the negotiations.
Councilwoman Jordan inquired if the resulting data applied to the whole system of 63
cities, and whether or not there was anything set out for the City of Lubbock, to which
Dr. McMorries responded that there had been no individual break out; that the rate
base value of property reflected was for the whole system; that the cost of service
was broken out into class customer by cities.
Dr. Jerry Don Miller, Professor of Business Administration, West Texas State University,
Canyon was the next witness, appearing as Consulting Economist. Dr. Miller indicated
he had been interested in rate cases for the last fifteen years, being involved over the
last two years in rate studies for the City of Fort Worth, Tesco, and Southwestern
Public Service; that he was asked "to do a study of a fair rate of return of Pioneer
Natural Gas," and submitted into evidence City Exhibit No. III, entitled "Prepared
Testimony of Jerry D. Miller, Pioneer Gas Company, 1978."
As Dr. Miller proceeded with his modified detailed presentation of his study, he commented
that one problem he encountered was the market value of Pioneer Natural Gas Corporation
vs. no market value of Pioneer Gas Company, as records for the Gas Company are available
only for 1977, thus preventing comparative studies. 0
Mr. Wayne Brown, CPA, Pampa was the third and final witness, appearing as Consulting
Accountant. He indicated the Steering Committee requested that documents be examined
and an investigation be made of the condition of rate application of Pioneer Gas
Company, which was comprised of certain parts, to -wit: rate base, fair rate of
return, and determination of cost of service.
Various Queries from the Council, with responses by the Consultants ensued, clarifying
various point, and establishing other data necessary for their deliberation.
Mayor Pro Tem Henry at one point indicated he had read in the Lubbock Avalanche -Journal
an article on this matter, which indicated "a compromise had been reached", making
reference to "splitting the difference," and Mayor Pro Tem Henry requested a response
as to this terminology, its meaning, and whether or not this was so.
Mr. McGinnis responded indicating there had been negotiations with Pioneer, but the
term "compromise" was incorrect; that it appeared to the consultants that there would
be reasonable return in effect if PNG would be satisfied with the particular return
we (consultants) recommended; and Pioneer accepted that recommendation.
Mr. LaGrone of Pioneer responded that their Statement of Intent reflected $19.6
million based on 8% return of adjusted value or fair value return; that the recent
Supreme Court decision was not too clear and interpretation of the Railroad Commission
was now basing returns on original cost; that Pioneer's first decision was to take
it to the Supreme Court; that Pioneer's second decision to appeal to the Railroad
Commission would involve a very expensive hearing; that Pioneer feels they were compromised,
but in light of all consideration, Pioneer has accepted these recommendations.
The ar' g adjo ed at 12:30 p.m. ATTE T:
o _ ro Tem Alan 76L
E LYN GA GA
City Secretary -Treasurer
(A Hearing has been set for Friday, February 2, 1979 at 1000 A.M.)
( A complete transcript of this hearing will be prepared upon request.)
50A
JAIL i 9 1979"'
NOTICE OF PUBLIC HEARING
79-38-49-62A
NOTICE is hereby given that on January 19, 1979 at 10:00 A.M. in the City Council Chamber on
the Second Floor of the City Hall, Lubbock, Texas, there will be held by the Lubbock City Council
a public hearing to allow appearances by any interested or affected parties, and to receive
testimony and eveidence from company officials of Pioneer Natural Gas Company and City Staff member
concerning rates within the cities and towns composing its West Texas Distribution System, t4hich
includes Lubbock, and to determine if existing rates are just and reasonable, and to determine if such
rates should be increased or decreased.
I, EVELYN GAFFGA, HEREBY CERTIFY that this notice was published in the Lubbock Avalanche Journal
on January 14, 1979.
(Seal)
/s/ Evelyn Gaff a
EVELYN GAFFGA
City Secretary -Treasurer
PURCHASE REMUISITION
REQ. BY HTrelya Gaffga CITY OF LUBBOCK
TO PURCHASING DEPT. — Purchase the Following Goods to be Delivered
To Lubbock A -J
DATE
Location
Chg. Acct. No. 1003--43434
QUANTITY
DESCRIPTION: Brand, Catalog No., Size, Wt.
Unit Cost
Total Cott
Item No.
Need
NOTICE OF PUBLIC }TEARING as per attached copyl
Pioneer Natural Gas -- 4=ar Tip hearin
v/Hest Texas Distribution System)
FOR PURCHASING DEPT.
TOTAL
Terms _ _ .. - V O. B.
Delivery
Pricing
P. O. NO. BID NO. I APPPROVED BUDGET
C
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2
3
4 _.. _.
5_
6
JAN 19 1979