HomeMy WebLinkAboutResolution - 2020-R0289 - 90 Day Suspension of West Texas Gas Rate IncreaseResolution No. 2020-RO289
Item No. 8.19
August 25, 2020
RESOLUTION NO. 2020-RO289
RESOLUTION BY THE CITY OF LUBBOCK, TEXAS ("CITY")
SUSPENDING THE EFFECTIVE DATE FOR NINETY DAYS IN
CONNECTION WITH THE STATEMENT OF INTENT FILED BY
WEST TEXAS GAS, INC. ON ABOUT AUGUST 7, 2020 TO INCREASE
RATES; FINDING THAT THE MEETING COMPLIES WITH THE
OPEN MEETINGS ACT; MAKING OTHER FINDINGS AND
PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN
EFFECTIVE DATE
WHEREAS, West Texas Gas, Inc. ("WTG" or "Company") filed a Statement of Intent with
the City on about August 7, 2020, to change its rate schedules within the corporate limits of the
City, specifically to increase its annual revenue requirement by approximately $4.1 million,
which represents, on a system -wide basis, an increase in base rates of about 65%; and
WHEREAS, the City is a regulatory authority under the Gas Utility Regulatory Act ("GURA")
and under Chapter 104, § 103.001 et seq. of GURA has exclusive original jurisdiction over
WTG's rates, operations, and services within the municipality; and
WHEREAS, in order to maximize the efficient use of resources and expertise in reviewing,
analyzing and investigating WTG's rate request and its changes in tariffs, it is prudent to
coordinate the City's efforts with a coalition of similarly situated municipalities; and
WHEREAS, WTG's rate request consists of a voluminous amount of information including
WTG's rate -filing package, exhibits, schedules, and workpapers; and
WHEREAS, WTG's rate application is the Company's first general rate case since about June,
2013, and follows six consecutive annual increases approved pursuant to the Interim Rate
Adjustment ("IRA") mechanism, also known as "GRIP" filings; and
WHEREAS, WTG proposed September 11, 2020, as the effective date for its requested
increase in rates; and
WHEREAS, it is not reasonably possible for the City to complete its review of WTG's filing
by September 11, 2020; and
WHEREAS, the City will need an adequate amount of time to review and evaluate WTG's rate
application to enable the City to adopt a final decision as a local regulatory authority with
regard to WTG's requested rate increase.
WHEREAS, the City will require the assistance of specialized legal counsel and rate experts to
review the merits of WTG's application to increase rates; and
WHEREAS, WTG submitted a corresponding application with the Railroad Commission of
Texas, or may appeal the City's action to the Railroad Commission of Texas, and thus the
decision of the Railroad Commission of Texas will have a direct impact on the City and its
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West Texas Gas, Inc. 2020 Statement of Intent
citizens who are customers of WTG, and in order for the City's participation to be meaningful
it is important that the City intervene in any such proceedings at the Railroad Commission of
Texas related to WTG's application to increase rates.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
LUBBOCK, TEXAS THAT:
SECTION 1. The findings set out in the preamble are in all things approved and incorporated
herein as if fully set forth.
SECTION 2. WTG's proposed effective date for its proposed increase in rates is hereby
SUSPENDED for ninety days beyond September 11, 2020.
SECTION 3. The statutory suspension period may be further extended if WTG does not
provide timely and meaningful, and proper public notice of its request to increase rates, if its
rate -filing package is materially deficient, or by agreement.
SECTION 4. The City shall participate in a coalition of cities known as the Alliance of WTG
Municipalities ("AWM"), and authorizes intervention in proceedings related to WTG's
Statement of Intent before the Railroad Commission of Texas and related proceedings in courts
of law; and
SECTION 5. The City hereby orders WTG to reimburse the City's rate case expenses
consistent with the Gas Utility Regulatory Act and that WTG shall do so on a monthly basis
and within 30 days after submission of the City's invoices for the City's reasonable costs
associated with the City's activities related to this rate review or related to proceedings
involving WTG before the City, the Railroad Commission of Texas, or any court of law.
SECTION 6. Subject to the right to terminate engagement at any time, the City retains and
authorizes the law firm of Herrera Law & Associates, PLLC to act as Special Counsel with
regard to rate proceedings involving WTG before the City, the Railroad Commission of Texas,
or any court of law, and to retain such experts as may be reasonably necessary for review of
WTG's rate application subject to approval by the steering committee of the AWM.
SECTION 7. The City, in coordination with the Steering Committee, shall review the invoices
of the lawyers and rate experts for reasonableness before submitting the invoices to WTG for
reimbursement.
SECTION 8. A copy of this resolution shall be sent to Mr. Alfred R. Herrera, Herrera Law &
Associates, PLLC, 4400 Medical Parkway, Austin, Texas 78756, and a courtesy copy to
WTG's local representative.
SECTION 9. The meeting at which this resolution was approved was in all things conducted
in strict compliance with the Texas Open Meetings Act, Texas Government Code, Chapter 551.
SECTION 10. This resolution shall become effective from and after its passage.
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West Texas Gas, Inc. 2020 Statement of Intent
Passed by the City Council on the 25th
ATTEST:
Reber a Garza, City Secrelq�)�
APPROVED AS TO CONTENT:
W. Jarr9K Atkinson, City Manager
APPROVED AS TO FORM:
Amy L. S�,eputy City Attorney
day of August , 2020
DANIEL M. POPE, MAYOR
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West Texas Gas, Inc. 2020 Statement of Intent
Resolution No. 2020-RO289
AGENDA INFORMATION SHEET
ITEM NO. 8.19
SUSPENSION OF WEST TEXAS GAS, INC.'S PROPOSED
EFFECTIVE DATE FOR ITS PROPOSED INCREASE IN RATES
BACKGROUND
On or about August 7, 2020, West Texas Gas, Inc. ("WTG") filed a Statement of Intent to
increase its base rate revenues by a total of approximately $4.1 million; this equates to an
increase in annual revenue of about 47% including gas costs, and 53% not including gas
costs. This is WTG's first request to increase its base rates since 2013. Following the
conclusion of its 2013 rate gas (Gas Utilities Docket No. 10235), WTG has raised its
rates by means of several Interim Rates Adjustment ("IRA") filings, also known as
"GRIP" filings. However, WTG has exhausted the maximum number of IRA filings it is
permitted to make under statute, thus triggering WTG's current request to increase rates.
WTG made a similar filing with the Railroad Commission of Texas with regard to its
outside -the -city rates.
WTG proposes an effective date of September 11, 2020 for its change in rates. As is
explained below, the proposed resolution related to WTG's application to increase its
base rate revenues, if adopted, suspends WTG's proposed effective date for the statutory
time period of 90 days, to December 10, 2020.
BILL IMPACT:
WTG proposes to increase base rates for its "Domestic Customers," i.e., residential
customers, and "Non -Domestic Customers," i.e., industrial and commercial customers,
located in Lubbock. The effect on a typical customer's hill under WTG's proposed rates
is as follows:
Customer
Current
Proposed
Class
Average
Average
Percentage
Percentage
Monthly
Monthly
Proposed
Increase
Change
Bill with
Bill with
Monthly
with Gas
without
Gas Cost
Gas Cost
Increase
Cost
Gas Cost
Lubbock
Incorporated,
Domestic
$31.34
$79.47
$48.13
153.6%
223.0%
Lubbock
Incorporated,
Non -Domestic
$118.81
$172.02
$53.20
1 44.8%
76.9%
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West Texas Gas, Inc. 2020 Statement of Intent
REVENUE IMPACT:
Assuming WTG's proposed increase is approved, the effect on the change in base rate
revenue not including gas costs, for each customer class is shown below:
Percentage
Class of Customer
Current Revenue
Proposed Revenue
Increase
Lubbock, Domestic
$152,147
$491,454
223.0%
Lubbock, Non -
Domestic
$52,039
1 $92,049
76.9%
CURRENT BASE RATES VERSUS PROPOSED BASE RATES:
WTG proposes to increase the fixed customer charges and consumption charges for the
Domestic class and Non -Domestic class of customers located in Lubbock. The table
below shows WTG's current base rate charges and its proposed base rate charges:
Class of Customer
Current
Proposed
$ Change
% Change
Domestic Lubbock
Customer Charge
Per Month
$7.86
$20.00
$12.14
154.5%
Consumption
Charge Per Month
(per me
$1.79
$6.49
$4.70
262.3%
Non -Domestic, Lubbock
Customer Charge
Per Month
$15.59
$26.22
$10.63
68.2%
Consumption
Charge Per Month
(per mcf)
$1.3 8
$2.47
$1.09
79.4%
ACTION REQUIRED BY September 11,2020
The City must take action on WTG's Statement of Intent before September 11,
2020. Absent such action, WTG's proposed rates are deemed approved by operation of
law.
ALLIANCE OF WTG MUNICIPALITIES
The Alliance of WTG Municipalities ("AWM") was organized by a number of
municipalities served by WTG. Alfred R. Herrera, with the law firm of Herrera Law &
Associates, PLLC, has previously represented the AWM in rate cases involving WTG.
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West Texas Gas, Inc. 2020 Statement of Intent
CITY JURISDICTION TO SET WTG'S RATES
Unless a city ceded its original jurisdiction to the Railroad Commission of Texas, the Gas
Utility Regulatory Act § 103.001 grants a city exclusive original jurisdiction over a gas
utility's rates, services, and operations within the city limits. But even if a city has ceded
its jurisdiction to the Railroad Commission, the Gas Utility Regulatory Act § 103.023
("GURA"), grants a city the statutory right to participate in rate proceedings before the
Railroad Commission.
RATE CASE EXPENSES
Cities by statute are entitled to recover their reasonable rate case expenses from the
utility. See GURA § 103.022. Legal counsel and consultants approved by AWM will
submit monthly invoices to the coalition -designated city that will be forwarded to WTG
for reimbursement. No individual city's budget is negatively affected.
SUSPENSION
WTG's rate -filing package is voluminous as it contains thousands of pages of data. In
order to have time to review the rate -filing package, the Council is requested to suspend
WTG's proposed effective date for ninety (90) days as provided by the Gas Utility
Regulatory Act. It is a virtual impossibility for the City to set just and reasonable rates
without suspending WTG's rate request for ninety days; suspension of WTG's proposed
effective date will permit its special regulatory counsel and experts an opportunity to
closely evaluate WTG's application. Further, should WTG's notice prove to be deficient,
then the statutory period would be extended; also by agreement between the City and
WTG, the statutory suspension period may be further extended.
RECOMMENDATION
It is recommended that the City join in AWM and retain the law firm of Herrera Law &
Associates, PLLC to represent the City's interest in matters related to WTG's rate case
before the City and WTG's application at the Railroad Commission of Texas; intervene
in the proceedings at the Railroad Commission; and though unlikely, in court appeals,
should such proceedings develop.
The recommendation is also to suspend WTG's proposed effective date of September 11,
2020, for its proposed increase in rates as set forth in WTG's Statement of Intent for 90
days. Assuming WTG's notice meets the statutory criteria for adequate notice, the
suspension period runs until December 10, 2020.
The City must take action no later than September 11, 2020. If the City does not
take action by September 11, 2020, WTG's proposed rates will be deemed approved
by operation of law, subject to the City's right to hold a hearing to address WTG's
rate application.
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West Texas Gas, Inc. 2020 Statement of Intent