2005-020RESOLUTION N0.05-020
OFFICIAL RECORD
RESOLUTION ABATING SHOW -CAUSE
AND ACCEPTING SETTLEMENT WITH
TXU ELECTRIC DELIVERY
WHEREAS on or about April 5, 2005, the City of Southlake, acting under its original jurisdiction to regulate electric
transmission and distribution utilities and as a member of the Steering Committee of Cities served by TXU
Steering Committee) did pass a resolution requiring TXU Electric Delivery (Electric Delivery) to show -cause
why its rates should not be reduced; and
WHEREAS Electric Delivery and the Steering Committee engaged in settlement discussions regarding abatement of any full-
scale rate investigation and interim relief that may be available to Cities; and
WHEREAS it remains impractical, if not impossible, to deliver rate relief to the vast majority of residential customers until
the expiration of price to beat (PTB) on January 1, 2007; and
WHEREAS the unfair and adverse impacts of street lighting and water pumping tariffs that Cities have experienced since the
implementation of retail deregulation on January 1, 2002 can be addressed on an interim basis pending a final
order in a future rate case through a financial distribution from the Steering Committee of funds received from
Electric Delivery as part of a Settlement; and
WHEREAS the coupling of interim relief with the Steering Committee's recognition that resources should be devoted to the
2005 Legislative Session to promote overall enhancements in electric retail competition for the benefit of all
end-users; and
WHEREAS the Steering Committee and Electric Delivery have entered into a Settlement Agreement pending approval by the
20 Cities that passed show -cause resolutions; and
WHEREAS Electric Delivery has agreed to improve communication, coordination and timing of construction in rights of
way, permit development of a tariff that will allow city mandated underground placement of distribution
facilities, modify certain franchise renewal negotiation positions and improve meter reading on certain city
accounts that are estimated; and
WHEREAS Electric Delivery has committed to the Steering Committee during the period of rate case abatement to share
information on certain company operations and procedures that should enhance the Cities' ability to
appropriately exercise regulatory responsibilities in the rate proceeding that Electric Delivery nas agrees to rue
on or before July 1, 2006; and
WHEREAS that Agreement calls for immediate and long-term benefits to flow to all city members of the Steering Committee
which in turn have indirect but positive benefit to all city residents and public safety in general.
THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE that:
1. The Show -Cause proceeding initiated against TXU Electric Delivery is abated and no rate case filing will be
expected from Electric Delivery before July 1, 2006.
2. The Settlement Agreement between the Cities' Steering Committee and TXU Electric Delivery is hereby
ratified.
Approved this day of Q/' ( , 2005.
Mayor
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SOUTH
Attest: .•••.... •;-
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SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement') is made and entered into between TXU
Electric Delivery Company ("Electric Delivery") and the Steering Committee of Cities Served
by TXU Electric Delivery Company on behalf of all cities listed on Exhibit A to this Agreement
Cities'% hereinafter referred to jointly herein as "Signatories."
WHEREAS, the city councils of 23 cities who are members of Cities passed resolutions
in 2044 requiring Electric Delivery to file with those cities information that demonstrates good
cause for showing that Electric Delivery's transmission and distribution rates should not be
reduced (hereinafter referred to as "Show Cause Actions'l;
WHEREAS, other cities who are members of Cities are contemplating initiating similar
Show Cause Actions against Electric Delivery,
WHEREAS, Cities and Electric Delivery desire to resolve all outstanding issues related
to the existing and potential Show Cause Actions and other regulatory issues; and
WHEREAS, after extensive negotiations, Cities and Electric Delivery have reached a
compromise and settlement to resolve those issues.
NOW, 'THEREFORE, the Signatories, through their undersigned representatives, hereby
agree to the following:
1. ElecWc Delivery agrees to propose and support in its next system -wide rate case or city
rate inquiry one or more municipal rates, each without a demand ratchet, that together will cover
all municipal accounts, including a street lighting rate and municipal pumping rate that will be
lower than they otherwise would be. Cities agree to provide to Electric Delivery any information
needed to design the rates described in this paragraph.
2. Electric Delivery agrees to file a system -wide rate case at the Public Utility Commission
of Texas ("PUC") no later than July 1, 2006, based on a test year ending. December 31, 2005
unless Cities and Electric Delivery mutually agree that such a filing is unnecessary. For those
cities that do not have a City Council meeting in July, 2006, Electric Delivery will extend its
effective date to accomplish suspension by August 31, Zu04. However, ii Electric Delivery files
a system -wide rate case at the PUC on or before June 1, 2006, then Electric Delivery will not
extend its effective date.
3. Cities agree that Electric Delivery is not required to respond to any pending Show Cause
Action initiated by any city listed on Exhibit A to this Agreement prior to July 1, 2006. Cities
finther agree to abate or dismiss all pending Show Cause Actions, not to pursue any abated Show
Cause Actions, and not to initiate similar actions before July 1, 2006, provided the provisions of
this Settlement Agreement are honored. Cities agree not to intervene in, or participate in any
manner in, any show cause action initiated at the PUC or in any other jurisdiction prior to the
proceeding described in paragraph 2, or in any appeals of such show cause actions, except as
necessary to protect the tariff or tariff -efforts associated with paragraph 1 or to protect the city or
its residents from being prejudiced in any show cause action pending on appeal at the PUC. If
Cities intervene in a show cause action pending on appeal at the PUC, then Cities agree not to
take any position in that proceeding that is inconsistent with its obligations under this Settlement
Agreement.
4. In consideration for Cities' obligations under this Agreement, Electric Delivery agrees to
make a cash payment of $8.5 million to Cities by the later of March 31, 2005 or two weeks after
receiving notice from Cities that (1) all cities listed on Exhibit B to this Settlement Agreement
have abated or dismissed show cause actions pending against Electric Delivery, and (2) each city
on Exhibit C to this Settlement Agreement has passed a resolution ratifiying this Settlement
Agreement or provided to Cities a letter in substantially the same forth as Exhibit D to this
Settlement Agreement that has been signed by an authorized representative of the city. Starting
March 31, 2006, and each March 31`t thereafter, Electric Delivery will make an annual cash
payment of S8 million to Cities. Electric Delivery's obligation to make this payment ceases on
the date upon which Cities fail to comply with their obligations under this Agreement or the date
upon which the tariffs approved in Electric Delivery's next system -wide rate case at the PUC or
in a city rate inquiry become effective on a temporary or permanent basis ("Termination Date");
provided, however, in the year the new tariffs become effective, the annual payment shall be
prorated until the Termination Date.
5. Electric Delivery agrees to vw rk with Cities to improve the timeliness of streetlight
maintenance and to develop a process so that every city -owned and Electric Delivery -owned
street light is assigned an identifiable geographic location. Signatories agree to establish a task
force of senior employees that will develop, by June 30, 2005, the process and planned rollout
for the street light assignment project. Electric Delivery also agrees to provide to Cities a
specific contact person (or persons) within Electric Delivery who will be responsible for
handling all unresolved Cities' requests with respect to streetlights, including, but not limited to,
billing, maintenance, installation, removal, and account initiation and closure. Signatories agree
to diligently pursue resolution of the issues discussed in this paragraph; however, failure to reach
an agreement with respect to these issues will not constitute a breach of this Settlement
Agreement by either Cities or Electric Delivery.
6. Electric Delivery agrees to work with Cities to establish improved communication,
coordination, and timing of construction concerning relocations of Electric Delivery's facilities
Ti "viiblic right ofway- Signatories a=e to establish a task force of senior employees that will
develop, by June 30, 2005, the process and planned rollout of an improved relocation process.
Signatories agree to diligently pursue resolution of the issues discussed in this paragraph;
however, failure to reach an agreement with respect to these issues will not constitute a breach of
this Settlement Agreement by either Cities or Electric Delivery.
7. Electric Delivery agrees to discuss with Cities the payment of franchise fees on a
quarterly basis regardless of whether the basis for a quarterly payment is historic or prospective
and the standardization of a franchise renewal process that permits transition from a prospective
basis to a historic basis where the franchise is up for renewal. Signatories agree to diligently
pursue discussion of the issues discussed in this paragraph; however, failure to reach a resolution
2
of these issues will not constitute a breach of this Settlement Agreement by either Cities or
Electric Delivery.
S. Electric Delivery agrees to negotiate with Cities, and Cities agree to approve, a tariff that
permits Cities to request undergrounding of new or existing distribution facilities. The tariff
shall ensure full cost recovery by Electric Delivery through a surcharge in the requesting city in
the event that no third party is required by Electric Delivery's tarif& or applicable city ordinance,
to pay for undergrounding costs. That tariff will also allow Cities to request undergrounding of
transmission. lines to the extent Electric Delivery determines that (a) such undergrounding is
feasible, (b) such undergrounding is consistent with the PUC's Substantive Rules and ERCOT's
requirements, and (c) Electric Delivery can recover the costs of such undergrounding through a
surcharge in the requesting city. Electric Delivery will not be obligated to file the tariff for city
approval until after the expiration of the Price to Beat or the modification of the Price to Beat in
a manner that allows pass through of tariff charges to the ultimate consumer.
9. Electric Delivery agrees to provide quarterly updates to ,,r,Q,,,,.tatives designated by
Cities and their consultants concerning Electric Delivery's capital expenditure projects and
affiliate transactions, the creation and regulatory treatment of a Pension and Health Benefits
Reserve for Electric Delivery, possible workable parameters for performance based rates for
Electric Delivery, and other topics as agreed upon by the Signatories. Electric Delivery will
work with Cities to provide information requested by Cities concerning those topics.
10. Electric Delivery shall pay up to $10,000 per month in regulatory expenses directly to
Cities' consultants, after receipt of appropriate documentation and invoices, provided said
expenses may be deferred for recovery. Cities agree to support recovery of such costs in Electric
Delivery's next rate case. Should recovery be denied by the PUC, then the payments will
immediately cease.
11. Electric Delivery agrees to work with Cities to establish better communications between
the Cities and Electric Delivery with respect to access to city meters for monthly reading. Each
city shall provide in writing, by March 31, 2005, a contact person for inaccessible meters for city
accounts, and shall promptly notify Electric Delivery of any change in the contact person. In
months where a meter reader is unable to gain access to the premises to read the meter on regular
meter reading trips, or in months when meters are not read, Electric Delivery agrees to provide
the customer with a postcard and request the customer to read the meter and return the card to
tiectric u- Give f the posrcard is not receiver by i lri.i iu D&; V t.y uI uuIt tui LFAILI , Elmuic
Delivery may estimate the meter reading and issue a bill. Electric Delivery agrees that all
municipal metas will be read at least once every three months by it or by the respective city.
The failure of a city to designate a contact person for inaccessible meters affects only that city
and does not adversely impact any other city or mitigate responsibilities and benefits otherwise
inherent to this Agreement
12. Electric Delivery agrees to reimburse Cities for the expenses incurred related to the Show
Cause Actions in an amount not to exceed $100,000 after receipt of appropriate documentation
and invoices, and Cities agree that those costs can be deferred for recovery in its next rate cue
and agree to support deferral and recovery in that case. Notwithstanding any provisions in
existing applicable franchise agreements to the contrary, Electric Delivery agrees to reimburse
Cities for reasonable and necessary expenses incurred in Electric Delivery's next rate case in an
amount not to exceed $2,000,000. The rate case expense reimbursements will be made monthly,
beginning with the first month after the consultants are hired. Cities further agree not to contest
the recovery of Cities' rate case expenses and Electric Delivery's reasonable and necessary rate
case expenses in Electric Delivery's next rate case. Electric Delivery further agrees to pay, and
Cities agrees to accept, $150,000 in settlement of all previously disputed regulatory expenses.
Electric Delivery will not seek reimbursement of that $150,000 amount in Electric Delivery's
rates.
13. Electric Delivery agrees that, in franchise negotiations, it will not seek to extend the
prohibition on reimbursement of municipal rate case expenses beyond June 2008.
14. Electric Delivery agrees that if the 2005 Texas Legislature considers the implementation
of a nodal pricing system in ERCOT, then Electric Delivery will provide information to the
Legislature concerning the importance of a vibrant electric transmission system and the benefits
of the expansion of transmission facilities in helpingto reduce congestion costs.
15. Signatories acknowledge that Electric Delriery intends to offer certain terms of this
Settlement Agreement to cities served by Electric Delivery that are not listed on Exhibit A
Negotiations'). Electric Delivery agrees that all cities listed on Exhibit A are entitled to Most
Favored Nations protection during those Negotiations and that any benefits that Electric. Delivery
agrees to provide to any city during those Negotiations that are not already included in this
Settlement Agreement will be offered to all cities listed on Exhibit A. Cities acknowledge and
agree that to receive any additional benefits from Electric Delivery, additional consideration
from Cities to Electric Delivery may be required.
16. The Signatories agree that the amounts paid by Electric Delivery to Cities pursuant to
paragraphs 4, 10, and 12 of this Agreement are paid solely in consideration for Cities' abatement
or dismissal of, and forbearance from filing or pursuing, Show Cause Actions against Electric
Delivery and Cities' agreement to abide by the terms of this Agreement, and to reimburse Cities'
expenses associated with the Show Cause Actions and other regulatory proceedings. To the
Went that the amounts paid may be in excess of Cities' expenses, the excess is paid solely in
order to settle the matters that are the subject of this Agreement. Signatories recognize and agree
that the payments specified in this Agreement are not a rate reduction, refund, rebate, discount,
preference or privilege of any kind for services provided by Electric Delivery or any of its
affiliates or prcdecmwrs In int=si uudw tuty lama, vrlL Zw iu Q,v t,a.,t, ",w, V, is illu futures.
As such, the provision of electric delivery service to Cities by Electric Delivery or any affiliate
or predecessor has been and will continue to be governed solely by the rates, terms, and
conditions of the applicable tariffs.
17. Cities agree that for a ten-day period following the date this Settlement Agreement is
executed, neither Cities nor the cities listed on Exhibit A will make any public statements or take
any public action concerning the existence of a settlement or the terms of the Settlement
Agreement.
18. This Agreement shall become effective only upon the execution of this Agreement and
the entry of resolutions or orders abating or dismissing the Show Cause Actions.
19. Each person executing this Agreement represents that he or she is authorized to sign this
Agreement on behalf of the party represented
20. The Signatories expressly acknowledge and agree that oral and written statements made
by any party or its representative during the course of the settlement negotiations that led to this
Agreement cannot be -used or portrayed as an admission or concession of any sort and shall not
be admissible as evidence in any proceeding in any forum.
Executed on this the `ZZ day of February, 2005, by the Signatories hereto, by and through
their undersigned duly authorized representatives.
TXU Electric Delivery Company Steering Committee of Cities Served by
TXU Electric Delivery Company on behalf
of all cities listed on Ezhibit A to this
Agreement
1
Exhibit A
City of Addison City of Highland Park
City of Allen City of Honey Grove
City of Alvarado City of Howe
City of Andrews City of Hurst
City of Archer City City of Hutto
City of Arlington City of Irving
City of Belton City of Jolly
City of Benbrook City of Josephine
City of Big Spring City of Justin
City of Breckenridge City of Kaufman
City of Bridgeport City of Keller
City of Brownwood City of Kerens
City of Buffalo City of Lakeside
City of Burkbutnett City of Lamesa
City of Burleson City of Lindale
City of Caddo Mills City of Little River Academy
City of Camel City of Luella
City of Canton City of Malakoff
City of Carrollton City of Mansfield
City of Celina City of McKinney
City of Centerville City of Midland
City of Cleburne City of Milford
City of Colleyville City of Murphy
City of Collinsvilte City of Murchison
City of Comanche City of New Chapel Hill
City of Corinth City of North Richland Hills
City of Crowley City of O'Donnell
City of Dallas City of Oak Leaf
City of Dalworthington City of Oak Point
Gardens City of Odessa
City of DeLeon City of Ovilla
City of Denison City of Palestine
City of Early City of Pantego
City of Eastland City of Paris
City of Edgecliff Village City ofPlano
City of Euless City of Ranger
i Far ers-$ranch Ci!3-e€Rher$c
City of Flower Mound City of Richardson
City of Forest Hill City of Richland Hills
City of Fort Worth City of Roanoke
City of Frisco Cityof Robinson
City of Frost City of Rockwall
City of Glenn Heights City of Rosser
City of Grand Prairie City of Rowlett
City of Granger City of Sherman
City of Grapevine City of Snyder
City of Gunter City of Southlake
City of Harker Heights City of Sulphur Springs
City of Heath City of Sunnyvale
City of Henrietta City of Sweetwater
City of Hewitt City of Temple
City of The colony
City of Tyler
City of University Park
City of Venus
City of Waco
City of Watauga
City of White Settlement
City of Wichita Falls
City of Woodway
Exhibit B
City of Arlington
City of Benbrook
City of Brownwood
City of Burlcson
City of Carrollton
City of Dallas
City of Dalworthingtoa Gardens
City of Denison
City of Ft. Worth
City of Harker heights
City of Heath
City of Pantego
City of Plano
City of Richland Hills
City of Robinson
City of Rockwalt
City of Snyder
City of Sulphur Springs
City of The Colony
City of Woodway
City of Addison
City of Allen
City of Andrews
City of Archer City
City of Belton
City of Big Spring
City of Breckenridge
City of Bridgeport
City of Bu&MMeti
City of Celina
City of Cleburne
City of Colleyville
City of DeLeon
City of Early
City of Eastland
City of Euless
City of Fanners Branch
City of Flower Mound
City of Forest Mill
City of Frisco
City of Glenn Heights
City of Grand Prairie
City of Grapevine
City of Henrietta
City of Highland Park
City of Howe
City of Hurst
City of Irving
City of Keller
City of Lakeside
City of Lamesa
City of Lindale
City of Little River Academy
City of Mansfield
City of McKinney
City of Midland
City of Murphy
city of Norta Kictuaw tilos
City of Oak Point
City of O'Doancll
City of Odessa
City of Palestine
City of Paris
City of Richardson
City of Roanoke
City of Rowlett
City of Shectuan
City of Soudldw
City of Sunnyvale
City of Sweetwater
City ofTemple
Exhibit C
City ofTyler
City ofUniversity Park
City of Waco
City of Watauga
City of White Settlement
City of Wichita Falls
EXIMIT D
April 5, 2005
Mr. Geoffrey Gay
Lloyd Gosselink Blevins Rochelle Baldwin & Townsend, P.C.
111 Congress Avenue, Suite 1800
Austin, Texas 78701
Re: Settlement Agreement between Steering Committee of Cities Served by TXU Electric Delivery and TXU
Electric Delivery Company
Dear Mr. Gay:
I hereby acknowledge that the Steering Committee of Cities Served by TXU Electric Delivery has the authority to act on
behalf of the City of Southlake, Texas in the negotiation and execution of a settlement agreement with TXU Electric Delivery
Company, dated February 22, 2005.
I also represent that I am duly authorized by the City of Southlake, Texas to sign this letter.
Sincerely,
Andy Wambsganss
Mayor