RES 1564 04/24/2018 OF C/6
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RESOLUTION NO. 1564
A RESOLUTION OF THE CITY OF CIBOLO APPROVING A
RATE DECREASE FOR GAS-UTILITY SERVICES PROVIDED
BY CENTERPOINT ENERGY RESOURCES, CORP. D/B/A
CENTERPOINT ENERGY ENTEX AND CENTERPOINT
ENERGY TEXAS GAS — SOUTH TEXAS DIVISION
("CENTERPOINT") IN RELATION TO THE COMPANY'S
STATEMENT OF INTENT TO CHANGE GAS RATES FILED
WITH THE CITY ON ABOUT NOVEMBER 16, 2017;
DECLARING EXISTING RATES TO BE UNREASONABLE;
ADOPTING TARIFFS THAT REFLECT RATE ADJUSTMENTS
CONSISTENT WITH A DECREASE IN CENTERPOINT'S NON-
GAS REVENUE REQUIREMENT AND FINDING THE RATES TO
BE SET BY THE ATTACHED TARIFFS TO BE JUST AND
REASONABLE; FINDING RATE CASE EXPENSES ATTENDANT
TO CENTERPOINT'S STATEMENT OF INTENT TO BE
REASONABLE; DIRECTING CENTERPOINT TO REIMBURSE
THE CITY ITS REASONABLE RATE CASE EXPENSES;
DETERMINING THAT THIS RESOLUTION WAS PASSED IN
ACCORDANCE WITH THE REQUIREMENTS OF THE TEXAS
OPEN MEETING ACT; DECLARING AN EFFECTIVE DATE;
AND REPEALING ANY PRIOR RESOLUTIONS OR
ORDINANCES INCONSISTENT WITH THIS RESOLUTION
WHEREAS, pursuant to Texas Utilities Code § 103.001, the City of Cibolo,
Texas ("City") has exclusive original jurisdiction as a regulatory authority over
CenterPoint Energy Resources, Corp. d/b/a CenterPoint Energy Entex and CenterPoint
Energy Texas Gas — South Texas Division's ("CenterPoint" or "CenterPoint") rates,
operations, and services within the City; and
WHEREAS, the City is also a gas utility customer of CenterPoint, and has an
interest in CenterPoint's rates and charges; and
WHEREAS, CenterPoint filed a Statement of Intent with the City on about
November 16, 2017 to increase its system-wide annual revenue requirement by
approximately $490,000, which represents an increase in rates of approximately 4%; and
WHEREAS, CenterPoint requested approval of a 12-month surcharge to recover
approximately $675,992 in Hurricane Harvey restoration costs;
WHEREAS, CenterPoint requested approval to recover its and the cities'
reasonable rate case expenses; and
WHEREAS, the City previously took action to suspend the effective date by the
maximum extent allowable by law to allow the City's special counsel and rate
consultants to review CenterPoint's application to increase rates; and
WHEREAS, the City coordinated its review of CenterPoint's filing with other
similarly situated municipalities through a coalition of cities known as the Alliance of
CenterPoint Municipalities— South Texas Division("ACM"); and
WHEREAS, one of ACM's goals is to minimize rate-case expenses to the extent
reasonable, that otherwise would result from lengthy, contested rate-case proceedings
before the Railroad Commission of Texas and, if and where necessary, through the
appellate process in the courts for the pending rate case; and
WHEREAS, as part of ACM's review of CenterPoint's filing, ACM authorized
its attorneys and experts to formulate and review reasonable non-litigated outcomes to
resolve CenterPoint's pending request to increase rates; and
WHEREAS, ACM's special counsel and rate consultants met numerous times
with the CenterPoint to resolve CenterPoint's filing without the need for protracted
litigation; and
WHEREAS, after extensive review and analysis, ACM's special counsel and rate
consultants found that CenterPoint's proposed increase in revenue and its proposed rates
are unreasonable; and
WHEREAS, CenterPoint, ACM, and other affected parties, agreed that a "black-
box" decrease of $3.0 million in CenterPoint's current non-gas revenue is reasonable,
without agreeing to any particular ratemaking methodology, all as set forth in the
attached Settlement Agreement; and
WHEREAS, ACM's special counsel and rate consultants, having evaluated a
likely outcome from a fully-litigated proceeding at the Railroad Commission of Texas,
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are of the opinion that decrease of approximately $3.0 million in CenterPoint's current
non-gas revenue and approval of the surcharges related to Hurricane Harvey and Rate-
Case Expenses, compares favorably with a likely outcome from a fully-litigated
proceeding at the Railroad Commission of Texas; and
WHEREAS, for future Interim Rate Adjustments ("IRA") that CenterPoint
submits under the Texas Utilities Code § 104.301, sometimes referred to as Gas
Reliability Infrastructure Program (GRIP) applications, baseline plant amounts and
certain local- and state-tax elements must be established, and allocation factors to allocate
among the classes of customers, changes in rates related to future GRIP filings; and
WHEREAS, pursuant to Texas Utilities Code § 104.059, in future rate filings
CenterPoint may pursue recovery of a deferred benefit regulatory asset or liability, which
requires that base-year levels be established to track changes in pension-related and other
post-employment benefits; and
WHEREAS, to allow CenterPoint to maintain accurate plant-account balances
and related accumulated depreciation, depreciation rates must be established; and
WHEREAS, CenterPoint, in further implementation of the effects of the Tax Cut
and Jobs Act of 2017, has committed to making a separate filing on or before November
15, 2019, pursuant to Texas Utilities Code § 104.111, to adjust its rates to reflect a
reduction in its federal income tax expense related to excess deferred income taxes
("EDIT") and that its EDIT adjustment will be computed based on the average rate
assumption method (ARAM) for those amounts required under Internal Revenue Service
(IRS) normalization rules; and
WHEREAS, CenterPoint will issue a one-time credit to its South Texas Division
customers in the amount of$640,158 related to over-recoveries under CenterPoint's prior
IRA filings; and
WHEREAS, after extensive review and analysis, ACM's special counsel and rate
consultants found CenterPoint's proposed increase of $490,000 to be unreasonable and
that the negotiated rate decrease of $3.0 million in non-gas revenue, the Hurricane
Harvey and Rate-Case Expense surcharges, and the agreed plant balances to be used in
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future GRIP filings, the base-year balances for pension-related and other post-
employment benefits, and CenterPoint's depreciation rates to be reasonable; and
WHEREAS, ACM's special counsel and rate consultants recommend that the
City approve the attached Settlement Agreement, resulting in a decrease of$3.0 million
in CenterPoint's non-gas current revenue, approval of the Hurricane Harvey and Rate-
Case Expense surcharges, the agreed baseline plant balances to be used in future GRIP
filings, the base-year balances for pension-related and other post-employment benefits,
and CenterPoint's depreciation rates, and the attached tariffs, along with CenterPoint's
commitments regarding future filings and the IRA refund noted above and other terms of
the Settlement Agreement; and
WHEREAS, under the Texas Utilities Code § 103.022, the City has a right to
reimbursement of its reasonable rate-case expenses and CenterPoint has an obligation to
reimburse the City's reasonable rate-case expenses; and
WHEREAS, the attached tariffs implementing new rates are just, reasonable, and
in the public interest, and are consistent with a reduction in non-gas revenue of $3.0
million, and the Settlement Agreement as a whole is in the public interest;
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF CIBOLO,
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. That the City Council finds that:
A. The Settlement Agreement, Attachment A to this Resolution, and the decrease of
$3.0 million in CenterPoint's non-gas current revenue, the Hurricane Harvey and
Rate-Case Expense surcharges are just and reasonable and in the public interest;
B. The plant balances to be used in future GRIP filings set forth in Attachment A,
Paragraph 4 and Exhibit C and Exhibit C.1 to the Settlement Agreement are
reasonable;
C. CenterPoint may pursue recovery of a deferred benefit regulatory asset or liability
pursuant to Texas Utilities Code § 104.059 in a future filing and that the balances for
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pension-related and other post-employment benefits set forth in Attachment A,
Paragraph 5 of the Settlement Agreement are reasonable;
D. CenterPoint's depreciation rates set forth in Exhibit C to the Settlement Agreement,
are reasonable; and
E. The attached tariffs and rates as shown in Exhibit A and Exhibit B, respectively, to
the Settlement Agreement are just and reasonable and in the public interest;
F. For purposes of future IRA filings, CenterPoint shall use the following capital
structure and weighted cost of capital, including the pre-tax return shown below:
Class of Capital Percent Cost Weighted Pre-tax
Cost of Return
Capital
Long-Term Debt 45.00% 6.0480% 2.7216% 2.7422%
Common Equity 55.00% 9.8000% 5.3900% 6.8743%
Weighted Average 100.00% 8.1116% 9.6165%
Cost of Capital
Section 3. That CenterPoint's existing rates are found unreasonable upon the
implementation of the rates set forth in the Settlement Agreement.
Section 4. That the revenue and resulting rates set forth in the Settlement Agreement
and schedule of rates and tariffs for utility service provided by CenterPoint are just and
reasonable, and are hereby adopted effective upon approval of the Settlement Agreement
by the Railroad Commission of Texas.
Section 5. That to the extent any resolution or ordinance previously adopted by the
Council is inconsistent with this Resolution, it is hereby repealed.
Section 6. That 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 7. That if any one or more sections or clauses of this Resolution is adjudged
to be unconstitutional or invalid, such judgment shall not affect, impair or invalidate the
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remaining provision of this Resolution and the remaining provisions of the Resolution
shall be interpreted as if the offending section or clause never existed.
Section 8. That this Resolution shall become effective from and after its passage.
Section 9. As a courtesy, the City Secretary or other appropriate city official shall
notify CenterPoint of this Resolution by sending a copy of the Resolution to Sam
Chang, CenterPoint Energy Services CenterPoint, LLC, 1005 Congress Avenue,
Suite 650, Austin, Texas 78701 and ACM shall be notified by sending a copy of this
Resolution to Mr. Alfred R. Herrera, Herrera Law & Associates, PLLC, 816
Congress Ave., Suite 950, Austin, Texas 78701.
PASSED AND APPROVED this 24th day of April , 2018.
Stosh Bo e
Mayor
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ATTEST:
Peggy Cimics, TRMC
City Secretary
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