HomeMy WebLinkAboutOrd 48 Determining the General Natural Gas Rates
ORDINANCE NO. 48
AN ORDINANCE FIXING AND DETMUN'ING THE GENERAL SERVICE RATE
TO BE CHARGED FOR SALES OF NATURAL GAS TO RESIDENTIAL AND
COMMERCIAL CONSUMERS WITHIN THE TOWN LIMITS OF
WESTIAKE , DENTON COUNTY AND TA3RP7.ITT COUNTY,
TEXAS, AND PROVIDING FOR THE MANNER IN WHICH SUCH RATE MAY BE
CLANGED, ADJUSTED AND AMENDED.
BE IT ORDAINED BY THE BOARD OF ALDERMEN OF THE TOWN OF WESTIAKE, TEXAS:
SECTION 1. Effective with the first gas bills rendered from
and after thirty (30) days from the date of final passage of this ordi-
nance, the maximum general service rate for sales of natural gas ren-
dered to residential and commercial consumers within the town limits of
Westlake by Lone Star Gas Company, a Texas corporation,
its successors and assigns, is hereby fixed and determined as follows:
First
1,000
cu.
ft.
or fraction
thereof $2.444 Gross;
$2.20 Net
Next
3,000
cu.
ft.
@
$1.256
per
Mcf
Gross;
1.13
per
Mcf
Net
Next
6,000
cu-
ft-
@
1.133
per
Mcf
Gross;
1.02
per
Mcf
Net
Next
15,000
cu.
ft-
@
1.044
per
Mcf
Gross;
.94
per
Mcf
Net
Next
75,000
cu.
ft.
@
.978
per
Mcf
Gross;
.88
per
Mcf
Net
All Over
IOO,OOO
cu.
ft.
@
.944
per
Mcf
Gross;
.85
per
Mcf
Net
No gas bill will be rendered to any residential or commercial consumer
served under the above rate not consuming any gas during any monthly bill-
ing period.
ADJUSTMEUTS
The amount of each net monthly bill computed at the above -stated
rates shall be subject to the following adjustments: Plus or minus the
amount of any increase or decrease, respectively, above or below the 42.5
cents per Mcf level in the intracompany city gate charge as authorized by
the Railroad Commission of the State of Texas or other regulatory body hav-
ing jurisdiction for gas delivered to Lone Star Gas Company's distribution
system for sale to residential and commercial consumers where such changes
are caused by increases or decreases in the cost of gas purchased by the
Company; plus an amount equivalent to the proportionate part of any new tax,
or increased tax, or any other governmental imposition, rental, fee or charge
(except state, county, city and special district ad valorem taxes and taxes
on net income) levied, assessed or imposed subsequent to April 1, 1972, upon
or allocable to the Company's distribution operations, by any new or amended
law, ordinance or contract. Each gross monthly bill shall be adjusted pro-
portionately. Company, at its option, may forego the application of any
adjustment if such adjustment would result in an increase in the monthly
bill.; however, failure of Company to apply any adjustment shall not con-
stitute a waiver of Company's right from time to time, or at any time,
to make any adjustment, in whole or in part, in any subsequent current
monthly bill that may be applicable to such bill.
Net rate shall apply to all bills paid within ten days from
monthly billing date; gross rate shall be applicable thereafter.
The above rate is applicable to each residential and commercial
consumer per meter per month or for any part of a month for which gas is
used at the same location.
In addition to the aforesaid rates, Company shall have the right
to collect such reasonable charges as are necessary to conduct its business
and to carry out its reasonable rules and regulations in effect.
SECTION 2. The rate set forth in. Section 1 may be changed and
amended by either the Town or Company furnishing ga.s in the manner pro-
vided by law. Service hereunder is subject to the orders of regulatory
bodies having jurisdiction, and to the Company's Rules and Regulations
currently on file in the Company's office.
SECTION 3. It is hereby found and determined that the meeting
at which this ordinance is passed is open to the public, as required by
Texas law, and that advance public notice of the tzme, place and purpose
of said meeting was given, and that this rate ordinance is in compliance
with the applicable general criteria issued by the Price Commission under
the Economic Stabilization Act of 1970, as amended..
PASSED AND APPROVED on this the 22nd day of May ,
A.D. 19 72.
ATTEST:
r
A. L. Odom, Secretary
IXA, 1-15':
G. H. Harmon, Jr., Mayor
Town of Westlake , Texas
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STATE OF TEXAS §
COUNTY OF DENTON §
COMM OF TARRANT §
I, A. L. ODOM , Secretary of the Town of
estla,ke .,Denton Coun and Tarrant County
Texas, hereby certify that the above and foregoing is a true and correct
copy of an ordinance passed and approved by the Board of Aldermen
of the Town of Westlake at a regular session
held on the 22nd day of May , 19 72 , as it
appears of record in the Minutes of said Board, of Aldermen
in Book 2 , page
WITNESS MY HAND AND SEAL OF SAID TOWN, this the 22nd day of
May . , A.D. 19 72
j
r
A. L. Odom, Secretary
Town of Westlake , Texas
-3-
LONE STAR GAS COMPANY EXHIBIT 1
WESTLAXE, TEXAS DISTRIBUTION SYSTEM
ORIGINAL COST LESS ACCUMULATED PROVISION FOR DEPRECIATION
AT DECEMBER 31, 1971
Accumulated
Original
Line
Original
Provision
For
Cost
Less
No.
Cost
Depreciation
Depreciation
Distribution Plant
1
Mains
$163
997
71
$22 022
27
$141
975 44
2
Services
11
689
83
1 569
76
10
120 07
3
Meters
3
211
66
431
27
2
780 39
4
Meter Installations
360
00
48
34
311 66
5
House. Regulators
1
052
78
141
37
911 41
6
House Regulator Installations
303
00
40
69
262 31
7
Total Distribution Plant
180
614
98
24 253
70
156
361 28
8
General Plant Allocated
2
500
74
904
80
1
595 94
9
Total
$183
115
72
$25 158
50
$157
957 22
Line
No.
. LONE STAR GAS C014PANY
WESTLAKE, TEXAS DISTRIBUTION SYSTEM
REPRODUCTION COST NEW LESS ADJUSTMENT FOR AGE AND CONDITION
AT DECEMBER 31, 1971
Adjustment
Reproduction For Age And
Cost New Condition
EXHIBIT 2
Reproduction
Cost New Less
Adjustment
Distribution Plant
1 Mains
$136
922
73
$20 538
41
$116
384
32
2 Services
10
333
98
1 550
10
8
783
88
3 Meters
4
665
56
699
83
3
965
73
4 Meter Installations
443
53
66
53
377
00
5 House Regulators
1
012
60
151
89
860
71
6 House Regulator Installations
316
00
-
316
00
7 Total Distribution Plant
153
694
40
23 006
76
130
687
64
8 General Plant Allocated 1/
2
500
74
904
80
1
595
94
0
1/ Per Books
Total
$156 195 14 $23 911 56 $132 283 58
LONE STAR CAS C014PANY EXHIBIT 3
WESTLAKE, TEXAS DISTRIBUTION SYSTEM
FAIR VALUE RATE BASE
AT DECEMBER 31, 1971
Original Cost Reproduction
Line Less Accum. Cost New Less
No. Prov. For Depr, Adlustment Fair Value
Distribution Plant
Total
157 957
22
132 283
58
147 687
77
9
Construction Work in Progress
1 Mains
$141
975
44
$116
384
32
$1.31
738
99
2 Services
10
120
07
8
783
88
9
585
59
3 Meters
2
780
39
3
965
73
3
254
53
4 Meter Installations
311
66
13
377
00
90
337
80
5 House Regulators
95
911
41
860
71
891
13
6 House Regulator Installations
262
31
316
00
283
79
7 General Plant Allocated
1
595
94
1,
595
94
1
595
94
8
Total
157 957
22
132 283
58
147 687
77
9
Construction Work in Progress
135
34
135
34
135
34
10
Retirement Work in Progress
(3
28)
(3
28)
(3
28)
11
Contributions in Aid of Constr..
(83
75)
-
(50
25)
12
Working Capital
1 161
37
1 161
37
1 161
37
13
Total
$159 166
90
$133 577
Ol
$148 930
95
Line
No.
LONE STAR GAS COMPANY EXHIBIT 4
WESTLAKE, TEXAS DISTRIBUTION SYSTEM
REVENUES, EXPENSES, NET INCOME AND ADJUSTMENTS FOR KNOWN CHANGES
TWELVE MONTHS ENDED DECEMBER 31, 1971
Per Books
Adjusted
29 Provision For Federal Income Tax
30 Net Operating Income
31 Return on Rate Base of $ 148 930.95
$(2 553 06) $(2 239 11)
(1.71%) (1.50%)
Revenues
1
Residential Gas Sales
$14
791.75
$16
015
32
2
Commercial Gas Sales
87
92
98
05
3
Industrial Gas Sales
-
-
4
Total Gas Sales
14
879
67
16
113
37
5
' Other Gas Revenues
323
75
323
75
6
Total Revenues
15
203
42
16
437
12
Expenses
Gas Purchased
7
Residential
5
502
15
6
280
28
8
Commercial
34
11
39
82
9
Industrial
-
-
10
Company Used
-
-
11
Unaccounted For
412
93
423
90
12
Total Gas Purchased
5
949
19
6
744
00
13
Distribution Operations - Labor
765
77
790
09
14
Distribution Operations - S & E
343
45
343
45
15
Distribution Maintenance - Labor
456
68
471
18
16
Distribution Maintenance - S & E
242
08
242
08
17
Customer Accounts -- Labor
697
98
720
15
18
Customer Accounts -- S & E
426
82
441
91
19
Sales Expense - Labor
301
88
311
47
20
Sales Expense - S & E
221
52
221
52
21
Admin. and General - Labor
461
50
470
76
22
Admin. and General - S & E
674
98
677
11
23
Uncollectible Accounts
71
07
71
07
24
Taxes Other Than Federal Income
1
004
60
1
032
48
25
Merchandise Revenue - Net
(240
22)
(240
22)
26
Provision for Depreciation
6
379
18
6
379
18
27
Total Expenses (Excluding Federal Income Tax)
17
756
48
18
676
23
28
Net Income Before Federal Income Tax
(2
553
06)
(2
239
11)
29 Provision For Federal Income Tax
30 Net Operating Income
31 Return on Rate Base of $ 148 930.95
$(2 553 06) $(2 239 11)
(1.71%) (1.50%)
LONE STAR GAS COMPANY EXHIBIT 5
WESTLAKE, TEXAS DISTRIBUTION SYSTEM
DETAIL OF ADJUSTMENTS TO REVENUES AND EXPENSES
Adjustment No. 1 - Annualization of 6-1/2% General Wage Increase
Effective July 16, 1971
$
162
55
Distribution Operations - Labor
$
24
32
Distribution Maintenance - Labor
$
14
50
Customer Accounts - Labor
$
22
17
Sales Expense - Labor
$
9
59
Administrative & General - Labor
9
26
Administrative & General - Supplies and Expenses
$
2
13
Total Expenses
$
81
97
Provision for Federal Income Tax
$
(39
35)
Adjustment to Net Income
$
(42
62)
Adjustment, No. 2 - City Gate Gas Cost Adjustment
Residential Gas Purchased
$
162
55
Commercial Gas Purchased
1
03
Company Used Gas
$
-
70
Unaccounted For
$
10
97
Total Purchases
$
174
55
Provision for Federal Income Tax
83
78
Adjustment to Net Income
$
(90
77)
4djustment No. 3 - Normalize Weather
Residential Gas Sales
$
1 223
57
Commercial Gas Sales
10
13
Total. Gas Sales
$
1 233
70
Residential Gas Purchased
$
615
58
Commercial Gas Purchased
4
68
Taxes Other Than Federal Income
24
67
Provision for Federal Income Tax
282
61
Total Expenses and Federal Income Tax
$
927
54
Adjustment to Net Income
$
306
16
Adjustment No. 4 - Annualize Increase in Postal Rate, Effective
May 16, 1971
Customer Accounts - Supplies and Expenses $ 15 09
Provision for Federal Income Tax (7 24)
Adjustment to Net Income $ (7 85)
Adjustment No. 5 - Giving Effect to FICA Tax Base Increase
Effective. January 1, 1972
Taxes Other Than Federal Income $ 3 21
Provision for Federal Income Tax _(1.54)
Adjustment to Net Income $ (1 b7)
LONE STAR GAS COMPANY
WESTLAKE, TEXAS DISTRIBUTION SYSTEM
REVENUE DEFICIENCY
Line
No.
EXHIBIT 6
1
Rate Base at December 31, 1971
$
148
930 95
2
Rate of Return
X
8%
3.
Net Operating Income Required (Line 1 X Line 2)
$
11
914 48
4
Adjusted Net Operating Income 2/
6
335 14
5
Net Operating Income Deficiency (Line 3 Less Line 4)
$
5
579 34
6
Ratio Incremental Net Income to Incremental Revenue l/
.50960
7
Increase in Revenue Required (Line 5 : Line 6)
$
10
948 47
8
Increase in Revenue Required as Per Cent of Residential. and
Commercial Actual Revenue Excluding Air Conditioning Sales
68.99%
9
Approximate Increase in Revenue Resulting From Proposed Rate
$
1
586 98
10
Increase in Revenue Resulting From Proposed Rate as Per Cent
of Residential and Commercial Revenue Excluding Air
Conditioning Sales
10..00%
l/ Incremental Revenue 1..00000
Incremental Occupation Tax -
Incremental Street and Alley Rental .02000
Incremental Taxable Income .98000
Incremental Federal Income Tax at 48% .47040
Incremental Net Operating Income .50960
2/ Adjusted To Reflect Negative Federal Income Tax, if any
LONE STAR GAS COMPANY
APPLICATION TO THE TOWN OF WESTIAKE' TEXAS
FOR APPROVAL OF COMPANY'S PROPOSED
RESIDENTIAL AND COMMERCIAL RATE SCHEDULE
FOR NATURAL GAS SERVICE
TO THE HONORABLE MAYOR AND BOARD OF ALDERMEN
TOWN OF WESTLAKE, TEXAS
Gentlemen:
Lone Star Gas Company, throughout its long period of service
to the people of Texas, has had as a matter of first concern the neces-
sity of providing dependable gas service at reasonable prices to all of
our customers. In order to secure the large amount of capital which is
required to meet the ever-growing demand for natural gas service, at the
lowest cost to the consumer, we must earn a fair return upon the fair
value of our property.
Since 1969, when the Company last requested rate relief, vir-
tually all of our costs have increased. To cite just a few examples,
a half -ton service truck that cost $2,835 in 1968 costs $3,205 today,
an increase of 13.1%; a loader tractor with side boom that cost $36,050
in 1968 costs $41,457 today, a 15% rise; a truck/trailer that cost $21,500
in 1968 now costs $28,038, a substantial 30.4% increase. The price of
4 -inch distribution line pipe has increased since 1968 by 21.5%.
In order to retain and attract qualified employees, it has
been necessary to give wage increases totaling 11.3% in the last two.
years.
The cost of borrowed money reached a high of 9 3/4% in 1970,
and the Company's latest borrowing was at the rate of 7.5% in 1971.
The Company's weighted average interest cost on all borrowed money in-
creased 17% in this three-year period.
The most substantial increase, of course, is in the cost of
purchased gas. Because of the advantages of gas as a clean -burning
source of energy, the demand for natural gas is great. Due to Lone Star's
careful advance planning, there is an adequate supply of gas for Lone
Star customers (unlike the situation in some parts of the nation where
a gas shortage exists). Lone Star Gas Company, like most other gas
utility companies, buys a large part of its gas from independent pro-
ducers. Lone Star must be able to meet the prices offered to producers
by other pipeline companies, including interstate pipelines, in order
to continue to maintain its present adequate supply of gas for the people
and industries of Texas. The cost of this gas has increased. While
Lone Star is still purchasing gas under some contracts that were made
in the 50's at a price of approximately 15C per 1,000 cubic feet, we
must purchase new gas at today's prices, which sometimes exceed 30G
per 1,000 cubic feet. This is part of our cost of preparing for the
future. To continue to protect our consumers, we must pay the competi-
tive price.
The cost of purchased gas is reflected as an expense of the
Company in the city gate rate or intracompany charge by the Transmission
Division to the Distribution Division, which is fixed by the Railroad
Commission.
-2-
On March 3, 1972, the Texas Railroad Commission granted adop-
tion of the Gas Cost .Adjustment Rule that was requested by Lone Star
Gas Company after full hearings participated in by representatives of
many of the cities which we serve. This order authorized the intracom-
pany "city gate" charge for gas sold to residential and commercial cus-
tomers to be adjusted for changes in the cost of gas purchased by Lone
Star. When the cost of gas is increased or decreased, the cost of gas
at the city gate will be increased or decreased by 65% of the change
in the purchase price. This calculation is made every six months, and
Lone Star must ftle a certified statement covering such costs with the
Texas Railroad Commission and furnish a copy to each incorporated city.
or town which it serves. Unless this gas cost data is contested within
thirty days, it will go into effect as part of the authorized intracompany
charge.
It should be realized that nn increase in the amount of the
authorized intracompany city gate charge does not result in any revenue
to the Company until it: is put in effect in the distribution rates for
the cities and towns served. Therefore, this rate application also
carries an adjustment to cover any increase or decrease i.r, gas purchase
expense. Pone Star filed its applications for gas cost adjustments
at the Railroad Commission and now with the cities we serve, because
of the accelerating price that none Star must pay for gas and the regulatory
-3-
lag that has restricted capital necessary to find new gas supplies for
its customers. In the findings in the above-mentioned Railroad Commis-
sion proceedings, the Commission stated, "the adoption of gas cost ad-
justment rules requested by Lone Star Gas Company is a proper regulatory
practice. The Commission further finds that due to the rapidly spiral-
ing cost of gas and the effect of regulatory lag, such relief will bene-
fit both Lone Star and the cities, towns, and villages it serves." The
gas -cost -adjustment clause will permit the Company to compete for gas,
and it will save money for the cities in legal costs in connection with
frequent gate rate hearings before the Texas Railroad Commission and
city governing bodies. It should be noted that gas cost adjustments
are not new, and their, advantages have been recognized in some thirty-
four other states. Existing rates for gas sold by Lone Star to all cus-
tomers in Oklahoma and to industrial customers in Texas have for many
years contained gas -cost -adjustment clauses. There are seventy-two
towns in Lone Star's gas distribution system in Texas which currently
have gas cost adjustments. Most electric utility companies that operate
in Texas have fuel cost adjustments in their rates. Lone Star's gas
purchase cost, when related to total operating expenses, is twice as
high as the percentage relationship between fuel cost and total operating
expenses in the case of an electric utility.
As a result of the recent proceedings and the subsequent
filing of our certified cost of gas, the Railroad Commission has
-4-
authorized Lone Star to increase its intracompany charge by 1.1C, from
41.40 to 42.50 per Mcf. This increase is reflected in the data presented
to you in the attached schedules. The Price Commission has expressly
endorsed the allowance of gas cost adjustments, since they are totally
cost -oriented and do not contribute to inflationary expectations.
In view of our increased expenses, we must request this in-
crease in rates which is needed immediately to maintain our standards
of service, to obtain sufficient capital to permit necessary facility
expansion, and to meet the ever-growing demand for gas. With this in-
crease, natural gas will still be the most economical source of energy
for home or business.
In view of the national policy to combat inflation, we are
limiting our request for increased rates to a maximum of ten percent
of the present average rate in those towns and cities which have a
greater deficiency.
In making this request, the Company has considered the gen-
eral criteria which are applicable to municipalities as regulatory bodies
under the provisions of Price Commission Regulations, Section 300.16a.
(1) The increase is cost -justified and does not reflect
future inflationary expectations.
(2) The increase is the minimum required to assure con-
tinued, adequate and safe service or to provide for
necessary expansion to meet future requirements.
(3) The increase will achieve the minimum rate of return
needed to attract capital at reasonable costs and not
to impair the credit of the public utility.
(4) The increase does not reflect labor costs in excess
of those allowed by Price Commission policies.
(5) The increase takes into account expected and obtain-
able productivity gains, as determined under Price
Commission policies.
(6) The procedures of the regulatory agency provide for
reasonable opportunity for participation by all
interested persons, or their representatives, in
its proceedings.
These cost -oriented increases fully comply with the above criteria. While
we have increased productivity on a per employee basis, this is reflected
in the data for the base year 1971.
In requesting as prompt action as possible by your honorable
body, we submit herewith the following seven exhibits.
Exhibit 1: Original Cost Less Accumulated Provision for
Depreciation.
Exhibit 2: Reproduction Cost New Less Adjustment for
Age and Condition.
Exhibit 3: Fair Value Rate Base.
Exhibit 4: Revenue, Expenses and Net Operating Income
Adjusted for Known Changes.
Exhibit 5: Detail of Adjustments of Revenue and Expenses.
Exhibit 6: Revenue Deficiency.
Exhibit 7: Proposed Residential and Commercial Rate
Ordinance,
We respectfully present this application and request that you
place it on the agenda of your next open meeting for consideration and
passage of the proposed rate ordinance.
Sincerely yours,
LONE STAR GAS COMPANY
S 7
BYDate Presented Presented anager
-6-