Res 034-91 2/19/1991RESOLUTION NO. 31/—/Y
RESOLUTION AUTHORIZING THE CITY MANAGER TO
EXECUTE A CONTRACT WITH MATHIS, WEST,
HUFFINES & CO. , P.C. /REED-STOWE AND COMPANY
FOR THE PURPOSE OF CONDUCTING A RATE ANALYSIS
OF THE LONE STAR GAS COMPANY LOCAL RATE CASE.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WICHITA
FALLS, TEXAS, THAT:
SECTION 1. The City Manager be and is hereby authorized to
execute a contract with Mathis, West, Huffines & Co. , P.C. /Reed-
Stowe and Company to perform a rate analysis of the pending Lone
Star Gas Company local rate case in accordance with the proposal
attached hereto and made a part hereof for all purposes.
SECTION 2. It is hereby officially found and determined
that the meeting at which this resolution is passed is open to
the public as required by law and that public notice of the time,
place, and purpose of said meeting was given as required.
PASSED AND APPROVED this the 19th day of February, 1991.
t
M A Y O R
ATTEST:
City Clerk
MATHIS, WEST, HUFFINES & CO., P.C.Capital Center• Indiana at Seventh
Certified Public Accountants P. 0. Box MWH • Wichita Falls, Texas 76307-9980
817) 723-1471 FAX(817) 723-2251
i February 8, 1991
The Mayor and City Council
City of Wichita Falls
P. 0. Box 1431
Wichita Falls, Texas 76307
Re: Contract to Assist in Review of Lone Star Gas
Company Rate Increase Application
1/Gentlemen:
Mathis, West, Huffines & Co. , P.C. proposes to represent the City
of Wichita Falls in reviewing the application for a rate increase
by Lone Star Gas Company to give the City reasonable assurance
1".?
that any rate increase recommended is fair, equitable and justified.
In order to make sure that the City of Wichita Falls obtains a report
that properly analyzes all facets of the proposed rate increase
application in conformity with state law and regulations; Mathis,
West, Huffines & Co. , P.C. proposes to consult with and joint venture
this engagement with Reed-Stowe & Co. All procedures outlined in
their letter of January 14, 1991 , (attached) will be performed and
147
a report presented within 60 days from the receipt of requested data
from Lone Star Gas .Company. This should give the City adequate time
to consider the findings prior to the 90 day extension date of May
20, 1991. Mr. Vernal L. Huffines, CPA, of our firm will be available
at any time during the process to consult with City staff and/or
elected officials as to the progress and results of this engagement.
Also, Mr. Huffines and Mr. Keith Reed will meet with the staff and
City Council to review their findings upon completion of this
engagement. The fee for this engagement will still not exceed
17,000 plus out-of-pocket expenses of $1,000.
We appreciate the City Council and staff giving a local firm the
opportunity to assist them in their responsibility for reviewing Lone
Star Gas Company' s rate increase proposal.
Sincerely yours,
7)24-4t34=a-- 77-42•
74- 4#1-""
MATHIS, WEST, HUFFINES & CO. , P.C.
ACCEPTED BY:
DATE:
z
r I •, '
17•14 ItE11i111—NTOWE & Co.
GOVERNMENTAL CONSULTING SERVICES
January 14, 1991
Mr. Gregory D. Humbach
City Attorney
City of Wichita Falls
1300 7th Street
Wichita Falls, Texas 76307
Dear Mr. Humbach:
Reed-Stowe & Co. is pleased to have this opportunity to propose to assist the
City of Wichita Falls in performing a review and analysis of Lone Star Gas
Company's (LSG) application for a rate increase filed January, 1991.
Our proposed assistance will include, but not be limited to the following
tasks:
TASK I.REVIEW OF COMPANY'S FILING
Perform an in-depth analytical review of the Company's Filing and supportive
documentation. The purpose of this task is:
o Determine, document and if necessary, challenge the Company's
rationale, methodologies and assumptions utilized in developing:
Selected Test Year
Selected Capital Structure
Invested capital (rate base) and fair value of invested
capital
Test Year Operating Income
Weighted cost of capital including the cost of equity
utilized in arriving at overall rate of return
Proposed revenue deficiency including tax conversion
Cost of services and rate class cost of service
Proposed rate design and pricing of services
o Prepare and submit to LSG requests for additional information
12770 COIT ROAD AT LBJ FWY,SUITE 1 107 1 OF;E SIX rH STr1FE r,SI 11 l E R50
DALLAS.TEXAS 75251 AUSTIN.TEXAS 79701
214)458-9398 5 12)4 7 9-0Uaq 1
FAX(214)458-0205 FAX(512)479-ORRP
Upon the conclusion of Task I, we shall meet with representatives of LSG to:
o Review detailed Summary of Company's Filing including, but not
limited to:
Identified Issues within the Filing summarizing the
Company's approach and specific explanations of our
exceptions taken (if any)
Identification of unsupported positions taken by the
Company
Identification of data and information deficiencies
o Requests for additional information to properly analyze and
evaluate the Company's Filing, if necessary.
TASK II. DEVELOPMENT OF INVESTED CAPITAL
o Perform Historical Ratio Analysis
Investment per customer
Investment per MCF sold
Etc.
o Identify investor and non-investor supplied funds.
o Trace components of invested capital to books of original entry,
if necessary.
o Challenge allocation methodologies (if appropriate) employed to
assign Corporate, Division and/or District investment to the
City's Distribution System.
o Analyze "Other Invested Capital Items" and their development,
e.g.:
Cash Working Capital - actual, 1/8th formula, lead-lag
Prepayments - actual versus average
Unrestored Post PURA ITC
Customer Deposits
Etc.
Upon the conclusion of Task's I. and II., we shall:
o Submit to City staff a "Draft" of our Findings, Conclusions and
Recommendations.
o Meet with designated City staff and officials to review Draft
Report.
o Revise Draft Report as appropriate.
Reed-Stowe & Co. will submit a Final Report of its findings, conclusions and
recommendations to be presented in Council work session and formally in a
public hearing. As enumerated in Task I. above, we propose one meeting with
LSG representatives to review our study . results to _assure no
misunderstandings in communications.
We anticipate completion of this engagement within sixty rom the
receipt of initial information from LSG. Our fee for t is engagement will
not exceed $17,000.00 plus out-of-pocket expenses incurred at cost, not to
exceed $1,000.00. Therefore, total fees and expenses shall not exceed
18,000.00. In the event the City desires more than the two anticipated
presentations, and/or meetings, this fee shall be adjusted for actual hours
spent in attendance of additional meetings. In the event the City of Wichita
Falls desires a level of effort different from that set forth in this letter,
we would of course adjust our fees and anticipated timing accordingly.
ARTICLE III, Section 3.03 of the Gas Utility Regulatory Act and Cox Act is
presented as additional information for City officials.
Sec. 3.03. AUTHORITY OF GOVERNING BODY; COST
REIMBURSEMENT. (a) The governing body of any municipality
participating in or conducting ratemaking proceedings shall have
the right to select and engage rate consultants, accountants,
auditors, attorneys, engineers, or any combination thereof, to
conduct investigations, present evidence, advise and represent
the governing body, and assist with litigation or gas utility
ratemaking proceedings before any regulatory authority or in
court. The gas utility engaged in those proceedings shall be
required to reimburse the governing body for the reasonable costs
of those services to the extent found reasonable by the
applicable regulatory authority.
If this letter is in agreement with your understanding of the engagement and
services to be provided, please sign one copy and return to our Dallas
office. If you should have any questions regarding this letter, please feel
free to contact Mr. Jack E. Stowe, Jr. or Mr. Keith Reed at (214) 458-9388.
Very truly yours,
dr' j362.4_4_
eed-Stowe & Co.
Accepted by:
Date:
el
v.
REED-STOWE & CO.
LONE STAR GAS CO. RATE CASES ANALYZED
City of Waco City of Wylie
City of Lewisville - 2 cases City of Rockwall
City of Mesquite City of Denison
City of Paris - 2 cases
o Consultant to the Lone Star Gas Co. State Steering Committee
ADDITIONAL
LONE STAR GAS CO. RATE CASE EXPERIENCE
City of Sherman City of Abilene
City of Farmers Branch City of Arlington
City of Cleburne City of Sulpher Springs
City of Carrollton City of Hurst
City of Addison City of Euless
City of Greenville