Resolution - City Manager: Consider a resolution authorizing the Mayor to deny Southwestern Public Service Company's proposed increase in rates; authorizing the City of Lubbock's continued participation with other cities in the Alliance of Xcel Municipalities, to direct the activities of lawyers and consultants; authorizing the hiring of attorneys and consultants; authorizing the intervention and participation in related rate proceedings; and requiring reimbursement of reasonable legal and consultant expenses.
Item Summary
On July 1, 2022, Southwestern Public Service Company ("SPS") filed an application with the City seeking authority to implement a surcharge to recover the additional amount of revenue that SPS would have received during the period from March 15, 2021, through February 28, 2022, the "True-up Period" if the rates approved in Docket No. 51802 had been in effect during that time.
Under state law, SPS has the right to recover revenue for what is called the "Relate-Back Period." The Relate-Back Period is the period of time from the 155th day after a utility files a rate case, to the date of the final order of the Public Utility Commission of Texas (PUCT) in that rate case. Also, in SPS's most recent general rate case, and based on a settlement reached in a prior general rate case for SPS, the PUCT approved recovery of revenue related to the increase the PUCT finally approved, reaching back to the 35th day after SPS filed its rate application in Docket No. 51802.
Docket No. 51802 is the case number the PUCT assigned to SPS's most recent general rate case in which the PUCT issued its final order on May 20, 2022. In Docket No. 51802, SPS requested an increase of about $144.4 million. Ultimately the parties, including the Alliance of Xcel Municipalities ("AXM"), reached a settlement for an increase in base rates of about $88.5 million. The PUCT approved that settlement on May 20, 2022.
Additionally, SPS's surcharge application requests authority to true-up revenues recovered through a surcharge associated with two prior rate cases, Docket Nos. 51644 and 52446. In those dockets the PUCT required SPS to true-up the surcharges in those dockets with the amount SPS actually collected and to refund or surcharge any over or under-collection from those surcharges.
Finally, the net of SPS's surcharge application related to Docket Nos. 51802, 51644, and 52446, is a surcharge of about $88.9 million, including interest of about $5.6 million. SPS also proposes to implement the net surcharge over a one-year period, from October 1, 2022, through September 30, 2023, and to true up the amounts actually surcharged or refunded against the amounts authorized by the Commission to be surcharged or refunded.
CITY ACTION REQUIRED:
AXM's Special Counsel recommends that the City, as part of AXM, deny SPS's application for its proposed surcharge. A denial is the more expeditious process to address SPS's application. A denial by the City means that SPS will appeal the City's decision to the PUCT and the PUCT ultimately will issue an order on the amount of the final surcharge for SPS to implement.
INTERVENTION AT THE PUBLIC UTILITY COMMISSION OF TEXAS:
SPS filed its surcharge application with the City and with the PUCT on the same date, July 1, 2022. It is important to participate in the proceedings before the PUCT because the PUCT's decision will impact the surcharge SPS will charge customers within the City. Thus, the accompanying Resolution authorizes intervention in proceedings at the Commission as well as any appeals taken from the Commission's decision.
REPRESENTATION AND PARTICIPATION IN AXM:
The law firm of Herrera Law and Associates, PLLC has previously represented the City and its participation in the coalition of cities named the Alliance of Xcel Municipalities ("AXM") in rate matters involving SPS, including SPS's most recent general rate case and its pending fuel-factor cases. The accompanying resolution authorizes continued retention of Herrera Law & Associates, PLLC as Special Counsel and continued participation in the AXM coalition.
RECOMMENDATION: DENY SPS'S RATE INCREASE REQUEST
AXM's Special Counsel recommends that the City deny SPS's request for a surcharge. If the City denies SPS's request, SPS will appeal that decision to the Public Utility Commission of Texas and the PUCT will issue a final decision on the amount of SPS's surcharge.
Fiscal Impact
SPS's application to implement a surcharge is a rate making proceeding. Thus, under state law, the Alliance of Xcel Municipalities' reasonable rate case expenses are subject to reimbursement by the Company.