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HomeMy WebLinkAbout06-20-1961332 Record of Official Proceedings of the Common Council of the City of Rochester, Minn., June 20, 1961 • Minutes of an adjourned regular meeting of the Common Council of the City of Rochester,, Minnesota, held in the Council -Chambers in the City -Hall, in said -City, on June 200 1961. President Tingley called the meeting to order at 3:15 o'clock P. M:, the following members being present: President Tingley, Aldermen DeVries, Morris, Stadler, Wilson. Absent.: Aldermen Leonard and Wilkus. R. V. Ehrick, City Attorney, reported that in July or August, 1959 Northern Natural Gas Company made application -for a rate increase, submitted -their figures and we analyzed them with the technical assistance of Mr. R. R.'Herrmann:and in April, 1960 the Common'Council adopted a resolution which denied any increase to the Company. He stated that at the -time a rate increase • was denied the Common Council was very critical of many figures and formulas in their report and application for rate increase, including -the fair value rate base concept which would have resulted in'an increase of their rate base of approximately 50%. The rate base is the value of the property which the company invested and on which it is entitled to make a reasonable return on a reasonably efficient operation. The Common Council felt that original cost less deprecia- tion was the proper rate base and thereby the Common Council reduced the company's asserted base by about $1,000,000.00. The Common Council was also critical of the failure to use the -propane plant for peak shaving ptjrposes. Because the cost of the demand units had risen to an alleged $3.50 per unit, which is $42.00 per year, this problem of peak shaving becomes important. The common Council objected to that and determined that the capacity of the propane plant should be used to reduce the djemand units contracted for. The Common Council also objected to the use of $3.50 demand charge because this sum was being collected under bond from jurisdictional customers under federal law and had not been approved.by the F. P. C. on the merits. The Common Council's computations indicated that the company was making approximately 6% on their original depreciated cost. It was suggested by Judge Murphy that Northern Natural Gas Company come back to the Common Council and make a presentation of their 1960 figures. The following figures have been computed or calculated by Mr. Herrmann.and myself and based on the position heretofore taken by the Common Council: Rate Base (original cost) 2,032,000.00 • Working Capital 150,000.00 Total Rate Base 2,182,000.00 Return at 6k% 136,375100 Computation of Revenue Deficiency Return at 6U. (after.taxes) 136,375.00 Income Taxes 124,530.00 Operating Expenses 371,823.00. Depreciation at 37. 84,710.00 Local & misc. taxes 92,799.00 Commodity charge 1,392,060.00 Demand charge 858,593.00 'Peak shaving cost (nat) 37,230.00 Total expense & return 3,098,120.00 1960 Revenues (adjusted) 2,856,471.00 Deficiency 241,649.00 Although Northern Natural Gas Company is claiming a rate base of $3,200,000.00 it is -our contention that the proper rate base is $2,182,000.00. This is the physical investment in the • Record of Official Proceedings of the Common Council of the City of -Rochester,'. Minn., June 20,. 1961 33 3- plant less depreciation and includes the.entire propane plant.- The $2,182,000.00 can not easily be further reduced. This figure gives no recognition to trended costs just the number of dollars invested in physical plant plus working capital. So this is the most advantageous base that can be used for rate purposes as far as the consumer is concerned. I have computed a return at 6k% for two reasons (1) the F.P.C. has now approved for ,F� `c cc Northern Natural Gas on its.national system a rate of 6%7. and (2) according to Mr. Herrmann a local distributing company is entitled,. in his opinion, to one to two.percent more than the F.P.C. allows on the national basis. I have taken the 64. which again is most advantageous to • the consumer. Northern is entitled to a return of $136,375.00 after taxes on this basis. With respect4"to demand charge, we have cut it down $150,000 because they did not give adequate recognition to the propane plant, although since 1958 the company has allocated a portion of the capacity to Rochester and.a portion to the remainder of the "billing group". The figure for peakshaving costs is for the additional cost of propane and operation of the propane plant when it is used for peak shaving purposes. If fair value would turn out to be the legal rate base and if it is, basically as the company asserts, its deficit in revenue would be $165,000.00 more or $406,649.00. If Northern is successful in allocating the propane plant there would be a further deficit. Mr. Larry Potter, Manager of Peoples Natural Gas Company, was then called in to the meeting. He was asked if this suggested compromise was granted if the company would be back again in 6 months asking for another raise. Mr. Potter said he hoped he would not have to make such a request at least not for another year and one-half. He was then asked if Northern Natural plan any application to.F.P.C. for an increase. He said last summer when they first started this action they were anticipating asking for an increase. President Tingley left the meeting at 4:40 P. M. Alderman Morris was appointed as President pro tem. Alderman Stadler stated that the Common Council has the responsibility and duty to set the maximum rates. He said the previous Council rejected the application for a rate increase and turned down their own experts recommendation, we have the same experts and seem • to be in agreement that Mr. Herrmann is a qualified expert and respected by both sides and I think it is on us to grant this raise, the tentative amount that we arrived at the last meeting knowing that none of us wants to pay a higher gas rate but I can not see how we can expect the Gas Company to supply us gas and lose money. Alderman Morris stated that he felt this raise was justified and should be granted. R. V. Ehrick, City Attorney, stated that Northern Natural Gas Company went for injunction last year and this case has been slated for a year and at the request of Northern trial has been set for June 27th and they do not want to give up their trial date unless some action is -initiated. He then read resolution directing a authorizing and R. V. Ehrick, City Attorney,:to execute and enter into on behalf of the City the following stipulation in the case of Northern Natural Gas Company.vs City of Rochester, et al, now pending in the District 334 Record of Official Proceedings of the Common Council of the City of Rochester, Minn., June 20, 1961 • D5WALD PUBLISHIND CD., NEW LI LM, MIN N. A352. Court in and for Olmsted County, Minnesota: STATE OF MINNESOTA COUNTY OF OLMSTED Northern Natural Gas Company a corporation, d/b/a Peoples Natural Gas Division, Plaintiff, -vs- City of Rochester, a municipal COrporation, Alex P. Smekta, Albert J. Tingley, Harold DeVries, David A. Leonard, James R. Wilson, Lawrence B. Stadler, Stanley M. Morris and Frank J. Wilkus, Defendants. DISTRICT COURT THIRD JUDICIAL DISTRICT STIPULATION It is hereby stipulated by and between counsel for the respective parties herein, with authority from the respective parties, that: 1. The above -named Court may and it is hereby requested to enter an order by consent of the parties in the above -entitled matter, which order shall provide as follows: A. That the plaintiff herein may, and is specifically authorized to, beginning June 27, 1961, charge and collect retail gas rates in the City of Rochester, Minnesota, in accordance with the rates specified in Schedules 1 and 2 attached hereto and hereby made a part hereof. B. That the plaintiff shall refund to its retail gas customers in the City of Rochester such amount, if any, as may be finally determined by the courts to have been paid bysuch customers over and above a. fair and reasonable rate, but that the plaintiff shall bot be required to post a. bond to guarantee payment of any refund which may ultimately kdetermined to be due herein. 2. The order described and requested above shall remain in force and effect until the defendants by proper action approve the rates specififed in Schedules 1 and 2 attached hereto and hereby made a part hereof, or until the'ttial of this action is concluded and the Court has entered its decision herein. 3. The trial of this cause of action shall be continued on the calendar of the above named Court until the defendants shall have had a reasonable length of time,. not to exceed three months from the date hereof, to confider the adoption of the rates specified in the attached schedules. If the rates specified in the attached schedules are adopted by the defendants by an amendment to Ordinance 903, which amendment becomes effective within three months from the date hereof,'this action shall be dismissed. If the defendants do not approve the said rates by amending Ordinance 903 within the stated period of time, this action shall be rescheduled for trial on the merits and the above -described order shall be continued in effect until the conclusion thereof and the Court has entered its decision herein. SCHEDULE 1 FIRM GAS SERVICE RETAIL RATE SCHEDULE Class of Customer: Domestic, Commercial Industrial Gas Consumption Cubic Feet per Month Rate Blocks Tr-om To First Block -Minimum Bill 0 600 Second Block 601 3 000 Third Block 3 001 50 000 Fourth Block 50 001 1000 00 Fifth Block 100.000 300 000 Sixth Block Excess Over 300 000 Consumption Cubic Feet in Block 600 2 400 47 000 50 000 200 000 Rate per MCF in Block $1.00 per Bill 1.18 .68 .66 .62 1 • 1 1 • 1 0 • Record of Official Proceedings of the Common Council of the City of Rochester, Minn., June 20,_ 1911 33 1 • • 1 The above schedule is stated so as to represent payments net after allowed discounts for prompt payments. Gross billing equals the above net plus 10 percent of cost of the first 50,000 cubic feet. SCHEDULE 2 INTERRUPTIBLE GAS SERVICE RETAIL RATE SCHEDULE Class of Customer: Interruptible Commercial and Industrial Gas Consumption Consumption Rate Cubic Feet per Month Cubic Feet Per MCF Rate Block From To in Block in Block First Block -Minimum Bill 0 600 600 $1.00 per Bill Second'Block 601 3 000 2 400 1.18 Third Block 3 001 50 000 47 000 .68 Fourth Block '50 001 100 000 50 000 .66 Fifth Block 100 001 300 000 200 000 .41 Sixth Block Excess Over 300 000 - .38 The above schedule is stated so as to represent payments net after allowed discounts for prompt payments. Gross billing equals the above net plus 10 percent of cost of the first 50,000 cubic feet. Sales to other large volume interruptible customers with•a lower curtailment priority may be made under contract at or below the rates set for the above. A motion was then made by Stadler, second by DeVries, that the said resolution be adopted as present - read, and all/voting in favor thereof (Morris, DeVries, Stadler, Wilson) , President pro tem Morris declared the said resolution duly passed and adopted and the City Attorney was instructed to enter into on behalf of the City the said stipulation. An Ordinance amending an Ordinance entitled, "An Ordinance Granting to the Northern Natural Gas Company, a Corporation (Operating as Peoples Natural Gas -Division) Its Successors and Assigns, a Non -Exclusive Franchise to Produce and Manufacture and to Use the Streets, Alleys, and Other Public Places for the Transmission, Distribution and Sale of Gas and Prescribing the Terms and Conditions of Such Franchise"(amending Section 4 by inserting the above listed schedules) was given its first reading. Alderman Stadler then introduced a resolution that the Rochester -Olmsted County Operational Survival Plan as heretofore filed in the office of the City Clerk by the Director of Civil Defense is hereby, in all respects, approved, which was read. A motion was then made by Stadler, second by DeVries, that the said resolution be adopted as read, and all present (Morris, DeVries, Stadler, Wilson) voting in favor thereof, President pro tem Morris declared the said resolution duly passed and adopted. Upon motion by Wilson, second by Stadler, the meeting was adjourned. Ci . Clerlj 0