263383 WH17E - CITY CLERK 263�83
PINK -..FINANCE COLl11C11 �
BL'UERY - MAYORTMENT GITY OF SAINT PALIL File NO.
�
oun il Resolution
Presented By
Referred To Committee: Date
Out of Committee By Date
WHEREAS, the Northern States Power Company has applied to the City
of Saint Paul, by petition dated March 8, 1974, for an increase in its
gas rates in connection with the operation in the City of Saint Paul
and pursuant to the provisions of its franchise, Section 7, Ordinance
No. 15474, approved November 1, 1973; and
WHEREAS, it will be necessary to retain a utility consultant to
examine the petition and the factual basis to which it relates, and to
present any advice and testimony to this Council of the City of Saint
Paul as required in a hearing before a duly ap�ointed hearing examiner,
before the Council itself, or in District Court, and the qualifications
and experience of Elmer Fox & Company, a partnership, as such consultant,
have been duly examined and approved by the Utilities Committee hereof;
now, therefore, be it
RESOLVED, That the proper City officers are authorized and directed
to enter into and e�ecute an agreement with Elmer Fox & Company for its
retention as rate consultant to serve in an advisory capacity, to examine
the basis for the petition, to participate during the entire Northern
States Power Company gas hearing, both before the hearing examiner and
the Council, and in related proceedings.
COUNCILMEN
Yeas Bt1t.l�T Nays Requested by Department of:
�artr-
Konopatzki In Favor
Levine ,l
Meredith V Against BY
�Roedler
Tedesco
Mme.President�tler— �t
APR 1 6 1974 Form Approv Attorne
Adopted by Council: Date
Certifie e by Council Secretary � BY
By d�-�i
Approv MaXo . Date Approved by Mayor for Submission to Council
gy By
��s��
.
r � l �V V V�
, Elmer
- Fox
� Certified Public Accountants
First National Bank Bui�ding/St. Paul,Minnesota 55101/(612) 224-3379
comp�y
April 5, 1974
City Council Utilities Committee
Councilman Rosalie Butler, Chairma.n
Council President Ruby Hunt
Councilman Patrick Roedler
Councilman Leonard Levine
Dear Councilmen:
At your committee meeting March 25, 1974, you requested an
estimate of the remaining consultants fees regarding the NSP electric rate
case. Based on our work-in-process since March 1, 1974, and on estimate
of our involvement to complete the rate case, we estimate our remaining
fees will be approximately $35,000.
We would also take this opportunity to discuss certain issues and
problems involved in this case that have consumed large blocks of time:
Magnitude of the requested increase
NSP requested an increase in revenues of nearly $13 million
representing a 28% increase to the City of Saint Paul rate payers. Inherent
in a request of this size is that NSP has a substantial concern in the result
and will use any available means to substantiate their request.
Accordingly, it requires a more diligent search to identify all
issues, gather all relevant data and provide thorough doctunentation of all
information obtained from NSP.
Prairie Island Generating Plant
One major issue arising in this case was NSP's inclusion of the
Prairie Island Generating Plant in the rate base without normalizing any
revenues or expenses for plant operation. Inclusion of this plant in the
rate base, as presented by NSP, would allow approximately a $6 million
revenue increase being passed on to the City of Saint Paul rate payers.
Because of the major impact of this issue to the City of Saint Paul,
we needed to be thoroughly familiar with all aspects of the plant as well as
the impact to the NSP system as a whole if and when it becomes a generating
unit.
,
. _
.�r
' -2-
Proposal for seasonal rates
NSP made a basic change from their rate design pattern by
proposing seasonal rates and brings forward one of the most important
issues of the case: "Who is going to pay for the increased revenue
requirements?"
Required filing information
The information required to be filed by NSP when petitioning
for increased rates is not defined by the City. Therefore, there is a
mini_mum of information filed by NSP. In fact, there was less source
information filed in this case than was filed in the previous case. The
development of information to prepare a proper test year had to be entirely
prepared by our staff.
Energy crisis
NSP provided through their testimony that a substantial factor
in their requested revenue increase was the impact of the current energy
crisis.
This fact, as well as the problem of developing a test year in
the midst of an energy crisis, requires a substantial analysis of financial
information to identify and normalize for nonrecurring problems.
Filing of revised exhibits
NSP filed revised exhibits after a substantial amount of field
work had been completed relating to the original exhibits. Additional
field work needed to be done to test the revised exhibits.
Conclusion
We feel that we have developed a solid rate case. We have
identified those issues having a substantial impact on the City of Saint
Paul rate payers and considering the magnitude of the issues involved, we
feel the time is fully justified and supported. Considering the issues
involved and the magnitude of the sum of money requested by NSP, we think
that it would be an incomplete comparison to simply compare the fee in
this case with the fee in the last case.
Very truly yours
�/ /--;
G7 sc.C�:�if/ /•-
Of Elmer Fox & Company
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- � � -� 6 � ���
ACTUAL DATA REGARDING REPORTED $5.8 MILLION ERROR
RELATING TO GROSS EARNINGS FEE
� Based on Based on
minimum maximum
recommended recottmiended
rate of return rate of return
1
Required revenue increase:
As filed $378,000 $1,505,000
As corrected �41I,000 1,636,000
Difference - Increase 33 000 $ 131,000
' % Increase
As filed .8% 3.3%
As corrected .9 3.5
Difference - Increase L% .2%