258105 ORI6INAL TO CITY GLBRK
' CITY OF ST. PAUL . HLENCiI NO. �� - �
• - -- OFFICE OF THE CITY CLERK
, ' � COU IL RESO UTION-GENERAL FORM
PRESENTED 6Y
COMMISSIONE ^ ° DAT
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WHEREAS� the Northern States Power Company has filed a
request with the City of Saint Paul, by letter dated March 27,
1972, for an increase in its electric utility rates ; and
WHEREAS, such increase is professed to be in addition
to the one granted by the City of Saint Paul under Ordinance
No. 15024� adopted January 28 � 19?2; and
WHEREAS, upon due co nsideration of the request� the
utility's �ermit, and the state law by which such permit is
granted� the Utilities Committee has recommen ded that the re-
quest for increase be not granted at this time, now� therefore ,
be it
RESOLVED, that in view of the conditions for only one
increase in rates in a calendar year being permitted by the
provisions of Min.n. Stat. � 451.07, and in view of an increase
in the rates of said utility having been already prescribed
during the calendar year of 1972� the request by the Northern
States Power Company be not granted at this time ; and be it
FURTHER R�SOLVED, `�hat any change in the electrical
rates of said utility shall only be considered and prescribed
after an investigation of the propriety of such change .by
qualified personnel acting on beh alf of the City, and a full
scale hearing on the question to be financed by the Northern
States Power Company.
FOR OV D:
Asst. Corp ion Counsei ��
APR 12 1972
COUNCILMEN Adopted by the Counci� 19—
Yeas Nays
But�er AP R 12 1��
�rone 19—
`Levine �n Favor
Meredith
Sprafka Mayor
.�.Z�igainst
Tedesco
Mr. President, McCarty
PUBLISHFA APR 151912
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N O R T H E R N 5 T A T E S P O W E R C O M P A N Y
SAINT -PAUL, MINNESOTA 65102 � ,� I
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March 27, 1972
The Honorable Harry E. Marshall
City Clerk
City Hall and Court House
Saint Paul, Minnesota 55102
Dear Mr. Marshall:
On June 8, 1971, NSP petitioned the Council for an electric rate increase in
the City of Saint Paul. The matter was referred by the Council to a Hearing
Examiner who conducted extensive hearings, received evidence, and on
December 22, 1971, issued a decision recommending a rate increase and
regulatory guidelines to the Council. .
The Council adopted its Examiner's recommendations and enacted Ordinance
No. 15024, which was accepted by NSP expressly subject to the right to
petition for a further rate increase if justified.
Your Examiner's recommendation for a rate increase was based on 1970
operating costs and plant investment, 1971 actual figures not then available.
Although it was known at the hearing that 1970 figures used were not current
and therefore deficient, the City objected to the use of projections or
predictions of either 1971 or 1972 costs because it contended such predictions
must of necessity be speculative.
Your Examiner recognizing this problem stated in his opinion as follows:
"If the predictions made by NSP's experts as to revenue
requirements for 1972 prove correct, nothwithstanding
the wage-price freeze, it will be the obligation of the
City to make such additional adjustment in the rate
_ schedules in the City of St. Paul as may then be indica- '
ted. "
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'The Honorable Harry E. Marshall -2- March 27, 1972
NSP now has the actua.l figures for its 1971 operations in Saint Paul. These
figures show substantial increases beyond Company's control in costs of
providing service during 1971, which had been included during the hearings
in Company's predictions for future revenue requirements, but which were
not reflected in your Examiner's recommendation.
Accordingly, NSP now requests in compliance with the obligation stated in
your Examiner's decision that the City establish reasonable electric rates
which would increase revenues by 4. 8 per cent to cover additional 1971 costs
not reflected in your Examiner's recommended rates.
Enclosed herewith are detailed schedules showing revenue requirements of
NSP based on 1971 actual operating costs and plant investment using the same
rate of return, identical allocations, and other guidelines included in the
Examiner's decision.
Very truly yours, -
`?�"k.-�ss+�,d G
C
Thomas A. Connelly
Division Manager
encls
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•Northerz� States Power Company (Minnesota) Schedule 1
Electric Utility - City of St Paul
INCOME STATEMEiVT
1971 and 1971 With Make Whole Adjustments
" Adjustments 1971
Actual To Make Make
1971 1971 Whole* Whole
TOTAL ELECTRIC REVENUES $35 837 600 A $ 2 207 000 $38 044 600
Revenue Deficiency from Schedule 4 B 1 828 400 1 828 400
Other Operating Revenues 137 100 137 100
Total Operating Revenues 35 974 700 40 O10 100
OPERATING EXPENSES
Production � 10 990 800 10 990 800
Transmission 462 300 . 462 300
•Distribution 2 173 200 2 173 200
Customer Accounts 775 800 775 800
Sales 264 800 264 800
Administrative & General ' 2 262 300 2 262 300
Taxes:
Real Estate & Personal Property 4 120 700 4 120 700
Gross Earnings 2 521 100 C 668 700 3 189 800
Social Security 180 800 180 800
Federal & State Income Taxes 474 300 D 1 845 800 2 320 100
Deferred Income Taxes 1 039 300 D 29 600 1 068 900
Income Taxes Deferred in Prior Years -58 500 -58 500
Provision for Depreciation & �
Amortization 3 883 000 3 883 000
Total Operating Expenses 29 089 900 31 634 OUO
OPERATING INCOME 6 884 800 8 376 100
NET OPERATING INVESTMENT - ORIGINAL
COST 102 176 700 102 147 100
� RATE OF RETt1RN 6.74% 8.20%
� * See Schedule 5 for explanation of adjus_tments. .
Northern Stat�s Power Company (Minnesota) Schedule 2
`.Elec�ric Utility - City of St Paul �
- NET OPERATING INVESTMENT AT ORIGINAL COST DEPRECIATED
D�cember 31, 1971
P'LANT IN SERVICE �
Production $ 58 109 100
Tra.nsmission 2� �+52 200
Communication Equipment 125 200
Distribution �+�+ 605 000
General 1 268 900
Common 3 923 l00 '
Total 132 ET�Spp
RESERVE FOR DEPRECIATION
Production 13 8�+9 900
Transmission � �+ 023 100
Communication Equipment �+9 300
� Distribution 11 2�+0 300
General 481 000
Co�m►on � 917 800
Total 30 5 1 00
' NET PLANT IN SERVICE � 101 922 100 ,
Deduct: '
Contributions in Aid of Construct}on 307 200
Accumulated Deferred Income Taxes 3 981 400
Accumulated Deferred Investment Tax Cr. 457 900
Net Before Working Capital 97 175 00
Add Other Capital Requirements:
Cash Working Capital 1 617 700
Average Ma,terial & Supplies . 844 100
Average Fuel on Hand 1 779 600
Deferred Research & Development Costs 759 700 -
NET OPERATING INVESTMENT - December 31, 1971 102 17 700
Deduct Additional Deferred Income Taxes 29 600 �
NET OFERATING INVESTP�i�IT - December 31, 1971 102 147 100
NortHern States Power Company (Minnesota) Schedule 3
�El�ctric Utility - City of 5t Paul
COMPUTATION OF FEDERAL AND STATE INCOME TAXES
1971 and 1971 with Make Whole Adjustments
1971
Actual Make
1971 Whole
1. Total Operating Revenues $ 35 974 700 $ 40 O10 100 .
2. Total Operating Expenses before
Income Taxes & Depreciation 23 751 800 24 420 500
3. Net . 12 222 900 15 589 600
Deduct•
4. Income tax depreciation 5 973 900 5 973 900
-5. Removal expenses deducted for taxes 212 800 212 800
6. Interest • 3 843 000 3 843 000
7. Items capitalized per books but
expensed for taxes (property taxes, .
sales taxes, payroll taxes and pensions) 849 900 849 900
8. Net taxable income (N) 1 343 300 4 710 000
9. Preferred dividend credit at 10.25%
of $990,000 (P) 101 500 101 500
10. Preliminary income taxes at
.5424(N) - .14(P) 2 540 500
.527399(N) - .135639(P) 694 700
11. Deduct Investment Tax Credit 220 400 220 400
12. Federal & State Income Taxes 474 300 2 320 100
Norihern States Pawer Company (Minnesota) Schedule 4
` . Ele�tric Utility - City of St Paul
• REVENUES REQUIRED TO EARN 8.2% RATE OF RETURN
1'�71 Including Make Whole Adjustments
Return Requirement
1. Net Operating Investment $102 147 100
2. Return @ 8.2% 8 376 100
Income Tax Requirement
3. Return from Line 2 8 376 100
4. Deduct Interest 3 843 000
5. Deduct other capitalized items 849 900 `
6. Add Book depreciation & amortization 3 883 000
7. Deduct tax depreciation 5 973 900
8. Deduct removal expenses 212 800
9. Deduct investment tax credit 220 400
� 10. Deduct Preferred Dividend Credit 14 200
11. Add Deferred Income Taxes 1 068 900
12. Deduct Income Taxes Deferred in Prior Years � 58 500
13. Income Tax Base 2 155 300
14. Preliminary Iacome Taxes @ 1.1853 �a� 2 554 700
15. Deduct Investment Tax Credit 220 400
16. Deduct Preferred Dividend Credit 14 200
17. Final Income Taxes 2 320 100
Gross Earnings Pr_vment Required "
18. Return from Line 2 8 376 100
19. Income Taxes from Line 17 2 320 100
20. Operating Expenses Excluding
Gross Earnings Taxes & Income Taxes �b� 26 124 100
21. Deduct Other Operating Revenues 137 100
22. Base for Gross Earnings Paynent 36 683 200
23. Gross Earnings Payment @ ,0869565 ��� 3 189 800
Cost of Service
24. Operating Expenses from Line 20 26 124 100
25. Gross Earnings Payment from Line 23 3 189 800
26. Income Taxes from Line 17 2 320 100
27. Return from Line 2 8 376 100 �-
28. Total Cost of Service at 8.2% Rate of Return 40 O10 100
29. Deduct Revenues for 1971 with Rate Increase �b) 38 181 700 .
Deficiency:
30. Amount . 1 828 400
31. Percent 4.g%
�a� ltt = .5424 : (1-.5424) or 1.1853 •
(b) From Schedule 1
(c) At the rate of .08 t (1-.08) or .0869565
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'North.ern States Pbwer Company (Minnesota) Schedule 5
E�ectric Utility - City of St Pa,ul
EXPLANATION OF ADNSTMENTS TO MAKE ACTUAL 1971 WHOLE IN
TERMS OF ORDER OF JUDGE J. SHERAN IN 1971 RATE CASE
A - Adjustment to reflect full annual effect of the rate increase of 4.6�0,
the portion of the gross earnings fee of 8°fo not in actual data for
1971 and the effect upon revenues because of fuel clause adjustments.
B - Additional revenues required to earn 8.2°fo rate of return in 1971 make whole.
C - Ad�justment to show the added expense for that portion of the gross earnings
fee of 8°fo not in actual data for 1971 and that associated with the revenue
deficiency. �
D - This adjustment includes: �
l. Amounts representing the increase in the Minnesota State income
tax effective July 1, 1971:
' a. $19,700 increase in income tax rate and other changes
. b. �29,600 increase in deferred income tax
2. �1,826,100 for the effect of the other make whole adjustments.
Also, the income tax computation aiso recognized deductions for interest
and other items capitalized durir.e construction allocated to the City
, of St Pa.ul using a basis which includes construction work in prooress.
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� - •� - CITY OF SAINT PAUL
� DEPARTMENT OF PUBLIC UTILITIES
216 City Hall cnd Court House 55102
PHON�x 223-4747
ROBERT F. SPRAFKA
Commissioner of Public Utilities
and
Preaideat,Board of R'ater Commiasioners
JOHN B. LaPOINTE
Deputy Commieeion�
April 11, 1972
The City Council of the
City of Saint Paul
RE: Northern States Power Company
Request for Rate Increase
March 27, 1972
Sirs and Madam:
Pursuant to the direction of the City Council, on April 7, 1972 the
members of the Utilities Committee reviewed a recent request of the
Northern States Power Company for an electrical rate increase which was
to be in addition to the one made effective on January 14, 1972. The
basis for such increase was stated to be further costs incurred after
the test year adopted in the rate hearing conducted before Robert J. Sheran.
In the utility's correspondence, reliance was placed on certain language
of the recommendation of Mr. Sheran to the effect:
"If the predictions made by NSP's experts as to
revenue requirements for 1972 prove correct,
notwithstanding the Wage-Price Freeze, it will be
the obligation of the City to make such additional
adjustment in the rate schedules in the City of
Saint Paul as may then be indicated." (Underlining
added)
After due consideration by the Committee, it is its recommendation that
no increase be granted at the present time, since the State law by which
permits are granted to the utility, t4inn. Stat. � 451.07, limits rate
increases as follows:
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The City Council 2. April 10, 1972
". . . the governing body of the City is hereby
authorized. . . by ordinance. . .to prescribe from
time to time, but not more often than once in each
calendar year, reasonable rates which the public
service corporation may charge for such service
within the City. . ." (Underlining added)
In view of the fact that our Ordinance No. 15024 adopted January 28, 1972
did grant a rate increase and did prescribe the rates during the calendar
year of 1972, a further increase by the Council and change in rates would
be contrary to the dictates of the statute.
Also, the comment of the hearing examiner, taken in context, is intended
to mean that before any increase is granted, the revenue requirements of
the company must be fully reviewed as they relate to the cost of imbedded
capital, the proper return on common equity, and the allocable expenses,
revenues, and extent of investment. Thus, the members of this Committee
are of the consensus that only in a full scale rate investigation and
hearing can the propriety of a rate change be determined. It is, therefore,
the additional recom4nendation of the Committee that no rate increase be
allowed in the future without such a hearing to be held at the expense of
NSP.
Very truly yours,
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Robert F. Sprafka h irman
Public Utilities C tee
TJS:RFS:ml
April 11, 2972
Mr, Da.t�ie1 A. Klas
Cor.goration Counsel
Buildin�;
�ear Sir:
't'Yze City Cauzicil today received a r�port of the
Public Utili�ies G�ommittee recomm�ndin� that the
reques�t o�' Northern States Power Campany for an
electric rate increase r�ot b� granted.
The Council rec�uests a determination by you aa
ta wh�ther c�r saot City t;ouncil action concurrin�
3n tk.� recamd�ndation is required.
Very truly yours,
City A.erk
AO�ng
r�cn z8, i97�
Hon. Robert F. Sprafka
Oamsr. of Public UtiZities
and
Chairman, Public Util3ties Co�.ttee
Building °�
Dear Sir:
Th� City Council t od�y referrec� to the PuUlic
Uti.liti.ee Committ�e the attacY�d application
for an i.t�erea�e in electrical ratee � deecribed
in the asttached. file.
Very truly yours�
G3ty Clerk
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