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R-02-08-08-11B1 - 8/8/2002RESOLUTION NO. R- 02- 08- 08 -11B1 WHEREAS, the City of Round Rock ( "City ") is a plaintiff in Cause No. 00 -9383; City of Denton, Texas et al vs. TXU Electric Company, et al, and WHEREAS, a proposal has been made to settle the lawsuit on terms acceptable to the City, and WHEREAS, the City Council wishes to authorize the Mayor to execute a Compromise, Settlement and Release Agreement for the above referenced cause, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the Mayor is hereby authorized and directed to execute on behalf of the City a Compromise, Settlement and Release Agreement in Cause No. 00 -9383; City of Denton, Texas et al vs. TXU Electric Company, et al, a copy of said Agreement being attached hereto as Exhibit "A" and incorporated herein. The City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended. .. o" na\" ORLDox\ o, \rmox \RIsocurx \a2oeoaei.wen /a= A EST: RESOLVED this 8th day of August, 20 02. CHRISTINE R. MARTINEZ, City Secretar 2 /" W LL, Mayor City of Round Rock, Texas COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT This Compromise, Settlement, and Release Agreement (the "Agreement ") is made and entered into as of the date set forth below by and between the City of Round Rock (the "City ") and TXU Electric Company n/k/a TXU US Holdings Company ( "TXU Electric "), TXU Gas Company ( "TXU Gas ") and TXU Corp. (collectively sometimes referred to as the "TXU Defendants "): WHEREAS, there is currently pending in the 134 Judicial District Court of Dallas County, Texas, in Cause No. 00 -9383, a suit styled City of Denton, Texas et al. vs. TXU Electric Company, et al. (the "Litigation ") which includes claims by the City against the TXU Defendants arising out of the electric and gas franchise ordinances entered into by and between the City and TXU Electric and TXU Gas and, specifically, a dispute with regard to the amount of franchise fees paid to the City by TXU Electric and TXU Gas; WHEREAS, the City and the TXU Defendants have compromised and settled all claims asserted in the Litigation; NOW, THEREFORE, in order to settle and finally resolve the causes of action asserted in the Litigation and to fully and finally resolve all disputes and claims arising out of the calculation and payment of franchise fees to the City by TXU Electric and TXU Gas prior to and through December 31, 2001, for the mutual promises and covenants set forth in this Agreement, the adequacy and sufficiency of which consideration is acknowledged, and, without the TXU Defendants having admitted any of the validity of any allegations made in the Litigation, the City and the TXU Defendants agree as follows: 1. AMENDMENTS TO THE ELECTRIC FRANCHISE ORDINANCE As the result of electric industry restructuring, the electric franchise formerly held by TXU Electric has been assigned to Oncor Electric Delivery Company ( "Oncor "), accordingly, effective January 1, 2002, the City agrees to enter into and TXU Electric agrees to cause Oncor to COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Page 1 • EXHIBIT 1 nAn accept an amendment to the current electric franchise ordinance substantially in the form of the amendment attached as Exhibit A which amendment shall, at the election of the City, provide that the Discretionary Services Charges identified in Section 6.1.2 of the Tariff for Retail Delivery applicable to Oncor which are directly paid by the customer and which are those charges identified as items DD1 through and inclusive ofDD24 in said tariff, shall be subject to an additional franchise fee based on 4% of such charges which additional franchise fee shall be paid to the City pursuant to the terms of the amendment attached as Exhibit A. The City acknowledges that Oncor may file with the Texas Public Utility Commission and/or the City a tariff amendment in compliance with the terms of this agreement, which will provide that Oncor shall have the right to collect from the customer the franchise fee on such Discretionary Service Charges such that the customer shall bear 100% of the franchise fee on such Discretionary Service Charges. The City acknowledges that Oncor is an intended third -party beneficiary of this agreement and agrees to cooperate with Oncor in order for Oncor to pass through to customers the entire franchise fee on such Discretionary Service Charges by taking the following actions: (i) to the extent the City acts as regulatory authority, by adopting and approving that portion of any tariff in compliance with the terms of this Agreement which provides for 100% recovery of such franchise fees; (ii) in the event the City intervenes in any regulatory proceeding before a federal or state agency in which the recovery of the franchise fees on such Discretionary Service Charges is an issue, the City will take an affirmative position supporting the 100% recovery of such franchise fees by Oncor and; (iii) in the event of an appeal of any such regulatory proceeding in which the City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by Oncor. The City further agrees not to take any action to prevent the recovery of the franchise fees on such Discretionary Service Charges by Oncor and to take other action which may be reasonably requested by Oncor to provide for the 100% recovery of such franchise fees by Oncor. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Pave 2 2. AMENDMENTS TO THE GAS FRANCHISE ORDINANCE Effective January 1, 2002, the City agrees to enact and TXU Gas agrees to accept an amendment to the current gas franchise ordinance substantially in the form of the amendment attached as Exhibit B to provide that, at the election of the City, the franchise fee will increase to a maximum of 4.00% of the applicable franchise fee payment base and, at the election of the City, the franchise fee payment base shall be amended to include miscellaneous fees, contributions in aid of construction, bad debt expense, transportation revenues and third -party gas sales and gross receipts fees as well as a favored nations clause with respect to franchise fee payments and franchise fee calculations, substantially in the form of the provisions in Exhibit B. The City acknowledges that TXU Gas has the right to recover from its ratepayers such additional franchise fee payments to the City and the City agrees to cooperate with TXU Gas in order for TXU Gas to pass through to its ratepayers the entire franchise fee payment, as amended, by taking the following actions: (i) as regulatory authority, by adopting and approving the ordinance, rates or tariff which provide for 100% recovery of such franchise fees as part of TXU Gas' rates; (ii) in the event the City intervenes in any regulatory proceeding before a federal or state agency in which the recovery of TXU Gas' franchise fees is an issue, the City will take an affirmative position supporting 100% recovery of such franchise fees by TXU Gas and; (iii) in the event of an appeal of any such regulatory proceeding in which a City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by TXU Gas. The City further agrees not to take any action to prevent the recovery of such franchise fees by TXU Gas and to take other action which may be reasonably requested by TXU Gas to provide for the 100% recovery of such franchise fees from TXU Gas' ratepayers. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Page 3 3. PAYMENTS TO THE CITY Upon execution and delivery of a fully executed and notarized original of this Agreement and conditioned upon the dismissal of the Litigation with prejudice as provided by Paragraph 5: A. TXU Gas agrees to pay to the City by payment to its attorneys, Strasburger & Price, the sum of $94,310.00 the same being City's share of an aggregate sum of exactly $2,000,000.00 which TXU Gas agreed to pay to the Plaintiffs in the Litigation, which $2,000,000.00 amount is calculated by multiplying the general business revenues received by TXU Gas in the calendar year 2000 in the City in which TXU Gas did business in the aggregate amount of $165,591,132.80 by a factor equal to 0.0120779414. The City acknowledges that TXU Gas has the right to and shall recover the portion of the $2,000,000.00 amount actually paid to the Plaintiffs in connection with the settlement of the Litigation from its ratepayers pursuant to the tax adjustment clause applicable to TXU Gas, by applying a surcharge to the monthly bills rendered to its ratepayers, provided that the recovery of such surcharge shall be limited as follows: (1) the surcharge shall be amortized over a period not less than three years, and (2) the accrual balance will not be subject to interest. TXU Gas agrees that the franchise fee paid to the City and recovered from ratepayers under this Agreement will not include any amounts collected in the past from ratepayers. B. TXU Electric agrees to pay or cause Oncor to pay the City, by payment to its attorneys, Strasburger & Price, the sum of $76,013.00 the same being City's share of an aggregate sum of exactly $1,000,000.00 which TXU Electric agreed to pay to the Plaintiffs in settlement of the Litigation, which $1,000,000.00 is calculated by multiplying the general business revenues received by TXU Electric in the calendar COMPROMISE. SETTLEMENT AND RELEASE AGREEMENT - Page 4 year 2000 in the City in which TXU Electric did business in the aggregate amount of $1,149,561,767.63 by a factor equal to 0.000869897. C. The TXU Defendants agree and expressly represent that none of the amounts set forth in paragraphs 3(B) and 4 shall be recovered from ratepayers pursuant to a tax adjustment clause or by applying a surcharge to the monthly bills rendered to ratepayers, or otherwise "passed thru" to ratepayer(s). 4. FEES AND EXPENSE REIMBURSEMENT Upon execution and delivery of a fully executed and notarized original of this Agreement and conditioned upon the dismissal of the Litigation with prejudice as provided by Paragraph 5, the TXU Defendants agree to pay and/or cause Oncor to pay the City, by payment to its attorneys, Strasburger & Price, the sum of $18,342.30 the same being City's share of an aggregate sum of exactly $915,000 which the TXU Defendants agreed to pay to the Plaintiffs to reimburse the Plaintiffs for attomeys' fees and expenses incurred in the Litigation. 5. DISMISSAL OF THE LITIGATION The parties recognize and agree that this settlement is a full settlement of all claims asserted or which could have been asserted by the City against TXU Electric, TXU Gas and TXU Corp. in the Litigation related to the calculation or payment of franchise fees prior to and through December 31, 2001 and the parties agree that, in connection with such settlement, they will jointly file with the Court having jurisdiction of the Litigation appropriate pleadings in order to dismiss the Litigation with prejudice as to the City, with the order of dismissal to provide that costs of court will be taxed against the party incurring the same and be substantially in the form of the Agreed Order attached as Exhibit C. COMPROMISE. SETTLEMENT AND RELEASE AGREEMENT - Pave 5 6. RELEASE OF THE TXU DEFENDANTS BY THE CITY Except for claims arising out of a breach of this Agreement, the City of Round Rock, on behalf of itself and its successors and assigns and any and all persons, entities or municipalities claiming by, through or under them, hereby RELEASES, DISCHARGES AND ACQUITS, forever and for all purposes, TXU Electric Company (now known as TXU US Holdings Company), its successor Oncor Electric Delivery Company, TXU Gas Company, including its division TXU Gas Distribution, TXU Corp. and each of their respective agents, employees, officers, directors, shareholders, partners, insurers, attorneys, legal representatives, successors and assigns as well as their affiliated corporations, including TXU Business Services Company and TXU Energy Company LLC and its subsidiaries, from and against any and all liability which they now have, have had or may have, and all past, present and future actions, causes of action, claims, demands, damages, costs, expenses, compensation, losses and attomeys' fees of any kind or nature whatsoever, or however described, whether known or unknown, fixed or contingent, in law or in equity, whether asserted or unasserted, whether in tort or contract, whether now existing or accruing in the future arising out of or related to the payment, calculation or rendition of franchise fees to the City on or before December 31, 2001 and all claims which were asserted against the TXU Defendants in the Litigation or which could have been alleged against the TXU Defendants in the in the Litigation in any way related to the payment, calculation or rendition of franchise fees by the TXU Defendants on or before December 31, 2001. This release is intended to only release claims related to the payment, calculation or rendition of franchise fees by the TXU Defendants on or before December 31, 2001 and is not intended to release any other claim or cause of action that any party to this Agreement has, known or unknown, or which accrues in the future. COMPROMLSE. SETTLEMENT AND RELEASE AGREEMENT - Pane 6 7. WARRANTY AS TO OWNERSHIP OF CLAIMS AND AUTHORITY A. The City warrants and represents that it is the owner of the claims being compromised, settled, discharged and released pursuant to this Agreement and each further warrants and represents that it has not previously assigned all or any part of such claims to another entity or person. The City warrants and represents that there are no liens of any nature, assignments or subrogation interests in or to the money paid to the City under the terms of this Agreement. B. The TXU Defendants warrant that the person(s) executing this Agreement on their behalf has authority to bind the entity for whom such person signs this Agreement. 8. NO ADMISSION OF LIABILITY This Agreement is made to compromise, terminate and to constitute an accord and satisfaction of all of the claims released by this Agreement and the TXU Defendants admit no liability, fault or wrongdoing of any nature or kind whatsoever and expressly deny and disclaim any liability, fault or wrongdoing alleged or which could have been alleged with regard to the claims asserted in the Litigation. 9. RECOVERY OF DAMAGES DUE TO BREACH In the event of breach by any party of the terms and conditions of this Agreement, a non- breaching party shall be entitled to recover all expenses as a result of such breach, including, but not limited to, reasonable attorneys' fees and costs. MISCELLANEOUS PROVISIONS 10. It is understood and agreed that all agreements and understandings by and between the parties to this Agreement with respect to the Litigation, the settlement of the Litigation and the payment of franchise fees are expressly embodied in this Agreement and that this Agreement supersedes any and all prior agreements, arrangements or understandings between the parties relating to the claims COMPROMISE. SETTLEMENT AND RELEASE AGREEMENT - Pave 7 released pursuant to this Agreement or any matters related thereto executed by the parties, including the Memorandum of Understanding dated January 31, 2002 signed by counsel for the Plaintiffs and the TXU Defendants. 11. The parties acknowledge and agree that the terms of this Agreement are all contractual and not mere recitals. 12. The parties acknowledge that they have read this Agreement, understand its terms, and that this Agreement is entered into voluntarily, without duress, and with full knowledge of its legal significance. 13. This Agreement may not be modified in any manner, nor may any rights provided for herein be waived, except by an instrument in writing signed by each party. 14. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. 15. Should any term or any provision of this Agreement be declared invalid by a court of competent jurisdiction, the parties agree that all other terms of this Agreement are binding and have full force and effect as if the invalid portion had not been included. 16. The parties represent and warrant that no party has been induced to enter this Agreement by a statement, action or representation of any kind or character made by the persons or entities released under this Agreement or any person or persons representing them, other than those expressly made in this Agreement. 17. It is understood and agreed that this Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes. 18. The headings contained herein are for convenience and reference only and are agreed, in no way, to define, describe, extend or limit the scope or intent of this Agreement or its provisions. 19. This Agreement shall be construed in accordance with the laws of the State of Texas. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Pace 8 set forth. IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Page 9 THE CITY OF ROUND ROCK, TEXAS By: Its: Date: TXU ELECTRIC COMPANY n/k/a TXU US HOLDINGS COMPANY By: Its: Date: TXU GAS COMPANY By: Its: Date: TXU CORP. By: Its: Date: STATE OF TEXAS § COUNTY OF TRAVIS § This instrument was acknowledged before me on the day of June 2002, by , as on behalf of the City of Round Rock, Texas. STATE OF TEXAS § COUNTY OF DALLAS § COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Pape 10 Notary Public, State of Texas This instrument was acknowledged before me on the day of June 2002, by , of TXU Electric Company n/k/a TXU US Holdings Company, on behalf of said corporation. Notary Public, State of Texas STATE OF TEXAS COUNTY OF DALLAS This instrument was acknowledged before me on the day of June 2002, by , of TXU Gas Company, on behalf of said corporation. STATE OF TEXAS § COUNTY OF DALLAS § This instrument was acknowledged before me on the day of June 2002, by , of TXU Corp., on behalf of said corporation. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Page II Notary Public, State of Texas Notary Public, State of Texas ORDINANCE NO. AN ORDINANCE AMENDING THE EXISTING ELECTRIC FRANCHISE BETWEEN THE CITY AND ONCOR ELECTRIC DELIVERY COMPANY, TO PROVIDE FOR A DIFFERENT CONSIDERATION; PROVIDING AN EFFECTIVE DATE; PROVIDING FOR ACCEPTANCE BY ONCOR ELECTRIC DELIVERY COMPANY; FINDING AND DETERMINING THAT THE MEETING AT WHICH THIS ORDINANCE IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW. WHEREAS, Oncor Electric Delivery Company, successor in interest to TXU Electric Company (hereinafter called "Oncor ") is engaged in the business of providing electric utility service within the City and is using the public streets, alleys, grounds and rights -of -ways within the City for that purpose under the terms of a franchise ordinance heretofore duly passed by the governing body of the City and duly accepted by Oncor; and WHEREAS, the City and Oncor desire to amend said franchise ordinance to provide for a different consideration; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF , TEXAS: that SECTION 1: The existing electric franchise ordinance between the City and Oncor Electric Delivery Company is amended as follows: A. Effective January 1, 2002, the franchise fee due from Oncor shall be a sum comprised of the following: (1) a charge, as authorized by Section 33.008(b) of PURA, based on each kilowatt hour of electricity delivered by Oncor to each retail customer whose consuming facility's point of delivery is located within the City's municipal boundaries and as specified by Oncor to the City by letter dated January 21, 2002. (a) The franchise fee due pursuant to Section 33.008(b) of PURA shall be payable in accordance with the existing electric franchise; and (2) a sum equal to four percent (4 %) of gross revenues received by Oncor from services identified in its "Tariff for Retail Delivery Service ", Section 6.1.2, "Discretionary Service Charges," items DD1 through DD24, that are for the account or benefit of an end -use retail electric consumer. EXMIBIT A (a) (b) The franchise fee amounts based on "Discretionary Service Charges" shall be calculated on an annual calendar year basis, i.e., from January 1 through December 31 of each calendar year. The franchise fee amounts that are due based on "Discretionary Service Charges" shall be paid at least once annually on or before April 30 each year based on the total "Discretionary Service Charges" received during the preceding calendar year. B. Oncor Franchise Fee Recovery Tariff (1) Oncor may file a tariff amendment(s) to provide for the recovery of the franchise fee on Discretionary Service Charges. (2) City agrees (i) to the extent the City acts as regulatory authority, to adopt and approve that portion of any tariff which provides for 100% recovery of the franchise fee on Discretionary Service Charges; (ii) in the event the City intervenes in any regulatory proceeding before a federal or state agency in which the recovery of the franchise fees on such Discretionary Service Charges is an issue, the City will take an affirmative position supporting the 100% recovery of such franchise fees by Oncor and; (iii) in the event of an appeal of any such regulatory proceeding in which the City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by Oncor. (3) City agrees that it will take no action, nor cause any other person or entity to take any action, to prohibit the recovery of such franchise fees by Oncor. SECTION 2: In all respects, except as specifically and expressly amended by this ordinance, the existing effective franchise ordinance heretofore duly passed by the goveming body of the City and duly accepted by Oncor shall remain in full force and effect according to its terms until said franchise ordinance terminates as provided therein. SECTION 3: This ordinance shall take effect upon its final passage and Oncor's acceptance. Oncor shall, within thirty (30) days from the passage of this ordinance, file its written acceptance of this ordinance with the Office of the City Secretary in substantially the following form: To the Honorable Mayor and City Council: Oncor Electric Delivery Company, acting by and through the undersigned authorized officer, hereby accepts in all respects, on this the day of Page 2 of 3 SECTION 4. It is hereby officially found and determined that the meeting at which this Ordinance 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 BY THE CITY COUNCIL OF THE CITY OF , TEXAS , this the day of , 2002, at which meeting a quorum was present and voting. ATTEST: City Secretary APPROVED AS TO FORM: City Attorney 20 Ordinance No. amending the current electric franchise between the City and Oncor and the same shall constitute and be a binding contractual obligation of Oncor and the City. Oncor Electric Delivery Company By Vice President Mayor Page 3 of 3 ORDINANCE NO. AN ORDINANCE AMENDING THE EXISTING GAS FRANCHISE BETWEEN THE CITY AND TXU GAS COMPANY, TO PROVIDE FOR A DIFFERENT CONSIDERATION AND TO AUTHORIZE THE LEASE OF FACILITIES WITHIN THE CITY'S RIGHTS -OF -WAY; PROVIDING AN EFFECTIVE DATE; PROVIDING FOR ACCEPTANCE BY TXU GAS COMPANY; FINDING AND DETERMINING THAT THE MEETING AT WHICH THIS ORDINANCE IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW. WHEREAS, TXU Gas Company (hereinafter called "TXU Gas ") is, through its TXU Gas Distribution division, engaged in the business of furnishing and supplying gas to the general public in the City, including the transportation, delivery, sale, and distribution of gas in, out of, and through the City for all purposes, and is using the public streets, alleys, grounds and rights - of -ways within the City for that purpose under the terms of a franchise ordinance heretofore duly passed by the governing body of the City and duly accepted by TXU Gas; and WHEREAS, the City and TXU Gas desire to amend said franchise ordinance to provide for a different consideration and to authorize the lease of facilities within the City's rights -of- way; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF , TEXAS: that SECTION 1: The existing gas franchise ordinance between the City and TXU Gas Company is amended as follows: A. Effective January 1, 2002, the consideration payable by TXU Gas for the rights and privileges granted to TXU Gas by the franchise ordinance heretofore duly passed by the goveming body of this City and duly accepted by TXU Gas is hereby changed to be four percent (4 %) of the Gross Revenues, as defined in Section 1.B. below, received by TXU Gas. "Gross Revenues" shall mean all revenue derived or received, directly or indirectly, by the Company from or in connection with the operation of the System within the corporate limits of the City and including, without limitation: (1) all revenues received by the Company from the sale of gas to all classes of customers within the City; EXHIBIT B (2) all revenues received by the Company from the transportation of gas through the pipeline system of Company within the City to customers located within the City; (3) the value of gas transported by Company for Transport Customers through the System of Company within the City ( "Third Party Sales "), with the value of such gas to be reported by each Transport Customer to the Company, provided, however, that should a Transport Customer refuse to fumish Company its gas purchase price, Company shall estimate same by utilizing TXU Gas Distribution's monthly industrial Weighted Average Cost of Gas, as reasonably near the time as the transportation service is performed; and (4) "Gross revenues" shall include: (5) (a) other revenues derived from the following `miscellaneous charges': i. charges to connect, disconnect, or reconnect gas within the City; ii. charges to handle returned checks from consumers within the City; iii. such other service charges and charges as may, from time to time, be authorized in the rates and charges on file with the City; and iv. contributions in aid of construction" ( "CIAC "); (b) revenues billed but not ultimately collected or received by the Company; and, (c) gross receipts fees. "Gross revenues" shall not include: (a) the revenue of any Person including, without limitation, an affiliate, to the extent that such revenue is also included in Gross Revenues of the Company; (b) sales taxes; and (c) any interest income earned by the Company; and Page 2 of 5 (d) all monies received from the lease or sale of real or personal property, provided, however, that this exclusion does not apply to the lease of facilities within the City's right of way unless the lessee is also an entity that pays franchise fees to the City. C. Calculation and Payment of Franchise Fees Based on CIAC (1) The franchise fee amounts based on "Contributions in aid of Construction" ( "CIAC ") shall be calculated on an annual calendar year basis, i.e., from January 1 through December 31 of each calendar year. (2) The franchise fee amounts that are due based on CIAC shall be paid at least once annually on or before April 30 each year based on the total CIAC recorded during the preceding calendar year. D. Effect of Other Municipal Franchise Ordinance Fees Accepted and Paid by TXU Gas (1) If TXU Gas should at any time after the effective date of this Ordinance agree to a new municipal franchise ordinance, or renew an existing municipal franchise ordinance, with another municipality, which municipal franchise ordinance determines the franchise fee owed to that municipality for the use of its public rights -of -way in a manner that, if applied to the City, would result in a franchise fee greater than the amount otherwise due City under this Ordinance, then the franchise fee to be paid by TXU Gas to City pursuant to this Ordinance shall be increased so that the amount due and to be paid is equal to the amount that would be due and payable to City were the franchise fee provisions of that other franchise ordinance applied to City. (2) The provisions of this Subsection D apply only to the amount of the franchise fee to be paid and do not apply to other franchise fee payment provisions, including without limitation the timing of such payments. E. TXU Gas Franchise Fee Recovery Tariff (1) TXU Gas may file with the City a tariff amendment(s) to provide for the recovery of the franchise fees under this amendment. (2) City agrees that (i) as regulatory authority, it will adopt and approve the ordinance, rates or tariff which provide for 100% recovery of such franchise fees as part of TXU Gas' rates; (ii) if the City intervenes in any regulatory proceeding before a federal or state agency in which the Page 3 of 5 (3) recovery of TXU Gas' franchise fees is an issue, the City will take an affirmative position supporting 100% recovery of such franchise fees by TXU Gas and; (iii) in the event of an appeal of any such regulatory proceeding in which the City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by TXU Gas. City agrees that it will take no action, nor cause any other person or entity to take any action, to prohibit the recovery of such franchise fees by TXU Gas. F. Lease of Facilities Within City's Rights -of -Way. TXU Gas shall have the right to lease, license or otherwise grant to a party other than TXU Gas the use of its facilities within the City's public rights -of -way provided: (i) TXU Gas first notifies the City of the name of the lessee, licensee or user; the type of service(s) intended to be provided through the facilities; and the name and telephone number of a contact person associated with such lessee, licensee or user and (ii) TXU Gas makes the franchise fee payment due on the revenues from such lease pursuant to Sections I.A. and I.B. of this Ordinance. This authority to Lease Facilities Within City's Rights -of -Way shall not affect any such lessee, licensee or user's obligation, if any, to pay franchise fees. SECTION 2: In all respects, except as specifically and expressly amended by this ordinance, the existing effective franchise ordinance heretofore duly passed by the goveming body of the City and duly accepted by TXU Gas shall remain in full force and effect according to its terms until said franchise ordinance terminates as provided therein. SECTION 3: This ordinance shall take effect upon its final passage and TXU Gas' acceptance. TXU Gas shall, within thirty (30) days from the passage of this ordinance, file its written acceptance of this ordinance with the Office of the City Secretary in substantially the following form: To the Honorable Mayor and City Council: TXU Gas Distribution, a division of TXU Gas Company, acting by and through the undersigned authorized officer, hereby accepts in all respects, on this the day of , 20 , Ordinance No. amending the current gas franchise between the City and TXU Gas and the same shall constitute and be a binding contractual obligation of TXU Gas and the City. Page 4 of 5 ATTEST: City Secretary APPROVED AS TO FORM: City Attorney TXU Gas Distribution A division of TXU Gas Company By Vice President SECTION 4. It is hereby officially found and determined that the meeting at which this Ordinance 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 BY THE CITY COUNCIL OF THE CITY OF , TEXAS , this the _ day of , 2002, at which meeting a quorum was present and voting.. Mayor Page 5 of 5 CITY OF DENTON, TEXAS, et al., vs. Plaintiffs, TXU ELECTRIC COMPANY, et al., Defendants. NO. 009383 § IN THE DISTRICT COURT DALLAS COUNTY, TEXAS 134 JUDICIAL DISTRICT AGREED ORDER OF DISMISSAL WITH PREJUDICE AS TO THE CITY OF ROUND ROCK On this day, came on to be considered the above - referenced cause and Plaintiff, the City of Round Rock, and Defendants, by and through their respective attorneys of record, announced that the parties have compromised and settled their disputes and moved that this action be dismissed with prejudice as to the City of Round Rock; IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that the above -styled and numbered cause of action is dismissed with prejudice to the refiling of same as to the City of Round Rock, that all costs incurred are taxed against the party incurring same, and that any and all relief requested by the City of Round Rock not expressly granted herein is denied. SIGNED this day of 2002. JUDGE PRESIDING EXHIBfl' G APPROVED AND AGREED AS TO FORM AND CONTENT: STRASBURGER & PRICE, L.L.P. By: Kevin 7. Maguire State Bar No. 12827900 ATTORNEY FOR PLAINTIFF IIUNTON & WILLIAMS By: David P. Poole State Bar No. 16123750 ATTORNEY FOR DEFENDANTS TXU ELECTRIC COMPANY TXU GAS COMPANY AND TXU CORP. AGREED ORDER OF DISMISSAL — Page 2 DATE: August 2, 2002 SUBJECT: City Council Meeting — August 8, 2002 ITEM: 11.B.1. Consider a resolution authorizing the Mayor to execute a Compromise, Settlement and Release Agreement in a franchise fee lawsuit styled City of Denton, Texas et al v. TXU Electric Company et al. Resource: Steve Sheets, City Attorney History: In 2000, City joined a lawsuit pending in the 134 Judicial District Court of Dallas County, Texas; under Cause No. 00 -9383 styled City of Denton, Texas et al v. TXU Electric Company et al. The subject matter was dispute over the amount of franchise fees paid to the City by TXU Electric and TXU Gas. Pursuant to the Agreement TXU Gas will pay to the City $94,310 and TXU Electric will pay $76,013 for a total of $170,323. After the settlement agreement is approved in court, TXU and the City will amend its existing franchise agreements to increase the franchise fee to 4% of base and will clarify that miscellaneous fee in the base. Funding: Cost: N/A Source of funds: N/A Outside Resources: N/A Impact/Benefit: N/A Public Comment: N/A Sponsor: N/A Cit DENTON Robert L. Bennett, Jr. City Manager City of Round Rock 221 East Main Street Round Rock, TX 78664 Dear Mr. Bennett: 5,0ur DOCUmenie\LiGeaionUXIMU Settlement Utter,. dun November 21, 2002 CONFIDENTIALITY NOTE: This letter or memorandum and any accompanying enclosures are intended as attorney /client communication between the undersigned attorneys and the representatives of the Cities listed below through their duly authorized constituents. The addressees and noted copy recipients, acting within their official capacities on behalf of the City of Denton and their respective cities, are the only intended recipients. You are requested to neither divulge the contents of this letter or memorandum to any other person or entity, whether within or without your organization, nor to use this information for personal benefit. RE: City ofDenton, et al. v. TXU, et al. Proportional Reimbursement of TXU Litigation Costs Please find enclosed a check from the City of Denton in the amount $12,533.89 which represents your City's proportional share of the TXU litigation costs reimbursement of $915,000.00, less your City's share of the outstanding invoices. Also enclosed is a chart showing the amount each of the 37 cities in the lawsuit contributed to the litigation fund, the percentage of litigation costs paid by the cities (as calculated by Dan Lawton, of Diversified Utility Consultants, Inc.), TXU's payment to each City of their proportion of the $915,000 litigation cost reimbursement, your proportion of the outstanding $295,123.18 in unpaid litigation costs, and the amount of each of the 37 cities litigation costs reimbursement check from the $626,694.31 remaining after the outstanding invoices are paid. Also attached is a list of the amount of the outstanding invoices from Strasburger and Price, Diversified Utility Consultants, Inc., Paramount Communications, and Image Net. Approximately 95.86% of the outstanding invoices have been paid from the litigation account. Your check amounts to about 81% of the amount which you contributed to the litigation fund through your two assessments. The amount left to be reimbursed not only includes your percentage of the $619,876.82, which will be left after the payment of the $295,123.18 of outstanding invoices, but also includes a small amount that was left over from your original "Dedicated to Quality Service" www.cityofdenton.com City Attorney's Office City of Denton, Texas 215 East McKinney Denton, Texas 76201 (940) 349 -8333 Fax (940) 382 -7923 ?c C 0 2 T OOo ' November 21, 2002 Page 2 contributions along with interest earned on the funds that were deposited in the TXU Litigation Account. At this time we have received reimbursement checks from 34 of the 37 cities involved in the litigation who have settled the matter. We have not received reimbursement checks for the cities of Cleburne, Woodway, and Haltom City. Your Steering Committee, which is comprised of representatives from the cities of Fort Worth, Carrollton, Pflugerville, Lake Worth, and Denton, voted to cut off any additional billings by Strasburger and Price to the litigation account as of September 30 of this year. Any cities seeking advice regarding the settlement after that time, including those cities that have not yet settled the suit, will be responsible for paying Strasburger and Price individually for any legal services they require. The reimbursement checks of the 34 cities who have settled this suit amount to $877,177.55. These settling cities are responsible for 95.86% of the outstanding invoices. Cleburne, Woodway and Haltom City are responsible for paying the remainder of the outstanding invoices. The settlement included the $915,000 reimbursement of litigation costs by TXU, the payment of $1,000,000 in historic electric franchise fees, $2,000,000 in historic gas franchise fees, and TXU's agreement to amend existing gas and electric franchises to include many new revenue sources as well as raising the franchise fee percentage to 4 %. The basic terms of the settlement were reached as a result of a mediation in the Law Office of Mediator Sid Stahl on January 31 of this year. This mediation session was attended by representatives of Strasburger and Price, the members of your Steering Committee, and representatives of TXU. A number of concerns about the exact language of the Compromise Settlement and Release Agreement, as well as the language of the amendments to the electric and gas franchises remained to be agreed upon. After several conference calls involving the Steering Committee and Strasburger and Price, it was decided that another meeting with TXU's attorneys and their representative was necessary to finalize the language of the settlement documents. This meeting took place on May 16 of this year. The final language of the settlement documents was agreed to after that meeting by representatives of TXU and the Steering Committee. It has taken all summer and part of the fall to get the ordinances approving the settlement passed by the vast majority of the cities involved in the litigation, to get the settlement documents executed by TXU and the cities, and to get the order of dismissal, which triggered the reimbursement checks, signed and filed in the Dallas District Court. Another step in the process has been the transfer of the reimbursement checks from TXU to the Strasburger and Price trust account and from there to the TXU Litigation Fund Account, which the City of Denton has been keeping. Although all the cities have not yet accepted the Settlement, the Steering Committee recently made a decision to pay 95.86% of the bills and the reimburse all of the cities that have completed all the steps necessary to settle the litigation. I regret that it has taken this long to send your share of the TXU reimbursement check and that we were not able to reimburse you 100% of your contribution to the litigation costs. During the period of eight months from the end of January through the end of September, while we were finalizing the language of the settlement documents and taking the steps necessary to obtain the reimbursement and settlement checks 5'■OUr Malmo gat,. 1AT %U Selllvnem Letter- feWS.Lnc ' November 21, 2002 Page 3 from TXU, the billing of litigation expenses continued. Accordingly, the total litigation costs of $1,066,365.41 exceeded the $915,000 reimbursement. Through February of this year, the amount paid by the cities was $771,242.23. A little over half a million dollars was raised by the two assessments. Denton, who initiated the litigation in March of 2000, also had spent well over two hundred thousand dollars on the litigation costs before the other cities started joining the litigation in November of 2000. Due to the intensity of the adversary relationship between TXU and the cities, the cities ran out of money and the litigation account was almost exhausted in August of 2001. The $295,123.18 in outstanding litigation costs represent billings by the law firm and consultants going back to July of 2001 through September of this year. In the fall of 2001, the Steering Committee had to make a decision whether to request additional assessments from the cities, to pursue some sort of contingent fee arrangement with the law firm or to attempt to settle the case. At the time, Strasburger and Price indicated that it would cost an additional million dollars to get the case through trial which was set for July of 2002. This would have meant all the cities would have to agree to at least four additional assessments to fund the litigation through trial. The Steering Committee from August of 2001 through December of 2001 was exploring a contingent fee arrangement to avoid requesting the cities to contribute the additional assessments while at the same time pursing negotiations to settle the lawsuit with TXU. In December of 2001, the Steering Committee received a settlement offer from TXU which, although it was considerably less than the final settlement, gave the Steering Committee hope that the matter could be favorably resolved. As indicated earlier in the letter, as a result of the mediation on the last day of January of this year, we agreed to the basic terms of the settlement. But, unfortunately, it took us another nine months to finalize the terms and to get enough cities through the steps of approving the settlement to be able to send your reimbursement checks. We appreciate your participation in this important lawsuit. Most of you know that many other Texas cities in the TXU system who did not join the litigation have benefited from the TXU settlement. This was only possible due to your courageous decision to join this litigation. Although, for the reasons set forth herein, we are not able to reimburse you 100% of your contribution, your reimbursement check taken together with your historic revenue settlement checks, as well as the prospective financial benefits of the amended franchises, should far outweigh your financial contribution. Should you have any questions concerning your reimbursement check or any of the other matters discussed in this letter, please do not hesitate to contact me at 940.349.7799. s.au enca.ifigadonVIMIXIJ S I L, a -Iina. Sincerely, l Herbert L. Prouty Treasurer of the Steering Committee November 21, 2002 Page 4 Enclosures cc: Michael A. Conduff, City Manager Kathy DuBose, Assistant City Manager/Fiscal & Municipal Services Kevin McGuire, Strasburger & Price, L.L.P. Dan Lawton, Diversified Utility Consultants, Inc. 011,.e umenUwigaiiaT.ATx11 swmmmiTmcr.c.. TXU Settlement2.xls I $915,000.00 5295,123.18 $626,694.31 City Amount Paid by Cities as of 2/4/02 Percentage Paid by Cities Allocation of TXU Litigation Cost Reimbursement Cities' Additional Share of Outstanding Invoices Amount Left to be Reimbursed Argyle $2,000.00 0.26% $2,372.80 8767.32 $1,629.40 Benbrook $9,782.00 1.27% $11,605.34 $3,748.06 $7,959.18 Bowie $2,000.00 0.26% $2,372.80 $767.32 $1,629.40 Bridgeport $1,790.50 0.23% $2,124.25 $678.78 $1,441.40 Burleson $7,400.50 0.96% 88,779.94 $2,833.18 $6,016.26 Carrolton $41,084.50 5.33% $48,742.56 $15,730.06 $33,402.81 Cedar Park $2,580.50 0.33% $3,061.50 $973.91 $2,068.09 Clebume* $11,102.50 1.44% $13,171.98 $4,249.77 $9,024.40 Copperas Cove $12,039.50 1.56% $14,283.63 $4,603.93 $9,776.43 Denton $276,491.41 35.85% $328,028.84 $105,801.66 $224,669.79 Town of Edgecliff Village $2,000.00 0.26% $2,372.80 $767.32 $1,629.40 Everman $2,836.00' 0.37% $3,364.62 $1,091.96 $2,318.77 Forest Hill $5,741.00 0.74% $6,811.11 $2,183.92 $4,637.54 Fort Worth $223,809.50 29.02% $265,527.07 $85,644.75 $181,866.69 Greenville $5,767.00 0.75% $6,842.86 $2,213.42 $4,700.21 Haltom City* $16,428.00 2.13% $19,490.14 $6,286.13 $13,348.59 Iowa Park $3,036.00 0.39% $3,601.90 $1,150.98 $2,444.11 Kaufman $2,625.00 0.34% $3,114.29 $1,003.41 $2,130.76 Keene $3,944.00 0.51% $4,679.15 $1,505.13 $3,196.14 Lake Worth $4,000.00 0.52% $4,745.59 $1,534.64 $3,258.81 Leander $5,000.00 0.65% $5,931.99 $1,918.30 $4,073.51 Lewisville $11,630.00 1.51% $13,797.81 $4,456.36 $9,463.08 Nacogdoches $7,718.00 1.00% $9,156.62 $2,951.23 $6,266.94 Odessa $22,424.00 2.91% $26,603.78 $8,588.08 $18,236.80 Palestine $9,021.00 1.17% $10,702.49 $3,452.94 $7,332.32 Paris $12,349.50 1.60% $14,651.42 $4,721.97 $10,027.11 Pflugerville $2,222.00 0.29% $2,636.18 $855.85 $1,817.41 Richland Hills $4,375.00 0.57% $5,190.49 $1,682.20 $3,572.16 River Oaks $3,350.001 0.43% $3,974.43 $1,269.03 $2,694.78 Robinson $3,555.50 0.46% $4,218.24 $1,357.57 $2,882.79 Round Rock $15,460.50 2.00% $18,342.30 $5,902.46 $12,533.89 Sanger $2,000.00 0.26% $2,372.80 $767.32 $1,629.40 Sherman $15,798.00 2.05% $18,742.71 $6,050.03 $12,847.23 South Lake $3,532.50 0.46% $4,190.95 $1,357.57 $2,882.79 Trophy Club $2,000.00 0.26% $2,372.80 $767.32 $1,629.40 Watauga $10,000.00 1.30% $11,863.98 $3,836.60 $8,147.03 Woodway* $4,347.50 0.56% $5,157.86 $1,652.70 $3,509.49 TOTAL 771,242.23 100.00% $915,000.00 $295,123.15 $626,694.31 1 *Cities which have not completed the settlement and for which no reimbursement checks have been received. TXU Settlement2.xls STRASBURCFR & PRICE July 2001 September 2001 October 2001 November 2001 December 2001 January 2002 February 2002 March 2002 April 2002 May 2002 June 2002 July 2002 August 2002 September 2002 Less agreed disallowed amt. $ DUCT May -Dec 2001 Jan -March 2002 MISC Less Outstanding Invoices Total to be distributed to Cities 14,036.64 3,857.29 7,945.64 12,453.43 13,787.53 26,618.30 8,034.93 4,318.64 9,797.47 8,462.34 5,596.24 6,365.95 5,494.88 6.646.44 133,415.72 -740 04 132,675.68 126,602.20 '32 852 08 159,454.28 Paramount $ 812.50 ImageNet 2.180.72 $ 2,993.22 TOTAL $ 295,123.18 Reimbursment of Litigation Costs by TXU Balance of Cities' Litigation Account Includes interest earned on litigation account. TXU LITIGATION OUTSTANDING INVOICES 915,000.00 6.817 49 921,817.49 -295 123 18 626,694.31 THIS DOCUMENT CONTAINS A VOID PANTOGRAPH, ARTIFICIAL WATERMARK, AND MICROPRINTING eL30976 P`AY TYNELVE THOUSAND FIVE HUNDRED THIRTY THREE AND 89100'""'"""? TGI cry OP ROUND ROCK NTON TEXAS CREWING ACCOUNT :Mt E MCKINN,EY ST N1odsr; TEXAS 16201.4 ILL924491j 029 862 C,A, 4 1 wtl3l FItKR void � CASH €b aF?fiits¢ o$� -- MP w October 30, 2002 Mr. Robert L. Bennett, Jr. City Manager City of Round Rock 221 East Main Street Round Rock, TX 78664 Re: Cities of Denton, et al v. Texas Utilities Company, et al Cause No. 2000-60109-393 Dear Mr. Bennett: Enclosed is a settlement check in the amount of $170,323.00 made payable to the City of Round Rock. Very truly yours, Kevin J. Maguire dsh Enclosure 694482.1 /5 RO/291 21 /01 04/ 1 03 02 00 2 Strasburger ATTORNEYS AT LAW KEVIN J. MAGUIRE Direct Dial: 214.651.4696 Direct Fax: 214 - 659 -4056 kevin. magu ire @strasburger.com Stras6 urger 9 Price, E1P 901 Main Street. Suite 4300 • Dallas, Texas 75202.3194 • 214.651.4300 tel • 214.651.4330 fax • www.strasburger.com Austin • Dallas • Houston • San Antonio • Washington D.C. • Mexico City 11'00 70 2 2n' I:1 i 10000 251: 4J -F 0001807 2863411' STRASBURGER & PRICE, L.L.P. TRUST ACCOUNT P.O. BOX 60100 2144661-4000 DALLAS, TX 76260 doc Bank ofAmeric � ' ACM 0/5 11100002 5 7022 PAY DATE TO THE ORDER OF $ 1 70,323.00 ** 10 -29 -02 3 2 - 2/1110 06 I? 1145 THIS CHECK DOLLARS n IN kViw,.,( September 20, 2002 Mr. Robert L. Bennett, Jr. City Manager City of Round Rock 221 East Main Street Round Rock, TX 78664 Dear Mr. Bennett: Very truly yours, Kevin J. aguire KJM:dsh 6944821/5P0/29121/0104/09202002 Strasburger ATTORNEYS AT LAW Re: Cities of Denton, et al v. Texas Utilities Company, et al Cause No. 2000-60109-393 KEVIN J. MAGUIRE Direct Dial: 214.651.4696 Direct Fax: 214 - 6594056 kevin.mag uireestrasburgercam I must once again report to the Court regarding this case. We face the very real prospect of having the Court dismiss any remaining cities' causes of action for want of prosecution unless good cause exists to keep the case on the Court' docket. As soon as possible please respond in writing, and provide me the date in which you expect your city council to approve the settlement. If for any reason you do not anticipate that your city will approve the settlement, please let me know immediately. Your prompt attention in this matter is greatly appreciated. Strasburger 6 Price, LLP 901 Main Street. Suite 4300 • Dallas, Texas 75202.3794 • 214.651.4300 tel • 214.651.4330 fax • www.strasburger.com Austin • Dallas • Houston • San Antonio • Washington D.C. • Mexico City October 23, 2002 Mr. Robert L. Bennett, Jr. City Manager City of Round Rock 221 East Main Street Round Rock, TX 78664 Re: Cities of Denton, et al v. Texas Utilities Company, et at Cause No. 2000 -60109 -393 Dear Mr. Bennett: Enclosed is the original fully executed and notarized Compromise, Settlement and Release Agreement as to the City of Round Rock. If you have any questions in this regard, don't hesitate to contact me. Sincerely, Kevin . Maguire Enclosure 891828 .11SPO /29121I0104I18232OO2 Strasburger ATTORNEYS AT LAW Oc T KEVIN J. MAGUIRE 214.651.4898 kevin.mapuire©ebeeburper.com Strasburger S Price, LIP 901 Main Street, Suite 4300 • Dallas, Texas 75200.3794 • 214.651.4300 tel • 214.651.4330 fax • www.strasburgeccom Austin • Dallas • Houston • San Antonio • Washington D.C. • Mexico City August 7, 2002 Mr. Robert L. Bennett. Jr. City Manager City of Round Rock 221 East Main Street Round Rock, TX 78664 Re: Cities of Denton, et al v. Texas Utilities Company, et al Cause No. 2000 -60109 -393 Dear Mr. Bennett: Strasburger ATTORNEYS AT LAW After the amended gas franchise ordinance has been adopted, please send it to your TXU Gas representative. After the electric ordinance has been adopted, please send it to your Oncor representative. Thank you for your attention to this matter. Very truly yours, :dsh Kevin J. Maguire 695738.1ISP012 91 2 1 /01 0 4108 0 72 00 2 KEVIN J. MAGUIRE 214.651,4696 kevin.magu ire @strasburger.com Strasburger 6 Price, 11P 901 Main Street, Suite 4300 • Dallas, Texas 75202.3794 • 214.651.4300 tel • 214.651.4330 for • www.strusburger.com Austin • Dallas • Houston • San Antonio • Washington O.C. • Mexico City COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT This Compromise, Settlement, and Release Agreement (the "Agreement ") is made and entered into as of the date set forth below by and between the City of Round Rock (the "City") and TXU Electric Company n/k/a TXU US Holdings Company ( "TXU Electric "), TXU Gas Company ( "TXU Gas ") and TXU Corp. (collectively sometimes referred to as the "TXU Defendants "): WHEREAS, there is currently pending in the 134 Judicial District Court of Dallas County, Texas, in Cause No. 00 -9383, a suit styled City of Denton, Texas et al- vs. TXU Electric Company, et al. (the "Litigation ") which includes claims by the City against the TXU Defendants arising out of the electric and gas franchise ordinances entered into by and between the City and TXU Electric and TXU Gas and, specifically, a dispute with regard to the amount of franchise fees paid to the City by TXU Electric and TXU Gas; WHEREAS, the City and the TXU Defendants have compromised and settled all claims asserted in the Litigation; NOW, THEREFORE, in order to settle and finally resolve the causes of action asserted in the Litigation and to fully and finally resolve all disputes and claims arising out of the calculation and payment of franchise fees to the City by TXU Electric and TXU Gas prior to and through December 31, 2001, for the mutual promises and covenants set forth in this Agreement, the adequacy and sufficiency of which consideration is acknowledged, and, without the TXU Defendants having admitted any of the validity of any allegations made in the Litigation, the City and the TXU Defendants agree as follows: 1. AMENDMENTS TO THE ELECTRIC FRANCHISE ORDINANCE As the result of electric industry restructuring, the electric franchise formerly held by TXU Electric has been assigned to Oncor Electric Delivery Company ( "Oncor "), accordingly, effective January 1, 2002, the City agrees to enter into and TXU Electric agrees to cause Oncor to COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Page 1 £-o2 -O8 os 1161 accept an amendment to the current electric franchise ordinance substantially in the form of the amendment attached as Exhibit A which amendment shall, at the election of the City, provide that the Discretionary Services Charges identified in Section 6.1.2 of the Tariff for Retail Delivery applicable to Oncor which are directly paid by the customer and which are those charges identified as items DD1 through and inclusive of DD24 in said tariff, shall be subject to an additional franchise fee based on 4% of such charges which additional franchise fee shall be paid to the City pursuant to the terms of the amendment attached as Exhibit A. The City acknowledges that Oncor may file with the Texas Public Utility Commission and/or the City a tariff amendment in compliance with the terms of this agreement, which will provide that Oncor shall have the right to collect from the customer the franchise fee on such Discretionary Service Charges such that the customer shall bear 100% of the franchise fee on such Discretionary Service Charges. The City acknowledges that Oncor is an intended third -party beneficiary of this agreement and agrees to cooperate with Oncor in order for Oncor to pass through to customers the entire franchise fee on such Discretionary Service Charges by taking the following actions: (i) to the extent the City acts as regulatory authority, by adopting and approving that portion of any tariff in compliance with the terms of this Agreement which provides for 100% recovery of such franchise fees; (ii) in the event the City intervenes in any regulatory proceeding before a federal or state agency in which the recovery of the franchise fees on such Discretionary Service Charges is an issue, the City will take an affirmative position supporting the 100% recovery of such franchise fees by Oncor and; (iii) in the event of an appeal of any such regulatory proceeding in which the City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by Oncor. The City further agrees not to take any action to prevent the recovery of the franchise fees on such Discretionary Service Charges by Oncor and to take other action which may be reasonably requested by Oncor to provide for the 100% recovery of such franchise fees by Oncor. COMPROMISE SETTLEMENT AND RELEASE AGREEMENT- PaPP 2. AMENDMENTS TO THE GAS FRANCHISE ORDINANCE Effective January 1, 2002, the City agrees to enact and TXU Gas agrees to accept an amendment to the current gas franchise ordinance substantially in the form of the amendment attached as Exhibit B to provide that, at the election of the City, the franchise fee will increase to a maximum of 4.00% of the applicable franchise fee payment base and, at the election of the City, the franchise fee payment base shall be amended to include miscellaneous fees, contributions in aid of construction, bad debt expense, transportation revenues and third -party gas sales and gross receipts fees as well as a favored nations clause with respect to franchise fee payments and franchise fee calculations, substantially in the form of the provisions in Exhibit B. The City acknowledges that TXU Gas has the right to recover from its ratepayers such additional franchise fee payments to the City and the City agrees to cooperate with TXU Gas in order for TXU Gas to pass through to its ratepayers the entire franchise fee payment, as amended, by taking the following actions: (i) as regulatory authority, by adopting and approving the ordinance, rates or tariff which provide for 100% recovery of such franchise fees as part of TXU Gas' rates; (ii) in the event the City intervenes in any regulatory proceeding before a federal or state agency in which the recovery of TXU Gas' franchise fees is an issue, the City will take an affirmative position supporting 100% recovery of such franchise fees by TXU Gas and; (iii) in the event of an appeal of any such regulatory proceeding in which a City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by TXU Gas. The City further agrees not to take any action to prevent the recovery of such franchise fees by TXU Gas and to take other action which may be reasonably requested by TXU Gas to provide for the 100% recovery of such franchise fees from TXU Gas' ratepayers. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Page 3 3. PAYMENTS TO THE CITY Upon execution and delivery of a fully executed and notarized original of this Agreement and conditioned upon the dismissal of the Litigation with prejudice as provided by Paragraph 5: A. TXU Gas agrees to pay to the City by payment to its attorneys, Strasburger & Price, the sum of $94,310.00 the same being City's share of an aggregate sum of exactly $2,000,000.00 which TXU Gas agreed to pay to the Plaintiffs in the Litigation, which $2,000,000.00 amount is calculated by multiplying the general business revenues received by TXU Gas in the calendar year 2000 in the City in which TXU Gas did business in the aggregate amount of $165,591,132.80 by a factor equal to 0.0120779414. The City acknowledges that TXU Gas has the right to and shall recover the portion of the $2,000,000.00 amount actually paid to the Plaintiffs in connection with the settlement of the Litigation from its ratepayers pursuant to the tax adjustment clause applicable to TXU Gas, by applying a surcharge to the monthly bills rendered to its ratepayers, provided that the recovery of such surcharge shall be limited as follows: (1) the surcharge shall be amortized over a period not less than three years, and (2) the accrual balance will not be subject to interest. TXU Gas agrees that the franchise fee paid to the City and recovered from ratepayers under this Agreement will not include any amounts collected in the past from ratepayers. B. TXU Electric agrees to pay or cause Oncor to pay the City, by payment to its attorneys, Strasburger & Price, the sum of $76,01100 the same being City's share of an aggregate sum of exactly $1,000,000.00 which TXU Electric agreed to pay to the Plaintiffs in settlement of the Litigation, which $1,000,000.00 is calculated by multiplying the general business revenues received by TXU Electric in the calendar COMPROMISE SETTLEMENT AND RELEASE AGREEMENT - Page 4 year 2000 in the City in which TXU Electric did business in the aggregate amount of $1,149,561,767.63 by a factor equal to 0.000869897. C. The TXU Defendants agree and expressly represent that none of the amounts set forth in paragraphs 3(B) and 4 shall be recovered from ratepayers pursuant to a tax adjustment clause or by applying a surcharge to the monthly bills rendered to ratepayers, or otherwise "passed thru" to ratepayer(s). 4. FEES AND EXPENSE REIMBURSEMENT Upon execution and delivery of a fully executed and notarized original of this Agreement and conditioned upon the dismissal of the Litigation with prejudice as provided by Paragraph 5, the TXU Defendants agree to pay and/or cause Oncor to pay the City, by payment to its attomeys, Strasburger & Price, the sum of $18,342.30 the same being City's share of an aggregate sum of exactly $915,000 which the TXU Defendants agreed to pay to the Plaintiffs to reimburse the Plaintiffs for attorneys' fees and expenses incurred in the Litigation. 5. DISMISSAL OF THE LITIGATION The parties recognize and agree that this settlement is a full settlement of all claims asserted or which could have been asserted by the City against TXU Electric, TXU Gas and TXU Corp. in the Litigation related to the calculation or payment of franchise fees prior to and through December 31, 2001 and the parties agree that, in connection with such settlement, they will jointly file with the Court having jurisdiction of the Litigation appropriate pleadings in order to dismiss the Litigation with prejudice as to the City, with the order of dismissal to provide that costs of court will be taxed against the party incurring the same and be substantially in the form of the Agreed Order attached as Exhibit C. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Pane 5 6. RELEASE OF THE TXU DEFENDANTS BY THE CITY Except for claims arising out of a breach of this Agreement, the City of Round Rock, on behalf of itself and its successors and assigns and any and all persons, entities or municipalities claiming by, through or under them, hereby RELEASES, DISCHARGES AND ACQUITS, forever and for all purposes, TXU Electric Company (now known as TXU US Holdings Company), its successor Oncor Electric Delivery Company, TXU Gas Company, including its division TXU Gas Distribution, TXU Corp. and each of their respective agents, employees, officers, directors, shareholders, partners, insurers, attomeys, legal representatives, successors and assigns as well as their affiliated corporations, including TXU Business Services Company and TXU Energy Company LLC and its subsidiaries, from and against any and all liability which they now have, have had or may have, and all past, present and future actions, causes of action, claims, demands, damages, costs, expenses, compensation, losses and attomeys' fees ofany kind or nature whatsoever, or however described, whether known or unknown, fixed or contingent, in law or in equity, whether asserted or unasserted, whether in tort or contract, whether now existing or accruing in the future arising out of or related to the payment, calculation or rendition of franchise fees to the City on or before December 31, 2001 and all claims which were asserted against the TXU Defendants in the Litigation or which could have been alleged against the TXU Defendants in the in the Litigation in any way related to the payment, calculation or rendition of franchise fees by the TXU Defendants on or before December 31, 2001. This release is intended to only release claims related to the payment, calculation or rendition of franchise fees by the TXU Defendants on or before December 31, 2001 and is not intended to release any other claim or cause of action that any party to this Agreement has, known or unknown, or which accrues in the future. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Pave 6 7. WARRANTY AS TO OWNERSHIP OF CLAIMS AND AUTHORITY A. The City warrants and represents that it is the owner of the claims being compromised, settled, discharged and released pursuant to this Agreement and each further warrants and represents that it has not previously assigned all or any part of such claims to another entity or person. The City warrants and represents that there are no liens of any nature, assignments or subrogation interests in or to the money paid to the City under the terms of this Agreement. B. The TXU Defendants warrant that the person(s) executing this Agreement on their behalf has authority to bind the entity for whom such person signs this Agreement. 8. NO ADMISSION OF LIABILITY This Agreement is made to compromise, terminate and to constitute an accord and satisfaction of all of the claims released by this Agreement and the TXU Defendants admit no liability, fault or wrongdoing of any nature or kind whatsoever and expressly deny and disclaim any liability, fault or wrongdoing alleged or which could have been alleged with regard to the claims asserted in the Litigation. 9. RECOVERY OF DAMAGES DUE TO BREACH In the event of breach by any party of the terms and conditions of this Agreement, a non - breaching party shall be entitled to recover all expenses as a result of such breach, including, but not limited to, reasonable attorneys' fees and costs. MISCELLANEOUS PROVISIONS 10. It is understood and agreed that all agreements and understandings by and between the parties to this Agreement with respect to the Litigation, the settlement of the Litigation and the payment of franchise fees are expressly embodied in this Agreement and that this Agreement supersedes any and all prior agreements, arrangements or understandings between the parties relating to the claims COMPROMISE. SETTLEMENT AND RELEASE AGREEMENT - Pave 7 released pursuant to this Agreement or any matters related thereto executed by the parties, including the Memorandum of Understanding dated January 31, 2002 signed by counsel for the Plaintiffs and the TXU Defendants. 11. The parties acknowledge and agree that the terms of this Agreement are all contractual and not mere recitals. 12. The parties acknowledge that they have read this Agreement, understand its terms, and that this Agreement is entered into voluntarily, without duress, and with full knowledge of its legal significance. 13. This Agreement may not be modified in any manner, nor may any rights provided for herein be waived, except by an instrument in writing signed by each party. 14. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. 15. Should any term or any provision of this Agreement be declared invalid by a court of competent jurisdiction, the parties agree that all other terms of this Agreement are binding and have full force and effect as if the invalid portion had not been included. 16. The parties represent and warrant that no party has been induced to enter this Agreement by a statement, action or representation of any kind or character made by the persons or entities released under this Agreement or any person or persons representing them, other than those expressly made in this Agreement. 17. It is understood and agreed that this Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes. 18. The headings contained herein are for convenience and reference only and are agreed, in no way, to define, describe, extend or limit the scope or intent of this Agreement or its provisions. 19. This Agreement shall be construed in accordance with the laws of the State of Texas. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT- Pape 8 set forth. IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Pagel THE CITY OF ROUND ROCK, TE By: Its: Date: By: Its: Date: $- S- Oa./ TXU ELECTRIC COMPANY n /k/a TXU US HOLDINGS COMPANY TXU GAS COMPANY By: - • its: \ j LQ r ' r . Si • e.,, Date: TXU CORP. I 0 - 15 — ('L Yoki STATE OF TEXAS COUNTY OF TRAVIS 1 CHRISTINE R. MARTINEZ r MY COMMISSION EXPIRES 4z August 28, STATE OF TEXAS COUNTY OF DALLAS § This instrument was acknowledged before me on the 1 o day of 4et3e 2002, by N'/L6 ma)GLOGI - as M4 yOR, on behalf of the City of Round Rock, Texas. J_1 Ji ! •/PAIJ_. Notary Public, State of Texas This - nst me was acknowledged before me on the /! day of -3etne 2002, b , ofTXU Electric Company n/k/a TXU US Holdings Company, on behalf of aid corpora ion. Notary Public, State of Tex '=i • L. Charlene Camp of Notary Public, State of Texas Ai My Comm, Expires 04!20/03 �'9 / COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Nee 10 COUNTY OF DALLAS § STATE OF TEXAS This instrument was acknowledged before me on the day of Jtxfe 2002, byS12pketd J 00 e, of TXU Gas Company, on behalf of said corporation. STATE OF TEXAS r' ' , Gwen T. Drinkard Notary Pu6IIc, State 01 Texas far` *�± My C omm, Expires 07/70/05 COUNTY OF DALLAS Notary Public, State of Texas / /Tlt,is tru ' - t was acknowledged before me on the � day of Junris 2002, - , , of TXU Corp., on behalf of laid corporation. COMPROMISE, SETTLEMENT AND RELEASE AGREEMENT - Page 11 NStary Public, Stated ' exas ORDINANCE NO. AN ORDINANCE AMENDING THE EXISTING ELECTRIC FRANCHISE BETWEEN THE CITY AND ONCOR ELECTRIC DELIVERY COMPANY, TO PROVIDE FOR A DIFFERENT CONSIDERATION; PROVIDING AN EFFECTIVE DATE; PROVIDING FOR ACCEPTANCE BY ONCOR ELECTRIC DELIVERY COMPANY; FINDING AND DETERMINING THAT THE MEETING AT WHICH THIS ORDINANCE IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW. WHEREAS, Oncor Electric Delivery Company, successor in interest to TXU Electric Company (hereinafter called "Oncor ") is engaged in the business of providing electric utility service within the City and is using the public streets, alleys, grounds and rights -of -ways within the City for that purpose under the terms of a franchise ordinance heretofore duly passed by the goveming body of the City and duly accepted by Oncor; and WHEREAS, the City and Oncor desire to amend said franchise ordinance to provide for a different consideration; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF , TEXAS: that SECTION 1: The existing electric franchise ordinance between the City and Oncor Electric Delivery Company is amended as follows: A. Effective January 1, 2002, the franchise fee due from Oncor shall be a sum comprised of the following: (1) a charge, as authorized by Section 33.008(b) of PURA, based on each kilowatt hour of electricity delivered by Oncor to each retail customer whose consuming facility's point of delivery is located within the City's municipal boundaries and as specified by Oncor to the City by letter dated January 21, 2002. (a) The franchise fee due pursuant to Section 33.008(b) of PURA shall be payable in accordance with the existing electric franchise; and (2) a sum equal to four percent (4 %) of gross revenues received by Oncor from services identified in its "Tariff for Retail Delivery Service ", Section 6.1.2, "Discretionary Service Charges," items DD1 through DD24, that are for the account or benefit of an end -use retail electric consumer. EXHIBIT A (a) (b) The franchise fee amounts based on "Discretionary Service Charges" shall be calculated on an annual calendar year basis, i.e., from January 1 through December 31 of each calendar year. The franchise fee amounts that are due based on "Discretionary Service Charges" shall be paid at least once annually on or before April 30 each year based on the total "Discretionary Service Charges" received during the preceding calendar year. B. Oncor Franchise Fee Recovery Tariff (1) (3) Oncor may file a tariff amendment(s) to provide for the recovery of the franchise fee on Discretionary Service Charges. (2) City agrees (i) to the extent the City acts as regulatory authority, to adopt and approve that portion of any tariff which provides for 100% recovery of the franchise fee on Discretionary Service Charges; (ii) in the event the City intervenes in any regulatory proceeding before a federal or state agency in which the recovery of the franchise fees on such Discretionary Service Charges is an issue, the City will take an affirmative position supporting the 100% recovery of such franchise fees by Oncor and; (iii) in the event of an appeal of any such regulatory proceeding in which the City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by Oncor. City agrees that it will take no action, nor cause any other person or entity to take any action, to prohibit the recovery of such franchise fees by Oncor. SECTION 2: In all respects, except as specifically and expressly amended by this ordinance, the existing effective franchise ordinance heretofore duly passed by the governing body of the City and duly accepted by Oncor shall remain in full force and effect according to its terms until said franchise ordinance terminates as provided therein. SECTION 3: This ordinance shall take effect upon its final passage and Oncor's acceptance. Oncor shall, within thirty (30) days from the passage of this ordinance, file its written acceptance of this ordinance with the Office of the City Secretary in substantially the following form: To the Honorable Mayor and City Council: Oncor Electric Delivery Company, acting by and through the undersigned authorized officer, hereby accepts in all respects, on this the day of Page 2 of 3 SECTION 4. It is hereby officially found and determined that the meeting at which this Ordinance 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 BY THE CITY COUNCIL OF THE CITY OF , TEXAS , this the day of , 2002, at which meeting a quorum was present and voting. ATTEST: City Secretary APPROVED AS TO FORM: City Attorney , 20 , Ordinance No. amending the current electric franchise between the City and Oncor and the same shall constitute and be a binding contractual obligation of Oncor and the City. Oncor Electric Delivery Company By Vice President Mayor Page 3 of 3 ORDINANCE NO. AN ORDINANCE AMENDING THE EXISTING GAS FRANCHISE BETWEEN THE CITY AND TXU GAS COMPANY, TO PROVIDE FOR A DIFFERENT CONSIDERATION AND TO AUTHORIZE THE LEASE OF FACILITIES WITHIN THE CITY'S RIGHTS -OF -WAY; PROVIDING AN EFFECTIVE DATE; PROVIDING FOR ACCEPTANCE BY TXU GAS COMPANY; FINDING AND DETERMINING THAT THE MEETING AT WHICH THIS ORDINANCE IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW. WHEREAS, TXU Gas Company (hereinafter called "TXU Gas ") is, through its TXU Gas Distribution division, engaged in the business of furnishing and supplying gas to the general public in the City, including the transportation, delivery, sale, and distribution of gas in, out of, and through the City for all purposes, and is using the public streets, alleys, grounds and rights - of -ways within the City for that purpose under the terms of a franchise ordinance heretofore duly passed by the governing body of the City and duly accepted by TXU Gas; and WHEREAS, the City and TXU Gas desire to amend said franchise ordinance to provide for a different consideration and to authorize the lease of facilities within the City's rights -of- way; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF , TEXAS: that SECTION 1: The existing gas franchise ordinance between the City and TXU Gas Company is amended as follows: A. Effective January 1, 2002, the consideration payable by TXU Gas for the rights and privileges granted to TXU Gas by the franchise ordinance heretofore duly passed by the governing body of this City and duly accepted by TXU Gas is hereby changed to be four percent (4 %) of the Gross Revenues, as defined in Section 1.B. below, received by TXU Gas. B. "Gross Revenues" shall mean all revenue derived or received, directly or indirectly, by the Company from or in connection with the operation of the System within the corporate limits of the City and including, without limitation: (1) all revenues received by the Company from the sale of gas to all classes of customers within the City; EXHIBI7 B (2) all revenues received by the Company from the transportation of gas through the pipeline system of Company within the City to customers located within the City; (3) the value of gas transported by Company for Transport Customers through the System of Company within the City ( "Third Party Sales "), with the value of such gas to be reported by each Transport Customer to the Company, provided, however, that should a Transport Customer refuse to furnish Company its gas purchase price, Company shall estimate same by utilizing TXU Gas Distribution's monthly industrial Weighted Average Cost of Gas, as reasonably near the time as the transportation service is performed; and (4) "Gross revenues" shall include: (a) other revenues derived from the following `miscellaneous charges': i. charges to connect, disconnect, or reconnect gas within the City; ii. charges to handle returned checks from consumers within the City; iii. such other service charges and charges as may, from time to time, be authorized in the rates and charges on file with the City; and iv. contributions in aid of construction" ( "CIAC "); (b) revenues billed but not ultimately collected or received by the Company; and, (c) gross receipts fees. (5) "Gross revenues" shall not include: (a) the revenue of any Person including, without limitation, an affiliate, to the extent that such revenue is also included in Gross Revenues of the Company; (b) sales taxes; and (c) any interest income earned by the Company; and Page 2 of 5 (d) all monies received from the lease or sale of real or personal property, provided, however, that this exclusion does not apply to the lease of facilities within the City's right of way unless the lessee is also an entity that pays franchise fees to the City. C. Calculation and Payment of Franchise Fees Based on CIAC (1) The franchise fee amounts based on "Contributions in aid of Construction" ( "CIAC ") shall be calculated on an annual calendar year basis, i.e., from January 1 through December 31 of each calendar year. (2) The franchise fee amounts that are due based on CIAC shall be paid at least once annually on or before April 30 each year based on the total CIAC recorded during the preceding calendar year. D. Effect of Other Municipal Franchise Ordinance Fees Accepted and Paid by TXU Gas (1) If TXU Gas should at any time after the effective date of this Ordinance agree to a new municipal franchise ordinance, or renew an existing municipal franchise ordinance, with another municipality, which municipal franchise ordinance determines the franchise fee owed to that municipality for the use of its public rights -of -way in a manner that, if applied to the City, would result in a franchise fee greater than the amount otherwise due City under this Ordinance, then the franchise fee to be paid by TXU Gas to City pursuant to this Ordinance shall be increased so that the amount due and to be paid is equal to the amount that would be due and payable to City were the franchise fee provisions of that other franchise ordinance applied to City. (2) The provisions of this Subsection D apply only to the amount of the franchise fee to be paid and do not apply to other franchise fee payment provisions, including without limitation the timing of such payments. E. TXU Gas Franchise Fee Recovery Tariff TXU Gas may file with the City a tariff amendment(s) to provide for the recovery of the franchise fees under this amendment. (2) City agrees that (i) as regulatory authority, it will adopt and approve the ordinance, rates or tariff which provide for 100% recovery of such franchise fees as part of TXU Gas' rates; (ii) if the City intervenes in any regulatory proceeding before a federal or state agency in which the Page 3 of 5 (1) (3) recovery of TXU Gas' franchise fees is an issue, the City will take an affirmative position supporting 100% recovery of such franchise fees by TXU Gas and; (iii) in the event of an appeal of any such regulatory proceeding in which the City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by TXU Gas. City agrees that it will take no action, nor cause any other person or entity to take any action, to prohibit the recovery of such franchise fees by TXU Gas. F. Lease of Facilities Within City's Rights -of -Way. TXU Gas shall have the right to lease, license or otherwise grant to a party other than TXU Gas the use of its facilities within the City's public rights -of -way provided: (i) TXU Gas first notifies the City of the name of the lessee, licensee or user; the type of service(s) intended to be provided through the facilities; and the name and telephone number of a contact person associated with such lessee, licensee or user and (ii) TXU Gas makes the franchise fee payment due on the revenues from such lease pursuant to Sections I.A. and I.B. of this Ordinance. This authority to Lease Facilities Within City's Rights -of -Way shall not affect any such lessee, licensee or user's obligation, if any, to pay franchise fees. SECTION 2: In all respects, except as specifically and expressly amended by this ordinance, the existing effective franchise ordinance heretofore duly passed by the governing body of the City and duly accepted by TXU Gas shall remain in full force and effect according to its terms until said franchise ordinance terminates as provided therein. SECTION 3: This ordinance shall take effect upon its final passage and TXU Gas' acceptance. TXU Gas shall, within thirty (30) days from the passage of this ordinance, file its written acceptance of this ordinance with the Office of the City Secretary in substantially the following form: To the Honorable Mayor and City Council: TXU Gas Distribution, a division of TXU Gas Company, acting by and through the undersigned authorized officer, hereby accepts in all respects, on this the _ day of , 20 , Ordinance No. amending the current gas franchise between the City and TXU Gas and the same shall constitute and be a binding contractual obligation of TXU Gas and the City. Page 4 of 5 SECTION 4. It is hereby officially found and determined that the meeting at which this Ordinance 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 BY THE CITY COUNCIL OF THE CITY OF , TEXAS , this the _ day of , 2002, at which meeting a quorum was present and voting.. ATTEST: City Secretary APPROVED AS TO FORM: City Attorney TXU Gas Distribution A division of TXU Gas Company By Vice President Mayor Page 5 of 5 CITY OF DENTON, TEXAS, et al., vs. Plaintiffs, TXU ELECTRIC COMPANY, et al., Defendants. NO. 009383 § IN THE DISTRICT COURT DALLAS COUNTY, TEXAS 134 JUDICIAL DISTRICT AGREED ORDER OF DISMISSAL WITH PREJUDICE AS TO THE CITY OF ROUND ROCK On this day, came on to be considered the above - referenced cause and Plaintiff, the City of Round Rock, and Defendants, by and through their respective attorneys of record, announced that the parties have compromised and settled their disputes and moved that this action be dismissed with prejudice as to the City of Round Rock; IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that the above - styled and numbered cause of action is dismissed with prejudice to the refiling of same as to the City of Round Rock, that all costs incurred are taxed against the party incurring same, and that any and all relief requested by the City of Round Rock not expressly granted herein is denied. SIGNED this day of 2002. JUDGE PRESIDING EXHIBjr c APPROVED AND AGREED AS TO FORM AND CONTENT: STRASBURGER & PRICE, L.L.P. By: By: Kevin J. Maguire State Bar No. 12827900 ATTORNEY FOR PLAINTIFF HUNTON & WILLIAMS David P. Poole State Bar No. 16123750 ATTORNEY FOR DEFENDANTS TXU ELECTRIC COMPANY TXU GAS COMPANY AND TXU CORP. AGREED ORDER OF DISMISSAL —Page 2 Fold nt line top of envelope to the th, rcdurp address UNITED STATES POSTAL SERVICE u CERTIFIED MAIL 11 1 11 1 7107 6719 6320 0017 4319 Mr. Robert L. Bennett, Jr. City Manager City of Round Rock 221 East Main Street Round Rock, TX 78664 December 10, 2001 Dear Clients: 'Z 'Strasburger ATTORNEYS AT LAW DAVID J. LaBREC 214.651.4751 david.labrec @stresburger.com CONFIDENTIAL ATTORNEY - CLIENT PRIVILEGE PRIVILEGED COMMUNICATIONS WORK PRODUCT Via Regular Mail Mr. Robert L. Bennett, Jr. City Manager City of Round Rock 221 East Main Street Round Rock, TX 78664 Re: Cities of Denton, et al v. Texas Utilities Company, et al Cause No. 2000 - 60109 -393 Settlement Offer of $63,662.95 to the City of Round Rock To follow -up on my facsimile of December 7, 2001, enclosed is a complete copy ofTXU's settlement proposal to the City of Round Rock. Be mindful that TXU has submitted identical proposals to all of the other participating cities as well. The total of those proposals is $959,269.64 which does not include the $200,000 of proposed reimbursement of attorneys' fees. Enclosed is a breakdown by city of those numbers. The Steering Committee has asked us to convert to a contingency fee agreement for the duration of the case. We anticipate that there will be the necessity for an additional assessment to cover court cost, expert witness fees, etc., on a continuing basis. Once again, should you have any questions, please do not hesitate to call me at the number listed above or my partner, Kevin Maguire at (214) 651 -4696. I remind you that these materials are confidential and they should not be discussed or divulged to anyone outside the city administration. If you are contacted by anyone from TXU relating to these matters, please let me know immediately. 674178 .1 /SP0f2912110104112102001 Strasburger 6 Price, 11P 901 Main Street, Suite 4300 • Dallas, Texas 15202.3794 • 214.651.4300 tel. • 214.651.4330 fax • www.strasburger.com Austin • Dnllas • Ilouston • San Antonio • Washington D.C. • Mexico City December 10, 2001 Needless to say, we would like to hear back from you as soon as possible regarding your city's position on this proposal. Sincerely, David J. LaBrec DJL:hdb (w /o attachments) cc: Steering Committee Kevin Maguire 674178.1 /SP012912110104/12102001 Z Strasbur er ATTORNEYS AT LAW &1 Worsham fors yth a Wooldridge «p HAND - DELIVERED David J. LaBrec Strasburger & Price, L L P 901 Main Street, Suite 4300 Dallas, TX 75202 December 6, 2001 Re: Denton et al. v. TXU Electric et al.; Settlement Communications Dear Mr. LaBrec: Enclosed are settlement counter - proposals for each of the Plaintiff Cities in the above - referenced litigation. These settlement proposals are each made conditioned upon the execution and delivery of mutually acceptable documents evidencing the settlement, including the execution and delivery of a complete release of the Defendants against whom the Plaintiffs assert a claim as well as dismissal of the pending litigation with prejudice. Please let me know if you have any questions or comments regarding this proposal. Thank you for your attention to this matter. cc: Paul Plunket Win Colbert Attorneys and Counselors at Law Energy Plaza, 30th Floor 1601 Bryan Street Dallas, Texas 75201 214.979.3000 214,880.0011 Fax www.worsham.net Other Offices Richardson / Telecom Corridor Austin F 0 0 David P. Poole Direct Dial: 214.979.3019 •v� Email: dpoole@worsham.net • Si erel , avid P. Poole IIN MO OM =MI= 11•0 s M M N TXU ELECTRIC AND TXU GAS ANALYSIS AND SETTLEMENT COUNTER -OFFER Denton et al v. TXU Electric et al. Counter- offer to the City of Round Rock 12/05/2001 Conf and Privileged; Prepared for Settlement Discussions Only MN - r= NM M I NM NO • MN • MN MI - NM I I MN TABLE OF CONTENTS • Overview — Letter from TXU Electric and TXU Gas — Summary of Plaintiffs' Claims — Summary of TXU Electric and TXU Gas' Position — Summary of Pending Litigation — Summary of other Relevant Documents • Franchise Language — Electric — Gas 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 2 INN N r - - - NM I - - - - - N - - ■N EN INN TABLE OF CONTENTS (Cont.) • Analysis of Claims — Laches /Estoppel — Sales Tax — Contributions in aid of construction — Transportation of gas (Affiliates; Non - affiliates; Non- industrial) — Rent from Electric property — Miscellaneous Service Charges — Bad Debt Expense - Gas — Attorneys' Fees 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 3 NM r r MI r- I MO M - - - -- ■IN TABLE OF CONTENTS (Cont.) • Summary Settlement Counter -Offer • Appendix — Electric Franchise — Gas Franchise — City of Pearland v. Reliant Energy Entex — City of Wharton v. Reliant Energy HL &P — Other Relevant Documents 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 4 r r • — • — — — — — — — r TXU Electric and TXU Gas December , 2001 Mayor and City Officials City of Round Rock c/o Strasburger & Price 901 Main Street, Suite 4300 Dallas, Texas 75202 Re: City of Denton, et al. v. TXU Electric Company, et al. Dear Mayor and City Officials: TXU Electric and TXU Gas have worked diligently to prepare a counter -offer to your offer to settle this litigation between us. We realize that this settlement discussion document is fairly thick, but we wanted to provide you with a detailed analysis of the reasons supporting our proposal. We hope that you will take the time to read the package of materials so that you can understand our view of the issues presented and the reasons we believe that our offer is fair to you and to the companies. TXU Electric and TXU Gas value their relationship with the City and seriously desire to resolve this matter. Respectfully, 12/05/2001 Confidential and Privileged; Prepared for Settlement 5 Discussions Only OM MS MO s MI OM M— i r r MI MI Ma — r— r OVERVIEW 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 6 �■. MN .. .r MI r NM NM MB MO MO MN NM r UM r all OVERVIEW & BACKGROUND • Litigation. Municipalities around the state are suing electric and gas utilities asserting that franchise fees have been underpaid for several years. • Nature of the Dispute. The disputes between municipalities and utilities generally center on whether categories of revenues received by the utilities other than from the sale of electricity or gas are covered by the terms of the franchises (as asserted by the municipalities) or not covered (as asserted by the utilities). 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 7 MI NM MN Ma i r NM • OM MN ! OM MO NM r NM • i MI OVERVIEW & BACKGROUND (Cont.) • Time Frame Covered. The municipalities contend that statutes of limitations are not applicable to them, so they seek to recover money plus interest for extended periods in the past. The utilities maintain that, even assuming liability were found (which the utilities deny), recovery prior to a few years in the past (typically 2 to 4 years) is barred by the equitable doctrines of lathes and estoppel with regard to claims on the electric franchise, under the terms of the limitation period imposed by the 1999 electric industry restructuring law. • Denton, et al v. TXU Electric et al. Litigation. Thirty-seven cities, including yours, have hired counsel and sued TXU Electric and TXU Gas asserting underpayment of franchise fees under both gas and electric franchises. A significant number of cities elected not to sue TXU Electric or TXU Gas, under agreements that those cities will be treated in the same manner as the Plaintiff Cities are treated as a result of the litigation. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 8 MI NW NM MI • MI MO NO MO NO MI MI NM MN M- OM OM MI OVERVIEW: Summary of Plaintiffs' Claims • Gross Receipts /Gross Revenues. Plaintiff Cities note that the franchises require payment of a fee based on a percentage of "gross receipts" or "gross revenues" and assert that TXU Electric and TXU Gas have underpaid by failing to pay the fee on the following: — Sales Tax, — Contributions in aid of Construction, — Bad debt expense, — Rent from Electric property, — Sales of Gas by Affiliates and related Transportation of Gas, and — Miscellaneous Service Charges. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 9 M!• OM S• -- UN NO ON I r OM MN MN NM MI OVERVIEW: Summary of Plaintiffs' Claims (Cont.) • Fraud. The Plaintiffs contend that the failure to pay on the disputed items was fraudulent. • Time Frame. The Plaintiffs assert that there is no limit on the time frame over which they may recover damages. • Settlement Offer. The Plaintiffs have added up the calculations made under each of the items under the Gross Receipts /Gross Revenues above, based on data for the last ten to twenty years, and offered to settle this lawsuit for an amount in the range of $79,000,000. 12/05/2001 Confidential and Privileged; Prepared for Settlement 10 Discussions Only - - - - - - - - - r - - - - - - - - - OVERVIEW: Summary of TXU Electric and TXU Gas' Position • Entire Franchise. The franchise, like any municipal ordinance, is construed based on the plain language. The words of the franchises must be read in their entirety — not out of context (i.e., "gross receipts from the sale of gas" or "gross revenues from the sale of electricity"). • Revenue not covered by Franchise. TXU Electric and TXU Gas maintain that the categories of revenue claimed by the Plaintiff Cities are not covered by the clear wording of the franchises since none of those categories are revenues or receipts from the sale of electricity or gas. • No Fraud. TXU Electric and TXU Gas absolutely deny that there was any fraud because: (i) TXU Electric and TXU Gas were open and forthcoming about their calculation methods, and (ii) the Cities, their agents, employees, officials and attorneys knew or should have known through the exercise of reasonable diligence the methods for calculating franchise fee payments by TXU Electric and TXU Gas — both when the franchises were negotiated and enacted and during the time they have been in effect. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 11 r - - - - - - • • Claims barred by Laches and Estoppel. TXU Electric and TXU Gas maintain that in the unlikely event that the Plaintiffs are successful in any of their claims, those claims that are older than four . years from the date the suit was filed (November 1997 from most Plaintiffs and later for others) are barred by the equitable doctrine of lathes. In addition, the acceptance by Cities of the franchise fee payments made by TXU Electric and TXU Gas for many years prior to the initiation of this litigation without the Cities ever having asserted that the franchise fee agreement should be interpreted in a manner differently than the agreements are written and, specifically, when the Cities knew exactly what they were being paid on for the duration of their respective franchises and they received payment for years without complaining that they were being paid on the wrong franchise fee base results in the Cities being estopped from making their current claims. With regard to the claims against TXU Gas, each Plaintiff had access to rate filing information which clearly shows that the franchise fee is not paid on 100% of the company's operating revenues and thus put the Cities on notice that they were not being paid on the money they made the basis for their claims. 12/05/2001 Confidential and Privileged; Prepared for Settlement 12 Discussions Only OM MO • NM a • = MOM • MO • -- -_ N• - MN • Claims barred by Statute. TXU Electric asserts that in the unlikely event that the Plaintiffs are successful in any of their claims against TXU Electric, those claims are barred for any municipality which did not exercise its rights by the statutory deadline set out in Sec. 33.008(e) of the Texas Utilities Code. • Offer Rejected. TXU Electric and TXU Gas rejected the Plaintiffs' demand to settle for $79,000,000 but agreed to make a counter -offer for purposes of resolving this matter. We have carefully reviewed the facts underlying the allegations, the controlling legal authority and the pending litigation in other courts and prepared this counter - offer. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 13 ■� - -• MN OM OM ON MN OM MN I M- O_ OM OM NM MI SUMMARY OF RECENT LITIGATION • Basis for settlement offer. Lawsuits between municipalities and other utilities are pending or have recently been resolved in other areas of the state. Because the other litigation is generally more advanced procedurally than the Denton v. TXU Electric case, TXU Electric and TXU Gas have relied on the legal principles from those other cases in preparing this settlement offer. The following is a summary of these lawsuits. Attached in the Appendix are copies of relevant court documents in these lawsuits. • City of Wharton et al. v. Reliant HL &P. The Cities of Wharton, Pasadena and Galveston sued HL &P and this case has been tried to a jury and it is currently on appeal. The outcome of this trial was as follows: 1. Sales tax. The judge found for HL &P with respect to sales tax on summary judgment, so this issue was rejected even before the case was presented to the jury. 2. Wheeling sales. The jury found for HL &P. 3. Sales to other utilities. The jury found for HL &P. 4. Pole attachment fees. The jury found for HL &P. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 14 MR OM • MN OM OM OM MO I MO -- -- i_ • ON • 5. "Fee on fee. During the early 1980s, HL &P billed franchise fees as a pass - through item that appeared as a separate line item on customers' bills. Cities were arguing that HL &P owed the 4% franchise tax on this franchise tax revenue, such that the effective franchise fee would be 4.16 %. The jury found for HL &P. 6. CIAC. This item involves instances where the customer reimburses the utility in order to obtain service (also called contributions in aid of construction). The jury found for the Cities. 7. Miscellaneous service fees. These charges are not in the basic rate for electric service, but are return check charges, reconnect fees, etc. The jury found for the Cities. • City of Pearland v. Reliant Energy Entex. The issue in this case was whether franchise fees are due on sales tax and the interest accruing on the sales tax collected as well as the collection fee. This case was decided on summary judgment and, very recently the 14th Court of Appeals in Houston rendered a decision in this case which held that "any monies received by Entex from its customers for any purpose other than "the sale of gas" are not included within Entex's obligation" and ruled that "the phrase 'gross receipts ... for the sale of gas' does not include sales tax." 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 15 i MI OM MN OM MI S all NM — — I MI • • MI I• OM SUMMARY OF OTHER RELEVANT DOCUMENTS • Discovery. Discovery has not proceeded very far in this case. Therefore, all the documents necessary to litigate the matter have not been produced by the Cities and all the depositions have not been taken to discover relevant facts. Nevertheless, certain documents are important to this case. These documents are included in the Appendix. • Fort Worth City Attorney Opinion Letter. This letter reflects the opinion of the City Attorney of Fort Worth that franchise fees are not due to the City by TXU Electric on revenues from miscellaneous service charges. 12/05/2001 . Confidential and Privileged; Prepared for Settlement Discussions Only I6 • MI • N• -- I a• OM • I IN • UM SUMMARY OF OTHER RELEVANT DOCUMENTS • Audit Reports from the Cities of Haltom City and Watauga. These reports reflect that audits of franchise fees were conducted by these cities, that TXU Electric and TXU Gas fully cooperated in the audit process, that claims now made the basis of this lawsuit were reviewed by the auditors and, to the extent the auditors asserted that categories like miscellaneous service charges should be included, TXU Electric and TXU Gas took the same position then as :low and the Cities never pursued the matter until years later when this suit was filed. • Rate Case Interventions. TXU Electric is regulated by municipalities and by the Texas Public Utility Commission. Municipalities routinely intervene into TXU Electric's rate proceedings where counsel for the Cities ask literally thousands of questions and require production of thousands of documents. As a result the Cities had access to significant financial information about TXU Electric and could have easily determined that there were revenue sources to TXU Electric not included in the franchise fee base. 12/06/2001 Confidential and Privileged; Prepared for Settlement 17 Discussions Only • - -- NM i OM i MI NM OM NM OM I MO OM MN MN MI FRANCHISE LANGUAGE 12/05/2001 Confidential and Privileged; Prepared for Settlement 18 Discussions Only - I I I r N- N - - - -- MN M- r NM = TXU Electric's Franchise in the City of Round Rock The payment provision of TXU Electric's Franchise in the City of Round Rock, finally adopted on the 27th day of May, 1993, provides as follows: "four percent (4 %) of its gross receipts from the retail sale of electric power and energy within the corporate limits of the City" 12/05/2001 Confidential and Privileged; Prepared for Senlement Discussions Only 19 I ME • M - - - - M N MI UM - - - - r - = I TXU Gas' Franchise in the City of Round Rock The payment provision of TXU Gas' Franchise in the City of Round Rock, finally adopted on the 19th day of December, 1991, provides: "three percent (3 %) of the gross receipts received by Company from the sale of gas to its residential and commercial customers within the corporate limits of said City (expressly excluding governmental accounts and receipts derived from sales to all other classes of customers in said City) " 12/05/2001 Confidential and Privileged; Prepared for Settlement 20 Discussions Only MI MN MN r I I I MI MI = I OM • - - MN • I MO ANALYSIS OF CLAIMS 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 21 MO • MI MI I MO NM MN M - - - = MN MI MO MN MO I ANALYSIS OF CLAIMS: NO BAR TO CLAIM (CACHES DOES NOT APPLY) PLAINTIFFS' CLAIMS: There are no limits on how far back the claims may go because statutes of limitations don't run against municipalities. 12/05/2001 Confidential and Privileged; Prepared for Settlement 22 Discussions Only • OM NM M MN • NM NM • MI • MI MB MN MI MO • MI NM ANALYSIS OF CLAIMS: NO BAR TO CLAIM (CACHES DOES NOT APPLY) TXU Electric and TXU Gas' Position: Plaintiffs' claims are barred by the equitable principles of laches and estoppel for periods prior to November 1997. • Legal Authority for TXU Electric and TXU Gas' Position: The District Court in the City of Wharton et al. v. Reliant HL &P case submitted the issue to the jury and the jury found that laches did apply to bar recovery of municipalities' claims prior to a certain date. The Court entered judgment notwithstanding this jury finding but this issue is on appeal and TXU Electric and TXU Gas expect the Court of Appeals to hold that laches does bar the Cities' recovery. As reflected above, given the Cities' knowing acceptance of the franchise fee payments for years without question, TXU Electric and TXU Gas believe the Cities' claims are barred by estoppel. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 23 MN ■M S MI NM MI N MI OM UM ON E MN MN a•• r• ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS OF SALES TAX PLAINTIFFS' CLAIM: Franchise fees should have been paid based on a percentage of revenue from sales tax collected and the sales tax collection fee. 12/05/2001 Confidential and Privileged; Prepared for Setllemenl Discussions Only 24 M■ MI I r OM MI ON MN MI NM • OM NM OM S ON MN • UM MN ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS OF SALES TAX TXU Electric and TXU Gas' Position: Sales tax revenue is not "gross receipts from the sale of gas" and is not "gross receipts from the sale of electricity" and therefore franchise fees are not due under the franchise. • Legal Authority for TXU Electric and TXU Gas' Position: City of Pearland v. Entex, Fourteenth Court of Appeals, Houston, October 25, 2001 at 4: — "Thus, we find the phrase 'gross receipts ... for the sale of gas' does not include sales tax." • Settlement Offer: No offer because TXU Electric and TXU Gas have no liability for the claim under controlling legal authority. 12/05/2001 Confidential and Privileged; Prepared for Settlement 25 Discussions Only - M - -- w MN MI r MI NO = WI NM OM OM OM MO OM ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM CONTRIBUTIONS IN AID OF CONSTRUCTION PLAINTIFFS' CLAIM: The Cities claim that franchise fees should be paid based on money paid to TXU Electric and TXU Gas by customers who are obligated to reimburse the companies for construction of new facilities. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 26 ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM CONTRIBUTIONS IN AID OF CONSTRUCTION TXU Electric and TXU Gas' Position: As the Court held in the Entex appeal, money received for something other than the sale of gas or electricity is not included in the franchise fee base. CIAC is not revenue from the sale of gas or electricity — it is simply reimbursement of the costs of construction. Although the jury in the Wharton case found for the Plaintiffs on this item, TXU Electric and TXU Gas expect that part of the judgment to be reversed on appeal. • Settlement Offer: No offer because TXU Electric and TXU Gas have no liability for the claim. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 27 ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM THE TRANSPORTATION OF GAS FOR AFFILIATES AND THE VALUE OF GAS SOLD BY AFFILIATES PLANTIFFS' CLAIM: The Cities claim that the revenue from transportation of gas and the value of the gas sold by a TXU Gas affiliate should be the basis of franchise fees. 12/05/2001 Confidential and I'rivileged; Prepared for Settlement Discussions Only 28 MN MI = NM =•• MI MI I ON MI I MI MI MN MO • IN ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM THE TRANSPORTATION OF GAS FOR AFFILIATES AND THE VALUE OF GAS SOLD BY AFFILIATES TXU Gas' Position: Transportation revenues are not revenues from the sale of natural gas and the revenues of affiliates of TXU Gas are not includable in the franchise fee base. Further, transportation of gas was primarily provided to industrial customers and most cities' franchise fee base excludes or omits industrial customers. The franchise with Round Rock expressly excludes industrial customers with the following language "three percent (3 %) of the gross receipts received by Company from the sale of gas to its residential and commercial customers within the corporate limits of said City (expressly excluding governmental accounts and receipts derived from sales to all other classes of customers in said City)." Since the transportation and sales by affiliates were to industrial customers, such sales and transportation revenues would not have been included in the franchise fee base even if the sales were made by TXU Gas. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 29 OM MO • NM MI NO OM NM • MI MI MN - • MI MI MI MI MO ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM THE TRANSPORTATION OF GAS FOR AFFILIATES AND THE VALUE OF GAS SOLD BY AFFILIATES • Settlement Offer: No offer because TXU Gas has no liability for the claim. 12/05/2001 Confidential and Privileged; Prepared for Settlement 30 Discussions Only • OM • I • ON • OM WM • MI MO • OM • _ - MN • MO ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM RENT FROM ELECTRIC PROPERTY PLANTIFFS' CLAIM: The Cities claim that the rental payment from electric property should be included in the franchise fee basis. 12/05 /2001 Confidential and Privileged; Prepared for Settlement Discussions Only 31 IM EN EN SE NE MO - MO SE - - EN I NM - - EN EN ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM RENT FROM ELECTRIC PROPERTY TXU Electric's Position: The revenues from rent of property owned by TXU Electric are not for the sale of electricity and thus are not within the franchise fee language. • Settlement Offer: None 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 32 OM NM OM • • OM NO MN MN MO ••• MI MI NM OM ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM MISCELLANEOUS SERVICE CHARGES PLANTIFFS' CLAIM: The Cities claim that the miscellaneous service revenues from return check charges, connect charges and the like should be included in the franchise fee base. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 33 OM OM ®•• OM NM OM EN • MO - - - • MI i• OM ANALYSIS OF CLAIM: PERCENT OF GROSS RECEIPTS FROM MISCELLANEOUS SERVICE CHARGES TXU Electric and TXU Gas' Position: The charges are not for the sale of gas or the sale of electricity and thus are not within the franchise fee language. • Settlement Offer: Although TXU Electric and TXU Gas expect that the Court would rule as a matter of law that these revenues are not included in the franchise fee base, in an effort to resolve this lawsuit, TXU Electric and TXU Gas offer to pay $63,662.95 which is the franchise fee on the miscellaneous service revenues for the period from January 1, 1997 to July 31, 2001. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 34 MO MO MI MI MN NM MI I OM - NM OM MO OM I MN MO • MI ANALYSIS OF CLAIMS: TORT CLAIMS: negligent representation, fraudulent inducement, fraud, breach of duty of good faith and fair dealing, and unjust enrichment PLANTIFFS' CLAIMS: These non - contractual claims are all based on the allegation that the exclusion of the disputed categories of revenue from the franchise fee payments were wrongful and not only breached the franchise ordinance payment provisions but entitled the Cities to additional damages under these theories. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 35 MN NM OM MN = ! I NM MI O - - - - - MI • • MO ANALYSIS OF CLAIMS: TORT CLAIMS: negligent representation, fraudulent inducement, fraud, breach of duty of good faith and fair dealing, and unjust enrichment TXU Electric and TXU Gas' Position: Plaintiffs' fraud and tort claims make no sense — TXU Gas and TXU Electric had no reason to misrepresent the facts since the franchise fee is a pass through to the customer as part of the cost of service included in the rates - there is no financial benefit to TXU Electric and TXU Gas by excluding categories of revenue, nor are there detriments to TXU Electric and TXU Gas from including other categories. The Cities had access to information through the time the franchise ordinances were in effect regarding the payments and what was included in the base. • Settlement Offer: None 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 36 MIll I OM MN = I M -- r MN I E -- MN MN MN MN ANALYSIS OF CLAIM: BAD DEBT (GAS) PLAINTIFFS' CLAIMS: The Cities claim that by not paying franchise fees on bad debts, TXU Gas has underpaid its franchise fees. 12/05/2001 Confidential and Privileged; Prepared for Settlement 37 Discussions Only =I MN MN MN OINI MIMI= IIIIN ANALYSIS OF CLAIM: BAD DEBT (GAS) TXU Gas' Position: Bad debts are not revenue, since the bad debt expense simply accounts for the fact that certain customers do not pay their bills, thus there are some accounts for which revenue is not received and, therefore, the bad debt expense is not "gross receipts from the sale of gas." Accordingly, no franchise fees are owed with regard to the bad debt expense. • Settlement Offer: No offer because TXU Gas has no liability for the claim. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 38 I• - NM MO = MI MN I MN = - -- OM I I r NM ANALYSIS OF CLAIM: ATTORNEYS' FEES PLANTIFFS' CLAIM: The Plaintiffs claim that they have a right to recover attorneys' fees based on the breach of contract claim. 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 39 MI MN NM MI A N - -- MN = OM MN MN O -- NM MI ANALYSIS OF CLAIM: ATTORNEYS' FEES TXU Electric and TXU Gas' Position: The Cities will only have a right to seek to recover attorneys' fees if they win on the breach of contract claim -- an outcome that, based on the Entex opinion, seems highly unlikely. • Settlement Offer: TXU Electric and TXU Gas will reimburse the Cities for their actual attorneys' fees expended, not to exceed the aggregate amount of $200,000 for all Plaintiffs. 12/05/2001 Confidential and Privileged; Prepared for Settlement 40 Discussions Only MN = MI MI OM MI NM MI UM • - - -• M A -- MO THE FUTURE 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 41 111111111110111•11111•11011111111111MINNIIIIIIIINIMIIIIIIIION TXU Electric Future Franchise Fees • Effective January 1, 2002, TXU Electric will agree to amend the existing electric franchise ordinance to include in the franchise fee payment to the City a franchise fee calculated on 4% of the revenue generated from the discretionary services provided by TXU Electric under the terms of section 6.1.2 of its Tariff for Retail Delivery Services. You must understand, however, that payment of additional franchise fees based on this revenue will have the effect of increasing the cost of electric service to your citizens, as the additional franchise fee will be passed through to electric customers and it will be required that the City take all action reasonably necessary to approve the recovery of these additional costs from customers, including the approval of a tariff permitting recovery of these additional fees from electric customers. 12/05/2001 Confidential and Privileged; Prepared for Settlement 42 Discussions Only r - - - = NW i OM • - - - .. .. .M OM .. .. TXU Gas Future Franchise Fees • TXU Gas will agree to amend the existing franchise ordinance to include any one or more of the following categories of revenue: — Miscellaneous fees — CIAC — Bad Debt expense — Transportation Revenue and Third Party Sales You must understand, however, that inclusion of these categories in the franchise fee base will have the effect of increasing the cost of natural gas service to your citizens, as the additional franchise fee will be passed through to TXU Gas' customers and it will be required that the City take all action reasonably necessary to approve the recovery of these additional costs from the customers. 12/05/2001 Confidential and Privileged; Prepared for Settlement 43 Discussions Only MO NM OM RS OM OM M - OM I MP = ! MI A - - M = SUMMARY OF SETTLEMENT COUNTER -OFFER BY TXU ELECTRIC AND TXU GAS 12/05/2001 Confidential and Privileged; Prepared for Settlement 44 Discussions Only 111111 11•11 MN IN MI r S M - -- me u -- - w ow SUMMARY OF COUNTER -OFFER BY TXU ELECTRIC AND TXU GAS • $63,662.95 for Miscellaneous Service Revenues, Gas and Electric • Reimbursement of attorneys' fees subject to the specified cap • Proposed amendment of both Gas and Electric Franchise 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 45 MN MS •— a OM OM on — ow um ma A um ow = ■w — APPENDIX 12/05/2001 Confidential and Privileged; Prepared for Settlement Discussions Only 46 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 " TU I n ORDINANCE NO. _ AN ORDINANCE AMENDING THE EXISTING FRANCHISE BETWEEN THE CITY AND TEXAS UTILITIES ELECTRIC COMPANY TO PROVIDE FOR A DIFFERENT CONSIDERATION; PROVIDING AN EFFECTIVE DATE; PROVIDING FOR ACCEPTANCE BY TEXAS UTILITIES ELECTRIC COMPANY; FINDING AND DETERMINING THAT THE MEETING AT WHICH THIS ORDINANCE IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW. WHEREAS, Texas Utilities Electric Company (hereinafter called Electric ") is engaged in the business of providing electric utility service within the City and is using the public streets, alleys, grounds and rights -of -ways within the City for that purpose under the terms of a franchise ordinance heretofore duly passed by the governing body of the City and duly accepted by TU Electric; and WHEREAS, TU Electric has, pursuant to said franchise ordinance, been paying to the City a sum equal to three percent (3 %) of its gross receipts from the retail sale of electric power and energy within the City for the rights and privileges set forth in said franchise ordinance and, in addition thereto, has reimbursed the City for its ratemaking expenses pursuant to Section 24 of the Public Utility Regulatory Act; and WHEREAS, the City and TU Electric desire to amend said franchise ordinance to provide for a different consideration to consist of a sum equal to four percent (4%) of its gross receipts from the retail sale of electric power and energy within the City, which different consideration includes, among other things, TU Electric's obligation to reimburse the City for its ratemaking and KS/ORDQUNUORO 273D other regulatory expenses to be incurred by the City involving the regulation of TU Electric; Now Therefore BE IT ORDAINED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, THAT: I. The consideration payable by TU Electric for the rights and privileges granted to TU Electric by the franchise ordinance hereto fore duly passed by the governing body of this City and duly accepted by TU Electric is hereby changed to be four percent (4 %) of its gross receipts from the retail sale of electric power and energy within the corporate limits of the City, said changed percentage to be applied to said gross receipts beginning on June 1, 1993, and being payable as specified in said franchise ordinance and based upon the same time periods as specified in said franchise ordinance and being payment for the said rights and privileges during the period specified in said franchise ordinance, said payment being in lieu of and shall be accepted as payment for all of TU Electric's obligations to pay municipal charges, fees, rentals, pole rentals, wire taxes, inspection fees, easement taxes, franchise taxes, certain regulatory expenses under Section 24 of the Public Utility Regulatory Act or any similar or successor law, or other charges and taxes of every kind, except ad valorem taxes, sales and use taxes, and special taxes and assessments for public improvements. U. TU Electric shall make a one -time adjustment to the first payment due after June 1, 1993, under the said franchise ordinance 2. heretofore duly passed by the governing body of this City and duly accepted by TU Electric for the purpose 'of making the changed consideration as specified in Section 1 hereof effective on June 1, 1993, without altering the payment dates specified in said franchise ordinance, the amount of said adjustment being calculated as follows: (a) TU Electric shall determine the monthly average of its gross receipts from the retail sale of electric power and energy within the City during the period upon which the next franchise payment due to the City following June 1, 1993, is based; (b) the said monthly average of its said gross receipts shall be multiplied by 1% (0.01) and (c) the product so calculated shall be multiplied by the number of whole months from June 1, 1993, through the last day of the last month of the period for which the next franchise payment due to the City following June 1, 1993, is made. The amount of said adjustment shall be added to the said next franchise payment following June 1, 1993, determined in accordance with the provisions of said franchise ordinance as was in effect prior to this amendment. �. Notwithstanding anything to the contrary in Section I hereof, if TU Electric files general rate cases and the City incurs cumulative expenses, otherwise reimbursable by TU Electric under Section 24 of the Public Utility Regulatory Act or similar or successor law, in excess of $4 million, then in such event, TU Electric shall reimburse all of the expenses incurred by the City in connection with all general rate cases filed during the period ended fifteen (15) years from the effective date hereof in excess of said $4 million. The term "general rate case" as used in this 3. Section means a rate case initiated by TU Electric in which it seeks to increase its rates charged to a substantial number of its customer classes in the City and elsewhere in its system and in which TU Electric's overall revenues are determined in setting such rates. City agrees to exercise reasonable best efforts, considering the facts and circumstances, to keep its expenses on average to under $1,000,000 per general rate case. rv. Notwithstanding the provisions of Section I hereof, TU Electric will continue to reimburse the City's ratemaking expenses, if any, in connection with the appeal and any remand of Public Utility Commission of Texas Docket No. 9300 that re otherwise reimbursable under Section 24 of the Public Utility Regulatory Act, and will continue to reimburse the City's ratemaking expenses, if any, in connection with Public Utility Commission of Texas Docket No. 11735 that are otherwise reimbursable under Section 24 of the Public Utility Regulatory Act to the extent that said ratemaking expenses are incurred through the entry of the last action by the Public Utility Commission of Texas (i.e., the said Commission's order overruling the last motion for rehearing) in said Docket No. 11735; the City hereby agrees that any ratemaking expenses incurred in connection with said Docket No. 11735 that the City incurs on appeal of said order will be the City's sole responsibility and further agrees -- in the events that the City is a participant in the joint intervention of cities managed by the Steering Committee of TU Electric Service Area Cities intervening in Docket No. 11735, that the City decides to continue to participate with the Steering Committee in such appeal of said order, and TU Electric is required 4. to reimburse said Steering Committee for ratemaking expenses under Section 24 of the Public Utility Regulatory Act that are incurred on appeal of said order in Docket No. 11735 -- to reimburse TU Electric the City's share of reimbursable expenses related to said appeal and owed by TU Electric to said Steering Committee determined by the methodology chosen by the said Steering Committee (the City to notify TU Electric of the method so chooses by the Steering Committee prior to the submission of an invoice by the Steering Committee for the payment by TU Electric of said reimbursable expenses related to said appeal). V. In all respects, except as specifically and expressly amended by this ordinance, the said franchise ordinance heretofore duly passed by the governing body of this City and duly accepted by TU Electric shall remain in full force and effect according to its terms until said franchise ordinance terminates as provided therein. VI. This ordinance shall take effect from and after its final passage and TU Electmic's acceptance. TU Electric shall, within fifteen (15) days from the passage of this ordinance, file its written acceptance of this ordinance with the Office of the City Secretary in substantially the following form: To the Honorable Mayor and City Council: Texas Utilities Electric Company (TU Electric), acting by and through the undersigned authorized officer, hereby accepts, on this the 9 th day of June , 1993, Ordinance No. G . - 9345 ' 27 "V — amending the current franchise between the City and TU Electric. 5. TEXAS UTILITIES ELECTRIC COMPANY By: Senior ce rF+Fesident VII. It is hereby officially found and determined that the meeting at which this ordinance 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. VIII. A. All ordinances, parts of ordinances, or resolutions in conflict herewith are expressly repealed. B. The invalidity of any section or provision of this ordinance shall not invalidate other sections or provisions thereof. Alternative 1. By motion duly made, seconded and passed with an affirmative vote of all the Council members present, the requirement for reading this ordinance on two separate days was dispensed with. READ, PASSED, and ADOPTED on first reading this n day of I , 1993. Alternative 2. READ and APPROVED on first reading this the day of , 1993. READ, APPROVED and ADOPTED on second reading this the day of , 1993. 6. ATTEST: 0 LAND, City Secretary APPROVED AS TO FORM: STEPHAN L. SHEETS, City Attorney 7. dz CHARLES CULPEPH P //Iayor City of Round Rock, Texas 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ORDINANCE NO: a 5 `J AN ORDINANCE GRANTING TO LONE STAR GAS COMPANY, A DIVISION OF ENSERCH CORPORATION, A CORPORATION, ITS SUCCESSORS AND ASSIGNS, A FRANCHISE TO FURNISH AND SUPPLY GAS TO THE GENERAL PUBLIC IN THE CITY OF ROUND ROCK, WILLIAMSON COUNTY, TEXAS, FOR THE TRANSPORTING, DELIVERY, SALE, AND DISTRIBUTION OF GAS IN, OUT OF, AND THROUGH SAID MUNICIPALITY FOR ALL PURPOSES; PROVIDING FOR THE PAYMENT OF A FEE OR CHARGE FOR THE USE OF THE STREETS, ALLEYS, AND PUBLIC WAYS; AND PROVIDING THAT IT SHALL BE IN LIEU OF OTHER FEES AND CHARGES, EXCEPTING AD VALOREM TAXES; AND REPEALING ALL PREVIOUS GAS FRANCHISE ORDINANCES. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF ROUND ROCK, TEXAS: SECTION 1: That the City of Round Rock, Texas, hereinafter called "City ", hereby grants to Lone Star Gas Company, a Division of ENSERCH CORPORATION, hereinafter called "Company," its successors and assigns, consent to use and occupy the present and future streets, alleys, highways, public places, public thoroughfares, and grounds of City for the purpose of laying, maintaining, constructing, operating, and replacing therein and thereon pipelines and all other appurtenant equipment needed and necessary to deliver gas in, out of, and through said City and to sell gas to persons, firms, and corporations, including all the general public, within the City corporate limits, said consent being granted for a term of twenty -one (21) years from and after the date of the final passage and approval and publication of this ordinance. SECTION 2: Company shall lay, maintain, construct, operate, and replace its pipes, mains, laterals, and other equipment so as to interfere as little as possible with traffic and shall promptly clean up and restore to approximate original condition all thoroughfares and other surfaces which it may disturb. The location of all mains, pipes, laterals, and other appurtenant equipment shall be fixed under the supervision of the City or an authorized agent appointed by said City. When the Company is required to relocate its mains, laterals, and other facilities to accommodate construction, and the relocation is the result of construction or improvement to the Federal -Aid System (or any successor thereto), and Company is eligible for reimbursement for its costs and expenses incurred as a result of such construction and improvement from the Federal Government, the County Government, or the State of Texas, as permitted by law pursuant to any reimbursement program, and City requests reimbursement for costs and expenses incurred as a result of such construction or improvement, Company costs and expenses shall be included within any such application for reimbursement, provided that Company submits the appropriate ROUND ROCK TXU- 000382 documentation to City prior. to such application. City shall make a reasonable effort to provide sufficient notice to the Company to allow the submittal of appropriate cost information to the City. SECTION 3: When Company shall make or cause to be made excavations or shall place obstructions in any street, alley, or other public place, the public shall be protected by barriers and lights placed, erected, and maintained by Company; and in the event of injury to any person or damage to any property by reason of Company's construction, operation, or maintenance of the gas distribution plant or system of Company, Company shall indemnify and keep harmless City from any and all liability in connection therewith. SECTION 4: In addition to the rates charged for gas supplied, Company may make and enforce reasonable charges, rules and regulations for service rendered in the conduct of its business including a charge for services rendered in the inauguration of natural gas service, and may require, before furnishing service, the execution of a contract therefor. Company shall have the right to contract with each customer with reference to the installation of, and payment for, any and all of the gas piping from the connection thereof with the Company's main in the streets or alleys to and throughout the customers premises. Company shall own, operate and maintain all service lines, which are defined as the supply lines extending from the Company's main to the customer's meter where gas is measured by Company. The customer shall own, operate, and maintain all yard lines and house piping. Yard lines are defined as the underground supply lines extending from the point of connection with Company's customer meter to the point of connection with customer's house piping. SECTION 5: Company shall not be required to extend mains on any street more than one hundred feet (100') for any one customer of gas; provided that no extension of mains is required if the customer will not use gas for space heating and water heating, or the equivalent load, at a minimum. SECTION 6: Company shall be entitled to require from each and every customer of gas, before gas service is commenced, a deposit in an amount calculated pursuant to the Company's Quality of Service Rules as may be in effect during the term of this franchise. Said deposit shall be retained and refunded in accordance with such Quality of Service Rules and shalt bear interest, as provided in Tex. Rev. Civ. Stat. Ann. art. 1440a (Vernon Supp. 1991) as it may be amended from time to time. Company shall be entitled to apply said deposit, with accrued interest, to any indebtedness owed Company by the customer making the deposit. SECTION 7: The rights, privileges, and franchises granted by this ordinance are not to be considered exclusive, and City hereby expressly reserves the right to grant, at any time, like privileges, rights, and franchises as it may see fit to any other person or corporation for the purpose of furnishing gas for light, heat, and power to and for City and 2 ROUND ROCK TXU- 000383 the inhabitants thereof. Provided, however, City shall not grant more favorable conditions, including franchise fee, to any other gas utility franchisee than are herein granted to Company. SECTION 8: Company, its successors and assigns, agrees to pay and City agrees to accept, on or before the 1st day of February, 1992, and on or before the same day of each succeeding year during the life of this franchise, the last payment being made on the 1st day of February, 2012, a sum of money which shall be equivalent to three percent (3 %) of the gross receipts received by Company from the sale of gas to its residential and commercial customers within the corporate limits of said City (expressly excluding governmental accounts and receipts derived from sales to all other classes of customers in said City) during the preceding calendar year, which annual payment shall be for the rights and privileges herein granted to Company, including expressly, without limitation, the right to use the streets, alleys, and public ways of said City. The initial payment for the rights and privileges herein provided shall be for the period January 1 through December 31, 1992, and each succeeding payment shall be for the period January 1 through December 31 of the respective year in which the payment is made. And it is also expressly agreed that the aforesaid annual payment shall be in lieu of any and all other and additional occupation taxes, easement, and franchise taxes or charges (whether levied as an ad valorem, special, or other character of tax or charge), in lieu of municipal license and inspection fees, street taxes, and street or alley rentals or charges, and all other and additional municipal taxes, charges, levies, fees, and rentals of whatsoever kind and character which City may now impose or hereafter levy and collect, excepting only the usual general or special ad valorem taxes which City is authorized to levy and impose upon real and personal property. Should City not have the legal power to agree that the payment of the foregoing sums of money shall be in lieu of taxes, licenses, fees, street or alley rentals or charges, easement or franchise taxes or charges aforesaid, then City agrees that it will apply so much of said sums of money paid as may be necessary to satisfy Company's obligations, if any, to pay any such taxes, licenses, charges, fees, rentals, easement or franchise taxes or charges. In order to determine the gross receipts received by Company from the sale of gas to residential and commercial customers within the corporate limits of City, Company agrees that on the same date that payments are made, as provided in the preceding paragraph of this Section 8, it will file with the City Clerk a sworn report showing the gross receipts received from the sale of gas to its residential and commercial customers within said corporate limits during the calendar year preceding the date of payment. City may, if it sees fit, have the books and records of Company examined by a representative of said City to ascertain the correctness of the sworn reports agreed to be filed herein. SECTION 9: When this franchise ordinance shall have become effective, all previous ordinances of said City granting franchises for gas distribution purposes which were held by Company shall be automatically cancelled and annulled, and shall be of no further force and effect. 3 ROUND ROCK TXU- 000384 SECTION 10: Company shall file its written acceptance of this franchise ordinance within sixty (60) days after its final passage and approval by said City. PASSED ON Sp,OND AND FINA READING at the regular meting of the City Council on this the Ethh day of , A.D. 191 / . ATTEST: J SASSED ON R T READI Gat the regular meeting of the City Council on this the — day of ,A.D.19 STATE OF TEXAS COUNTY OF WILLIAMSON CITY OF ROUND ROCK 1, j ZogiJj C L4ji , City Secretary of the City of Round Rock, Williamson County, Texas, do hereby certify that the above and foregoing is a true and correct copy of an ordinance passed and approved by the City Council on first reading on the / day of D C ini cl€ , 1991, and finally passed and approved by the City Council on second and final reading on the ) ? day of C 662 , 1991, as it appears of record in the Minutes of said Council in Book Mayor n City of /WAY) icy , Texas �D , Page r � WITNESS MY HAND AND SEAL OF SAID CITY, this the o3 .C61— day of / , A. D. 199/ + 4 e it5r Secretary of Round Rock, Texas ROUND ROCK TXU- 000385 EXTRACT FROM THE MINUTES OF THE CITY COUNCIL OF THE CITY OF ROUND ROCK, TEXAS The City Council of the City of Round Rock, dliamson County, Texas, convened in 4 3 1 j . p h � session on the 1a day of k) ,Q,ep j 1 J j ? A , 19 9 / , at M., with the following persons present: Mayor: Council Members: Mayor Pro -tem Culpepper Councilwoman Oatman Councilman Stewart Councilman Joseph Absent: Mayor Robinson Councilman Palmer Councilman Stluka A a , onjm being present, came on to be read and considered Ordinance No. c??!! granting to Lone Star Gas Company, a Division of ENSERCH CORPORATION, a Texas corporation, a franchise to furnish and supply natural gas to the general public in the City of Round Rock, Texas, for the transporting, delivery, sale and distribution :f gas in, oi,it of, and thro s -'d m n'cipality for all purposes. On motion de by ) , / j'i Y// l / g 1 p - _ ,yi /L and seconded by ii_ . IL _ LIAL_/_ iA IreiGtiPMPArIJI i A which carried unanimously, the City Council voted the passage of the Ordinance and to record same at length in these minutes. 5 ROUND ROCK TXU- 000386 STATE OF TEXAS § COUNTY OF WILLIAMSON § CITY OF ROUND ROCK § 1, ,.An),UE LF}n1 , City Secretary of the City of Round Rock, Texas, do hereby certify that the above and foregoing is a true and correct " AAA t copy of the proceedings of the City Council of the City of Round Rock, Texas, at a /)session, held on the 19 — day of � C�/7 E2 _ , 19 9 / , in connection with the passage and adoption of Ordinance No. 55 1 granting a franchise to Lone Star Gas Company and that the same is of record in Book c9 0 , page of the Minutes of the City Council. WITNESS MY HAND AND SEAL OF SAID CITY, this the o73 day of DEC Er)18 ,2 , A. D. 19 4 I . 6 Secretary of Round Rock, Texas ROUND ROCK TXU- 000387 3 FROM BAKERBOTTSLLP (FRI)10. 26' 01 15:44/ST. 15:42/NO. 4863384557 P 2 Affirmed in part; Reversed and Rendered in part; and Opinion filed October 25, 2001. In The Jaurteen (gaud of )ppta1a NO. 14-00-00357-CV CITY OF PEARLAND, Appellant V. RELIANT ENERGY ENTEX, A DIVISION OF RELIANT ENERGY RESOURCES CORP. (f/k/a ENTEX, A DIVISION OF NORAM ENERGY CORP.) and RELIANT ENERGY RESOURCES CORP. (f/k/a NORAM ENERGY CORP.), Appellees On Appeal from the 239' District Court Brazoria County, Texas Trial Court Cause No. 3131- JG97 -1 OPINION This is a double appeal from an order granting a partial summary judgment in a declaratory judgment and breach of contract action brought by the City of Pearland against Reliant Energy Entex and Reliant Energy Resources Corp. [hereinafter jointly referred to as "Entex "] seeking compensation for the alleged underpayment of street rental franchise fees. The sole issue in this appeal is the proper construction of Pearland Ordinance No. 508. We affirm the trial court's grant of Entex's motion for partial summary judgment, and we FROM BAKERBOTTSLLP (FRI) 10. 26' 01 15:44/81'. 15:42/NO. 4863384557 P 3 reverse the trial court's partial grant of Pearland's motion for partial summary judgment and render judgment in favor of Entex. On May 27 ,1986, Pearland granted Entex a street franchise allowing Entex the use of Pearland's rights of way to distribute natural gas to Entex's customers inside the city limits in exchange for a payment of a percentage of Entex's gross receipts from the sale of natural gas. The ordinance provides in pertinent part In consideration of the rights and privileges herein granted, [ Entex] agrees to pay -to [ Pearland] annually during the continuance of this franchise a sum of money equal to two percent (2 %) of the gross receipts for the preceding year received by [Entex] after the effective date of this franchise for the sale . of gas to residential, commercial, and industrial customers, within the corporate limits of [ Pearland]. Payments hereunder shall be calculated on the basis of gross receipts from the sale of gas on all gas sold to residential, commercial, and industrial customers, within the corporate limits of [ Pearland]. Each year, Entex calculated its annual franchise fee on the basis of its "gross receipts" from the sale of natural gas. Entex did not include within the calculation of its "gross receipts" the sales tax collected from its customers. In 1997, Pearland, and other similarly situated municipalities, brought a class action suit against Entex seeking a declaratoryjudgment to determine the.legal construction of their franchise fee agreements, an audit of Entex, and breach of contract damages if the court determined that Entex underpaid-the cities. The trial court certified the class and appointed Pearland as the class representative. Following the class certification, boot sides moved for partial summary judgment. Entex claimed that sales taxes belong to the state and do not constitute "receipts" from the sale of natural gas. Pearland, however, reasoned that sales taxes are calculated on the sale of gas and, thus, are part of the gross receipts. Pearland also observed that while Entex collects sales taxes in its monthly billings, it transfers the money to the state on a quarterly basis. In addition, to the,interest earned on these tax monies, Entex is also authorized by statute to deduct a small collection fee to reimburse it for the expenses incurred in collecting the tax. Thus, Pearland argued that if sales tax does not 2 FROM BAKERBOTTSLLP (FR[ O 10. 26' 01 15:44/ST. 15:42/110. 4863384557 P 4 constitute part of the gross receipts from the sale of gas, certainly the statutory collection fee and time value on the collected tax monies is revenue paid to Entex from the sale. of gas that should be included within its gross receipts. The trial court granted in part Pearland's partial motion for summary judgment and granted one of Entex's two partial motions for stmi nary judgment In its.order, the trial court declared that sales taxes are collected for the benefit of the state and are not, as a matter of law, a part of Entex' s"gross receipts" as the term is used in Pearland's sheet rental franchise ordinance. The court, however, held that Entex owes franchise fees on the statutory collection fees it receives from the state for collecting the tax and on the time value of the tax from the time the money is collected until it is delivered to the state. Pearland and Entex then moved to sever Pearland's claims for the year 1998 from the balance of its othcr claims and from the claims of the other cities. The trial court granted the motion to sever and rendered final judgment against Entex for S39.59, representing two percent of the 1998 collection fees and interest earned. On appeal, both parties challenge the trial court's grant of partial summary judgment and its construction ofthe ordinance. In its appeal, Pearland contends that the plain meaning of the term "gross receipts," as it is used in the ordinance, includes all monies received by Entex without any deduction for the sales taxes received. Entex, conversely, asserts that the plain language of the ordinance dictates that sales tax, statutory collection fees paid to Entex by the State for the cost associated with its collection of the sales taxes, and the time value of sales taxes beld are not "gross receipts ... for the sale of gas" on which it must pay a franchise fee. The rules governing the construction of state statutes also control our construction of municipal ordinances. Mills v. Brown, 159 Tex. 110, 114, 316 S.W.2d 720, 723 (1958). The proper construction of an ordinance is a question of law. Johnson v. City ofFort Worth, 774 S.W.2d 653, 656 (Tex. 1989) (per curiam). We are required to discern and give effect to the intent of the enacting body. Sorokolit v. Rhodes, 889 S. W.2d 239, 241 (Tex. 1994). 3 FROM BAKERBOTTSLLP (FR1) t0. 26' 01 15:44/ST. 15:42/NO. 4863384557 P 5 To achieve this goal, we must first attempt to discern that intent must come from the plain language of the ordinance. Id. Our obligation, however, to enforce the plain language of the ordinance does not authorize us to employ a "bloodless literalism in which text is viewed as if it had no context" West Anderson Plaza v. Feyznia, 876 S.W.2d 528, 532 (Tex. App. — Austin 1994, no writ). We are required to consider the context and the consequences that would follow from a particular interpretation, and we must avoid interpretations that would produce absurd results or render other language mere surplusage. City of Amarillo v. Martin, 971 S.W.2d 426, 430 (Tex. 1998); Sharp v. House of Lloyd, Inc., 815 S.W.2d 245, 249 (Tex. 1991). The language of Pearland Ordinance 508 is unambiguous. The pertinent portion of the ordinance requires Entex, in exchange for the street rental franchise, to pay Pearland 2% of its gross receipts from the preceding year for the sale of gas to residential, commercial, and industrial customers. The ordinance does not require Entex to pay Pearland two percent of all monies received from its residential, commercial, and industrial customers; rather, the ordinance requires Entex to pay 2% of its gross receipts from the sale of gas." Thus, any monies received by Entex from its customers for any purpose other than "the sale of gas" are not included within Entex's obligation. As a seller of a taxable item, Entex is legally obligated to collect sales taxes from its purchasers. Davis v. State, 904 S.W.2d 946, 952 (Tex. App. —Austin 1995, no pet). When collecting sales tax, Entex acts as an involuntary ' agent of the state and that role is separate from its role as a public utility selling gas to its customers. Serna v. H.E. Butt Grocery Co., 21 S.W.3d 330, 333 (Tex. App. —San Antonio 1999, no pet.). Sales tax monies become state funds at the moment of collection, and Entex merely holds these funds in trust until they are remitted to the state. Davis, 904 S.W.2d at 953. While sales tax is calculated on the amount of the sale, it forms no part of the consideration paid by the customer in exchange for natural gas. Thus, we find the phrase "gross receipts ... for the sale of gas" does not include sales tax. 4 FROM RAKERBOTTSLLP Moreover, we also fmd the statutory collection fee does not constitute "gross receipts ... for the sale of gas." The collection fee paid to Entex by the state is payment for the collection of taxes, not payment for the sale of gas. We further find the time value or interest on the tax monies forms no part of the "gross receipt ... for the sale of gas." As we have previously observed, sales taxes belong to the state from the moment of collection. It is well settled in Texas that "interest follows principle." Phillips v. Washington Legal Foundation, 524 U.S. 156, 165 -66 (1998) (citing Sellers v. Harris County, 483 S.W.2d 242, 243 (Tex. 1972)). Interest is incident of the principal and belongs to the ultiMate owner of the principal. Id. Thus, while the state may hypothetically be entitled to the interest earned on the sales tax proceeds prior to its delivery, Pearland has no cognizable claim. When, as here, both parties have moved for summary judgment, we may reverse the trial court's judgment and render such judgment that the trial court should have rendered, including rendering judgment for the other movant. Alameda v. Transamerican Natural Gas, 950 S.W.2d 93, 96 (Tex. App. — Houston [14 Dist] 1997, writ denied). Accordingly, we affirm the trial court's grant of Entex's partial motion for summary j udgment, we reverse the trial court's grant in part of Pearland's partial motion for summary judgment, and we render judgment in favor of Entex declaring that Pearland is not entitled to a payment of a franchise fee on: (1) the statutory collection fees that the state pays Entex; and (2) the interest accrued on the sales taxes from the time Entex collects the taxes until the time it delivers the taxes to the State. /s/ J. Harvey Hudson Justice Judgment rendered and Opinion filed October 25, 2001. Panel consists of Justices Anderson, Hudson, and Seymore. Do Not Publish — TEX. R. App. P. 47.3(6). 5 al) 10. 26' 01 15:44/ST. 15:42/NO. 4863384557 P 6 1 1 i 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 v. .(F SCTTSLLP NOV 17 2000 Jive Cow Tame HOUSTON LIGHTING & POWER. — COMPANY AND HOUSTON INDUSTRIES FINANCE, INC. Defendants. (THU) 10. 11' at 15:04 /1T. 15:03/NC. 43504:2;32 ? 2 CAUSE NO. 96- 0166I3 SY ee.. CITIES OP WHAM, PASADENA AND GALVESTON, TEXAS, INDIVIDUALLY AND AS CLASS REPRESENTATTVES Class Plaintiffs, § § 269TH JUDICIAL DISTRICT IN THE DISTRICT COURT OP HARRIS COUNTY, TEXAS FINALTODGMENI This case was previously certified as a class action. However, partly in order to evaluate the appropriateness of class treatment in this case for trial purposes, the Court deferred a class trial and proceeded to trial only on the individual claims of the cities of Wharton, Pasadena and Galveston. For reasons stated below, the Court decertifies this case as a class action and enters this Final Judgment in this cause on the individual claims of Wharton, Galveston and Pasadena. L The Court called the cases of the cities of Wharton, Galveston and Pasadena to trial on all issues between these cities and the Defendants on February 14, 2000. The class claims were not tried. Plaintiffs, the cities of Wharton, Galveston and Pasadena, individually. and the Defendants, Houston Lighting and Power Company, now known as Reliant Energy, Inc., and Houston Industries Finance, Inc., each appeared and announced ready for trial by and through their respective representatives and counsel. The Court determined that a trial of the individual claims of the class representatives was preferable over a class treatment partly in order to determine the appropriateness of class treatment in this case as to the remaining class members. Therefore, only the individual claims of the three class representative cities, Wharton, Galveston and Pasadena, were called to trial. Final Judgment — 0320.01J 1 10/11/01 THU 18:05 [TI /RI NO 8408] (THU)10. 11' 01 16:04/ST, 16:03/NO. 4260402033 IL On February 14, 2000, the Court empaneled a jury of twelve persons plus two alternates. During trial, no jurors were excused and the two alternates were released prior to commencement ofjury deliberations. Twelve qualified jurors thereafter deliberated and returned a verdict signed by ten jurors. The same ten jurors signed both verdicts in this cause. III. At the conclusion of the evidence, the Court submitted its charge to the jury on all issues except exemplary damages. The Defendants had timely requested a bifurcated trial. On March 30, 2000, the jury returned the following verdict: QUESTION 1 Did FU..&P fail to comply with the franchise agreements between FIL.&P and the Cities? It is your duty to interpret the following language of the franchise agreements: 4% of the gross receipts for such year, exclusive of receipts for street lighting, received by [I3L.&P] from its electrical lighting and power sales for consumption within the corporate limits of the city. You must decide its meaning by determining the intent the parties at the time of the franchise agreements. Consider all the facts and circumstances surrounding the making of the agreements, the interpretation placed on the agreements by the parties, and the conduct ofthe parties. If you find that custom and usage actually existed, then you can consider that in determining the parties' contractual intent. Final Judgment — 0320.o116 10/11/01 THU 18:06 (T3 /RS NO 8408] 2 I ;_i '3P:( 4B0TTSLLP 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Answer "Yes" or "No" for each City. a. City of Wharton: YES b. City of Pasadena: YES c. City of Galveston: YES (THU)10. 11' 01 15:04 /ST. 16:03/NO. 4860402083 If your answer to Question la., lb. or lc. is "Yes," then answer the following question as to each City to which you answered "Yes." Otherwise, do not answer Question 2. Final Judgment — 0320.0116 QUESTION f .- What sum of money, if paid now in cash, would fairly and reasonably compensate the Cities for their damages, ifany, that resulted fromHL&P's failure to comply with the franchise agreements'? Consider the following elements of damages, if any, and none other: the amounts, if any, that HL &P should have paid to each City, but did not, with respect to each of the items listed below. With respect to item "f' only, do not include in your answer any amount that you find the City could have avoided by the exercise of reasonable care. Do not add any amount for interest on damages, if any. Answer in dollars and cents, if any, as to each item fbr each City. 10/11/01 Tau 1e:05 [TI /R3 NO 6406] 3 WRARTON PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities ") 0 0 0 b. wheeling 0 0 0 c. customer pay jobs 517, 714.20 5188,532.40 5143,178.64 d. miscellaneous charges 523,713.00 5249,934.08 5172,979.44 e. pole attachment charges (sometimes referred to as "rent from electric property ") 0 0 0 I ;_i '3P:( 4B0TTSLLP 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Answer "Yes" or "No" for each City. a. City of Wharton: YES b. City of Pasadena: YES c. City of Galveston: YES (THU)10. 11' 01 15:04 /ST. 16:03/NO. 4860402083 If your answer to Question la., lb. or lc. is "Yes," then answer the following question as to each City to which you answered "Yes." Otherwise, do not answer Question 2. Final Judgment — 0320.0116 QUESTION f .- What sum of money, if paid now in cash, would fairly and reasonably compensate the Cities for their damages, ifany, that resulted fromHL&P's failure to comply with the franchise agreements'? Consider the following elements of damages, if any, and none other: the amounts, if any, that HL &P should have paid to each City, but did not, with respect to each of the items listed below. With respect to item "f' only, do not include in your answer any amount that you find the City could have avoided by the exercise of reasonable care. Do not add any amount for interest on damages, if any. Answer in dollars and cents, if any, as to each item fbr each City. 10/11/01 Tau 1e:05 [TI /R3 NO 6406] 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 :' M 5AKEUOTTSLLP (THU)10. 11' 01 15:04 /ST. 16:03/NC. 436:)4 21;33 QITESTION 3 - Did HEAP fraudulently induce the Cities to enter into the franchise agreements? Fraudulent inducement occurs when — a_ a party makes a material misrepresentation, b. the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth as a positive assertion, c. the misrepresentation is made with the intention that it should be acted on by the other party, and d. the other party acts in reliance on the misrepresentation and thereby suffers injury. "Misrepresentation" means a promise of future performance made with an intent not to perform as promised. Answer "Yes" or "No" for each City. a. City of Wharton: NO b. City of Pasadena: NO c. City of Galveston: NO Final Judgment - 0320.0116 4 10/11/01 THU 18:05 (TX/LT NO 84081 WHARTON PASADENA GALVESTON f franchise fee charge (sometimes referred to as the "fee on the fee" issue) 0 0 0 g discount on factored customer accounts (sometimes referred to as "factoring,: issue) $17,812.40 S210,974.72 5150,355.00 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 :' M 5AKEUOTTSLLP (THU)10. 11' 01 15:04 /ST. 16:03/NC. 436:)4 21;33 QITESTION 3 - Did HEAP fraudulently induce the Cities to enter into the franchise agreements? Fraudulent inducement occurs when — a_ a party makes a material misrepresentation, b. the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth as a positive assertion, c. the misrepresentation is made with the intention that it should be acted on by the other party, and d. the other party acts in reliance on the misrepresentation and thereby suffers injury. "Misrepresentation" means a promise of future performance made with an intent not to perform as promised. Answer "Yes" or "No" for each City. a. City of Wharton: NO b. City of Pasadena: NO c. City of Galveston: NO Final Judgment - 0320.0116 4 10/11/01 THU 18:05 (TX/LT NO 84081 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 FROL2AKEREOTTSLL? (THU)10. 11' 01 15:04 /S T. 15: 03 /NO. 48504) 2 i83 If your answer to Question 3a., 3b. or 3c. is ''Yes," then answer the following question as to each City to which yo answered "Yes." Otherwise, do not answer Question 4. Final Ju+dg nenne — 0320.0116 QUESTION 4 What sum of money, if paid now in cash, would fairly and reasonably compensate the Cities for their damages, if any, that resulted from such fraud? Consider the following elements of damages, if any, and none other the difference between the amount of money that HL&P represented that it would pay under the franchise agreements and the amount that MAP did pay for eacli of the items listed below. With respect to item "f' only, do not include in your answer any amount that you find the City could have avoided by the exercise of reasonable care. Do not add any amount for interest on (tarnages, if any. Answer in dollars and cents, if any, as to each item for each City. 5 10/11/01 THU 16:05 (TI/RE NO 6406] WHARTON PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities ") 0 0 0 b. wheeling 0 0 0 c. customer pay jobs 0 0 0 d. miscellaneous charges 0 0 0 e. pole attachment charges (sometimes referred to as "rent from electric property ") 0 0 0 f. franchise fee charge (sometimes referred to as the "fee on the fee" issue) 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 FROL2AKEREOTTSLL? (THU)10. 11' 01 15:04 /S T. 15: 03 /NO. 48504) 2 i83 If your answer to Question 3a., 3b. or 3c. is ''Yes," then answer the following question as to each City to which yo answered "Yes." Otherwise, do not answer Question 4. Final Ju+dg nenne — 0320.0116 QUESTION 4 What sum of money, if paid now in cash, would fairly and reasonably compensate the Cities for their damages, if any, that resulted from such fraud? Consider the following elements of damages, if any, and none other the difference between the amount of money that HL&P represented that it would pay under the franchise agreements and the amount that MAP did pay for eacli of the items listed below. With respect to item "f' only, do not include in your answer any amount that you find the City could have avoided by the exercise of reasonable care. Do not add any amount for interest on (tarnages, if any. Answer in dollars and cents, if any, as to each item for each City. 5 10/11/01 THU 16:05 (TI/RE NO 6406] 7:10!. SAKERBOTTSLLP & discount on factored customer accounts (sometimes referred to as "factoring" issue) Final Judgment — 0320.0 1 I6 WHARTON 0 (THU) 10. 11'01 16 :04 /ST. 16:03/N0. 486040i'8i ? 7 PASADENA 0 GALVESTON 0 If your answer to Question 3a., 3b. or 3c. is "Yes," then answer the following question. Otherwise, do not answer Question 5. QUESTION S — Do you find by clear and convincing evidence that the harm to the Cities, if any, resulted from such fraud? "Clear and convincing evidence" means the measure or degree of proof that produces a firm belief or conviction of the truth of the allegations sought to be established. Answer "Yes" or "No" for each City. a. City of Wharton: NO b. City of Pasadena NO c. City of Galveston: NO QUESTION 6 After the franchise agreements were signed, did HL&P commit fraud against the Cities? Fraud occurs when — a- a party conceals or fails to disclose a material fact within the knowledge of that party; b. the party knows that the other parry is ignorant of the fact and does not have an equal opportunity to discover the truth, e. the party intends to induce the other party to take some action by concealment or failing to disclose the fact, and d. the other party suffers injury as a result of acting without knowledge of the undisclosed fact. 6 10/11/01 THU 16:05 [TX /RI NO 6406] A<= 1cOTTSLL? 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Answer "Yes" or "No" for each City. a. City of Wharton: YES b. City of Pasadena: YES c. City of Galveston: YES If your answer to Question 6a., 6b. or 6c. is "Yes," then answer the following question as to each City to which you answered "Yes." Otherwise, do not answer Question 7. QUESTION 7 - What sum of money, if paid now in cash, would fairly and reasonably compensate the Cities for their damages, if any, that resulted from such fraud? You are instructed that in answering only this Question, you should not consider any damages from HL&P's failure to comply, if any, with the franchise agreements. Only consider elements of damages independently caused by ML&P's &aud. With respect to the item "f' only, do not include in your answer any amount that you find the City could have avoided by the exercise of reasonable care. Do not add any amount for interest on damages, if any. Answer in dollars and cents, if any, as to each item for each City. Final Judgment — 032o.ot 16 (THU)10. 11'01 15:04/ST. 15:03/NO. 4860402,'83 3 7 10/11/01 THU 18:05 (TS /R% NO 84081 WHARTON PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities ") 0 0 0 b. wheeling _ . 0 0 0 c. customer pay jobs 544,285.50 5471,331,00 $357,946,60 d. miscellaneous charges 559,282.50 5624,835.20 5432,448.60 e. pole attachment charges (sometimes referred to as "rent from electric ProPertY ") 0 • 0 0 A<= 1cOTTSLL? 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Answer "Yes" or "No" for each City. a. City of Wharton: YES b. City of Pasadena: YES c. City of Galveston: YES If your answer to Question 6a., 6b. or 6c. is "Yes," then answer the following question as to each City to which you answered "Yes." Otherwise, do not answer Question 7. QUESTION 7 - What sum of money, if paid now in cash, would fairly and reasonably compensate the Cities for their damages, if any, that resulted from such fraud? You are instructed that in answering only this Question, you should not consider any damages from HL&P's failure to comply, if any, with the franchise agreements. Only consider elements of damages independently caused by ML&P's &aud. With respect to the item "f' only, do not include in your answer any amount that you find the City could have avoided by the exercise of reasonable care. Do not add any amount for interest on damages, if any. Answer in dollars and cents, if any, as to each item for each City. Final Judgment — 032o.ot 16 (THU)10. 11'01 15:04/ST. 15:03/NO. 4860402,'83 3 7 10/11/01 THU 18:05 (TS /R% NO 84081 ?A:KE tBOTTSLLP f. franchise fee charge (sometimes referred to as the "fee on the fee" issue) g. discount on factored customer amounts (sometimes referred to as _ "factoring" issue) WHARTON 0 544,531.00 PASADENA 0 S527,436.80 If your answer to Question 6a, 6b. or 6c. is "Yes," then answer the following question as to each City to which you answered "Yes." Otherwise, do not answer Question 8. QUESTION 8 Do you find by clear and convincing evidence that the harm to the Cities. if any, resulted from such fraud? "Clear and convincing evidence" means the measure or degree of proof that produces a firm belief or conviction of the truth of the allegations sought to be established. Answer "Yes" or "No" for each City: Cities? a. City of Wharton: YES b. City of Pasadena: YES c. City of Galveston: YES QUESTION 9 Did HL&P or HIFI receive an unjust enrichment by use of the franchise relationship with the Final Judgment — 0320.0116 (THU) 10. 11' 01 16:05/ST. 16 :03/!0. 4860 ; y You are instructed that the term "unjust enrichment" means the unjust retention of money or property against the fundamental principles of justice or equity and good conscience. GALVESTON 0 5375,877.50 8 10 /11 /01 THU 18:OS ITb /RI NO 64061 3,. A(FIa2CTTSLLP Final Judgment — 0320.0116 (THU)10. 11' 01 15:05 /ST, 16:03/N0. 4860402033 Answer "Yes" or No for each City and each defendant. HI.&P HIFI a. City of Wharton: YES • YES b. City of Pasadena: YES YES c. City of Galveston: YES YES If your each City o which y u to answered "Yes.. " Otherwise, or 9c. � g question as to aaswe Question estion 10. QUESTION 10 What sum ofmoney, if any, if paid now in cash, would fairly and reasonably compensate each City for its damages, if any, that resulted from the unjust enrichment of HL&P, HIFI or both? Consider the following elements of damages and none other. The amount of funds retained by HL &P or HIFI that should have been passed through to the Cities. Do not add any amount for interest on damages, if any. Answer separately in dollars and cents, if any, for each City and each defendant: HL &P Awr a. City of Wharton: S2,226,55 52,226.55 b. City of Pasadena: 526,371.84 526,371.84 c. City of Galveston: S18,794.38 $18,794.38 If in answer to Question 9a., 9b. or 9c. you have answered "Yes," then answer the following question as to each C ty to which you answered "Yes." Otherwise, do not answer Question 11. QUESTION 11 Do you find by clear and convincing evidence that HL&P or HIFI committed such unjust enrichment with malice? "Malice" means a specific intent by MAP or HMI to cause substantial injury to the claimant. Answer "Yes" or "No" for each City and each Defendant. 9 10/11/01 THU 10:05 [TS /R3 NO 6408] I FRO! AAF.RE0TTSILP - (THU) 10. 11' 01 1605/ST. 1 5:03/NO. 48604)2033 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 HL&P HIFI a. City of Wharton: YES YES b. City of Pasadena: YES YES c. City of Galveston: YES YES Q1TESTION 12 Do you find "waiver" by any olthe as to any of the following items? Waiver is an intentional surrender of a known right or intentional conduct inconsistent with claiming the right. Answer "Yes" or "No" for each item as to each City: Final Judgment — 0320.0116 10 10/11/01 THU 18:05 [TX/RI NO 64061 WHARTON PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities") NO NO NO b. wheeling NO NO NO c. customer pay jobs NO NO NO d. miscellaneous charges NO NO NO e. pole attachment charges (sometimes referred to as "rent from electric property") _ NO NO NO f. franchise fee charge (sometimes referred to as the "fee on the fee" issue) NO NO NO g. discount on factored customer accounts (sometimes referred to as "factoring" issue) NO ' NO NO — I FRO! AAF.RE0TTSILP - (THU) 10. 11' 01 1605/ST. 1 5:03/NO. 48604)2033 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 HL&P HIFI a. City of Wharton: YES YES b. City of Pasadena: YES YES c. City of Galveston: YES YES Q1TESTION 12 Do you find "waiver" by any olthe as to any of the following items? Waiver is an intentional surrender of a known right or intentional conduct inconsistent with claiming the right. Answer "Yes" or "No" for each item as to each City: Final Judgment — 0320.0116 10 10/11/01 THU 18:05 [TX/RI NO 64061 1 1 1 QUESTION 13 Do you find that "lathes" applies to any City as to any of the following items? 1 "Lathes" applies if a city unreasonably delayed in asserting its rights and HL&P made a good faith change of position to its detriment as a result of the delay. 1 Answer "Yes" or "No" as to each item for each City: 1 1 1 1 1 1 1 1 1 1 1 1 1 1 :0)4 aC£33CTTSLL? (THU) 10. 11' 01 15:05/ST. 15:03/NO. 43504'2!:32 ? 12 Final Judgment — 0330.0116 11 10/11/01 THU 18:05 (TI/RI NO 64081 WHARTON. PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities ") YES YES YES b. wheeling YES YES YES c. customer pay jobs YES YES YES d. micrpllareous charges YES YES YES e. pole attachment charges (sometimes referred to as "rent from electric Property ") YES YES YES f franchise fee charge (sometimes referred to as the "fee on the fee" issue) YES YES YES g. discount on factored customer accounts (sometimes . referred to as "factoring" issue) YES YES YES 1 1 1 QUESTION 13 Do you find that "lathes" applies to any City as to any of the following items? 1 "Lathes" applies if a city unreasonably delayed in asserting its rights and HL&P made a good faith change of position to its detriment as a result of the delay. 1 Answer "Yes" or "No" as to each item for each City: 1 1 1 1 1 1 1 1 1 1 1 1 1 1 :0)4 aC£33CTTSLL? (THU) 10. 11' 01 15:05/ST. 15:03/NO. 43504'2!:32 ? 12 Final Judgment — 0330.0116 11 10/11/01 THU 18:05 (TI/RI NO 64081 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Ec°OTTS1,LP (THi1)10. 11'01 15 :05 /ST. 15:03/Na e85;;a�)20S3 ' 13 QUESTION 14 Do you find that "estoppel" applies to any City as to any of the following items? You are instructed that "estoppel" applies if 1. The City a. by b. with knowledge of the facts or with lmo�wleedge or information doncealed material facts, that would lead a reasonable person to discover the facts, and c. with the intention that HL&P would rely on the false representation or concealment in acting or deciding not to act; and 2. HL&P a. did not know and had no means of !mowing the real facts and b. relied to its detriment on the false representation or concealment of material facts. Final Judgment — 0320.0116 Answer `Yes" or "No" as to each item for each City: 12 10/11/01 THU 18:05 (TS /Rd NO 64061 WHARTON PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities") NO NO NO b. wheeling NO NO . NO c. customer pay jobs NO NO NO d. miscellaneous charges NO NO NO e. pole attachment charges (sometimes referred to as "rent from electric property") NO NO NO f. fianchise fee charge (sometimes referred to as the "fee on the fee" issue) NO NO NO 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Ec°OTTS1,LP (THi1)10. 11'01 15 :05 /ST. 15:03/Na e85;;a�)20S3 ' 13 QUESTION 14 Do you find that "estoppel" applies to any City as to any of the following items? You are instructed that "estoppel" applies if 1. The City a. by b. with knowledge of the facts or with lmo�wleedge or information doncealed material facts, that would lead a reasonable person to discover the facts, and c. with the intention that HL&P would rely on the false representation or concealment in acting or deciding not to act; and 2. HL&P a. did not know and had no means of !mowing the real facts and b. relied to its detriment on the false representation or concealment of material facts. Final Judgment — 0320.0116 Answer `Yes" or "No" as to each item for each City: 12 10/11/01 THU 18:05 (TS /Rd NO 64061 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ?RC-u. r.3es20TTSLLP g. discount on factored customer accounts (sometimes referred to as "factoring" issue) WHARTON NO PASADENA NO Final Judgment — oaw.oi i s (THU) 10. 11' 01 16:05/ST. 16:03/N0. 48604: GALVESTON NO QUESTION 15 Do you find that "quasi estoppel" applies to any City as to any of the following items? Quasi estoppel applies if it would be unconscionsble -tti allow the city to maintain a position inconsistent with one in which the city acquiesced, or from which the city accepted a benefit. Answer "Yes" or "No" for each item as to each City. - 13 10/11/01 THU 16:05 (TI /RI NO 6406] WHARTON PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities ") YES YES YES b. wheeling YES YES YES c. customer pay jobs NO NO NO d. miscellaneous charges NO NO NO e. pole attachment charges (sometimes referred to as "rem from electric Property ") YES YES YES E franchise fee charge (sometimes referred to as the "fee on the fee" issue) YES YES YES g. discount on factored customer accounts (sometimes referred to as "factoring" issue) NO NO NO - 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ?RC-u. r.3es20TTSLLP g. discount on factored customer accounts (sometimes referred to as "factoring" issue) WHARTON NO PASADENA NO Final Judgment — oaw.oi i s (THU) 10. 11' 01 16:05/ST. 16:03/N0. 48604: GALVESTON NO QUESTION 15 Do you find that "quasi estoppel" applies to any City as to any of the following items? Quasi estoppel applies if it would be unconscionsble -tti allow the city to maintain a position inconsistent with one in which the city acquiesced, or from which the city accepted a benefit. Answer "Yes" or "No" for each item as to each City. - 13 10/11/01 THU 16:05 (TI /RI NO 6406] 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 FROM.3AKE EOTTSLLP (THU)10. 11' 01 16 :06 /ST. 16:03/10. 4360 ? QUESTION 16 Did any City ratify HI,&P's conduct with respect to any of the following items? Ratification may be express or implied. Mess ratification occurs ifthe city (1) approved HI &P's earlier acts by act, word, or conduct; (2) with full knowledge of the facts of HL&P's earlier acts; and (3) with the intention of giving validity to HL&P's earlier acts. Implied ratification occurs when a party, though it may have been unaware of unauthorized conduct at the time the conduct occurred, retains the benefits of the transaction involving the unauthorized conduct after it acquired full knowledge of the unauthorized conduct. Final Judgment — 0320.01 16 Answer "Yes" or "No" for each item as £o each' City: 14 10/11/01 THU 18:05 ITS /RS NO 64061 WHARTON PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities ") YES YES YES b. wheeling YES YES YES c. customer pay jobs NO NO NO d. miscellaneous charges NO NO NO e. pole attachment charges (sometimes referred to as "rent from electric property") YES YES . YES f. franchise fee charge (sometimes refereed to as the "fee on the fee" issue) _ YES YES YES g. discount on factored customer accounts (sometimes referred to as "factoring" issue) NO NO NO 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 FROM.3AKE EOTTSLLP (THU)10. 11' 01 16 :06 /ST. 16:03/10. 4360 ? QUESTION 16 Did any City ratify HI,&P's conduct with respect to any of the following items? Ratification may be express or implied. Mess ratification occurs ifthe city (1) approved HI &P's earlier acts by act, word, or conduct; (2) with full knowledge of the facts of HL&P's earlier acts; and (3) with the intention of giving validity to HL&P's earlier acts. Implied ratification occurs when a party, though it may have been unaware of unauthorized conduct at the time the conduct occurred, retains the benefits of the transaction involving the unauthorized conduct after it acquired full knowledge of the unauthorized conduct. Final Judgment — 0320.01 16 Answer "Yes" or "No" for each item as £o each' City: 14 10/11/01 THU 18:05 ITS /RS NO 64061 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 TROY EAS_3- OTTSLLP Fined Judgment - 0320.0116 (THU) 10. 11' 01 15:06 /ST. 16:03/N0. 436040203' QUESTION 17 Did any City accept a different performance as full satisfaction of the existing obligations under the franchise ordinance with regard to any of the following items? Answer "Yes" or "No" for each item as to each City. V . Because the Defendants had requested a bifurcated trial with regard to punitive damages, the foregoing verdict did not include exemplary damages. With regard to exemplary damages, the jury entered the following verdict: 15 10/11/01 THU 18:05 1T3 /RS NO 8408] WRARTON PASADENA GALVESTON a. wholesale sales to other electric utilities (sometimes referred to as "sales to other utilities ") NO - NO - ._ - - NO h. wheeling NO NO NO c. customer pay jobs NO NO NO d. miscellaneous charges NO NO NO e. pole attachment charges (sometimes referred to as "rem from electric property ") NO NO NO f. franchise fee charge (sometimes referred to as the "fee on the fee" issue) NO NO • NO g. discount on factored customer accounts (sometimes referred to as "factoring" issue) NO NO NO 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 TROY EAS_3- OTTSLLP Fined Judgment - 0320.0116 (THU) 10. 11' 01 15:06 /ST. 16:03/N0. 436040203' QUESTION 17 Did any City accept a different performance as full satisfaction of the existing obligations under the franchise ordinance with regard to any of the following items? Answer "Yes" or "No" for each item as to each City. V . Because the Defendants had requested a bifurcated trial with regard to punitive damages, the foregoing verdict did not include exemplary damages. With regard to exemplary damages, the jury entered the following verdict: 15 10/11/01 THU 18:05 1T3 /RS NO 8408] Facm SA(en_OTTSLLP Answer in dollars and cents, if any, for each City: Final Judgment — 0320.011e (THU)10. 11'01 15:06/ST. 15:03 /YO. 435340 :33 QUESTION 1 What sum of money, if any, if paid now in cash, should be assessed against HL&P and awarded to the Cities for exemplary damages, if any, for the conduct found in Questions 6 and 8' "Exemplary damages" means an amount that you may in your discretion award as a penalty or by way of punishment. Factors to consider in awarding exemplary damages, if any, are - a. The nature of the wrong. - b. The character of the conduct involved. — - - c. The degree of culpability of HI:&P d. The situation and sensibilities of the parties concerned. e. The extent to which such conduct offends a public sense ofjustice and propriety. f. The net worth of HL&P. Answer in dollars and cents, if any, for each City: a. City of Wharton: 57,000,000.00 b. City of Pasadena: 57,000,000.00 c. City of Galveston: 57,000,000.00 QUESTION 2 What sum of money, if any, if paid now in cash, should be assessed against HL&P and awarded to the Cities for exemplary damages, if any, for the conduct found in Questions 9 and 11? "Exemplary damages" means an amount that you may in your discretion award as a penalty or by way of punishment. Factors to consider in awarding exemplary damages, if any, are - a The nature of the wrong. b. The character of the conduct involved. c. The degree of culpability of HL&P. d. The situation and sens of the parties concerned. e. The extent to which such conduct offends a public sense ofjustice and Propriety- f. The net worth of HL&P. 16 10/11/01 THU 18:05 (TX/RX NO 84061 v 3A „?3OTTSLLP (THU)10. 11'01 16:06 /ST. 16:03/NO. 4860402083 a. City of Wharton: $2,000,000.00 b. City of Pasadena: $2,000,000.00 c. City of Galveston: 52,000,000.00 QIILSTTON 3 What sum of money, if any, ifpaid now in cash, should be assessed against H1FI and awarded to the Cities for exemplary damages, if'any for the conduct found in Questions 9 and 11? "Exemplary damages" means an amount that you may in your discretion award as a penalty or by way of punishment. Factor to consider in awarding exemplary damages, if any, are - a. The nature of the wrong. b. The character of the conduct involved. c. The degree of culpability of HIFT. d. The situation and sensibilities of the parties concerned. e. The extent to which such conduct offends a public sense of justice and propriety. f. The net worth of HIFI. Answer in dollars and cents, if arty, for each City: City of Wharton: $1,000,000.00 b. City of Pasadena: $1,000,000.00 c. City of Galveston: $1,000,000.00 VL After the verdict was accepted, the Court disregarded the jury's findings for the Plaintiffs on Questions 6, 7, 8, 9, 10, and 11. The Court also disregarded the jury's exemplary damages findings on Questions 1, 2 and 3 (in the bifurcated section ofthe trial). The Court also disregarded the jury's findings for the Defendant, HL & P, on Question 13. Final Judgment — 0320.0116 17 10/11/01 THU 18:05 [TX /RI NO 8408] TRW. 3r,3= 53OTTSLLP (THU) 10. 11' 01 15:06 /ST. 16:03/NO. 4860402703 • ;y V1L After the verdict, the Court reconsidered the certification of the Class. The Court ordered that the class be decertified, based upon the following findings of fact and conclusions of law: 1, The Court Ends that TLx. R. Cyr. P. 42(b)(4) requires that questions of law or fact common to the members of the class predominate over any questions affecting only individual members. The Supreme court in Southwestern Refining Company v. Bernal, 22 S.W3d 425 (Tex. 2000), held the test for predominance is not whether common issues outnumber uncommon issues, but whether common issues or individual issues will be the object of most ofthe efforts of the litigants and Court. 2. The Supreme Court stated that if after common issues are resolved. presenting and resolving individual issues is to be overwhelmhtg or an unmanageable task for a single jury, then common issues do not predominate and that the predominance criteria should be rigorously applied. 3. The trial of the individual claims of the Cities of Wharton, Galveston and Pasadena has fully exposed the predominance problem. The Court submitted 20 questions to the jury in the two trial phases, and each question had to be answered for each city. 'The jury charge required the jury to determine each party's intent as to each agreement and directed the jury to consider all of the facts and circumstances surrounding the making of the agreement 4. The Court of Appeals approved the original certification in this case before the evidence had been developed on the individual issues surrounding each ofthe franchise agreements. The Court of Appeals and Judge Wood did not have the benefit ofthe trial to evaluate how the individual issues about each city's intent as to each agreement would affect the overall balance on the question of predominance between the common and individual issues. Final Judgment — 0320.0116 18 10 /11 /01 THU 16:05 mTZ /Rb NO 64061 FROM _Ati:38OTTSLLP ITHU110, 11'01 15:06/ST. 16:03/NO. 4860402!)3 ' 2'? 5. The Court's charge reflects the amount of time and the efforts spent by the parties on the individual issues during trial. The situation mirrors the test for predominance and illustrates that in the past trial the parties concentrated a great deal on the individual issues. These individual issues predominated over the common issues; thus class certification is no longer appropriate as defined under the rigorous standard of the predominance that the Supreme Court has directed trial courts to apply before granting or continuing class certification. It is, therefore, ORDERED, ADJUDGED AND DECREED that the May 16, 1996 order that granted Class Certification is vacated and this Class is decertified. VIIL In accordance with the prior legal rulings of tho Court and the jury's verdict, the Court finds that Plaintiffs, the cities of Wharton, Galveston and Pasadena, are the prevailing parties In this case_ It is, therefore, ORDERED, ADJUDGED AND DECREED that the city of Wharton have and recover from Reliant Energy the sum of 559,239.60 in actual damages, plus prejudgment interest in the amount of $28,204.72 dollars, together with post judgment interest on both sums at the rate of ten percent (10%) per annum, compounded annually, from the date this Judgment is signed until the date the Judgment is paid in full. It is further, ORDERED, ADJUDGED AND DECREED that the city of Galveston have and recover from Reliant Energy the sum of 5466,513.08 in actual damages, plus prejudgment interest in the amount of 5222,112.52 dollars, together with post judgment interest on both sums at the rate of ten Final Judgment — 0320.0116 19 10/11/01 THU 18:05 [TX/R3 NO 6406] FRCM 31KEISOTTS1.12 (THU) 10. 11' 01 16:07/ST. 16:03/N0. 4860402033 3 2' percent (10 %) per annum, compounded annually, from the date this Judgment is signed until the date the Judgment is paid in fu1L It is further, ORDERED, ADJUDGED AND DECREED that the city of Pasadena have and recover from Reliant Energy the sum of $649,441.20 in actual damages, plus prejudgment interest in the amount of S309,206.96 dollars, together with post judgment interest on both sums at the rate often percent (10%) per annum, compounded annually, from the date this Judgment is signed until the date the Judgment is paid in full. Ir is firrther, ORDERED, ADJUDGED AND DECREED that Judgment Notwithstanding the Verdict is entered onPlaintiffs' fraud and unjust enrichment claims and on Defendant's !aches theory; and, the jury's findings to Questions, 6, 7, 8, 9, 10, 11 and 13, and the jury's findings on exemplary damages in bifurcated Questions 1, 2 and 3 are disregarded. It is further, ORDERED, ADJUDGED AND DECREED that the Plaintiff cities are held to be the prevailing parties in this action under the Texas Declaratory Judgment Act and regarding the breach of contract claims. The Court, therefore, takes judicial notice of the contents of the Court's file in this matter, the number of hearings it has conducted, the number of witnesses and depositions, the obligations and performance of tasks required by Plaintiffs' counsel as wen u the proof and documents submitted by the Plaintiffs to establish their attorneys fees on recoverable claims in this case. Separately, the Court also takes judicial notice ufthe agreements between the parties regarding attorneys fees relating to jury findings. The Court further recognizes its separate authority to award Final Judgment - 0320.0116 20 10/11/01 THU 18:os ITS /R3 NO 64061 RO( 3AKEREOTTSLLP 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 (THU) 10. 11' 01 16:07 /ST. 16:03N0. 48604(02)83 ? 22 attorney's fees to the prevailing party under the Texas Declaratory Judgment Act and Chapters 37 and 38 of the Texas Civil Practices and Remedies Code. Accordingly, it is, ORDERED, ADJUDGED AND DECREED that the city of Wharton have and recover from Reliant Energy the sum of $4,561,06033 in attorney's fees in this case. The Court finds this to be a reasonable, necessary and just award of attorney's fees in this action pursuant to the Declaratory Judgment Act, the statutory authority for recovery of attorney's fees for breach of contract actions, as well including amounts under as the Rule 11 Agreement entered into between the parties relating to jury findings. The award of attorney's fees is authorized under each of the foregoing grounds independently. It is, further, ORDERED, ADJUDGED AND DECREED that the city of Galveston have and recover from Reliant Energy, the sum of $4,561,060.33 in attorney's fees in this case. The Court finds this to be a reasonable, necessary and just award of attorneys fees in this action pursuant to the Declaratory Judgment Act, the statutory authority for recovery of attorneys fees for breach of contract actions, as well including amounts under as the Rule 11 Agreement entered into between the parties relating to jury Endings. The award of attorneys fees is authorized under each of the foregoing grounds independer ly. It is, further, ORDERED, ADJUDGED AND DECREED that the city of Pasadena have and recover from Reliant Energy, the sum of $4,561,060.34 in attorneys fees in this case. The Court finds this to be a reasonable, necessary and just award of attorney's fees in this action pursuant to the Declaratory Judgment Act, the statutory authority for recovery of attorneys fees for breach of Final Judgment — 0720.0116 21 10/11/01 T'HU 18:05 [TI /RI NO 84001 'iCM 3AKEHOTTSLLP (THU) 10. 11' 01 15:07/ST. 15:03/N0. 435.._[':33: 23 is i� contract actions, as well including amounts under as the Rude 11 Agreement entered into between the parties relating to jury findings. The award ofattomey's fees is authorized under each ofthe foregoing grounds independently. It is, further, ORDERED, ADJUDGED AND DECREED that all relief not herein granted is denied. This Judgment disposes of all issues and all parties in this case and is final. All writs and orders for the execution and collection of this judgment and the payment of taxable court costs will be approved as necessary. Court costs are taxed against Reliant Energy. NOV 17 Z�QQ Done this day of A As 76 1^ —.,,, 0,,4 DI vid kvo imi ? P t'a f it i t Adt sick„ 1)- cLap.A-s Final Judgment -0110.0116 22 10/11/01 THU 16:05 (TI /RI NO 6406] FROM 2AXERBO TSLLP CAUSE NO. 96-016613 CITIES OF WHARTON, PASADENA § AND GALVESTON, TEXAS, § INDIVIDUALLY AND AS CLASS § REPRESENTATIVES § Plaintiffs § v. § HOUSTON LIGHTING & POWER § COMPANY AND HOUSTON § INDUSTRIES FINANCE, INC. § Defendants § (THU) 10. 11'01 16:07/ST. 16:03/Y0. 48604020 83 24 IN THE DISTRICT COURT OF HARRIS COUNTY, TEXAS 269TH JUDICIAL DISTRICT ORDER The Court has considered the following Motions, Objections, and Responses, and rules as follows: IT IS ORDERED that Defendants' Motion that Court Costs be Paid by the Party is woeful/denied and that the final Judgment shall so reflect; ORDERED that Defendants' Response and Objection to Plaintiffs' Supplemental Submission of Attorneys' Fee Proof Is: Sustained Overruled ORDERED that Defendants' Objection to Attorneys' Fees Award is: Sustained Overruled ORDERED that Plaintiffs' Motion to Determine Audit Costs is: Granted Denied 10/11/01 THU 16:05 [Td /R3 NO 6406] F710!,1 �AKER20TTSLLP L111uS OF WHARTON, PASADENA § IN THE DISTRICT COURT OF AND GALVESTON, TEXAS, INDIVIDUALLY § AND AS CLASS REPRESENTATIVES § Class Plaintiffs, § v. § HARRIS COUNTY, TEXAS HOUSTON LIGHTING & POWER - § COMPANY AND HOUSTON § INDUSTRIES FINANCE, INC. § Defendants. § 269TH JUDICIAL DISTRICT }At P P YLe Lies 0 — c4 k M tr,d W. lily t, Art 6,- Plk;rt/i(Gr ' `i Gkl.-t 1 t'. • L 1 k Qv Final Judgment - 0310.01 16 (THU) 10. 11' 01 16:07/ST. 16:03/N0. 4860402083 CAUSE NO. 96-016613 ORDER The Court has considered the Motion to Intervene filed by the City of Houston on October 19, 2000, and is of the opinion that the motion should be denied. Accordingly, it is ORDERED that the City of Houston's motion to intervene is denied. Signed this NC`! ; 1 29/1 day e • =r, 2000. JOHN T. WOOLD ICT JUDGE PRES ■ ING J: D Mania Cast N O V 1 7 2600 BMW Cory Texss By CaDUN 1 10/11/01 THU 18:05 (TI /RX NO 84001 :'RC'A SAKERBOTTSLLP �- p ES CV S ACAIUSSE j) awir Ct�k NOV 1 7 400D Hmis C0 TOW BY (THU) 10. 11' 01 16:07 /ST. 16:03/NO. 4860402033 P 26 Cause No. 96- 016613 City of Wharton, et al. § In the District Court Plaintiffs § vs. § Of Harris County, Texas Houston Lighting & Power, et al. § Defendants § 260 Judicial District ORDER IT IS HEREBY ORDERED, that Cause Numbcxs 2000- 53938, 2000 - 53980, 2000 - 53987, 2000 - 53964, 2000-53949, 2000 - 53973, 2000- 53953, 2000 - 53966, 2000- 53879, 2000 - 53939, 2000 - 53880, 2000 - 53909, 2000- 53965, 2000- 53943, 2000 - 53962, 2000 - 53941, 2000 - 53958, 2000-53952, 2000- 53948, 2000 - 53954, 2000 - 53959, 2000- 53942, 2000 - 53903. 2000 - 53977, 2000- 53951, 2000 - 53940, 2000 - 53947, 2000- 53967. 2000 - 53945, 2000 - 53910. 2000 - 53946, 2000 - 53911, 2000- 53881, 2000 - 53975, 2000- 53976, 2000 - 53882, 2000 - 53957, 2000- 53976, 2000 - 53882, 2000 - 53957, 2000- 53950, 2000 - 53944, 2000 - 53955, 2000 - 53979, 2000 - 53912, 2000- 53956, 2000 - 33981, 2000- 53974, and 2000 -53974 (hereinafter referred to as "the Consolidated Cause Numbers ") with Cause No. 96-016613. IT IS FURTHER ORDERED that the above- stated Consolidated Cause Numbers are hereby severed from this action and made the subject of a separate action, and that it proceed as such to final judgment or other disposition in this Court under Cause No. 96- 016613-A, styled The City of Houton, of al. v. Houston Lighting & Power Company. now known as Reliant Energy, Inc., et al. IT IS FURTHER ORDERED that the District Clerk place certified copies of any and all pleadings filed in the above - stated Consolidated Cause Numbers, including, Plaintiffs' Ninth Amended Petition, Request for Class Certification and Jury Demand and the supplement thereto entitled First Supplement to Plaintiffs' Ninth Amended Petition. Request for Class Certification and Jury Demand filed in Cause No. 96- 016613, in the separate severed action bearing the docket Cause Number 96-016613 -A. IT IS FURTHER ORDERED that the City of Houston shall pay the costs of the severance and copying costs, of the certified documents and pleadings filed in the Consolidated Cause Numbers and Plaintiffs' Ninth Amended Petition, Request for Class 10 /11 /01 Tau 10:05 (TX /RI NO 04001 A;(33BOTTSLLP (Ti )10. 11' 01 16:08 /ST. 16 :03/N0. 4860402033 ? 27 1 Certification and Jury Demand and Supplement thereto filed in Cause No. 96.016613, requested in this Order. IT IS FURTHER ORDERED that each party or city requesting additional documents be added to the severed cause of action shall bear the cost of such additional copying. 1 SIGNED this N of N 2000. 1 1 1 1 1 1 1 1 10/11/01 THU 16:05 [TE /Rd NO 6406] 1 : ,CM- ?AKERBOTTSLLP (THU)10, 11'01 16:08/ST. 16:03/V0. 4860402 :3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 CAUSE NO. 96- 016613 -A CITY OF HOUSTON, et al. (Consolidated) Plaintiffs § v. § HOUSTON LIGHTING & POWER CO, § BY it • TO°s NOW KNOWN AS RELIANT ENERGY, § p INC, _ § S COUNTY, T E X A S § — Defendants § 269th JUDICIAL DISTRICT ORDER OF ABATEMENT On this day the Court has determined, on its own motion, that the above - styled and numbered cause should be abated during the pendency of appeals anticipated in Cause No. 96- 016613, Cities of Wharton, et al. v. Houston Lighting and Power Co., et al. (the "Wharton case "). Abatement would promote judicial convenience and economy, efficiency, and a more orderly disposition of the consolidated cases, which have issues that are inter - related with the issues presented in the Wharton case. The Defendants in the Wharton case are the same as the Defendants in Cause No. 96- 016613 -A, Resolution of certain legal issues to be addressed in the appeals of the Wharton case may aid in the efciem disposition of the abated cases. IT IS, THEREFORE, ORDERED that this case be abated pending further order of this Court. Signed this N Q V 1 7 2001 day of November, 2000. E A evS/ Gv, biD 14t wt ▪ M , A- PM,.ihie 1 ‘,NPZ - dre--+ . . • G. _ I..7 INLT OF Male am& NOV 1 7 200� N. JOHN T. WOOLD TRICT JUDGE PRESIDIN 10/11/01 THU 18:05 (TS /Ra NO 84081 / PA 13 11-> 5 WADE ADKINS CITY ATTORNEY OFFICE OF THE CITY ATTORNEY THE CITY OF FORT WORTH 1000 THROCKMORTON FORT WORTH, TEXAS 7610Z (917) 871.760 FAX 1817) 871 3359 February 13, 1995 Mr. Costa Triantaphilides City Internal Auditor 1000 Throckmorton Fort Worth, Texas 76102 Re: TU Electric Contract Audit (1194 -21) Dear Mr. Triantaphilides: You have sent me a draft of the subject audit report and have discussed it with me. Your audit reveals that Texas Utilities Electric Company (TUEC) has the following revenue accounts which were not included in their franchise fee calculations: a. Miscellaneous Revenues Miscellaneous Service Revenue -i.e. connect and disconnect charges, transformer rentals, late fees, special charges to the customer, and other Rate M services Sale of water and water power excess fee charges Undefined electric revenue b. TU Self Use TU use TU generating use TU light division use TU service division use Dallas Power & Light division use FW 00764 Mr. Costa Triantaphilides February 13, 1995 Page 2 City Internal Auditor c. TU Sales to Other Utility Companies Ouestion You have asked whether TUEC should have included the above accounts in calculating their franchise fee payments to the City. Short Answer " No. In my opinion, TUEC is not required to include the above accounts in calculating its franchise fee payments to the City. Reasons TUEC operates in the City of Fort Worth pursuant to Ordinance No. 11364, adopted on July 27, 1993. This Ordinance grants TUEC a franchise to use the streets and public ways in connection with its electric utility system. Section 2 of the Ordinance requires TUEC to pay the City a franchise fee based on 4% of "...TU Electric's gross receipts from the rendition of electric light, heat, power, and other services within the City...." The above accounts are not covered by the provisions of Section 2 and they are not required to be included in calculating the franchise fee. Background For the period from September 15, 1972, through September 15, 1982, Texas Electric Service Company (predecessor to TUEC) used the streets and public ways of the City in connection with its electric utility system pursuant to City Secretary Contract No. 7230. Section 1 of the contract provided for the following compensation to the City: "Commencing with the quarterly payments due on or before the 15th day of September, 1972, Service Company's payments shall be based on three per cent (3 %) of the gross revenues received by Service Company, its successors or assigns, from sales of electrical energy within the corporate boundaries of said City, during each immediately preceding calendar quarter, for which such payment is made and all such future quarterly payments shall be made on or before the 15th days of March, June, September and December of each year of the ten -year term of this contract." FW 00765 Mr. Costa Triantaphilides February 13, 1995 City Internal Auditor Page 3 The City Council later extended this contract to expire on September 15, 1992. In 1992 TUEC began renegotiating its franchise with the City of Dallas. The expiring Dallas franchise required TUEC to pay Dallas a franchise fee of 4% of its "gross receipts from the rendition of electric light, heat, power, and other services within the City." During negotiations, Dallas desired for the payments to remain at 4% and TUEC desired to reduce to 3%. In 1992 TUEC's franchise with the City of Fort Worth was also about to expire. TUEC wanted to complete its negotiations with Dallas before negotiating a new franchise with Fort Worth. Fort Worth extended the franchise for several short periods to permit the negotiations with Dallas to be concluded. At the same time, Fort Worth informed TUEC that if Dallas negotiated a new franchise which provided for 4% payments then Fort Worth should be allowed to increase its payments to 4%. In about June of 1.a92, Dallas and TUEC concluded their negotiations. TUEC agreed to a franchise which allowed Dallas to continue receiving 4%. TUEC also agreed to a franchise which would allow Fort Worth to receive 4%. On July 27, 1992, the Fort Worth City Council adopted Ordinance No. 11363 which amended TUEC's existing franchise to provide that it would terminate on June 30, 1993. Ordinance No. 11363 further provided that TUEC would make the September 15, 1993 payment under the existing franchise for the period from April 1, 1993, through June 30, 1993. This ordinance allowed for a transition between the old franchise and new franchise, made some adjustments in the schedule of payments and made some additional short term revenues available to Fort Worth. On July 27, 1993, the City Council also adopted Ordinance No. 11364 which granted the new franchise to TUEC. The term of the franchise commenced on July 1, 1993 and will continue for fifteen years from that date. Section 2 of the Ordinance contains the following provision concerning compensation to the City: "As compensation for the right, privilege and franchise herein granted, TU Electric shall pay to the City a sum of money equal to four percent (4%) of TU Electric's gross receipts from the rendition of electric light, heat, power, and other services within the City, but not to include the gross receipts from the sale of electric power and energy to other electric utilities for resale, said compensation being payable on a quarterly basis." FW 00766 Mr. Costa Triantaphilides February 13, 1995 City Internal Auditor Page 4 This provision is identical to the compensation provision in TUEC's franchise with Dallas. The City of Fort Worth insisted that the language be used in the Fort Worth ordinance so that Fort Worth would be compensated on exactly the same basis as Dallas. I par- ticipated in all of the Fort Worth negotiations with TUEC. There were no discussions or agreements about changing the revenue base upon which the franchise fees are calculated. As I recall, all of the revenues that were discussed during negotiations were based on a percentage of TUEC's gross receipts from retail sales of electricity within the City (see attached chart). In no case did the parties discuss changing the revenue base to include revenues from other sources. Discussion In my opinion, a court would hold that the "Miscellaneous Revenues," "TU Self Use and "TU Sales to Other Utility Companies" are not "gross receipts from the rendition of electric light, heat, power, and other services" under Section 2 of the Ordinance and that they should not be included in the franchise fee calculation. Let's look at the reasons. First, the "Miscellaneous Revenues" are not from the "rendition of electric light, heat, or power within the City." They are revenues from incidental charges that TUEC makes to its customers. Could these revenues be considered receipts from "other services within the City "? Possibly so, however, I believe that a court would probably find that the term is ambiguous and look at the original intent of the parties. A court could also find that the term was included in the ordinance by the parties due to a mutual mistake of fact and that the franchise ordinance should be reformed by deleting it. In either case, it is likely that a court would find that the parties never intended for the franchise fee calculations to include these revenues. Second, the category of "TU Self Use" covers electricity that TU itself consumes. This is apparently an accounting device to keep track of TUEC's internal use of electricity. It would not involve transactions that generate "receipts" to the company. Third, the category of "TU Sales to Other Utility Companies" should not be included because Section 2 of Ordinance No. 11364 expressly excludes "...gross receipts from the sale of electric power and energy to other electric utilities for resale..." Because Section 2 is identical to the provisions in TUEC's franchise with the City of Dallas, I asked Danny Reed, Utilities F? 00767 Mr. Costa Triantaphilides February 13, 1995 City Internal Auditor Page 5 Supervisor, to check with the City of Dallas to determine how Dallas interprets its franchise. On January 12, 1995, Danny spoke with John Carroll, his Dallas counterpart. Mr. Carroll informed Danny that the City of Dallas has interpreted its franchise to not include the miscellaneous revenues accounts in gross receipts for purposes of calculating franchise fees. Conclusion In conclusion, I recommend that the City not seek to recover additional franchise fees from TUEC based on the above - described revenue accounts. Please contact me if you desire any further information. cc: Bob Terrell City Manager Charles Boswell Assistant City Manager Very truly yours, Wade Adkins City Attorney FW 00768 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Ari■ r '1 J 1✓ rJ r1 ! - r J 1 - r 1 1 To: Mike Groomer City Manager 1 From: Charles S. Cox Director of Finance I Date: July 19, 1989 v. , , Subject: Franchise Audit The City Council authorized udlt.Complian oration to conduct an audit of Haltom City's itiiiichisilaisbe is now nearing 1 completion. Audits of TU Electric . a'ne Sta Gas': Sammons Communica- tions, Laidlaw Waste Systems; yandote have been completed. Mackay Advertisixigandl 11 audits should be complete within the next few months:''' The purpose of these audits was to verify theulowing factors: aw 1) That all customers are correctly coded as beaag within the City. 2) That there are no significant lag -times fromthe time of an annexation to the time a franchisee's customers are coded as being within the City. 3) That all the franchisee's revenue accounts have been included in he 'case for calculation of the franchise fee .pursuant to the franchise agreement. 4) That the franchisee has included any new sources of revenue in the base for calculation of the franchise fee paid the City. 5) That all appropriate accounting adjustments have been made in calculating the franchise fee_payment 6) That all franchise fee paymentsThave s_have beesr made timely, pursuant to the franchise agreement., IcEt gLac-4 -' Sammons Communications, Laidlaw Waste Systems, and city Hotel /Motel vendors were found to have no errors in either customer coding or revenue reporting. TU Electric and Lone Star Gas were noted for not including certain items in their gross revenue /franchise fee calcula- tion. A description of these items is listed below: T'J Electric "Miscellaneous Service Revenue" is not currently included in TII's revenue checks, calculation. Included in this account are charges for re- turned checks, reconnection fees, special meter readings, demand usage MEMORANDUM :con :..- a, n e..,. ,.-,no ....nrnn Torre 7s!17 reports, disconnect charges in connection with transfer of service, etc. The additional revenue due Haltom City (should this account be included in TU's revenue calculation) would, retroactively from 1982, be $15,592.34. The City's electric franchise ordinance /agreement provides for a franchise fee to be levied upon TU's gross revenues received on the sale of electricity. At issue for the City is whether "sale of electricity" may be interpreted broadly as all revenue associated with the sale of electricity. Lone Star Gas "Miscellaneous Service Revenue" is not currently included in Lone Star Gas's revenue calculation. Included in this account are charges for appliance service, service connection, returned checks and account collection. The additional revenue due Haltom City (should this account be included in Lone Star's revenue calculation) would, retro- actively from 1982, be $12,513.42. Had debt recoveries were omitted from the calculation of the 1982 report. The additional revenue due the city is $331.63. Receipts from Other Gas Revenue which includes billing for a Residen- tial Conservation Service charge were not included in the revenue calculation. The additional revenue due the city is $1,217.41. Deposit receipts are not included in the calculation. The additional revenue due the city is $2,850.28. United Gas was acquired by Lone Star Gas in 1987. United Gas did not pay Haltom City franchise fee revenue though they were legally obli- gated to do so. The additional revenue due the city (since 1982) is 52,907.89 - should Lone Star be required to pay United's liability. These audit findings are presented to the Council in summary fora for information purposes only. Detailed audit reports are available for more in -depth analysis. Audit Compliance Corporatio AUDIT OF MUNICIPAL FRANCHISE PAYMENTS OF LONE STAR GAS COMPANY for the period of January, 1982 to December, 1988 PREPARED FOR CITY OP HALTOM CITY AUDIT COMPLIANCE CORPORATION 123 N. Elm Denton, TX 76201 (817) 382-2586 HALTOiM CITY TXU- 000620 123 North Elm Denton, TX 76201 AUDIT COMPLIANCE CORPORATION AUDIT OF MUNICIPAL FRANCHISE PAYMENTS OF LONE STAR GAS COMPANY for the period of January, 1982 to December, 1988 PREPARED FOR CITY OF HALTOM CITY MAX WIESEN, Auditor - 1 - Randall S. Boyd, President 817- 382 -2586 HALTOM C iTY TXU- 00062! TABLE OF CONTENTS EXECUTIVE SUMMARY 3 AUDIT PURPOSE AND SCOPE 5 FRANCHISE EVALUATION 5 GENERAL INFORMATION 6 AUDIT FINDINGS Customer Coding 7 Revenue Calculation 8 Additional Revenue 8 CONCLUSION 13 INDEX TO WORKING PAPERS 14 - 2 - H.ALTOM CITY TX - 000622 EXECUTIVE SUMMARY The results of the audit for the reports filed for 1982 through 1988 indicated: 1. No errors in the coding of customers to your city. 2. Bad debt recoveries were omitted from the calculation of the 1982 report. These were properly included for other years. The additional revenue due the city is $331.63 (Schedule 1). 3 Receipts from Miscellaneous Service Revenue which includes appliance service charges, connection charges, returned check charges and collection charges were not included in the revenue calculation. These should have been included. The additional revenue due the city is $12,513.42 (Schedule 2). 4. Receipts from Other Gas Revenue which includes billing for a Residential Conservation Service charge were not included in the revenue calculation. These should have been included. The additional revenue due the city is $1,217.41 (Schedule 3). 5. Deposit receipts that are required before gas service is begun is not included in the calculation of your reports. The company has unrestricted use of these funds and they are a component of the rate making process. The additional revenue due the city is $2,850.28 (Schedule 4). 3 - HALTOM CITY TFIC- 0006 23 6. Another gas company may have been providing service to customers within your city without paying a franchise fee for the use of the public right of way. The additional estimated revenue based on the number of customers now being served by Lone Star Gas is $2907.89 (Schedule 5); however, additional revenue may be involved. 7. We have provided the Haltom City staff with a summary of procedures that, if used in the future, could assist you in monitoring franchise compliance and increase your cash flow. - 4 - HALTOM CITY Fxc- 000624 AUDIT PURPOSE AND SCOPE A franchise compliance audit of Lone Star Gas was performed in accordance with the LETTER AGREEMENT dated September 9, 1988 (Exhibit A). The audit covered the reports filed for 1982 through 1988. The objectives of our audit were: (1) to determine whether Lone Star Gas correctly coded customers to Haltom City if their service address is within its city limits, and (2) to determine if all gross revenue received from the sale of gas to domestic and commercial consumers is included in the calculation of the franchise fee. FRANCHISE EVALUATION ORDINANCE #6 was passed and approved by the City Council of Haltom City on December 6, 1948 granting Lone Star Gas the right to use the public right of way to furnish and supply gas to the general public for a period of fifty years. The ordinance was amended on January 5, 1967 increasing the street rental charge from two percent (2 %) of the "gross receipts" (as defined below) to four percent (4 %) of the "gross receipts ". The ordinance has not been amended subsequently. A copy of the original and the amendment of the ordinance is included as exhibit B. Payment provision requires that the Lone Star Gas pay the city 4% of the gross receipts received by the Company from the sale of gas to its domestic and commercial consumers within the - 5 - HALTOM CITY TXU 000823 city limits. Specifically excluded from the computation are receipts from the sale of gas to Federal, State, municipal and industrial consumers within the city limits. Payments are due on or before the first (1st) day of march on receipts for the previous calendar year. GENERAL INFORMATION Lone Star Gas, at the end of 1988, had approximately 8616 residential and commercial customers within Haltom City. Lone Star Gas billing and summary records identify customer locations primarily according to the method the customer receives gas service (main line or town plant) and by the location of the customer (inside or outside a city limits). Lone Star Gas has identified service addresses of customers within Haltom City as being in Division 4, Region E00, Office E01 and Town's 667, 843 and 854. The information concerning billing for 'towns' 843 and 854 was reported by Lone Star Gas to Haltom City in all periods covered by the audit. During 1987 Lone Star Gas acquired the operations of United Gas Transmission Company 'United' within Haltom City and the right to service those customers. Lone Star Gas reported receipts from 'Town 667' to Haltom City in 1987 and 1988. - 6 - HALTOM CITY TXU— 0006_6 Customer Coding: The procedures of Lone Star Gas were reviewed to determine: (1) the method that Lone Star Gas uses to classify a customer as to type of service i.e. residential, commercial, industrial or public authority, (2) the method of assigning a service address to a location i.e. 'town number', and (3) the method of supplying gas to a customer i.e. gas mainline or town plant. errors were noted. AUDIT FINDINGS Haltom City is surrounded by Fort Worth, North Richland Hills, Richland Hills and Watauga. After reviewing the above procedures it appeared that an error could occur in either incorrectly classifying a customer as to type of service or incorrectly assigning a service location to a city. In general, an industrial customer (versus a commercial) purchases a large volume of gas under contract and the gas service can be cur- tailed. No errors were noted in customer classifications. The other type of error could involve incorrectly assigning a customer to a city. Since Haltom City is surrounded by the above mentioned cities, the audit procedures involved selecting, on a test basis, streets that continued into an adjoining city to determine if any additional service locations should have been coded to Haltom City that were coded to an adjacent city. No HALTOM CITY TX0- 000627 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Revenue Calculation A review of the revenue reported from 1982 through 1988 (Exhibit C) indicated a decrease in revenue each year from 1983 to 1986. Normally the trend would have been upward. Discussions with company personnel and representatives from the Railroad Commission revealed that as a result of the gas cost adjustment for residential and commercial customers, gas became more econom- ical. No errors were noted as a result of this downward trend. The Federal Energy Regulatory Commission, Department of Energy has established a uniform system of accounts for Natural Gas Companies subject to the provisions of the Natural Gas Act (18 CFR 201). Exhibit D lists the revenue account and the criteria for charges to these accounts. Lone Star Gas uses these accounts along with company developed subdivisions to account for the location of a c4stomer and the method of providing service. Lone Star Gas reported gross receipts specifically from the sale of 'gas' to its residential (Account 480) and commercial customers (Account 481 -01). The Ordinance granting Lone Star Gas Company the right to operate in the public right of way does not specifically define the accounts to be included in the revenue computation. Section 9 of the Ordinance only excludes sales of gas to industrial and public authority consumers. Additional Revenue: The audit revealed one procedural error in the calculation of the gross revenue computation in the audit. In the 1982 - a - 000628 HALTO4i CiT`i TXL- report, Lone Star Gas did not add to the revenue base recovery of bad debts. The amount of revenue due to your city as a result of omitting the bad debt recovery for 1982 is $331.63 (SCHEDULE 1 $8,290.81 @ .04). At the time of the audit the company could not locate the actual amount. In the 1983 . and subsequent reports, bad debt recoveries were added to the revenue base. A careful analysis of your Ordinance reveals that the apparent intent of your city council was to permit Lone Star Gas to use your public right of ways to provide energy service to the general public. In return, your compensation would be based on Lone Star Gas's operation within the city limits. Unless a class of customer (industrial or public authority) or specific receipt category (none specified) is specifically to be excluded from the franchise computation, all operating revenue accounts represent- ing services necessary in furnishing an adequate supply of gas energy to customers should be included in the revenue computa- tion. Section 1 of your Ordinance authorizes Lone Star Gas to utilize the public right of way to install all necessary pipe lines and other equipment necessary 'to deliver and sell gas' to the general public. Section 4 of your Ordinance authorizes Lone Star Gas to charge its customers for the installation of all service pipes and retain control of those pipes from the main in the city street or alley, to and including the meter located on the consumer's premises, before furnishing service to the customer. - 9 - H.ALTOM CITY TXU- 000823 Based on the authorizations in the above sections, the following additional revenue accounts, as they relate to residen- tial and commercial customers, should be included in computing the franchise fee due to your city: 487. Forfeited Discounts. This account shall include the amount of discounts forfeited or additional charges imposed because of the failure of customers to pay gas bills on or before a specified date. The total amount charged to this account for the period is minimal; however, activity in this account in the future should be included in the revenue computation. 488 Miscellaneous Service Revenue. This account shall include revenue from all miscellaneous services and charges billed to customers which are not specifically provided for in other accounts. The amount charged to this account for residential and commercial customers within Haltom City for the audit period should be included in the franchise fee computation. The addi- tional revenue due to your city is $12,513.42 (SCHEDULE 2 -- $312,835.46 @ .04). 495. Other Gas Revenue. This account shall include revenue derived from gas operations not includible in any of the foregoing accounts. The amount charged to this account for residential and commercial customers within Haltom City for the audit period should be included in the franchise fee computation. The addi- tional revenue due to your city is $1,217.41 (SCHEDULE 3 -- $30,435.17 @ .04). - 10 - HALTOM CITY TXU- 000630 Other Receipts: Section 6 of the Ordinance authorizes Lone Star Gas to require a deposit from customers before gas service is begun. The amount of deposits a gas company has on hand is a component of the local rate making formula and thus affects the . .ount billed. The treatment of customer deposits is discussed in the Municipal Assistance Packet published by the RAILROAD COMMISSION OF TEXAS, Gas Utilities Division on page 6: "Two optional treatments are accorded customer deposits. The deposits are deducted from the rate base and the 6% interest paid to the customer on these funds pursuant to TEX. REV. CIV. STAT. ANN art. 1440 (Supp.1980) is included as an expense item, or the deposits are left in the company's rate base and they are included as a part of the company's capital structure at a cost of 6 %." Although a deposit is not revenue in the traditional ac- counting sense, it is an amount authorized by your ordinance to be collected before gas service is begun and should be considered a receipt for purposes of the revenue computation. The regulato- ry definition is: 235. Customer Deposits. This account shall include all amounts deposited with the utility by customers as security for the payment of bills. The difference between the receipts and refunds per year for residential and commercial customers within Haltom City for the audit period should be included in the franchise fee computation. The company did not separate the residential and commercial from - 11 - HALTOM CITY TXU- 000631 the total. The additional revenue due to your city is $2,850.28 (SCHEDULE 2 -- $71,257.00 @ .04). As discussed in the General Information section of this report, Lone Star Gas acquired the operations of 'United' in Haltom City in 1987. No information was provided concerning whether 'United' had obtained a franchise to use the public right of way in Haltom City. The estimated additional revenue due to your city is $2,907.89 (SCHEDULE 5 -- $72,697.26 @.04). This computation assumes that 'United' did not have any other opera— tions within your city and has ceased doing business in your city. Also included in SCHEDULE 5 is the address and phone number of 'United' as provided by the Texas Railroad Commission and relevant legal authority authorizing a city to require a franchise fee for using the public right of way. The additional revenue is included in this audit based on a theory of successor liability that Lone Star Gas Company assumed when they purchased the right to serve the customers of 'United.' The total additional revenue due to your city as a result of the audit is $19,820.63 (Summary 1 -- $495,515.94 @ .04). - 12 - HALTOM C1TF TXU- 000632 CONCLUSION The interpretation of Lone Star as Company of 'sale of gas' in the franchise agreement is improperly limited. The company has, without consulting the City, chosen which of the Federal Energy Regulatory Commission revenue accounts to include in the franchise fee computation. Lone Star as is excluding from the franchise payment certain revenue accounts which fall within the meaning of 'to deliver and sell gas' as stated in the franchise agreement. This revenue is contained in Accounts '488 - Miscellaneous Service Revenue' and '495 Other Gas Revenue'. These accounts should properly be included and franchise fee paid on the accounts. Lone Star Gas is also excluding from the franchise base, receipts it receives from customers as a precondition to estab- lishing service. These amounts are accounted for in Account '235 Customer Deposits'. Lone Star Gas is obligated to refund this deposit if the customer discontinues service. There is no restriction on the use of these funds, and the deposit is a component of the local rate making base. During the period 1982 through 1987, there is a likelihood that a gas utility was operating within your city without paying a franchise fee. The revenue from this operation should be recovered from Lone Star Gas Company. - 13 - HALTO4 CITY TXU- 000633 INDEX TO WORKING PAPERS REFERENCE DESCRIPTION PAGES SUMMARY 1 SUMMARY OF AUDIT ADJUSTMENTS 1 SCHEDULE 1 RECOVERY OF BAD DEBTS 1 SCHEDULE 2 MISCELLANEOUS SERVICE REVENUE 1 SCHEDULE 3 OTHER GAS REVENUE 1 SCHEDULE 4 CUSTOMER DEPOSITS 1 SCHEDULE 5 'UNITED' GAS OPERATIONS 1 EXHIBIT A LETTER AGREEMENT 2 EXHIBIT B ORDINANCE #6, as Amended 6 EXHIBIT C SUMMARY OF REVENUE REPORTED 1 EXHIBIT D FEDERAL ENERGY REGULATORY COMMISSION OPERATING REVENUE ACCOUNTS 4 EXHIBIT E 'LEGAL AUTHORITY' - 14 - H.ALTOM CIT1 TUU- 000"' SCHEDULE NAME SUMMARY 1 SUMMARY OF AUDIT ADJUSTMENTS 1 RECOVERY OF BAD DEBTS 2 MISCELLANEOUS SERVXCE REVENUE 3 OTHER GAS REVENUE 4 CUSTOMER DEPOSITS 5 'UNITED' OPERATIONS ADJUSTMENT FRANCHISE FEE $ 8,290.81 $ 331.63 312,835.46 12,513.42 30,435.41 1,217.41 71,257.00 2,850.28 72,697.26 2,907.89 TOTAL $495,515.94 $19,820.63 HALTOM CITY TXU- 000635 SCHEDULE 1— RECOVERY OF BAD DEBTS The bad debt recoveries for 1982 were not available the time of the audit. The procedure for determining an esti.,iated amount of bad debt recoveries for 1982 involved totaling the reported bad debt recoveries for 1983 through 1988 ($49,477.84) and dividing this amount by the number of years from 1983 through 1988 (six). An average of $8,290.81 ($49,744.86 divided by 6 years) was determined. The additional revenue is $329.85 ($8,246.31 @ .04). The procedure for estimating the 1982 bad debt recovery amount was discussed with Mr. Willard Gandy. He indicated he agreed with the procedures but indicated he would attempt to locate the actual amount for 1982. HA LTOM CITY T.G- 000636 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 SCHEDULE 2- MISCELLANEOUS SERVICE REVENUE ACCT 488 ACCT 488 -02 ACCT 488 -03 ACCT 488 -04 'TOWN' APPL SER CONNECT RETURNED COLLECTION TOTAL CHARGE CHARGE CHARGE CHARGE 1982 '843' 41.00 1,570.00 35.00 .00 1,646.00 '854' 5,467.83 27,130.00 1,561.00 .00 34,158.83 TOTAL 5,508.83 28,700.00 1,596.00 0.00 35,804.83 1983 '843' 194.01 2,020.00 120.00 .00 2,334.01 '854' 6,755.17 27,510.00 1,630.00 .00 35,895.17 TOTAL 6,949.18 29,530.00 1,750.00 0.00 38,229.18 '843' 25.00 '854' 5,909.75 1984 2,130.00 125.00 29,173.00 1,435.00 TOTAL 5,934.75 31,303.00 1,560.00 .00 2,280.00 .00 36,517.75 0.00 38,797.75 1985 '843' 197.14 2,850.00 142.50 .00 3,189.64 '854' 7,542.09 32,510.00 1,550.00 160.00 41,762.09 TOTAL 7,739.23 35,360.00 1,692.50 160.00 44,951.73 1986 '843' 142.50 3,800.00 195.00 535.00 4,672.50 '854' 7,080.93 30,562.00 1,770.00 8,720.00 48,132.93 TOTAL 7,223.43 34,362.00 1,965.00 9,255.00 52,805.43 1987 '667' .00 .00 .00 .00 .00 '843' 120.00 4,200.00 150.00 585.00 5,055.00 '854' 6,184.50 30,245.00 1,537.50 9,080.00 47,047.00 TOTAL 6,304.50 34,445.00 1,687.50 9,665.00 52,102.00 1988 '667' .00 130.00 .00 10.00 140.00 '843' .00 190.00 7.50 5.00 202.50 '854' 6,612.04 31,610.00 1,590.00 9,990.00 49,802.04 TOTAL 6,612.04 31,930.00 1,597.50 10,005.00 50,144.54 AUDIT TOTAL $312,835.46 ADDITIONAL REVENUE $ 12,513.42 H.ALTOM CITY TXU- 000037 SCHEDULE 3 -OTHER GAS REVENUE R E S I D E N T I A L 'TOWN' CONSERVATION SERVICE BILLING REVERSAL NET BILLING 1982 '843' .00 .00 .00 '854' .00 .00 .00 TOTAL .00 .00 .00 1983 '843' 669.76 .00 669.76 '854' 14,858.00 1.84- 14,856.16 TOTAL 15,527.76 1.84- 15,525.92 1984 '843' 352.95 75.66- 277.29 '854' 7,828.09 1,215.96- 6,612.13 TOTAL 8,181.04 1,291.62- 6,889.42 1985 '843' 219.16 25.41- 193.75 '854' 4,797.30 389.34- 4,407.96 TOTAL 5,016.46 414.75- 4,601.71 1986 . '843' 89.30 13.37- 75.93 '854' 1,616.16 202.42- 1,413.74 TOTAL 1,705.46 215.79- 1,489.67 1987 '667' .00 .00 0.00 '843' 45.01 6.00- 39.01 '854' 724.86 70.92- 653.94 TOTAL 769.87 76.92- 692.95 1988 '667' 3.27 .03- 3.24 '843' .00 .04- 0.04- '854' 1,274.47 42.17- 1,232.30 TOTAL 1,277.74 42.24- 1,235.50 AUDIT TOTAL 630,435.17 ADDITIONAL REVENUE $ 1,217.41 HALTOM CITY TXI;- 000638 SCHEDULE 4- CUSTOMER DEPOSITS BALANCE JANUARY 1, 1982 $49,055.00 YEARLY ACTIVITY: YEAR RECEIPT REFUND CHANGE 1982 $29,000.00 $14,505.00 $14,495.00 1983 71,193.00 47,170.00 24,023.00 1984 77,550.00 56,038.00 21,512.00 1985 84,355.00 66,745.00 17,610.00 1986 77,720.00 71,105.00 6,615.00 1987 76,520.00 72,935.00 3,585.00 1988 47,562.00 64,145.00 16,583.00- TOT..L NET CHANGE $71,257.00 ADDITIONAL REVENUE $ 2,850.28 BALANCE DECEMBER 31, 1988 $120,312.00 AUDIT TOTAL $ 71,257.00 ADDITIONAL REVENUE $ 2,850.28 H.ALTOM C I T Y TXU- 000639 TOWN 667: SCHEDULE 5- 'UNITED' GAS OPERATIONS YEAR P R I C E PER M. C. F. QUANTITY ESTIMATED RES. COMM. AVERAGE (1988) REVENUE 1982 5.5510 5.1193 5.3352 2,135.1 - 11,391.19 1983 6.3930 5.8665 6.1298 2,135.1 13,087.74 1984 6.3753 5.8747 6.1250 2,135.1 13,077.49 1985 6.1912 5.5452 5.8682 2,135.1 12,529.19 1986 6.1468 5.2965 5.7217 2,135.1 12,216.40 1987 5.9144 5.0861 5.5003 2,135.1 11,743.69 Less Amount Reported By Lone Star Gas 1,348.44- AUDIT TOTAL $72,697.26 ADDITIONAL REVENUE $ 2,907.89 Average price per MCF computed from Residential and Commercial prices computed by Lone Star Gas. Quantity estimated for 1982 thru 1987 using complete year (1988) that Lone Star Gas served customers that previously were served by 'United'. According to the Texas Railroad Commission, 'United' has the following addresses in Texas: Mr. Ronald N. Nelson Controller United Texas Transmission Company 600 Travis Street Houston, TX 77002 713- 229 -4903 BALANCE 10,395.25 Mr. Joe Cantu Controller United Gas Pipeline Company 600 Travis Street, PO Box 1478 Houston, TX 77251 -1478 713- 229 -4123 Exhibit E lists various legal authority for requiring a payment from a utility for the use of the public right of way. HALTOM CITY TXU- 000640 (h) EXHIBIT °A' 1.; 7 1) iri LETTER AGREEMENT Septemter 9, 195'2 Mayor and City Council Members City of Haltom City 3:24 Broadway Haltom City, Texas 76117 Dear Mayor and Council Members: This Letter Agreement is made by and between the City of Haltom City (the "City"), and Audit Compliance Caj (ACC") as follows: 1. ACC agrees to conduct a franchise compliance audit (the "Audit") of Southwestern Bell Telephone, Lone Star Gas, Texas Utilities Electric, Sammons Cable, MacKay Advertising, and Haltom State Bank (the "Companies") which hold franchises from the City. For purposes of requesting and receiving information from the Companies, and only for those purposes, ACC shall be an agent of the City. 2. The City agrees to notify the Companies of its intent to conduct an Audit using ACC as its agent and request that any preliminary 'nformation necessary to begin the audit be submitted to ACC as agsnt of the City. J. The Audit to be conducted by ACC shall be to determine if any franchise fees or other amounts are now due and owing the City and shall include ve of the following: (a) that all customers located within the City are correctly coded as being within the City: that all the Companies' revenue accounts have been included in the base for calculation of the franchise fee pursuant to the franchise agreement; and (c; that the Commanies have included any new sources of revenue in the base for calculation of the franchise fee paid the City. a fimal audit retort which will cu7line - 4 - crk prsvi,te recc7inenilazicns i=..rcvement cf fi:t":41 franc'nise fee rel7c7 anf HALTON', CITY TXU- 000641 Attest: ;'- EXHIBIT "A" '=-- 'with Audit compliance Corporation 9, 1988 Page 2 5. As compensation for the services provided hereunder, City agrees to pay ACC as follows: Fifty percent (50%) of any amounts . recoverd, refunded cr credited, and actepted as a result cf any cf the audit findings, including. fifty percent (50%) cf the value of any other compensation given to and accepted by the City as a result of the audit findings. All compensation shall be paid to ACC within thirty Oa) days after the date such amounts are collected, cr d, or refunded to City. 5. Upon payment to ACC of all amounts due as above described, ACC will turn over to City all working documents, files cr other information acquired during the audit process. 7. Unless prevented. by circumstances beyond the control of ACC, all Services, as described herein, shall be completed within 150 (one hundred fifty) days from the date of this Letter Arreement. B. ACC shall exercise the same degree of care, skill and dilic•ence in the performance of the services provided hereunder as is ordinarily provided by a certified public accountant under similar circumstances. 9. ACC agrees to defend and indemnify City from and against legal liability for damages arising out of the performance of the services provided herein, where such is caused by any errOr, omission or negligent act of AC:, its agents or employees. AUDIT COMPLIANCE CORPORATION / / /„.„. BY: Randall S. Boyd President CITY OF HALTOM OSTY, TEXAS Secrstary C:Lty Manar HALTOI CTY TM:- 000642 EXHIBIT "B" AN C SE4=1.3 GAS C.:JANT, A C-C:;, IT .U- CCs i. FE:3.1:CH AND CoPFLI G T. FUEL:LC IN TI.a;INC3A1 Cr !ULM! CITT, TAH:LZ:l =TT, AND T1:7- E17:4L•S NiVILEL: FOR Ti:: PAr-ENT CF A FEL U. CLLEEE FCa UE: LF Th: ST2laTS, iLLS AND PUBLIC LAYS, AND r:ii.x:D:xc. ThLT II SLLIL 2 Z LIEU CF CTh..L FEE5 AND CEIXI:3, .:..:ca AD vAID:A TA:az. n: IT oT.DAin:D :II =TT czunc:L CF THE r..7.Dapc::AT:D CITY, TEXAS: LECTION 1. That the incorporated of Haltaz City, Texas, acre- inafter called "Citr", hereby grants to Lone Star Gas- Caany, hereinafter called "Company", ite successors and assigns, consent to use and occupy the ;resent and future streets, alley's, tichways, public places, public thor- oughfares and grounds of-City for the purpose of laying, maintaining, con- structing, operating and replacing therein and thereon pipe lines and all other appurtenant equipment needed and necessary to deliver and sell gas to persons, firms and corporations, including all the general public, the City's corporate limits and the environs thereof, said cansent being granted for a term of fifty (5C) years frau and after the data of tae final passes° and approval of this ordinance. SCION 2. Company shall lay, maintain, construct, operate and its pipes, mains, laterals and other equipment so as to interfere an little as possible uith traffic, and ahall promptly clean up and restore to an approximate original condition, at its cost, all thoroughfares and other surfaces which it may disturb. The location of all mains, pipes, laterals and other appurtenant ecuipment shall be fixed under the superviion of tbe City Council or an authorized committee or agent arpointed by sad :ounaLl. SEC:ZON 3, ?hen Company shall make or cause to be made excavatiens, or shall place obstructions, in any street, alley or other public place, the public hall be protected by barriers and lishts placed, crested and maintained by Company; and in the event of injury to any person or damaze to any property by reason of the canstruction, optic n or aaintenance of the raz distributing plant cr system cf Codpany, Coapary shall Ondadnify and keep hard:Less City froa any and all liaCility in connection tatreit. Company shall :-ea..:, clean up and restart, to an sprodidatecrigOnal 42Ltion, all streets and alleys disturbed aar'-: -, c cora:raccoon dna roaLr of its gas distributin: ALTO' ,10064„; EXHIBIT "B Company bay lulls and enforce reasonable rules anal regula- ._ ns in tae ccnpuctof its business, and may re;',�re, before fu_hier ng eerlice, the execution of a contract therefor, =a }. within the cc : c:ate _its of Cl to ray require each tion U00 all service pipes City, r Co.-pa- far the installation of fro= the gain in the street or alley to and throughout the consumer's premises; and Company shat have the right to contract with each censuaer with reference to the installation of service pipes and the control 1 r. cf service pipes fro= the connection thereof with Company's m in the streets or alleys to and including the meter located on the consumer's prem- ises. Service lines are defined as supply lines from Co =pony's mains in the streets or alleys to and ending at consumer's meter. • sxTION 5. Cc =pony shall not be required to extend stains on any street sore than Fifty (50) feet for any one consumer of gas. for shy Company be required to connect consumers to intermediate or high - pressure lines. S• :ICr: 6. Company shall be entitled to require from each and ever con - sumer of gas,. before gas service is commenced, a deposit of trice the amount • of an es``immeted average monthly bill which said deposit may be retained by Company until service is discontinued and all bills therefor have been ,l paid. Company sham miner. recur. ^. said deposit to the consumer, together 'Kith six per cent (6N) interest - thereon from the date of said deposit up to the sate of discontinuance of service. Company shell be entitled to apply said deposit, Witt accrued interest, to any indebtedness owed Company by the consumer making the depocit. SECTION C pr_ : le and 7. The � hts , ' a franchises granted by ?.. 4 =s ordi- nance are not to be considered exclusive, and City hereby expressly reserves the __nt to grant, at any time, like privileges, rights and franchises - . it may s fit to any other person cr corporation for the purpose of fu_-- nis:i.g�g+as for light, heat and rover to and for City and the inhabitants Sw._ .. S. Company shall furnish reasonably adequate service to the pdhlic, at reasonable rates and charges therefor; and Cor. v ' naintain its property, .l erty, ec - _pt and ra to_ _ te a.^. appliances in toed order and condition. SEC T_0 9. Cc =pan', its successors and assigns er to ply, and - g City agrees to accept, on or before the,�� /_ de,, o: i—,�� _ _ and cr.�cr before the same day of eaeh succee4no year during the life r S� this franchise, up te and including the ye._.0 rr a sum of =oney x cn ef sr.. be equivalent to two per cent (21) of the gross receipts rec±red by Company from the sale of gas to its domestic an ©sc,erciai consumers within the city limits of said City for the precedimg calendar year, expressly excluding, however, repeipts derived from the sales of gas to Federal, State, =unicipal and industrial consumers vi'..n the city limits of City, which annual payment shy be for the richts and privileE.en herein grunted to Cap;;_-- including : e' ` -- :- th ^ pu- —= _ = on - c ._ t.. t.te streets, t _. .__e of said ` and r _ . annua: payment isc - "- a n t _ _:._ - e_�.. anscuate ant cc-- w :sr < HALTOM CITY TXC- 000614 additional cccUpetion taxes, easement and franchise .r c �,. se taxes or charges (whether as an ad valorem, special or ether character of tax or charge), and is lieu of all ether and additional municipal taxes, charges, levies fees and rentals of whatsoever kind and character and howsoever levied ihich city may =rose or hereafter be authorized to levy and collect, excepting only the usual general or special ad valorem taxes Ytich City is authorized to levy and impose upon real and personal property. hod ty not have the legal power to agree that the payment of the foregoing swss of money shall be in lieu of taxes, licensee, fees, street or alley rentals or charges, easement or franchise taxes or charges aforesaid, thcr. City agrees that it Y.L2.2 apply so much of said sums of money paid and to be paid as may be necessary to satisfy Company's obligations, if any, to pay any such taxes, licenses, charges, fees, rentals, easement or franc!'ise taxes or charges. In order to determine the gross receipts received by Company from the sale of gas within the corporate 'kits of City, Company agrees that on the sere date that payments are made as provided in the preceding paragraph of this Section 9, it will file with the City Secretary a sworn report showing the gross re ceipts from the sale of as to its domestic and commercial con - sumers within the said city limits for the respective calendar year pre- ceding the rem ective date of payment. City may, if it sees - fit, have the books and records of Company examined by a representative of said City to ascertain the correctness cf the scorn reports to be :lied herein. S C : 1C. The enactment of this franchise ordinance e i not alte- affect or change the present rates end charges presently being made o fr gas and gas service rendered to the public in the Village cf Haltom City. __c__:,;: " Company shall file its written acceptance of this franchise ordinance within sixty (6C) daysafter its ._-.al passage any a,sproval by said .._.,5.. 073C7=D on this o` ±_ ti. D., 19 y� �t cl_ n Q City Secretary EXHIBIT "B" ._age e` halts= City, texas HALTO,1 CITY TXG- 0(10645 iTAT: CF TZZAS CCU.= OF TZLIILI:7 EXHIBIT "B" 1 Robert A.Ceider , Secretary of the Villaze of Haltom City, larrant :emaa, !.ereby certify that tne above and foregoing is a true and correct copy of an ordinance pasted by the City Council of the Village of Balton City at a - - - renzler session held on the . a. day of be'" , 1943 a it appears of record in the Minutes of said t:ity Council, in Book Face :arrEzn 17 HAND An ST.U. OF SAID TITT, This 6.714 day of A. D. 151_E bearctary, Tillace of Zatom City, Texas. HA.I.TnM CITY, TX.U- 00064, 1 ST= CY T:4AS CF § • EXHIBIT "B" kJ' , Secretary of the City of County, Texas, ocrocy tnat the above and forer:oinr, is a true and correct copy of an ordinance- passed and e:oproved by the rl held on the =zr day of ' of the y . 4 at a session Cit of r,- (711,-,11 , , as it ap- pears of record in the Minutes of said P.00k r" , page janunry TI.TtESS MY HAND A= SAL OF SAID CITY, this the 5 t 1 ". day of , A.D. i9. ept -7, Secretary City of ts,14.,.. P14. , Texas 1 1 1 1 1 1 1 1 1 HALTOM CITY Txu- 00064; EXHIBIT 'B" CI:: l oS'Ar =D By TcE CITY CODICIL CF Ti : CITY 07 i_ :;,;0_: CITY, the C SEC-ION CiLyay cam.. ;c De eoese c_ __cgrd in the ^ of said - Page - - _ntig a franchise to Star Gas _•scs,. - is hereby __ended t char - the percentage -= the rental _-- - ., charge provided by Section 9 frcm ts percent cercent SECT1CN 2. s .. as oere:_bc-, :hanged and e_-end - -..- - terms _rcv_s_„ns, conditions and irer.._..ts - tr. aforesaid - s enac.ed on Decezber - •• s -- -- -- _f=eet. . 3. ..._s _ c.'7 - ___..._ . . __ Co-7--7 files its • it:er ace .. __ __ - - - .' -._y (30) a te` _t5 f'-. . - -= d this _ - .. ---, d a n n acceptance the r ..:is_,,..' hereof shall sa__ be be J b1..__ upon . , its successorscd s. '--• and -- PASSED AND A???G'T D on day City Secretary ✓ Ci7. FI.LTOM CITY TXU- 0005x8 EXHI3IT C- SU ?0'u,RY OF REVENUE REPORTED YEAR FRANCHISE RATE AMOUNT SASE (1) 1982 3,994,460.43 .04 5159,778.41 1963 4,662,696.41 .04 186,515.85- . 1984 4,546,804.06 .04 181,872.16 1985 4,230,358.49 .04 169,214.34 1986 3,663,056.01 .04 146,522.24 19 87 3,990,564.81 .04 159,622.56 1988 4,489,435.00 .04 179,577.40 (1) From company prepared worksheets. The yearly amounts are summarized from revenue reports for Division 4, Region E00, Office E01 and Town's 667, 843 and 854. H3.LTOM C [TY T10U- 000653 Part 201 EXHIBIT "D" 133 allowance fnr borrowed fund, u,ed during construction— Credit. This account shall Include concur rent credits for allowance for bor- rowed funds used during construction, not to exceed amounts computed in accordance with the formula pro- scribed in Gas Plant Instruction 3(17). 131 Extraordinary income. This account shall be credited - with gains of unusual nature and infre- quent occurrence. which would signifi- cantly distort the current year's income computed before Extraordi- nary Items. if reported other than as extraordinary items. Income tax relat. ing to the amounts recorded in this ac- count shall be recorded in account 409.3, Income Taxes- Extraordinary Items. (See General Instruction 7,1 133 Extraordinary deductions. This account shall be debited with losses of unusual nature and infra. quent occurrence, which would signifi- cantly distort the current year's income copputcd before Extraordi- nary Items. if reported other than as extraordinary items. Income tax relat- ing CO. the amounts recorded in this ac- count shall be recorded in account 409.3. Income Taxes. Extraordinary Items. (See General Instruction 7.1 a.fainsd Earning. Chan of Accounts 4.3 Balance transferred from Income. 435 Appropriations of retained earnings. 437 Dividends declared— preferred stock. 438 Dividends declared— common stock. 433 Adluscmcnts to retained earnings. Retained Earnings Accounts 133 nalanee transferred from income. This account shall include the net credit or debit transferred from ,..come for the year. ..,G Appropriations ur retained earning, us account ..jhall Inc.sdc appro. pr.--ions of retained ea clings. irevis co cy 18 CFR Ch. 1 (4 -1 -88 Edition) a cutler appropriations made at option of mitn4 for specific ourposeS. 437 Dividends declared — preferred stock, A. This account shall include amounts declared payable out of re- tained earnings as dividends on actual- ly outstanding preferred or prior lien - capital stock issued by the utility. 3. Dividends shall be segregated for each class and series of preferred stock as to those payable in cash. stock and other forms. if not payable in cash. the medium of payment shall be de- scribed with sufficient detail to identi. ty it. 439 Dividends declared — common stock. A. This account shall Include amounts declared payable out of re. tained earnings as dividends on actual- ly outstanding common capital stock issued by the utility. 3. Dividends shall be segregated for each class of common stock as to those payable in cash. stock and other forms. I' not payable in cash. the medium t: payment shall be described with sufftalent detail to Identify it. 439 Adjustments to retained earnings. A. This account shall. with prior Commssion approval, include signifi- cant nonrecurring transactions at- counted for as prior period adjust- ments. as follows: (11 Correction of an error In the 11- nanclal statements of a prior year 21 Adjustments that result from re. 3(13allon of income tax benefits of pre - acquisition operating loss car yfor- wards of purchased subsidiaries. All Other items of profit and (055 ree- og:.ized during a year shall be includ- ed in the determination of net Income for that year. BL .Odjll charges. or credits due to losses on reacquisition. resale or retirement of the company's own cap. .:51 s'nck shall be Included In th!s ac ccour.t 210. Gain or. Rea,:;e or Car cci;ztien of Reacquired Ops a...nw• Chen of Aeee„ni, .. ..... c, ov G,s II.ALTOM CITY TXU- 000630 Federal Energy Regulatory Commission 991 Commercial and industrial sales. :00 Other sales to public authorities r M alor only ). 443 Sales for resale. 484 Interdepartmental sales. 485 Ineraeompany transfers. 2. OtOca Ortaa:rre Revenues 487 Forfeited discounts. 488 Miscellaneous service revenues. :89 Revenues from transportation of gas of other. 490 Sales of products extracted from natu- ral gaa. 491 Revenues from natural gas processed 09 others. 492 Incidental gasoline and oil sales. 493 Rent from as property. 404 hi Lei rents. 195 Oliver cos revenues_ 406 Provis,on for rate refunds. Operating Revenue Accounts ISO Residential sales. • A. This account shall include the net billing for gas supplied for residential or domestic purposes. B. Records snail be maintained so that the quantity of gas sold and the revenues received under each rate schedule shall he readily available. Nom When gas supplied through a single meter ,s used for both residential and corn. ieurcial purposes. the total revenue shall be incnided In (5lt5 account or account 491. Comntcrelal and Industrial Sales. according to the rate schedule which is applied. 1f the same rate schedules are applicable to both residential and commercial service. classifi- cation shall be according to principal use. (SI Commercial and industrial sales. A. This account shall include the net billing for gas supplied to comrn-ercial and mdltstria! customers. Records s- ".all be maintained so that 0110 quantity of gas sold and reve• nue received under each rate schedule shall be readily available. C. :Major companies) Records st,al) be maintained 50 3.5 to show separately iiic revenues from commercial and in- .,.._1.101 custerners, as 10110,'5: ?re: s c be a Me ` e :eve- from customers 811.1: 050 tame excess of appraximateiy ma:1. ..tom e de. fa: and EXHIBIT "D" Part 20.1 missible in order that transfers of cus- tomers between the large and small classifications may be minimized)• Small commercial and industrial sales (wherein shall be included the reve. nues from customers which use vol. umes of gas generally less than 200.000 Mel per year or less than ap- proximately 800 lticf per day of normal requirements). 1o:c: When gaa Supplied through a single meter is used far both commercial end resi- dential purposes. the total revenue shall be included In this account Or In account 480. ricsidcn:lal Sates. according to the rate schedule which Is applied. If the same rate schedules are applicable to bola resldenal and u commercial sen'let elacgifteatlon Slinil to according to principal use. 4S2 Other sales to public authoritlo (Mains only). A. This account shall Include the net billing f0: gas supplied to municipali. ties or divisions or agencies of Federal or State Governments, under special 070:30 5 or agreements or service classifications. applicable only to public authorities. for general govern. mental and institutional purposes, except any revenues Under rate sched- ules the revenues from which are in- cludible in account 181 or 483. and except any revenues from gas used for purposes such as powerplant fuel for publicly owned electric systems. manu- facturing processes of arsenals. etc.. and ocher major uses of gas which ap- propriately may be classified in ac- count 483, Commercial and Industrial Sales. B. Records shall be maintained so that the quantity of gas sold and the revenue received from each customer and from 11211 major special contract shalt be readily available. 1:3 5aleo for resole. A. Tlt!5 account shall Include the net tiiiing for gas supplied to other ggas '1( e5 cr to public author::.__ for resgle p Rccurtis siiait be maimained 1:ierc bt readily asallable ..._ r - ^Jes for earn customer under ea,.: e arhe5ule and 150 bill.? c - - paiica ,._. vc-Mrpe of 6.._ (actufa. _......... .c.. HALTOM CITY TXU— 0006 1 Part 201 tract tiemmnd, maximum actual demand. billing demand. and Stu ad. justment factor; Nona Revenues from. gas supplied to outer public utilities for - u use by them and not for distribution. shall be included in ac. count 48.1. Commercut and Industrial sales. :mfrs. supplied under the same contract as and not readily separable from revenues im cl ud,bic to tluis account. 8 c 1 Interdepartmental sides. A. This account shall include amounts charged by the gas depart. merit at tariff or other specified rates for gas supplied by it to other utility departments. 13. Records 513011 be maintained so that the quantity of gas supplied each Other department and the charge made therefor shall be readily avail- able. 155 Inn racompuny transfers A. This account shalt include. for in- formational purposes only. the amount recorded for Cs supplied by the production division when the price is not determined by a cost -of- service rate proceeding. 3. Records shall be maintained so that Clue quality of gas transferred shall be readily available. 887 Forfeited discounts. This account shall Include the amount of discounts forfeited or addi- tional charges imposed because of the failure al customers 80 pay gas bills on or before a specified dale. I,x )liseellancous rcrviee revenues. This account shall include revenues from ail miscellaneous services and charges billed to customers which are nos specifically provided for in other accounts. • ang Cor...ee.tr.a. c. .is rr _ � "l rnair.te -.tree a - e,s. d n ra- dot, ,. rcr tor EXHIBIT 'D 18 CFR Ch. 1 (4 -1 -88 Edition) Major c 'names. sec account 185. Tempo e Pry Eric lucs.t. 4. Recovery of expenses .in connection with gnu diversion cues. Willing for the gas consumed shall he included In the npproorl• at gas revenue account -y 5. Services performed for other gas c oanies Inc testing and adjusting meters. Changing charts. etc. 881 Iterrnucs (ram transportation of gas .f others. This account shall include revenues from transporting gas for other com- panies through the production. trans - mission.. and distribution lines. or com- pressor stations of the utility. t95 Sales of products estrortrd -from nat- ural gars. A. This account shall include reve. nues from sales of gasoline, butane. propane. and other products extracted from natural Gas. net of allowances. adjustments. and discounts. including sales of similar products purchased for resale. 13. Records shall be maintained so that the quantity. sales price. and rev- enues for each type of product sold to each purchascnshatl be readily avail- able. 171 Revenues (robe natural no processed by others. • A. This account shall include reve- nues from royalties and permits. or Other bases of settlement. for permis- sion granted others to remove prod- ucts from natural gas of the utility. H. The records supportine this se- count shall be so maintained that full information concerning determination of the revenues wit) be readily avail- able concerning each processor of gas of the u t iii[y, including as applicable ta) the MCI of gas and apprOxirtlatc ay. erage llut content thereof per cubic foot delivered to such other party for Processing. i51 the Mc( of gas and Op. Proximate ave -nge Btu content there. of per cubic foot of gas received back I tom :`.:e processor. (0.: :Ile uld_ gen- prodactir.n . or other source _10 for g .eL elc.. 75 c:: e HALTOM CITY TXU— 000652 Federal Energy Regulatory Commission of. ill 1110 revenues accruing to - the vtilit y. and tg1 the basis of determina- tion of the revenues accruing to the utility. Such records shall be main. tained even though no revenues are derived from the - processor. 132 Incidental gasoline and oil sales. This account shall Include re0ennes From natural gas gasoline produced direct from gas wells or recovered iron: drips or obtained in connection with purification or dehydration. proc- esses. and revenues [ram oil obtained from wells which produce oil and gas, the investment in which is carried in accounts 330. Producing Gas Wells— Will Construction. and 331• Producing Gas Wells —Weil EtutpmCnt. 39:1 Rent from gas property. • A. This account shall include rents received for the use by others of land. Iluii[: i11g5. and other properly devoted to gas operations by the utility. 13. When property owned by the util- IS opera - red jointly with others under a defir1te arrangement for shar- :rg the actual expenses among the parties to the arrangement. any amount received by the utility for in• teresl or return or in reimbursement of taxes or depreciation on the proper- ty shall be credited to this account. Nurc Do not Include rent from proneny constituting an operating unit or system I0 Zhu account- (See account 412. Revenues From Gag Plant Loosed to Others. ) 191 Interdepartmental rents. This account shall include credits for rental charges made against other cepartmerts of the utility. In the ease property operated under a definite arrangement to allocate actual costs among Lite departments using the property, any allowance to the gas de• partinent for interest or return and recia_ian and taxes shall be Cred- 110U :0 this account. tuber cab revenues. Ti,, uric revenues der,: from 115 c ages nut ... ..1 any 01 the EXHIBIT 'D' Port 201 ITEMS 1. Comnnaslnn on sale Or dlsirih of gas of rulers wrlrnsold, under rates filed by such at hers. 2. Compensation for minor or incidental er rvices provided .1,3 others Such 1a custom- billing. engineering. eta a. Profit or loss on sale or maternal• and snpotirs not ordinarily purchased for resale and not handled through merchandising and lobbing accounts. t. Sales of :team, water. Or electricity. in chiding sales or transfer; l0 other depart - menls 01 1110 utility. - 5. Ser:ce charges for storing gas of others.. 8. Miscellaneous royalties received. 0. Revenues from dehydrat,On and other processing of gas of others. except products extraction gases products. are received as compensation and sates of such are includ- ible in account 490.. Sales of Products Ex- tracted Flom Natural Gas. and except com- pression of 115 of others. revenues from which are includible in account 489. Rev 0:00b lrnm Transportation of Gas of Others. b. include 1 h111or eompan1t31 1n a separate subtec0Vrl r n payment for rights and /or benefits received from others which are realized through research. development. and demonstration ventures. In the a l ent the amounts received are so large as to as- tort rm 00 for the year In which received (5 p rreu! of net income before application of the bonehi1 the amounts shall be cred- Iled to Account 153, Other Deferred Credits. and amortised by Credits to this account over 3 ptriOd TOL to 0500005 years. 196 1 .inn for rote refund.. A. This aerount shall be charged with provisions for the estimated pretax effects on net. Income of. the p0151005 of amounts being collected subject to refund which ate estimated to be required to be refunded. Such provisions shall be credited to Account - __9,Accumulated Provision for Rate Refunds. 13. This account shall also be charged with amounts refunded 'when such amounts had not been previously accrued. - C. I. :leo:vie lax ^fleets relating to the an:cunt; recorded to this 1=[01101 shall be recorded 11 1c:c1!nt 410.1. Provision !"' Deir0ved lneorne Taxes. Utility rl:+ ,tnie I 9:1.1. r 1 deferred 30 t0010 • 1 0 .005 — Operating 1••c,.,t_. u HALTOM CITY TXU- 000633 1.3 Section and Section 55(b) of Article 1446c appear to sane to be inconsistent and in conflict. Section. 21 says "Nothing in this act shall be construed as in any way limiting the rights and • - powers of a municipality to grant Or yefuse-a franchise to use the streets and alleys within its limits. . ." Section 55(b) says, 'Notwithstanding anY_ other provision of law, a public utility thsll have the right to continue and extend service within its its area. . . and co utilize the roads. . for the purpose of- - furnishing such. . . public service. .. The only way to reconcile these provisions is that Section 55(b), which soeais to the utility's right to use public thoroughfares to provide service, after annexation, merely restates the City's right to require relocation of facilities. Central Power 6 Light Company v. Public Utility Commission of Texas, 649 S.W.2d 287 (Sup. Ct. 1983). EXHIBIT "E" The legal questions that usually arise- in the negotiation of a telephone franchise agreement are listed with references to applicable legal authority. 1. - What is the lecal authority for the City to require a teleohcne company to obtain a franchise before the Cormanv can use or Continue to use the • streets and alleys of the Cities? • • .- 1.1 Home Rule:- Article 1175, Sec. 12,- (says can prohibit use by public utility without first obtaining - consent by ordinance and payment of coMpensation) and 16 (exclusion dominion, control jurisdiction of public streets), V.A.T.S.: Article 1181, (home-rule governing body has exolusive.pcwer to grant franchise, subject to referendum of petition), V.A.T.S. 2.2 General Law: Article 1016 (exclusive• control and xwer over streets), V.A.T.S. 1.4 Article 1416, V.A.T.S., authorizes carpanies to use public roads for long distance lines utilized for long distance service and a franchise cannot be required. The same principle also applies to intrastate service. City of Weslaco v. General Teleohone Company of the Southwest, 359 S.W.2d 260, 262-263 iTax. ay. App. - San Antonio 1961, ref'd n.r.e.): Athens telephone Co. v. CI:' of Athens, 163 S.W. 371 (Tex. Civ. Arc., ref.), Athens 'Teleohone Comoanv v. City of Athens, 192 S.W. 42 (Tex. Civ. nn., Anconlo 6 A.?. Rv. Co: v. Sou::7..."esce:n Talecrach 6 Teleohone C.. 93 Tax. 313, 55 S.W. 117, 49 A.L.R. 459; Cc: of Sr.o,nucc.c: Eroc.:n Tele:ore:on Telezn.cne Cc., 132. S.W. 72J, Tex. 1..4, L57 S.W. HALTOM CITY Vtiv- 000654 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 EXHIBIT "E° 1.5 The authority of a municipality to remuire a franchise arises a utility encrcactes in any manner apon tne municipality's streets, alleys or public grounds. west Texas Utilities CaTcanV v. City of Eaird, 286 5.W.2d 185 (.ex. Civ. App., ,. .astatd 1956, ref'd n.r.e.). A municipality's .authcritv to require a franchise extends to the area • arderneath the street easement. West Texas Utilities Cappanv v. Citv of Bar, supra; Citv cf San Antonia v. United Gas Pipeline Conpanl... 388 S.W.2d 23: (Tex. App. - San Antonio 1365, 1.6 When a ”- is able to place its facilities in private ease- ments which do not encroach in any manner upon public streets. Alleys or other public grounds, the utility is not subject to the municipality's authority to require a franchise. West . Texas Utilities v. City of Baird, supra: Ennis Waterworks v. Citv 'of Ennis, 105 Tex. 63, 144 S.W. 930 (Tex. 1912.) 1.7. When streets are plated and recorded and dedicated to the City,: the developer cannot reserve right to grant use for long distance service and demand rate base compensation. • Roarinc Scrinos Town-Site CO. v. Paducah Telephone Co., 109 Tex. 452. 212 S.W. 147 (Tex. 1919). .1.8 Prior ruling that Hooks Telephone Company is a local telephone company and is not entitled . to the privileges granted to long distance companies by Article. 1416 as affirmed. The court said that one mile long line between the incorporated towns cf Hooks and Leary did not make the company a long distance telephone com- pany. The court said that the line was merely an extension cf toe local Hooks telephone system. Hooks Telephone Co. v. To cE Leary, 352 S.W.2d 755 (Tex. Civ. App., n.r.e. 1961). 1.9 Ages pipeline cannot use a highway and two public streets without a franchise, even though the gas pipe line has a license from a railroad richt-of-way and only tunneled its pipeline under San Antonio streets. City of San Antonio v. United Gas pipeline Camraanv, 388 S.W.2d 231 (Tex. Civ. App. - San Antonio, 1965, ref'd n.r.e.). 1.10 Since September 1, 1976, the Public Utility Commission exercises exclusive jurisdiction over all remes and services cf telephone utilities. Art. 1445c,V.A.T.S. 1.11 Petition of magic Valley Electric Cooperative, Inc. and Central Per and Light Corpany for review CE an ordinance passed by Citv of Brownsville, Docket No. 2864 and 2882, - P.U.C. Bull. - April 27, 1381), P.U.C. held city ordinance remuicing filing of maps with city at least seven days prior to constriction effected service of public uzi1s a...,a_ry to P.U.C. Subst. Rule 052.0:34.048(c) and Section 22 of PURA. RUC action cpneld in cause 328,212, Citv of Erc Tex. v. -' Texas. J. Ct. r: Travis Crcnty, rcurt v. TJC. S7S S.',;.2d 337 (7ex. c.r.e. HALTOM CITY TXU- 000635 EXHIBIT "E" x'ac is the legal basis leer - - alt:. s -c street - »o - --� -�._ ....s_ --_.._.._ =- 2.1 Article 1175, Sector. 12, V.A... ar•ress'_y authorizes a hone rule 'city co repose a ___eet .. , c`_rce upon a publ -2.2 The'.autharity-of a• municipality ta i;rese•a street rental charge is derived fray. the• same statutes and charter provisions which grant the authority to regulate the streets; thus, where. there is a statutory grant of aut:crity to regulate or control express .grant of authority to charge for use. of the streets is not required. Southwestern - Telecraoh ; T=_leohone Co. v. City' of Dallas, 174 S.W. 636, 640 -641 (Tax. Civ.. App. - Waco,- 1964, writ rei'd n.r.e.); Read v. City of Waco, 223 S.W.2d 247 (Tex Civ. - Apo., ref., 1949.) • 2.3 Section 182.063, Tax Code, prohibits a municipality from imosing "an occupation tax or any charge far the privilege of doing busi- up ness" on a telephone caraany. InFlenino v. Houston Lich:inc 5 Power Co., 138 S.W.2d 520, 143 S.W.2d 923 (Sup. Ct. 1940), the Texas Supreme Court held_ that the street rental charge is not an occupation tax or a charge for the privilege of doing business and is valid. Also, !forth Texas Water Supply District v. City' cf Waco, 223 S.W.2d 247 (Tex. Civ. App., ref., 1949). • 2.4 Since the street renal charge is not a tax, the fee can be passed on to the utility custarers that are tax exempt. Attorney General Opinion W. JM -16 (1983).. 2.5 A rental charge of 48 was upheld in the case of Fleaine v. Houston Lichtina s Per C rr..anv, suora. 2.6 Reasonableness of amount is a jury question. Scuthwestern Telephone Co. and Teleorach v. Dallas, 174 S.W. 636,(Tec. Civ. 4p?., ref., 1915); '^.unicioal Gas Cc. v. City of Wichita Falls, 83 S.W.2d 606 (Tex. Civ. Apo., writ disr'd, 1935). 2.7 An ordinance is not invalid merely because it provides for measuring the amount of the rental charge'by a percentage of gross receipts of business transacted by the Company and the City. A 4 %s street rental charge was upheld. F1ainc v. Houston Lighting and Per Company, supra. 2.6 Article 1446c, Section 21, V. .T.S. provides, ''tithing this - act shall be construed as in _,y : ay limiting ._ rights and powers of .a municipality to grant or refuse franchises to use the streets and alleys within its limits and to .raise statutory charges far the use there0 =, but- no prayision of any --- ,.1i Se agreement stall limit or interfere with any power - ' -1' on the Commissi_.. by this act. _ _ 7._. - performs .s V fanc . ^:s t t.is :' -a 72.(e 5_c.. czhe :e _ar -_ De HALTOM CITY TXU- 000658 EXHIBIT • E• 2.9 Article 1446c, Section 55ibl, V.A.T.5., provides " ...subject to the authority cf the coverninc municipality to require any public utility, at its a.a expense, to relocate its facilities to permit the widening cr straightening of streets by giving to she public - utility third days' notice and specifying the new location for the Facilities along the right-of-way of the street or streets." 2.10 McQuillin, Section 34.82, trar.icical Corporations, provides the following explanation regarding the reasonableness of the charge that is adopted to offset the cost cf supervision and regulation: - 5 34.82. --Reasonableness. Primarily, • the amount - of the license fee. imposed on a public servic• company is discre- tionary with the municipality, • and is usually prescribed by the ordinance granting the franchise. Such discretion wi11 not - be interfered with in the absence of fraud or abuse. 50, where not prohibited by statute or otherwise, the amount of the fee may be increased or decreased from time to time. Prima facie, a license fee is reaso- nable, and it devolves on the .public service com- pany to show the contrary.. r caniples of fees upheld are indicated in the'footnote. k license fee is not unreasonable merely because it yields a return in excess of the amount necessary to reunburse the municipality for the costs of supervision and inspection, since the exact cost of supervision is incapable of proof in advance; and hence the municipality way rake the charge large enough to- cover any reasonable anti- cipated expenses, and the charge cannot be avoided because it subsequently appears that it was - scmewhat in excess of the actual cost of super- vision. Furthermore, what is reasonable in one muni- cipality may be oppressive and unreasonable in another. However, the fee is invalid if its amount is so much in excess of that necessary for supervision and inspection that it is clear the fee is one for revenue. Furthermore, license fees may be so crossly excessive as to be deemed arbitrary and unreasonable as a matter cf law. 3. Can the City pass a valid street use ordinance without the a - rival t`:e - _eltehone Car.Ja.^.`.'? - -_ .,. 3.1 In the Case cf FlemInc 'J. iic St.... Celt' _ o +_ sll ra the facts snowed that a cltv accptec a _ r.._. w_tncut 3 street rent-- and s - el cr' - HALTOM CITY TXU- 000657 EXEIBIT 'E" range fixing a 4% street rental not consent. The ca.'narr_ was upheld. utility obviously ___ a5 e1d. 4. If the telephone =many fails to comply with the franchise ordinance, wnat are the legal remedies of the C_ - •,? 4.1 Injunction is an available remedy against use of the streets. City of Texarkana v. Southwestern Telecraoh & Telechone -v 106 S.W. 915 (Tex. Civ. App., 1907); Tnccrpc -ated Ton of Hempstead v. Gulf States. 206 S.W.2d 227 (1947, Tex. Sup. Cc.); west Texas Utilities Caeav v. City of Baird, supra, Hooks Telephone Company v. Tsar, or Leary, supra. 4.2 If City does not take steps to - enforce street use charge provi- sion, it can be regarded as interpretation that payment is not required; City can be estopoed to maintain action for collection. . Fort Worth Gas v. Latex Oil &- Gas 299 S.W. 705 (CCA 1927, writ ref'd). However, it is not estopped from revoking the license within a reasonable tire. State ex rel. City of Jasper - v. G,;,+;; States Utilities Co., 189 S.W.2d 693 (1945, Tex. Sum. Ct.). 4.3 Upon expiration of a franchise, if a city does not desire to extend the franchise, the State of Texas, in a quo warranto pro- ceeding through the Attorney General, can carpel the utility to remove its facilities from the streets of the City, Texas-Ned Mexico Utilities Camanv v. City of Teague, 174 S.W.2d..57 ( CA 1943, writ ref'd want of merit). 4.4 The obstruction of City streets by placing telephone poles without authority from the City is a violation of Penal Code, Article 784, is a public nuisance as a =ratter of law, and is negligence per se. Alpine Telephone Corcaration v. McCall 184 5.W.2d 830, (S.C. 1944). 4.5 General Telephone rancanv of the Southwest v. City of Point Comfort, (CCA - 1977, no writ). The court said that even if Ctty has vested contractual right, PURA does not destroy t rights of the Cities, but does take away the district court's jurisdiction to adjudicate the question. The court said that ?URA conferred jurisdiction to adjudicate the question upon the can - mission. 4.6 The City can seek declaratory judgment with re to the franchise. Southwestern Bell Telephone Co. v. City of Pert Arthur, 491 S.W.2d 187 (Beaumont Civ. App., n.r.e., 1973). 4.7 With regard to these matters over which the P.U.C. has jurisdic- tion, such as rates, it has exclusive jurisdiction. The courts do not have any original jurisdiction. Gen. Tel. Co. of Southwest v. City of Pe_r_ _or, 552 S.W.2d 888 (Tex. Civ. kop., 1977). Can a City unil_-___w_y a..._.._ cr repeal an ext=,inc s 5.1 Texas Power o Liont Carman v. C_tv of Garland, 431 S.W.,2d ___ ,Tex. :760), A city does h„- possess power to _men .. a :._,his_ or H.ALTOM CITY TXU 000'853 EXHIBIT "E" prohibit its _1111 exercise, _hough .: at all t.rn s reserves ewer of ordinary control, meaning rea=_onapie exercise of its police powers. The court disc:=sed e sty cf Baird case, which held that a franchise Was a property r __ l - and could not be impaired, subject to the per reserved to the City to reasonably However, a City may bind itself by a franchise 5o long as it does not surrender or contract away its police powers or governmental powers. The rights to use the present and future streets of the City of Garland cannot be altered by legislation, unless the ordi- nance has a reasonable relationship to the protection of public health, safety, morals or welfare. The provisions of the ordi- nance which were destructive of franchise rights rather than regu -. latory in nature were void. 5.2 The franchise fee or investigation charge once approved in the franchise agreement is contractual and cannot be amended or repealed by one party without agreement of the other party.' With regard to these contractual provisions, the City has not surren- dered police or governmental posers. Southwestern Bell Telephone Co. v. City of port Arthur, 491 S.W.2d 187 (Tex. Civ. App., n.r.e., 19737. 6. Are there any limitations to the terms and conditions or other orin- cioles of law that snould be considered in the adoption of a franchise ordinance? 6.1 Article 1, Section 17, of the Texas Constitution, which prohibits an "irrevocable or uncontrollable grant of special privileges or unnlunities," would probably prohibit a franchise with an indefi- nite term. 6.2 Same City charters set forth a list of conditions which are sup- posed to be deemed to be a part of the franchise agreement. In the City of Jacksonville v. General Telephone Conran of the Southwest, S.W.2d (Tex. Civ. App. -Tyler 1976, ref'd n.r.e.), it was held that a provision retarding payment of certain expenses was waived when not contained in the franchise agreement. Therefore, it would be prudent to ensure that such charger provi- sions are expressly contained in the franchise agreement. 6.3 The Texas Supreme Court has held that the grant of an exclusive franchise constitutes a monopoly, which is prohibited by Article 1, Section 26, of the Texas Constitution. Ennis waterworks v. City of Ennis, 144 S.W. 930 (Tex. 1912). 6 4 ka a result of the holding in tne City of Corpus Christi .. Southern Community Gas Co., 368 S.W.2d _44 (Tex. Civ. =co. - Jan ?n tcnio 1963, ref'd n.r.e.), which the: Ender 1436b, r 1. 5. a gas utility is i-c from held the: _ recen and _ne street rental :n.. oe for - e.. (1C) years 'ter an _ _ annexed, it , .Gu1d be oen ='__c -:._ to _ludo in tne franchise agreement _ provision stating that the terms of- the franchise, HALTOM CITY TXU- 000639 EXHIBIT "E" i nc1uding5 the street rental, will automatically apply to utility in newly annexed areas ..::cn the effective date of annexation. - - da 6.6 Stahl v. Miller, 63 S.W.2d 579, e any obligation (Texx. Civ. App. _ franchise 1933, writ ref'd). Nei rray impose obiner bane r,:1e charter nor _ranchise zgagreement ^- a s cn the City which conflicts with laws of the state. the 6.7 Requiring the utility to pay relocation cost is a reasonable regulation and valid. State v. Citv of Austin,' 331 S.W.2d 737, (Tex., 1960). 6.8 City passed an ordinance requiring General to connect with lieensed radio common carriers. The ordinance was held- invalid 'cause of Article 1429, which says that rio telephone company shall be carzelled to receive from the wires and lines of another telephone company and transfer and convey the message to its final- destination if the message originates at any point on the line of the company being requested to interconnect. O. v. General Telephone Connanv (CCA - 1964, writ ref'd n.r.e.). 6.9 The jurisdiction to issue a certificate of necessity and con- venience, as distinguished from-the use of the streets, rests with the P.U.C. and not the City. Southwestern public Service v. Public Utility Commission, 578 S.W.2d 507 (Austin Civ. App., n.r.e., 1979). 6.10 Since the City has exclusive dominion and control over its streets, and since the basic purpose of the street is to fac_li- - tate and expedite travel and transportation of people and not for the purpose of public utilities, and since the public utilities are subject to reasonable regulation by the city, county or state, it is the duty of the public utility to bear the cost of removing and relocating its lines in connection with the reconstruction and improvement of the street. Benbrook water and Serer Authority v. City of Benbrook, 653 S.W.2d 320 (Tex. Civ. App. - Ft. worth, 1983, no writ). HALTOM CITY TXU- 000660 ] Id** MUNICIP FRANCHISE OF E TEXAS UTILITIES ELECTRIC for the period of January, 1982 to December, 1991 PREPARED FOR CITY OF WATAUGA MAX WIESEN, AUDITOR 0, 0 7 TEL' -w AT a C-1 000257 TABLE OF CONTENTS EXECUTIVE SUMMARY 3 AUDIT PURPOSE AND SCOPE 4 FRANCHISE EVALUATION 4 GENERAL INFORMATION 5 AUDIT FINDINGS 6 Customer Coding 6 Revenue Calculation 6 Additional Franchise Fee 7 Interest 8 Supplemental Information 9 CONCLUSION 11 INDEX TO WORKING PAPERS 12 - 2 - TXU - waTAL 000258 EXECUTIVE SUMMARY The results of the audit for the reports filed for 1982 through 1991 indicated: 1. All receipts were included in the franchise payment except receipts from the account, 'Miscellaneous' Service Revenue.' These receipts include charges for returned checks, reconnection fees, special meter readings, demand usage reports, disconnect charges in connection with transfer of service, etc. The addi- tional franchise fee due the city is $12,199.26 plus interest of 2,872.53 (thru April 16, 1992) for a total of 15,071.79 (Schedule 1). 2. No errors were noted in the coding of customers to your city. Additionally, we have provided the staff of the City of Watauga a list of recommendations which, if used in the future, may assist you in improving your cash flow and assure that all required revenue accounts are included in regard to the Texas Utilities Electric ordinance. - 3 - TXU- WATACC:a 000259 AUDIT PURPOSE AND SCOPE A franchise compliance audit of Texas Utilities Electric was performed in accordance with the LETTER AGREEMENT dated September 11, 1990 (Exhibit A). The audit :cvered the reports filed for 1982 through 1991. The objectives of our audit were: (1) to determine whether Texas Utilities Electric correctly coded customers to Watauga if the service address is within your city limits and (2) to determine if all gross revenue received from the sale of electricity is included in the calculation of the franchise fee. FRANCHISE EVALUATION ORDINANCE #1 was passed and approved by the City Council of Watauga on November 15, 1958 granting Texas Electric Service Company and its successors (Texas Utilities Electric) the right to use the public right of way to furnish and supply electricity to the general public for a period of fifty years. In return, Texas Utilities Electric agreed to pay a franchise fee equivalent to two (2) percent of the gross revenue received from the sale of electricity. Specifically excluded from the computation of the franchise fee were revenues from the sale of electricity to Federal, State, municipal, industrial and other consumers exempt from federal taxation. The ordinance was amended on February 10, 1962 removing the exemption from the sales of electricity to Federal, State, - 4 - TXU W>TAUG.k 000250 municipal, industrial and other consumers exempt from federal taxation. The ordinance was amended a second time on February 9, 1965 increasing the street reriai charge from two percent (2%) to three percent (3 %). The payment is due by the fifteenth (15th) day of March on receipts for the previous calendar year. A copy of the original ordinance and amendments are included as Exhibit B. GENERAL INFORMATION Texas Utilities Electric has several operating divisions - Dallas Power and Light, Texas Electric Service Company and Texas Power and Light providing energy service to residential, commer- cial, industrial and governmental organizations. One division, Texas Electric Service Company, provides service to Watauga and other cities in Tarrant county. Texas Utilities Electric has established company wide procedures for assigning service loca- tions to cities. This coding scheme is the basis for all tax and financial reporting purposes. - 5 - TXC -waT“C 00021 AUDIT FINDINGS Customer Coding: The procedures of Texas Utilities Electric were reviewed to determine whether a service location within your city limits was correctly coded to Watauga. The audit procedure involved selecting, on a test basis, streets that continued into an adjoining city to determine if any additional service locations should have been coded to Watauga that were coded to an adjacent city. No errors were noted in classifying customers to Watauga. Revenue Calculation: A review of the revenue reported from 1982 through 1991 (Exhibit C) shows an increase in revenue each year except from 1985 to 1986. Discussions with company personnel revealed that the decrease in revenue was the result of a fuel cost adjustment. No errors were noted as a result of this decrease in revenue from 1985 to 1986. The Federal Energy Regulatory Commission, Department of Energy has established a uniform chart of accounts for all public utilities subject to the provisions of the Federal Power Act (18 CFR 101). Texas Utilities Electric uses this system of accounts along with internally developed sub -codes to account for revenue. A copy of the revenue accounts is included in Exhibit D. The following financial records were used to determine whether all revenue accounts were included in the computation of gross revenue from the sale of electricity: - 6 - TXU -W s.T &U%.a 000262 1. RR370 Street and Alley Rental Work Lists 2. RR10 12 -Mos Revenue Summaries 3. F & 0 Financial & Operating Reports The documents list revenue generated by city. The Street and Alley Rental Work List is the report that is used primarily by Texas Utilities Electric to compute the fee due to a city. The Revenue Summary lists by city all revenue account classifica- tions of service and company developed sub - categories. The Financial and Operating report classifies the city's revenue by company defined geographic area. Texas Utilities Electric has included in the franchise base the following revenue accounts: 440 RESIDENTIAL SALES 442 COMMERCIAL AND INDUSTRIAL SALES 444 PUBLIC STREET AND HIGHWAY LIGHTING 445 OTHER SALES TO PUBLIC AUTHORITIES 446 SALES TO RAILROADS AND RAILWAYS 447 SALES FOR RESALE 448 INTERDEPARTMENTAL SALES 449 OTHER SALES 449.1 PROVISION FOR RATE REFUNDS 450 FORFEITED DISCOUNTS Additional Franchise Fee: Ordinance #1 requires a payment of a fee based on the gross revenue from the sale of electricity within the city limits. -7- T X 2 -w &1'- LC.. 000263 A careful analysis of your ordinance reveals that the apparent intent of your city council was to permit Texas Utili- ties Electric to use your public right of ways to provide energy service to the general public and in return, your compensation would be based on Texas Utilities Electric's operations within the city limits. Unless a class of customer (none specified) or specific receipt category (none specified) is specifically to be excluded from the franchise computation, all revenue accounts representing services necessary in furnishing an adequate supply of electric energy to customers should be included in the revenue computation. Texas Utilities Electric did not include in the gross revenue from the 'sale of electricity' computation, account number 451 - MISCELLANEOUS SERVICE REVENUES. These charges repre- sent revenue for services associated with providing 'energy' to customers. Included in this account are charges for returned checks, reconnection fees, special meter readings, special reports, disconnect charges in connection with transfer of services, etc. The charges in this account represent RATE M- MISCELLANEOUS SERVICE CHARGES as defined in TARIFF FOR ELECTRIC SERVICES (Exhibit E ). Interest: The Ordinance does not contain a provision for the payment of interest. Therefore, under Texas law, interest at the rate of six (6) percent per annum beginning thirty (30) days from and - 8 - TXU -w&T (1 000271 after the time when the sum is due and payable. (See Vernon's Ann.Civ.St. art. 50 69- 1.03.) Based on the exclusion of account 451 MISCELLANEOUS SERVICE REVENUE from the franchise fee calculation an additional amount of $12,199.26 plus interest of 2,872.53 (thru April 16, 1992) for a total of 15,071.79 is due as a result of this audit. Supplemental Information: In addition to examining your ordinance and the applicable revenue accounts, the regulatory environment that Texas Utilities Electric operates within was also considered. Texas Utilities Electric is a public utility producing electricity subject to regulation by the 'Public Utility Regularity Act' (ART.1446c, V.A.C.S.). Since electric light or power is produced, they are also subject to the 'Miscellaneous Gross Receipts Tax' (Texas Tax Code, Chapter 182). The COMPTROLLER OF PUBLIC ACCOUNTS is charged with the responsibility for compliance auditing of the PUBLIC UTILITY COMMISSION GROSS RECEIPTS ASSESSMENT TAX ( "PUC Tax ") and the MISCELLANEOUS GROSS RECEIPTS TAX ( "Miscellaneous Tax "). Accord- ing to COMPTROLLER's Rule 3.513 (Exhibit F) the Public Utility Commission Tax is based on "Rates" and "Gross Receipts" subject to the Commission's regulation. The ruling is very broad in scope. There are no equivalent published rulings for the Miscel- laneous Tax. Texas Utilities Electric officials stated that they include Account 451 MISCELLANEOUS SERVICE REVENUE in the PUC Tax - 9 - TXU -W T >UG> 00028 computation; however they stated accounts 450- FORFEITED DISCOUNTS and 451- MISCELLANEOUS SERVICE REVENUE are excluded from the Miscellaneous Tax computation. - 10 - TYU -W TaIGa 000 ^_h5 CONCLUSION Texas Utilities Electric interpretation of 'supplying electricity' in the franchise agreement is improperly limited. The company has, without consulting the City, chosen which of its revenue accounts should be included in the franchise fee base. Texas Utilities Electric is excluding from the franchise computation a certain revenue account which could fall within the meaning of 'supplying electricity' appearing in your franchise agreement. The additional revenue as defined by the Federal Energy Regulatory Commission is contained in account '451 -- MISCELLANEOUS SERVICE REVENUE.' This account should properly be included and franchise fee paid on it. TXC -% kr sA 000267 INDEX TO WORKING PAPERS REFERENCE DESCRIPTION PAGES SCHEDULE 1 SCHEDULE OF ADDITIONAL FRANCHISE FEES 1 EXHIBIT A LETTER AGREEMENT 2 EXHIBIT B ORDINANCE #1, as Amended 4 EXHIBIT C SUMMARY OF REVENUE REPORTED 3 EXHIBIT D FEDERAL ENERGY REGULATORY COMMISSION OPERATING REVENUE ACCOUNTS 4 EXHIBIT E TARIFF FOR ELECTRIC SERVICE 4 EXHIBIT F COMPTROLLER OF PUBLIC ACCOUNTS RULE 3.513 1 EXHIBIT G RECOMMENDATIONS 3 - 12 - TXU -W aT \CG a 90022268 SCHEDULE 1 Account 451 - MISCELLANEOUS SERVICE REVENUES YEAR ACCT -451 FRANCHISE ADJUSTMENT INTEREST TOTAL (1) FEE RATE (2) 1982 $20,853.00 .03 $ 625.59 $337.82 $ 963.41 1983 26,300.00 .03 789.00 378.72 1,167.72 1984 35,391.25 .03 1,061.74 445.93 1,507.67 1985 46,062.00 .03 1,381.86 497.47 1,879.33 1986 48,501.00 .03 1,455.03 436.51 1,891.54 1987 43,801.00 .03 1,314.03 315.37 1,629.40 1988 42,863.00 .03 1,285.89 231.46 1,517.35 1989 40,338.00 .03 1,210.14 145.22 1,355.36 1990 46,680.72 .03 1,400.42 84.03 1,484.45 1991 55,851.98 .03 1,675.56 0.00 1,675.56 TOTALS $12,199.26 $2,872.53 $15,071.79 (1) From FEDERAL ENERGY REGULATORY COMMISSION: Account 451 - MISCELLANEOUS SERVICE REVENUE. This account shall include revenue from all miscellaneous services and charges billed to customers which are not specifically provided for in other accounts. (2) Interest at 6% begins 30 days after due date (March 15). Computed thru April 16, 1992. TXU WATUG 0002 ^9 September 11, 1990 TU Electric 2341 N. Main St. Fort Worth, Texas 76106 ATTN: Dick Elkins Dear Mr. Elkins: Sincerely, V�8 i R. Anthon Mayor City of Watauga C Ir OF 'NAT A UOA EXHIBIT "A" 7101 WHITLEY ROAD * WATAGA, TEXAS 761411 * 117) 2112047 At the regularly scheduled council meeting on August 27, 1990 the City Council of the City of Watauga voted to retain Audit Compliance Corporation (ACC) to perform franchise compliance audits of all City of Watauga franchises. The purpose of the audit is to assure the City that all agreements having to do with franchise fees payable to the City from the respective franchise entities are in compliance with existing contracts. This letter is to advise you that Audit Compliance Corporation is an official agent of the City of Watauga, Texas and as such should be granted all assistance available pursuant to individual contract language in its efforts to conduct the said audit. You will be contacted in the near future by Randall S. Boyd of 123 North Elm Street, Denton, Texas, phone #817 -382 -2586, to se: up the necessary framework for the audit. Thank you for your cooperation in this endeavor. TXC AT V.•C a 0002 ?0 EXEI3:: Ordinance No. AN ORDINANCE WHEREBY THE TOWN OF WATAUGA, T". AS, AND THE TEXAS ELECTRIC SERVICE COMPANY AGREE THAT THE TEXAS ELECTRIC SERVICE COMPANY SHALL CONTINUE TO ERECT AND MAINTAIN ITS ELECTRIC LIGHT AND POWER LINES WITH ALL NECESSARY OR DESIRABLE APPURTENANCES (INCLUDING UNDERGROUND CONDUITS, POLES, TOWERS, WIRES AND TRANSMISSION LINES) AND THE TOWN GRANTS ITS CONSENT FOR THE USE OF ITS PRESENT AND FUTURE STREETS, ALLE.S, HIGHWAYS, AND PUBLIC GROTThDS IN SAID TOWN, UNDER REGULATIONS AND RESTRICTIONS AS STATED THEREIN AND THAT THE TOWN OF WATAUGA, TEXAS, SHALL RECEIVE AN ANNUAL PAYMENT FOR SAME, ALL AS S. PROVIDED. BE IT ORDAINED BY THE BOARD OF ALDERMEN OF TEE TOWN OF WATAUGA, TEXAS: Section called "Town' hereby grantstits consent its pre- sent and future streets, alleys, highways and public grounds by Texas Electric Service Company, its successors and assigns, herein called "Company," for the purposes of constructing, maintaining and operating in, along, under and across the present and future streets, alleys, and public places of the Town of Watauga, Texas, and its successors, electric light and power lines, with all necessary or desirable appurtenances (including underground conduits, poles, towers, wires and transmission lines, and telegraph and telephone lines for its on use) for the purpose of supplying electricity to the said Town, the inhabitants thereof and persons and corporations beyond the limits thereof, for light, heat, power and other purposes; said consent being granted for a term of fifty (5c) years from the date this Ordinance is adopted and approved. Section 2. Poles or towers shall be so erected as not to unreasonab y interfere with traffic over streets and alleys. Section 3. Company's property and operations in the To shall be subject to such regulation by the Town as may be reasonably necessary for the protection of the general public. Section 4. Company shall hold the Town harmless -1- TKU -WTV, A 000271 EXHIBIT "S" from all expense or liability for any act or neglect of the Company hereunder. Section 5. In consideration of the grant of said privilege and franchise by the Town and as full payment for the privilege of using and occupying the streets, alleys, highways, easements, parks and other public places within the Town, and in lieu of any and all occupation taxes, ease- ments, and franchise taxes whether levied as an ad valorem, special or other character of tax), and in lieu of license and inspection fees or charges, street taxes, street or alley rentals and of all other taxes, charges, levies, fees and rentals of whatsoever kind and character which the Town may impose or hereafter be authorized or empowered by law to levy and collect, excepting only the usual general or special ad valorem taxes which the To is authorized to levy and impose upon real and personal property, the Company (Texas Electric Service Company and its assigns) shall pay to the Town of Watauga, Texas, annually and on or before March 15 of each year during the term hereof, beginning March 15, 1959, an _ amount equivalent to two (2) per cent of the gross revenues received by the Company, its successors and assigns during the preceding year from sales of electricity within the corpo- rate limits of said Town, exclusive of sales to federal, state and municipal customers and exclusive of sales to industrial and other customers excluded from taxation under the provisions of the regulations of the Treasury Department of the United States, Article 40, Regulations 42 as amended by TD 4393, September 20, 1933, TD 4570, July 24, 1935, and TD 4751, July 21, 1937, irrespective of whether or not said regulations and decisions have been or shall be repealed, amended or changed. On or before the 15th day of March of each year a report shall be filed with the Town by the Company showing its gross revenues as aforesaid for the preceding calendar year, and the payment made hereunder shall be based upon said report. Section 6. Nothing herein contained shall ever be held or construed to confer upon the Company exclusive rights or privileges of any nature whatsoever. Section 7. This ordinance shall be cumulative and in addition to the other permits and franchises granted and ordinances owned, held or claimed by the Company provided, however, that all ordinances or parts of ordinances that conflict herewith are hereby repealed. TXU -a aT \UGA — 000272 :.xi -:B:: - 3' Section 8. This ordinance shall not become effective until the Company has accepted the same in writing. Said acceptance shall be given to the To by the Company within 30 days after final passage hereof. ADOPTED AND APPROVED this the , A. D. , 19 7- S . ATTEST: Town Secretary ' STATE OF TEXAS COUNTY OF TARRANT -3- J day of ,Mayor of the Town of/Watauga, Texas 1 , I `' 1 J •� -• •, Secretary of the Town of Watauga, Texas, hereby certify that the foregoing is a true and correct copy of Ordinance No. / , whereby the Town of Watauga, Texas, and the Texas Electric Service Company agree that the Texas Electric Service Company shall continue to erect and maintain its electric light and power lines with all necessary or desirable appurtenances (including under- ground conduits, poles, towers, wires and transmission lines) and the Town grants its consent for the use of its present and future streets, alleys, highways and public grounds in said Town, under regulations and restrictions as stated therein and that the Town of Watauga, Texas, shall receive payment for same, all as therein provided. WITNESS MY HAND AND SEAL, this the J day of '7 ,. (, . , , 19 _ Secretary 0', the Town of Watauga, Texas ..L Tt[ -lV aT Vi r. 000273 1 1 1 1 1 1 1 1 :AGREE THAT THE TEXAS ELECTRIC SERVICE COMPANY SHALL CONTINUE TO 111 ERECT AND MAINTAIN ITS rszcapac LIGHT AND rawin LINES WITH ALL _NECESSAPZ OR DESIRABLE APFURTZNANCES (INCLUDING UNDERGROUND CONEC POLES, TOWERS, WIRES AND TRANSMISSION LINES) AND THE TOWN GRANTS ITS Gentlemen: 1 1 ATTEST: EXHIBIT "B" TEXAS ELECTRIC SERVICE COMPANY FORT WORTH. TEXAS TO THS HOINORiAB.E MAYOR AND ALDERMEN TOWN C? WATAUGA WATAUGA, TEXAS COPY - November 24, 1958 Referring to Ordinance No. 1 entitled "AN ORDINANCE WFLRE.3Y THE TOWN OP WATAUGA, TEXAS AND THE TEXAS ELECTRIC SERVICE CC.MPA:Iy CONSENT FOR HE USE OP ITS PRESENT AND FUTURE STREETS, ALLEYS, HZG:;_ WAYS AND PUBLIC GROUNDS IN SAID TOWN, UNDER REGULATIONS AND 1 RECEIVE AN ANNUAL PAYMENT FOR SmE, 'ALL AS THEREIN PROVIDED," adopted by the Town of Watauga, Texas, on the 15th day of November, A. D. 1958. 1 This is to evidence acceptance by TEXAS ELECTRIC SERVICE COMPANY of said Ordinance and the terms thereof. WITNESS THE HAND AND SEAL OP SAID CORPORATION this the 24th day of November, A. D. 1958. RESTRICTIONS AS STATED THEREI'ii AND THAT THE TOWN OP WATAUGA SHALL TEXAS ELE By CE CC!PA.NY ones, resicen; TXL- WATALGa 000274 TO THE HONORABLE MAYOR AND BOARD OF ALDERMEN TOWN OF WATAUGA, TEXAS Gentlemen: EXHIBIT "B" TEXAS ELECTRIC SERVICE COMPANY FORT WORTH, TEXAS COPY FILE ;3 February 10, 1952 Reference is made to your Ordinance No. 1, adopted and approved on the 15th day of November, 1958, and partitrslarly to Section 5 thereof which ��elatee to the payment by this Company to the Tow of a aura equivalent to two per cent (2, °0) of the Jroae revenues received by thin Company, its aueCessors aid assigns; during the preceding year from Bales of electricity j *ithin the corporate limits of said Town exclusive of sales to federal, state . and rnusicip:l customers and exclusive of sales to induct ia1 and other Eustomera exclndzd from taxation under the provisions of the regulatians of the Treasury Department of the United States, Article 40, Regulations 42, was amended by TD 4393, September 20, 1933, TD 4570, July 24, 1935, and TD 4751, July 21, 1937, This is to advise that this Company hereby waives the exclu3iona just above mentioned to the end that future payments will be equivalent to two per cent (2%) of the gross revenues received by the Company, its successors and assigns, during the preceding calendar year from sales of elec within the corporate limits of said Town. In all other respects Ordinance No. 1 shall remain in full force and effect until it terminates by itn own terms. If the above and foregoing in acceptable to you, please indicate in the space provided below, thus making a binding agreement between ua. TOWN OF WATAUGA, TEXAS / By Mayor Date - TEXAS ELECTRIC SERVICE COMP By President TXU- WATALC 00027.5 Gentlemen: EXHIBIT "B" T1FWAS IEitEvin ,zj §Eav lE nn L :w:;3E.? F eCCwu. r,IHC■ HONORABLE MAYOR AND BOARD OF ALDERMEN TOWN OF WATAUGA, TEXAS Reference is made to your Ordinance No. 1 adopted and approved on the 15th day of November 1958, and particularly to Section 5 thereof, as modified by letter dated February 10, 1962, which relates to the payment by Texas Electric Service Company (Company) to the Town of Watauga (Town) of a sum equivalent to two per cent (2 %) of the gross revenues received by Company, its successors and assigns, during the preceding calendar year from sales of electricity within the corporate limits of Town. This is to advise that future payments will be equivalent to three per cent (3 %) of the gross revenues received by Company, its successors and assigns, d uring the preceding calendar year from sales of electricity within the corporate limits of Town. In all other respects said Ordinance shall remain in full force and effect until it terminates by its own terms. If the above and foregoing is acceptable to you, please indicate in the space provided below, thus making a binding agreement between us effective as of January 1, 1965. ACCEPTED: .J - 9 - , 1965 TOWN OF WATAUGA, TEXAS By. Z. v >, Title Very truly yours, TEXAS ELECTRIC SERVICE COMPANY President February 9, 1965 TXU a : s, 00027 EXHIBIT "C" TU ELECTRIC LOCAL GROSS RECEIPTS TAX CITY OF WATAUGA 1982 -1989 TOTAL MISC SERVICE TAXABLE PAYMENT REVENUE REVENUE REVENUE AMOUNT (A/C 440-451) (00 318) YEAR -TO -DATE 12/31/82 4,302.723.99 20,853.0 4,281,870.99 128,456.13 YEAR -TO -DATE 12/31/83 4,965.787.98 26,300.00 4,939.487.98 148,184.64 YEAR -TO -DATE 12/31/84 6,452.654.47 35,391.25 6,417.263.22 192,517,90 YEAR -TO -DATE 12/31/85 7.191,644.20 46,062.00 7,145,582.20 214.367.47 YEAR -TO -DATE 12/31/86 7,006,496.10 48,501.00 6,957,995.10 208,739.85 YEAR -TO -DATE 12/31/87 7,812,906.63 43,801.00 7,769,105.63 233,073.17 YEAR -TO -DATE 12/31/88 8,333.768.82 42,863.00 8,290,905.82 248,727.17 YEAR -TO -DATE 12/31/89 8,673,023.37 40,338.00 8.632.665.37 258,979.96 TOTAL 54,738,985.56 304,109.25 54.434.876.31 1,633,046.29 D.MCWILLIAMS 19—Oct-90 TX!: - w &T.>LC.> 000277 II • MI MN • OM MI r MI S• Oa i NM r MO MN OM M JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC RR0410 972.27704 53127429 621.21021 584.410.59 67 ,153.30 025.75095 1.108.3111.67 651.01907 1,173,886.35 917.577.16 603.746.13 673,284.53 RR 96901 975.002.84 036.09129 626.10121 589 767.59 677.20729 026.767.95 854 657.07 1.179.716.35 9213808.16 600.121.13 679,00653 RR 606 DIFF 2.72500 3.617.00 3.591.00 4.34700 3.11800 3.01700 000 3.630.00 6.280.00 6.092.00 6,37500 5.72000 MISC. REV 2.725.00 3.017.00 2591.00 836700 3.116.00 3.01700 000 3838.00 6.280.00 6.092 00 6.376.00 5.72000 • I • 000 0.00 000 0.00 0.00 000 0.00 0.00 0.00 000 000 000 TAX PAYMENTS RR 6610 972,27700 531,276.39 621,210.21 584,610.50 676.153.39 025750.95 1.108.301.87 851.019.07 1.172685.35 917.577.16 603.760.13 573.286 53 3% TAX 29.160 31 15,838.23 18030.31 16.63222 20.22800 11.772.53 35.051 66 25,53857 35.204.50 27.527 31 18.112.38 17.196.56 TOTAL PAYMENT @ 3 -15 -91 278.297.12 CITY OF WATAUGA LOCAL GROSS RECEIPTS TAX 1990 MACY LAMB 11- Apt -92 MN MI OM NM SW - I NM M r- I• N ON r ■I NM NI TAX PAYMENTS TOTAL PAYMENT @ 3 -15-92 312 560.18 CITY OF WATAUGA LOCAL GROSS RECEIPTS TAX 1991 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC RR 4410 1.104. 02023 665.595.99 68062914 03467771 653,075.77 830.28004 1,128.90677 1.149.663.36 1,080741 -13 625,747.57 974,49644 79032011 RR 6690, 1. 108. 26823 1170.620.99 085.120.56 639,062.71 05768077 93406503 1,133,12627 1,154,296.30 1,066.061.13 930,313.90 079,720.40 704,165.11 FIR 804 DIFF 4,240 CO 5.13500 4,99001 4,305.00 4.90500 4,584 99 4,220.00 4,41500 6.34000 4,56642 622466 3,64500 MISC.RE V. 4,24000 5.13500 4690.61 4,365.00 4,005.00 4,584.99 422600 4,41500 5,34000 4,568.42 5224.96 3.84500 000 0.00 000 0.00 0.00 0.00 000 0.00 0.00 0.00 000 000 RR 6410 1.104 028 23 665,685.99 660.92694 634.677 71 653.075.77 830.280 04 1.128006 77 1.149.683.30 1,010,741.13 625,74767 674,495.44 790.320 11 366 7A5 33,120 88 25,970 58 20.424 00 19.040 33 19.59227 24,908.40 33.887 20 34,49860 32,422.23 24.77263 20234.88 23,700 60 MACY LAMB 11- Ap, -92 Federal Energy Regulatory Commission Retained Earnings Accounts 433 Rulanee transferred from income. This account shall Include the net credit or debit transferred from income for the year. 436 .appropriations of retained earning.. This account shall include appro. prlations of retained earnings. trews 1. Appropriations required under terms of mortgages. preen of courts. contracts. or other agreements. 2. Appropriations required by action of regulatory authorities. 3. Other appropriations made at option of utility for speclf lc purposes. 433 Dividends declared— preferred stork. A. This account. shall include amounts declared payable out of re• tamed earnings as dividends on actual. ly outstanding preferred or prior lien conical stock ISSued by the utility. 13. Dividends shall be segregated for each class and series of preferred stock 1.1 to those payable In cash. stock, and other forms. If not payable in cash, the medium of payment shall be de- scribed with sufficient detail to identi. fy it. 435 Dividends declared —common stock. A. This account shall include amounts declared payable out of re. tamed earnings as dividends on actual- ly' outstanding common capital stock issued by the utility. Ei. Dividends shall be segregated for each class of common stock as to those Sayable In cash. stack and outer norms. If not payable in cash. the nudn410 of payment shall be deserlucd w1 111 suf hcient UClall to ulcntl(y• IL. 139 .Adjustments to retained earnings. A. This account shall, with prior Commission approval. include sigrilfl. 2alit nonrecurring transactions lie. counted for as prior ucrlo1 adjust- ments. as follows: ( ) Correction of an error In the fi• aane4:ll statements di a prior year (2) Adjustments that result :rem re• ah2allon of income tax benefits of pre. Cqulanlon operating loss carry(er., 'x'a CCl:t ul i1ur4113seu 544341±1144)75. EXF.IBIT "D" Part 101 All other hems of profit and loss rec• ognizcd during a year shall be includ- ed In the determination of net income for that year: Ei. Adjustments. charges. or credits due to losses on reacquisition. resale or retirement of the company's own cap- ital stock shall be included In this ac. count. (See account 210. Gain on Resale or Cancellation of Reacquired Capital Stock. for the treatment of gains.) 0p•reIine a Chen e4 a 1. Suss or E,0ctllelrr 440 Resldentlsl sales. 442 CommerCla1 and Industrial sales. 444 Public street and highway Written. 445 Otncr sales to public authorities Maier only). 446 Sales to railroads and railways IMalor 0041'). 447 Salt•t for resale. 449 Interdepartmental sales. 449 Other sales 4Nonmalur only). 449.1 Provision for rate refunds. 2. Ochre 0400.0180 Revenues 450 Forfeited discounts. 45 1 Miscellaneous service revenues. 453 Sales of water and water power. 454 Rent from electric property. 455 Interdepartmental rents 456 Other eleetne revenues. Operating Revenue Accounts 4 10 Residential soles. A. This account shall include the pct billing for electricity supplied for resi- dential or domestic purposes. El. Records shall be maintained so that the quantity of electricity sold and the revenue received under each rate se4l0Wlle shall be readily avail. chic. Not5: \YI,en eleotrlC11 l' Sunnlied llsrouali a sin,le met 1r ,s used 10e both rvstc1.1.1a4 and Cominl•rr,al ntirb0ses. the 10131 revenue 11113) Or included III 4)140 14001101. or 0 0014411 4:2. Comml•rr:al and Industrial Sales. ac- earalne In the rate Srhellulc which IS an- m4., 1 I 1)10 same rate sclICnuieS soon' 10 111 .i .L' t0 ednlnlCrcial 0110 Industrial - ...GCatW❑ 411011 uc 1 :laue 1000r0- u, Iasi use. 112 ( and industrial gala. :. .,s account shall include the net 1 ter 0l43!13e144 5130311014 Le 0115. TXL W&T -LUG .A 0021280 Port 101 EXHIBIT "D" tamers for commercial and industrial purposes. I3. Rccords shall be maintained so that the Quantity of electricity sold and the revenue received under each rate schedule Shall be readily avail- able. Records shall be maintained also so as to show separately the revenues from commercial and Industrial cus- tomers 111 which have demands genes ally of 1000 kw or more. and (21 those which have demands generally less than 1000 kw. Reasonable deviations above or below the 1000 kw demand are permissible In order that transfers of customers between the two classes during the year may be minimized. Noire A: If the utility classifies large corn. mcretal and industrial customers and relat• cif revenues on a lesser Oasts than 1000 kilo. watts of demand. or segregates Industrial customers and related revenues according to a recognized definition of an industrial cus• tamer. such classifications are acceptable In lieu of those otherwise regwred by the text of th13 account On the boas of 1000 kilo- watts of demand. Nose El: When electricity supplied through a single meter is used for both corn• =coal and residential purposes. the total revenue snail be included in this account. Or to account 440. Residential Sales. according to the rite schedule which s applied. 11 the same rate schedules apply to realden1lal to to commercial and industrial sconce. clash. (Icahn. shall be made according l0 the prtn• opal use. 444 Public street and highway lighting. A. This account shall Include the net billing for electricity supplied and services rendered for the purposes of lighting streets. htghways, parks and other public places. ar for traffic or outer signal system service. for rnu• nicipalilies or other divisions Or agen- cies of state or federal governments. r3. Records shall be maintained so that the quantity of electricity sold and the revenue received from each customer shall be readily available. In a:ldlli1n. cite records shall be main• Lamed so O5 LO show the revenues Irom (11 contracts whtch include both elec• 'trimly and services. and 121 contracts which include sales of electricity only. II. tither sales to public aulh.rities (,.hi/or onlyl. A. This account shall include the net billing for electrical' supplied to mu- 18 CFR Ch. I (4 -1 -88 Edition) nicipalitics or divisions or agencies of federal or state governments. under special contracts or agreements or service classifications applicable only to public authorities. except such reve- nues as are includible in accounts 444 and 447. 13. Records shall be maintained so ss to show the quantity of electricity sold and the revenues received from each customer. 411 Soles to railroads and railroads (Major only). A. This account shall include the net billing for electricity supplied to rail. roads and interurban and street rail. ways. for general railroad use. Irtclud• ing the propulsion of ears or Iocomo. Lives. where such electricity is supplied under separate and distinct rate sched. ules. 3. Records shall be maintained so that the quantity of electricity sold and the revenue received from each customer shall be readily available. Noir: Revenues from Incidental use of electricity furnished under a contract for propulsion Of ears Or locomotives shall oe Included herein. i • 117 Sole, for resale. A. Thu account shall include the net billing for electricity aupplted to other electric utilities or to public autlori• tics for resale pllrpOSeS. H. Records shall be maintained so ss to show the quantity of electricity sold and the revenue received from each Customer. Note: Revenues from electricity supplied t0 other public utilities for use ur them and not tor distribution. shall be included to a• count 442. Commercial and industrial Sales. unless supplied under the same contract as and not readily separable from revenues in. 51001b1e in tills account- Ill Interdepartmental ides. .5. This account shall Include amounts charged by the electric de• part:I:en: at tariff or other specified rates (or e1CC: rIClty suPPilcd el IL La other shitty at partmcnts. 3 Records shall be maintained so t':'.: the quantity of e1CCLrICtty' 5110' vac:: other department and toe TXl: -w &T.&LC.■ 000281 irderol Energy Regulatory Commission agrees therefor shall be readily at able. In fll her sales INonmajnr only 1. A. This account shall include rove• noes for electricity supplied which are not provided for elsewhere. 0. Records shall be maintained so as to show the quantity of electricity sold 0010 111c reecllitcs received from each customer. 10.1 I'rneiaiun for rate refunds. A. This account shall be charged with provisions for the estimated pretax effects on net income of the Portions of amounts being collected subject to refund which are estimated to use required to be refunded. Such Provisions sisal) be credited to Account :39. Accumulated Provision for Rate Refunds. B. This account shall also be charged with amounts refunded when sues amounts had not been previously sccrued. C. Income tax effects relating to the amounts recorded in this account shall cue recorded in account 410.1, Provision for Deferred Income Taxes. Utility Operating Income. or account 411.1. Provision for Deferred Income Taxes_ Credit. Utility Operating income, as appropriate. 1511 Forfeited discounts_ This account shall include the (mount of discounts forfeited er addi. uonal charges imposed because of the (allure of customers to pay their elec. Inc Dills on or before a specified date. 131 Miscellaneous service revenues. This account shall include revenues for ail miscellaneous services and enargcs billed to customers which are 0101 specifically provided far in other accounts. ITEMS 1. Fees for eh:Inform. connecting or ellseon• ecrnte. , :'ruht 0101 rnallltellance of :enhances. Gins, stem: or otirer Instaltatlons on cua- b oars nremue'a. :. Nut crrdlt nr drill( (cost 10.0s net .snlvaee 1110 Ito p:t ynirnt Irmo cu..Wow,, 011 010, In( 01 '.014 orders for plant instance for zmnorary aervie01 of I,._, sun one year. •Sot leebant 105. Temporary Yacilnlcs.) EXHIBIT "De Port 101 4. Rrrncery of ranenses In connection :Atli current uiverslon cues (billing for the electricity consumed shall be Included in the .appropriate gigs(rte revtotte account). 153 Sales of water and water power. A. This account 310011 include rove• sues derived from the sale of water for Irrigation. domcstie, industrial or other uses. or for the development by others of water pourer, or for headwa• ter benefits: also. revenues derived from furnishing water power for me- chanical purposes when the invest. rttcnt in the properly used in supply• ing such water or water power Is car- ried as electric plant in service. B. The records for this account shall be kept in such manner its to permit an analysis of the rates charged and the purposes for which the water Was used. 131 (tent frnm electric property. A. This account shall Include rents received for the use by others of land, buildings. and other property devoted to electric operations by the utility. B. when property owned by the util• ity is operated jointly with others under a definite arrangement for ap- portioning the actual expenses among the parties to the arrangement, any amount received by the utility for in• lerest or return or In reimbursement of taxes or depreciation On the proper• Cy shall be credited to this account. Nan: Do not include In this account renu from property constituting an operating unit or system. (See account 412. Revenues from Electric Plant Leueo to Others.) 455 Interdepartmental rents. This account shall include rents credited to the electric department on account of rental charges made against other departments teas. water, 111.1 of the utility. In the ease of prop. erty operated under a definite 0r• rangc:neno to allocate the costs among the de :artmenu using the property'. any re::37ourscrnent to the electric de. nartinent fur interest or return and dcllrecliltion apd Lases shall be cred- ited to this account. TYC -1 ALT tl,G.a 000232 Part 101 EXHIBIT "De 136 Miter electric revenues. This account Shall include revenues derived from electric Operations not Includible in any of the foregoing ac. counts. IL shall also Include In a stew rate subaccount revenues received from oIOeration of fish and wildlife. and recreation facilities whether Oper- ated by the company Or by contract concess1011aire&. such 8s revenues from leases. Or rentals of land for cottage. homes. or campsites. Mao 1. Commission on sale or distribution of electricity of others when sold under rates filed Oy such others. 2. Compensation for minor or Incidental services provided for others such as custom- er 1111135. engineering, etc 3. Profit or loss on sale of material and supplies not ordinarily purchased fdr resale and not tumefied through merchandising and (cubing accounts 4. Sale of steam. but not including sales made by a steamncating department or trarufers of steam under joint facility riper shops. 5. Revenues from transmission of e)eetrtet• ty of WW1 over transmission facilities of the utility. 8. Include In a separate subaeeount reve. hues In payment for rights a30 /or benefits received from others which are realized (nt0uah research. development. and demon. stratiOn ventures. In Lite event the amounts received are so large as to disuse& revenues for the year In which received (5 percent of net income before application of the bene- fit) tae amounts snail be credited to Ac- count 252. Other Deterred Credits. and am. Oruzed by eredlts to this 00 0un4 over a period not 10 eiCeed 8 years. Operation and Meint a Chan el Accounts 1. Power PRODUCTION Eirnnsu A. STCA ! POWCa 0CNC0ATION Operation 500 Operation supervision and engineering 501 Fuel. 502 Steam expenses (Major Only)• 503 Swam from other sources. 504 Steam transferred — Credit. 505 Electric ex007523 (Maier only). 506 Miscellaneous steam power ex re.scs ( Major only ). 507 Rents 508 Operation supplies and expenses i r +or. major 18 CFR Ch. 1 (4 -1 -88 Edition) Maintenance 510 Maintenance supervtslon and 133I01er- Ina (Major only!. 511 t.lamtenanee of structures (Major only). 512 Maintenance of boiler plant (Major only). 513 Maintenance of electric plant (Major on) y). 514 Stautcnanee of miscellaneous steam Want )Major only). 515 Maintenance of steam production Plant Iflonmalor only). t. MuCLUU ruwga CLMCa0TION Operation 511 Operation supervision and engineering (Maior only(. 518 Nuclear fuel expense (Major only). 545 Cnnlants and water (MaIO? only). 520 0n) Stea expenses 1MR10r only). 521 Steam from other sources 1Maior . m 522 Steam transferred — Credit (Major only). 523 Electric expenses IMalor only). 524 Miscellaneous nuclear power 300033es IMalor only). 525 Rents (Malor only). Ala fenanee 528 Maintenance supervision and engineer - Inc thtalor only). 528 Maintenance of structures (Maim only 1. 530 Maintenance of reactor plant Milo- mrut ) Mafnr only). 531 Maintenance of electric plant (Maier only). 532 Maintenance Of miscellaneous nuclear plant (f.tajor only). C. HYDRAULIC roma* DINCMT18N Operation 535 Operation supervision and engineering. 536 (water for power. 537 Hydraulic expenses (Major only). 538 Electric expenses (Maier only). 539 Miscellaneous hydraulic power genera- Lion expenses (Maier only). 540 Rents. 540.1 OOerallon 500Piies and ex0enSH ((tonms)or only). Aratnle3On0r 5i: 1. : alnlenance supervision and engineer. l.Ma)or only). 542 . .inlcnanee or structures (Major 0nn ) 543 Malntenonre of reservoirs. Dams ono a'..410rw'1)1 (40wr only). 544 Y. alnlenance of electric plant (hta(or on,y1. TXL- WATACGA 000283 TEXAS UTILITIES ELECTRIC COMPANt Section Title 2 3 5 OTHER Ghar.e No. Tariff vamm =SIB rr ^E. TARIFF FOR ELECTRIC SERVICE RATE M MISCELLANEOUS SERVICE CHARGES APPLICATION *00110601e to ell Customers serve by the Company. The service enarges listed bola are In addition to any other charges made under Company's Tari! ter Electric Service, and .11 be 4061110 for the aoproor late Condition desert bed, other services not Covered by these Stanaard conditions •Ili oe cnarged oh the Oasts of an estimate for the jbp or the Company's cost. rums and Description Amount Returned Chee5 Charge Is mace for each Customer's cheek returned S 6.00 unpaid by a financial Instlturlon for any 00000n. Reconnect Charge is made when Customer requests reconnection of e lectric service after having mean disconnected In accordance w ltn Company's Tariff for Electric 5erolee. a. 0. Reconnect at meter: I1 During regular working pours 2) Outside regular .arklno hours. Reconnect at pole or SuOsurfa0e Pips: I) During regular working hours 21 Outside regular working hours Field Collection Charge Is made for each trip to Customer's premises for the purpose of collecting an amount due. Meter Reading Out -of -Cycle Charge Is made each 1)555 Customer requests, and Company makes. an our -of -cycle mister reading. a. During regular working Flours 0. Outside regular working moors 00.clal 8111 Form Cnarga Is mace ea0n time Company provides a manually prepared s05c1a1 0111 analysis, State of Tawas Purcnass voucher, or other s0eclal vouchers at Custo'mer's request, An a00I rIOnal Cnarg• of SC.50 Is 0505 omen Con'pany buys Purchase Voucher from tna Srate or Tomes. Section N0. - � Sneer vo. III -0 Effective Date kovamber 13. • 980 Revision I Pege or10 1081 1 - 4001100010 Entire System S 17,00 30.00 S 50.00 90.00 S 7,00 S 25.00 50,10 S .00 TXL WAT.ACG 000284 TEXAS UTILITIES ELECTRIC compAM1 Section Title 6 7 9 OTHER Tariff dame a. Summary report O. Single - channel report c. Multi- Cnellnel report EXHIBIT "E' TARIFF FOR ELECTRIC SERVICE RATE M MISCELLANEOUS SERVICE CHARGES Load Report Charge Is made asen time Company provides suen report. An aedltlOnel c0argo of $30.00 Is made for each set of monthly produced after normal m0ntnly pro - cessing nes peen OOmpleted. A Supplement to the Agreement for Electric Service is reaulred. ElectrIcal Pulse Charge Is made m0nTnly when Customer ✓ and Comeany agrees t0 provide, electrical pulse3 proportional to Custossrls rate Of energy use; provided Customer hes agreed To oily Company for costs associated w lt9 Installing the necessary 50ulpment. The standard installation mst for pulses from a Single kWh meter i3 6300.00; ell ethers are cased on cost estimates of 3DICilic Installations. A supplement to the Agreement for Electric Service Is required. Tampering Charge Is made for uneutnorizSC r.COnneCtlon or orner Tampering .113 Company metering facilities or env 'heir 0, aleCTriC Service by any parson on :.Sromer's pramiSeS K evi- danCe thereof Dy rnomso5ver done a' C.uStomar'5 pramlSee. An additional Charge for The cos of repairs and /or replacement 0* damaged faCIll'las. Installen^ dr01ectiv5 facIIITles ^J re700e- Tion of meter, aria the es 3m0un' of aleCTriC service 9d' recorded Ov , 11 any, Is also made. I Section No. Sneor 00. 111.0 2 El/ective Dare NOvem1Cr 13. 7996 Revision I Pape Orioinal 2 0 _ 933■icaple Enrlre System S 10.00 20.00 30.00 S 6.00 Connectldn and Removal Charges In conjunction with Rider T, Temporary Service Rider. are mac. In addition ro normal Charges for use Of electric service. Charges not Covered ny these standard conditions are charged on the Des's of an engi- neering 5St1Nt5 for TM work reoulred rip provide service. O . Connect and disconnect single phase service and reed a f 16.00 meter already Installed, Including an Account 11119111k :n Charge. O me . Install end rev5 single phase service wires and a meter 70.00 (Cleland Or non0emen0) end read a meter, Including an Account Initiation Charge. c. Install end remove single 09335 service wires, meter and 370.20 transformer (up 10 50 k9A1 On existing pole and reed a meter, Including an Account IniriSrlon Charge. S -0 TXU W'ATALCA 001)283 TEXAS UTILITIES ELECTRIC COMPANY Section Title OTHER Chard• No. 10 larlff Nane Name end Description EXHIBIT "E" TARIFF FOR ELECTRIC SERVICE RATE M UI5CELLANECUS SERVICE CHARGES Disconnection Fee for Transfer of Service Is made even Customer ono Is receiving permanent electric service from Company requests In writing transfer of such service 10 e lectric utility. Prior to disconnecting electric service to trans suCh service to another electric utility, Customer pays Company for all meounts Deed Company. Company issues receipt to GUSTO upon payment of all amounts owed Company w hien Include: s. A disconnect charge to residential customers to remove meter and service based upon the average direct later and vehicle costs of disconnecting Customer. The emerge to 10en1.1.1 Customers for normal Installations Is also 5135.00 but, If special metering faCllitles ere to b• removed, the charge Is Increased to cover MIS additional Cost. b. The total COST of any distribution facilities rendered Idle and not usable •l saehar• on Company's System. based upon the original CoSt of suen facilities less d.OreCletlon and net salvage. C. Charges for electric service 1110091 the date of disconnection. d. Any other Charges applicable under Company's Tariff for Electric Service or Agreement for Electric Service. •, Any other applicable charges. Total Disconnection lee. *Plus applicable emerges under Daragraons 0, 0, d, and e. Recount History Charge Is - ape eat! time aTOmer reduea and Company provides a billing /usage premise ■story or analysis in excess of tn• latest 13 montns. $.colon 0 0, 111 -0 Effective Data NOVemDer '3 Revision 1 gaga Orlalnal 3 0f < ADDIIC•ole Entire System AmO Unt 3 135.00 S 135.00' $ TkL- w.&TaLG.. 000286 Section Title OTHER Charms No. 12 PAYMENT NOTICE TEXAS UTILITIES ELECTRIC COMPANY Tariff Name Name and Description EXHIBIT "E" TARIFF FOR ELECTRIC SERVICE RATE M MISCELLANEOUS SERVICE CHARGES meter Test Charge Is made when a residential Customer reouests and Company performs a meter test and the meter Is found to be within the accuracy standards establlsned by the American National Institute and said meter has peen tested Ore.. vlously on request of Customer .Itnin the pest four yNr period. The cnarge for meter for othar than residential Customers Is bases upon an chimers of the actual expenses Incurred for each test. 15 Account Initiation Charge Is made for processing en a0011Cation for electric lervICe. Otnr Miscellaneous Service Charges are Made ter misCellanSouS services not Covered by the standard Conditions above and are Charged en the balls of an estlmete for the Job or the Company'S Cost. Section No. I Sneer no, 111.0 2 Effective Date November 13. 1941 Revision 1 Page Or ialnal a of 4 Appl leaSi• Entire System Amount S 15.00 lei Existing location, exenpt those Instances Involving only a S 7.00 change In name wherein there Is no change In Ina actual Party responsible for the charges ter eIectrIC service. (51 New location 10.00 14 Collection Letter Charge Is mane for processing a rag' S 15.00 letter desending payment of past due secount$. 15 T Notification Charge IS made t0 recover expenses Incurred S 1,00 /dot. each time a In a master metered facility Is notified of unit either Impending dISCOnneetlon for nonpayment of file electric srvlCe bill Sr for actual disconnection. A5 Oalcuiateo Bills are due vnen rendered and are past due If not oaid within 16 days thereafter. BIAS for nonresidential rata customers are lncraasad 31 It nor pall xitnin 20 days after being renoarsC. Tills rats Is SuoJeCt to the orders of regulatory oodles having jurisdiction ono to tns or p.s'ors Of Company's Tariff for Electric Service. TXU —W AT &UG & 000287 (a) Definitions. EXHIBIT "p" STATE OF TEXAS COMPTROLLER OF PUBLIC ACCOUNTS PUBLIC UTILITY GROSS RECEIPTS TAX RULE §3.513 Tax Rate, Gross Receipts, Exclusions and Rates (1) "Rate" - every compensation, tariff, charge, fare, toll, rental anc classification, or any of them demanded, observed, charged, or collected whether directly or indirectly by any public utility for any service, product or commodity included in Texas Civil Statutes article 1446c, 43(c), and any rules regulations, practices, or contracts affecting any compensation, tariff, charge, fare, toll, rental, or classification. (2) "Gross Receipts" includes receipts from charges for services, pro- ducts or commodities which are supplied or sold to an ultimate consumer. The tax assessment is not imposed on receipts aerived from the sale of products or services which are purchased for resale. (b) Tax Rate. Each public utility within the jurisdiction of the Pudic • Utility Commission is assessed a tax equal to 1/6 of 1.0% of its gross receipts from rates charged to the ultimate customers. (c) Exclusions. Charges which represent taxes or assessments levied on a utility taxpayer, and which are passed on to its customers, remain a part of the rate charged by the utility, and are receipts subject to the .ax. However, taxes which are levied on the consumers, and which are co11ectec by utilities as agents for the taxing authority, are not receipts, and are not subject to the tax. Effective Date: April 19, 1982 Filed with Secretary of State: March 29, Oocument No. 822784 BOB BULLOCK Comptroller of Public Accounts TXU -wAMC:A 000238 EXHIBIT G RECOMMENDATIONS Franchise fee reporting and compliance could be improved in several areas. These recommendations are made based on our observation of the reporting practices currently in effect and are based upon our limited contact with Texas Utilities Electric- ity and your city. 1. A reporting form, similar to the enclosed, could be used to list specific revenue or receipt accounts and the revenue attributable to the operations within your city. They should also be required to disclose new regulatory revenue classifica- tions. 2. General economic conditions would indicate that you will probably receive more revenue in the current year than in previ- ous years because of an increase in population, increased demand for energy and /or higher energy costs. An internal document should be developed to monitor the due date, record the payment and maintain a cumulative history of receipts from Texas Utili- ties Electric. Decreases in receipts could be readily identified and appropriate follow up action taken. 3. Consideration should be given to requiring Texas Utili- ties Electric to make pre- payments of the following year's fee based on a percentage of the amount due for the current year. 4. Similar in concept to the above, Texas Utilities Elec- tric should be required to file reports and remit payment on a TXU- wAT.a[JG.. 000289 quarterly basis. The COMPTROLLER of PUBLIC ACCOUNTS requires that quarterly reports be filed for the Miscellaneous Gross Receipts Tax. These reports could be coordinated with the COMPTROLLER's filing The advantages of receiving cash on a more timely basis rather than requirements. 45 days after the end of the year are numerous. Your city would be earning interest on these funds, while reduc- ing your short -term borrowing. 5. An agreement could be reached with Texas Utilities Electric to permit the city to delay payment of their monthly utility bill without penalty until the franchise fee is received. TXL -W&T UCa 000290 TEXAS UTILITIES ELECTRIC FRANCHISE FEE REPORT FOR PERIOD ENDING FEDERAL ENERGY REGULATORY COMMISSION AMOUNT LESS AMOUNT ACCOUNT DESCRIPTION PER EXCLU- PER BOOKS SIONS ORDINANCE 440 RESIDENTIAL SALES 442 COMMERCIAL AND INDUSTRIAL SALES 444 PUBLIC STREET AND INDUSTRIAL SALES 445 OTHER SALES TO PUBLIC AUTHORITIES 446 SALES TO RAILROADS AND RAILWAYS 447 SALES FOR RESALE 448 INTERDEPARTMENTAL SALES 449 OTHER SALES 449.1 PROVISION FOR RATE REFUNDS 450 FORFEITED DISCOUNTS 451 MISCELLANEOUS SERVICE REVENUE 453 SALES OF WATER AND POWER 454 RENT FROM ELECTRIC PROPERTY 455 INTERDEPARTMENTAL RENTS 456 OTHER ELECTRIC REVENUES 496 PROVISION FOR RATE REFUNDS OTHER RECEIPTS: NEW FERC ACCOUNTS: TOTAL FRANCHISE FEE .03 AMOUNT DUE CITY TXU- wAT:CCA 1()0221