The following words, terms and phrases, when used in this article, shall have the meanings ascribed to them in this section, except where the context clearly indicates a different meaning:
Allocations.
The division of plant, revenues, expenses, taxes and reserves between cities or between cities and unincorporated areas, where such items are used for providing utility service for more than one (1) city or for a city and unincorporated areas. Examples of items subject to allocation include general office buildings, general administrative expenses and income taxes.
Separation.
The division of plant, revenues, expenses, taxes and reserves, and the amounts thereof, applicable to exchange or local service where such items are used in common for providing utility service to both local exchange service and other service, such as interstate or intrastate service.
(1991 Code, sec. 28-86)
The rules and regulations contained herein shall be and remain in full force and effect as between the city and Lone Star Gas Company and Texas Power and Light Company, hereinafter referred to as “utility.”
(1991 Code, sec. 28-87)
(a) 
Balance sheet and operating statement.
The utility shall file annually with the city clerk a complete balance sheet and operating statement. Such balance sheet and operating statement shall cover the local service area of the utility and shall be appropriate for the city’s use in reviewing local operations and in setting service rates. Such material shall include a statement of the total number of customers by classes served within the city and within the service territory covered by the operating statement; shall cover the fiscal year of the utility unless some other fiscal period shall be approved by the city; and shall be filed within one hundred twenty (120) days after the close of such period. In addition, the utility shall file:
(1) 
Copies of all statistical and operating reports filed with other regulatory agencies such as the Securities and Exchange Commission, and the Federal Power Commission, the state public utility commission, and the state railroad commission;
(2) 
A copy of annual and quarterly reports prepared for release to stockholders;
(3) 
Operating statement for the city or such other service area appropriate for;
(4) 
Such other reports or special information as may reasonably be required by the city for supervision of the utility and for the regulation of local rates and service.
(b) 
Certification.
The city hereby requires that information furnished by the utility to the city be supplied under oath by an appropriate official of the utility as to correctness, authenticity and adherence to accepted practices or recognized standards.
(c) 
Standards.
Reporting standards will be in accordance with the federal and state regulatory agencies.
(1991 Code, sec. 28-88)
(a) 
In fixing the rates of a public utility the city shall fix its overall revenues at a level which will permit such utility to recover its operating expenses together with a reasonable return on its invested capital.
(b) 
The utility shall be entitled to a reasonable return on its capital in property used and useful in service to the public. The rate of return shall be based on the utility’s actual cost of debt capital, a reasonable cost of equity capital, and shall be sufficient to attract capital in the national investment market and to maintain the financial integrity of the utility.
(c) 
The city shall not prescribe any rate which will yield more than a fair return upon the adjusted value of the invested capital used and useful in rendering service to the public.
(1991 Code, sec. 28-101)
(a) 
Adjusted value of invested capital.
“Adjusted value of invested capital” shall be a reasonable balance between original cost less depreciation and replacement or trended cost less an adjustment for both present age and condition.
(b) 
Balance between original cost and replacement cost.
Unless otherwise determined by the city, “reasonable balance” shall mean seventy-five (75) percent weighting of original cost less depreciation and twenty-five (25) percent weighting of replacement or trended costs less adjustment for both present age and condition. The adjustment for both present age and condition shall not be a lesser percentage of replacement or trended cost than book depreciation is for original costs. In the city’s determination of reasonable balance, it may consider inflation, deflation, quality of service being provided, growth rate of service area and need for the utility to attract new capital.
(c) 
Deduction.
In arriving at a rate base, deductions shall be made for:
(1) 
Contributions in aid of construction;
(2) 
Deferred liabilities such as deferred income taxes and investment tax credit;
(3) 
Deposits; and
(4) 
Other customer-contributed capital.
(d) 
Rate base.
When requesting a change in rates the utility shall treat, for rate base purposes, the following items as indicated:
(1) 
Construction work in progress shall not be included in rate base.
(2) 
Plant held for future use shall not be included in rate base.
(3) 
Materials and supplies.
A reasonable balance may be included in the rate base unless funds sufficient for such purposes have been provided by ratepayers through advance payment for service, tax accruals or other means.
(4) 
Working capital.
A reasonable allowance, which shall not exceed one-eighth of cash operating and maintenance expenses for the test period, may be included in rate base unless sufficient funds for such purposes have been provided by ratepayers through advance payment for service, tax accruals or other means.
The city may, in consideration of local circumstances, require or permit by specific action, treatment of the four (4) items enumerated above in such other manner it considers appropriate. The city may include or exclude other items from the rate base for reasonable cause.
(e) 
Aggregate of rate base elements.
The aggregate of all property rate base elements, not including items (d)(1) through (4) enumerated above, shall not exceed one hundred ten (110) percent of original cost undepreciated for those same items.
(1991 Code, sec. 28-102)
(a) 
All reasonable and necessary expenses of operating the utility shall be allowed in the determination of net operating revenue. Expenses included in annual reports or other reports to the city shall be actual expense recorded on the utility’s books. When filing for a rate increase, the utility shall show actual revenue and expense recorded on books and adjustments necessary in order to properly present net operating revenue for the period under review. Depreciation expense shall be based on original cost and not on other measures of value of assets.
(b) 
The city may exclude charitable contributions, advertising expense and other expenses not reasonably related to the utility’s operations. Contributions to civic and charitable groups, lobby expenses and advertising expenses will be listed. Advertising expenses will be separated into expenses for institutional, growth and conservation purposes. The city may also question other expenses and if utility fails to prove that these expenses are reasonable and necessary, then such expenses can be disallowed for rate-making purposes.
(1991 Code, sec. 28-103)
The city shall have the right to select and employ rate consultants, engineers, accountants, auditors, attorneys and other personnel to conduct investigations, present evidence, advise the council and conduct litigation on the establishment of rates, charges or fares; the utility shall reimburse the city for all such personnel costs and all other reasonable and necessary expense incurred; and such rate consultants, engineers, accountants, auditors and attorneys shall be qualified, competent and of good standing in their professions.
(1991 Code, sec. 28-104)
The utility shall file notice of its intent to seek a general rate increase at least thirty-five (35) days before filing of its application. Such notice of intent shall detail proposed increases and shall be published in a newspaper of general circulation in the city during such notice period at the expense of the utility. The company shall include its proposed rates in the two (2) cones cutive billings to its customers after notifying council.
(1991 Code, sec. 28-105)
The city may adopt rules of procedure for public hearings, including extent and nature of presentations, order of proceeding and extent of cross-examination.
(1991 Code, sec. 28-106)
Copies of requested records of the utility shall be promptly provided to any designated representative of the city without cost to the city.
(1991 Code, sec. 28-107)
No general rate increase shall be granted without public hearing at which the utility shall have burden of proving, through clear and convincing evidence, the necessity for such increase. All hearings may be before the full city council. At the discretion of the council, in each case, the council may provide that hearings shall be conducted before a committee of the council, a hearing examiner who may be an employee of the city, any person designated by the city council to act in such capacity, or an independent panel of citizens designated by the council. A record shall be made of all hearings at the expense of the utility. In the event the full council does not conduct the hearings, a written report and recommendation from the committee, examiner or panel shall be filed with the city council together with the record from such hearings. In such latter case, the council need not conduct further hearings, but may act on the basis of such report, recommendation and record together with any written argument which any citizen, the utility, utility representative, designated city staff member, auditor, attorney or consultant engaged by the city may wish to file within fifteen (15) days after filing of such report in response to such report, recommendation and record.
(1991 Code, sec. 28-108)
All testimony at public hearings shall be under oath and all exhibits or documentary evidence introduced at such hearings shall be supported by sworn testimony. For this purpose, oaths may be administered by appropriate parties conducting the hearing.
(1991 Code, sec. 28-109)
The city shall promptly review and take action on each application for a general rate increase within a reasonable period of time after its filing. In the event of such failure to act, the utility may put the requested rates into effect or appeal such decision as provided by law. Such reasonable period of time may be extended through agreement with the utility. Good cause for extension shall include, but not be limited to: complexity or magnitude of the evidence; failure of the utility to promptly proceed; failure of the utility to promptly provide information requested and newly discovered evidence.
(1991 Code, sec. 28-110)
The ordinance of the city shall provide for an effective date of any rate revisions, may require an unqualified acceptance by the utility within a stipulated period as a condition precedent to any rate revisions therein becoming effective, and may provide for a moratorium of twelve (12) months from the date of such ordinance before the next application for a general rate increase within the city may be filed by the utility.
(1991 Code, sec. 28-111)
The utility may appeal any city ordinance under this division as provided by law. The city shall certify as to the validity of the record, ordinance, written arguments, reports and recommendations which were before the city.
(1991 Code, sec. 28-112)
The city may promulgate reasonable standards of service and requirements for extension of facilities. Failure to substantially comply with such standards, considering the revenues and expenses of the utility, may justify a lower rate of return being granted to the utility. The city’s rate ordinance may provide for increases subject to the meeting of such standards or making certain extensions of facilities.
(1991 Code, sec. 28-113)
The city may provide procedures for tariff filings or revisions to rates for services other than basic services which may vary from the above procedures prescribed for general rate increases.
(1991 Code, sec. 28-114)