HomeMy WebLinkAbout05703AMENDED
SEPTEMBER 9, 19 91
ORDINANNCE NO. 5703
AN ORDINANCE CONSENTING TO THE TRANSFER OF
FRANCHISE RIGHTS FROM CENTEL CORPORATION TO
UTILICORP UNITED, INC. WITH CONDITIONS
WHEREAS, Centel Corporation ( "Centel ") currently provides
electric utility service to the City of Pueblo and its residents
by virtue of a franchise granted by Ordinance No. 5222, the
duration of which is twenty -five (25) years commencing August 12,
1985; and
WHEREAS, under the provisions of the franchise ordinance,
Ordinance No. 5222, the City reserved the right to consent to any
transfer of the franchise rights and obligations granted to
Centel; and
WHEREAS, the right of consent and approval to transfer was
retained in order that the City could protect its interests and
the interests of its citizens as provided in the franchise; and
WHEREAS, Centel wishes to sell its Colorado operations to
UtiliCorp United, Inc. ( "UtiliCorp ") and in the context of such
transaction has requested consent and approval to the transfer of
its franchise rights to UtiliCorp; and
WHEREAS, the City instituted a proceeding to investigate the
potential effects of the franchise transfer on the City and its
residents and entertained public comment concerning the franchise
transfer at a duly noticed public meeting held on August 21, 1991;
and
WHEREAS, if consent to transfer the franchise is granted, the
City will retain all rights delineated in Ordinance No. 5222.
NOW, THEREFORE,
BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that:
SECTION 1.
The City Council does hereby find and determine:
1. UtiliCorp owns and operates a number of electric and
natural gas utilities in the United States and Canada.
2. Centel and UtiliCorp have entered a sale agreement which
involves the transfer of the Centel Colorado assets either
directly to UtiliCorp or through a subsidiary of Centel whose
stock will be sold to and merged into UtiliCorp, for a price of
approximately $86.8 million, of which $14.5 million is a premium
over net book value.
3. In addition to consent to the transfer of the Centel
franchise, UtiliCorp is required to obtain other regulatory
approvals for the sale of the Centel system. To date, UtiliCorp
has received approval from the Federal Energy Regulatory Commis-
sion, such approval being conditioned upon certain ratemaking
treatment of the premium being paid and the tax consequences of
the transaction. The Colorado Public Utilities Commission has
established Docket No. 91A -159E to review the asset transfer
application filed jointly by Centel and UtiliCorp. By virtue of
Decision No. R91 -1077, Administrative Law Judge Kirkpatrick
recommended the approval of the transfer unconditionally. The
period for the filing of exceptions to Decision No. R91 -1077 is
pending. Approvals have yet to be received from the Kansas
Corporation Commission and the Missouri Public Service Commission.
4. In the context of the municipal consent proceeding and
the pending Public Utilities Commission docket, the City and
UtiliCorp have discussed resolution of the disputed issues. Prior
to the August 21 public hearing the City received a proposal from
UtiliCorp. This proposal was entered as evidence in the record of
the August 21 hearing as Exhibit No. 7. According to Exhibit No.
7, if consent to an assignment is granted UtiliCorp will adopt the
rates and tariffs of Centel and provide electric service in the
same manner as Centel. This commitment conforms to the require-
ments of Decision No. R91 -1077. UtiliCorp further commits to
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retain the Centel retail base rates (residential, commercial and
industrial) for a period of three years from the closing of the
transaction; however, UtiliCorp excepts from this commitment rate
increases associated with regulatory and taxation requirements.
Changes in the electric cost adjustment clause also are beyond the
scope of this commitment.
5. Through Exhibit No. 7, UtiliCorp represents that it will
seek recovery of the $14.5 million premium paid for the Centel
Colorado operations during future rate cases only in instances in
which the acquisition provides measurable benefits to ratepayers.
6. Account balances in the deferred income tax and the
accelerated depreciation accounts currently constitute a credit in
the amount of approximately $14 million. The benefit of these
accounts may be lost in whole or in part to Colorado ratepayers
once this sale transaction between Centel and UtiliCorp takes
place. Through Exhibit No. 7, UtiliCorp represents that it will
not seek a rate increase simply because of any income tax
consequences of the asset sale.
7. UtiliCorp states further that it will retain all
existing employees of Centel but will make no commitment to retain
an equivalent level of employment in Pueblo. Exhibit No. 7 at
page 4.
8. During the hearing held on August 21, Mr. Richard Green,
the President and Chief Executive Officer of UtiliCorp, testified
concerning the terms contained in Exhibit No. 7. Mr. Green
testified that for reasons of prudency UtiliCorp could not
entirely waive the right to seek an acquisition adjustment for the
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premium being paid for the Colorado property. Nevertheless, Mr.
Green did express a willingness to tentatively commit to certain
conditions being placed upon recovery of an acquisition adjust-
ment. Specifically, Mr. Green indicated that UtiliCorp would not
seek an acquisition adjustment corresponding with any cost savings
resulting from the reduction of employment levels, service levels,
or facilities within Pueblo. Further, Mr. Green stated that
UtiliCorp would not seek an acquisition adjustment based upon any
cost savings resulting from the negotiation and execution of a
wholesale power supply contract which is less expensive than the
current Public Service Company wholesale power contract. When
questioned concerning the removal of the word "simply" from the
language UtiliCorp has suggested regarding the tax consequences of
the transaction, Mr. Green responded that in order to ensure the
rate neutrality of this transaction there would be no effect on
rates in the future as a result of the tax consequences of this
transaction. Finally, Mr. Green testified that UtiliCorp would be
willing to honor the reimbursement ordinance enacted by the City,
Ordinance No. 5640, provided the fees and costs associated with
the consultants retained to investigate the proposed franchise
transfer were reasonable.
9. The purpose for which the City of Pueblo retained
consent rights concerning any transfer of the Centel franchise was
to assure itself that the rights granted by the franchise to the
City and its citizens would be protected in the event that Centel
were to transfer its system and obligations to a third party.
Under the terms of the franchise, specifically Article III, §1,
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the franchisee is obligated to provide electric utility service
"at the lowest possible cost." The evidence adduced at hearing,
both before the Public Utilities Commission and during the August
21 public hearing, indicates that Centel may not have met this
obligation when it did not enter into a renegotiated contract with
Public Service Company of Colorado which may have saved Centel
ratepayers approximately $4 million per year. The evidence
suggests that Centel did not enter into the renegotiated Public
Service Company contract because the sale agreement between Centel
and UtiliCorp prohibited Centel from entering into a new wholesale
power supply contract absent approval from UtiliCorp.
10. Based on the record evidence, it is clear that in order
to protect the interests of the City and its citizens under
Article III, §1, as well as other provisions of the franchise, any
approval of the franchise assignment must be conditional. Discus-
sions between the City and UtiliCorp have been ongoing concerning
the formulation of conditions which adequately protect the City
and its citizens yet are acceptable to UtiliCorp.
11. The testimony and responses of Mr. Green to questions
from Council focused on a number of concerns with the commitments
contained in Exhibit No. 7. Some of the statements made by Mr.
Green, although they were not firm commitments, may serve to
create a basis upon which the City may grant approval and consent
in this matter. Accordingly, the conditions listed below
correlate with the requests of the City and explanations received
from Mr. Green to certain of the questions posed by Council and
staff. The City, through this ordinance, will consent and approve
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the transfer of the Centel franchise to UtiliCorp, either directly
or through a subsidiary of Centel, but only upon the conditions
set forth below:
A. UtiliCorp must commit to forego the recovery of any
acquisition adjustment for any costs savings resulting from the
reduction in employment levels or services and facilities within
the City of Pueblo prior to 2001.
B. UtiliCorp must agree to forego any attempt to
recover an acquisition adjustment based upon savings resulting
from the negotiation and /or arrangement of a wholesale power
supply contract which supersedes or replaces the current Public
Service Company contract.
C. The three year rate moratorium on retail base rate
increases will exclude the monthly Electric Cost Adjustment (ECA)
filing, and cost increases associated exclusively with any pros-
pective changes in state and federal legislation, including tax
codes, or mandatory regulatory or accounting requirements
D. In addition to the payment required by Art. VIII,
§2 of the franchise, UtiliCorp and /or Centel must further commit
to reimbursement of the reasonable expenses incurred by the City
in the investigation of the proposed franchise assignment as
required by Ordinance No. 5640.
SECTION 2
The City agrees and UtiliCorp has represented that the
effects of this transfer must be "rate neutral." Council believes
that only through the inclusion of the conditions set forth in
Section 3 hereof will the public interest be protected and the
City and ratepayers held harmless from the effects of this
transaction. The agreement including the terms and conditions for
consent and approval in substantial form are set forth and adopted
herein as follows:
S TIPULATION AND AGREEMENT
UtiliCorp United Inc. ( "UtiliCorp "), Centel Corporation
( "Centel ") and the City of Pueblo, ( "City" or "Pueblo ")
stipulate and agree as follows:
WHEREAS, the City presently receives electric utility service
from Centel, and
WHEREAS, UtiliCorp intends to purchase the Colorado electric
utility assets, business and operations of Centel (the
"Transaction ") and is currently seeking approval of this
transfer of assets under C.R.S. 40 -5 -105 from the Colorado
Public Utilities Commission ( "Commission "), and
WHEREAS, Docket No. 91A -159E is currently pending before the
Commission, the purpose of which is to determine whether the
Commission will approve, under the standards appropriate to
C.R.S. 40 -5 -105, the proposed sale of assets from Centel to
UtiliCorp, and
WHEREAS, the City is a party to Docket No. 91A -159E, and
WHEREAS, the City established separate municipal consent
proceedings for the granting or denial of municipal consent
to the proposed transfer as required by the franchise agree-
ment with Centel, and
NOW, THEREFORE, as a condition to City's consent and approval
of the Transaction and in an attempt to resolve all issues
between the parties with respect to the above -noted matters,
the parties stipulate and agree as follows:
The City will not file exceptions to or otherwise oppose or
seek to appeal Decision No. R91 -1077 as entered in Docket No.
91A -159E.
The City will consent to and approve the transfer of the
Centel franchise to UtiliCorp either directly to UtiliCorp or
through a subsidiary of Centel whose stock will be sold to
and merged into UtiliCorp at the closing of the Transaction
which is anticipated to take place on September 30, 1991.
Immediately after the closing
will adopt the electric rates
and in effect for Centel.
of the Transaction, UtiliCorp
and tariffs currently on file
UtiliCorp agrees to freeze
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Colorado retail base rates for a period of three (3) years
after the closing date and, if UtiliCorp seeks to increase
base rates, will not implement increased base rates until the
expiration of the three (3) year period. This rate
moratorium specifically excludes the monthly Electric Cost
Adjustment filings, and filings to change rates due to
prospective state and federal tax changes and filings to
implement rate changes resulting from prospective mandatory
legislative, regulatory, or accounting requirements which are
beyond UtiliCorp's control.
During the three year rate moratorium, Pueblo agrees not to
file a complaint with the Commission as to the justness or
reasonableness of retail rates charged by UtiliCorp such that
any action resulting from the complaint could cause an
adjustment to rates before the expiration of the three year
moratorium. Pueblo reserves the right to intervene in any
Commission proceedings concerning any rate change, cost
adjustment or other tariff proceedings instituted or filed by
UtiliCorp.
In any future rate case filed with the Commission, if Utili-
Corp should seek rate recovery of any acquisition premium
associated with the Transaction, any such request will be
based upon measurable benefits to ratepayers resulting from
the Transaction. Measurable benefits shall not include any
savings which may result from a reduction in employment
levels, services or facilities in Pueblo prior to 2001 or
from any savings which may result from a new wholesale
purchase power contract which UtiliCorp may negotiate or
otherwise arrange to replace the existing purchase power
contract between Centel and Public Service Company of
Colorado. UtiliCorp reserves the right, however, to submit
to the Commission as a measurable benefit any savings which
may result from UtiliCorp securing a source of power, other
than a wholesale purchase power contract, but only to the
extent that such savings exceed those which would have
resulted from a new wholesale purchase power contract which
could have been entered into by UtiliCorp at that time.
UtiliCorp will not seek a retail rate increase in Colorado
because of the deferred tax and investment tax consequences
of the asset purchase and Transaction so long as the depre-
ciation and investment tax credit normalization rules of the
Internal Revenue Code are not violated.
UtiliCorp will continue with its examination of power supply
options to replace the wholesale power currently purchased
under the contract from the Public Service Company of
Colorado. These options include wholesale purchases, life
extension of existing power plants, demand side management
programs, cogeneration, and construction to interconnect with
other sources of energy. UtiliCorp will select the power
supply which in its judgment will result in the provision of
safe and adequate service to its Colorado customers at just
and reasonable rates. The City reserves all rights to
intervene in any Commission proceeding concerning the power
supply source chosen by UtiliCorp.
UtiliCorp will maintain the existing office and service
facilities in Pueblo, and will continue to offer existing
services through these facilities for a minimum period of
five (5) years. UtiliCorp pledges and agrees that no
existing Centel Colorado employee will lose his or her job as
a result of this Transaction and that such existing employees
will be employed by UtiliCorp at their aggregate salary and
benefit levels in effect on the date of closing or better.
UtiliCorp will appoint an executive liaison to cooperate with
the Cities on economic development. UtiliCorp will also join
and remain actively involved in the local chambers of
commerce and other appropriate economic development organiza-
tions. UtiliCorp will also permit the use of its facilities
(except generation, transmission and distribution facilities)
for economic development activities given reasonable notice
and subject to availability.
UtiliCorp will establish an advisory panel /board comprised of
community and business leaders from Colorado and Kansas
service territories. This panel /board will be designed to
insure that the citizens located in the Colorado and Kansas
service territories have first -hand input into the operations
of the division. The panel /board will be composed of at
least six individuals and three will be from Colorado.
UtiliCorp will make every effort to provide the lowest
possible industrial rates consistent with the Colorado Public
Utilities Law.
UtiliCorp will establish a special engineering and audit unit
within its Colorado operating division. This unit may be
composed of existing employees. During the six months
following the closing of the Transaction, this unit will
conduct an extensive energy audit in conjunction with
personnel from the City, except to the extent that seasonal
usage patterns prevent an effective audit during the
referenced six month period, the audit may be performed
within the next six months period. The purpose of this audit
will be to examine the electric usage of City's governmental
facilities. Site - specific examination of the load centers,
including, for example, pumping and streetlighting facili-
ties, will be conducted. Based upon the data collected and
in coordination with relevant City engineering officials,
UtiliCorp will make specific recommendations as to how the
City can reduce its electric billings through, for example,
scheduling of operations, improved equipment, and efficiency
improvements. UtiliCorp will provide continuing technical
assistance in order to best effectuate the recommendation.
Centel or UtiliCorp will pay Pueblo the sum of $375,000 as
payment for the franchise transfer fee required by Art. VIII,
§2 of the franchise. Centel will reimburse Pueblo the
reasonable costs and expenses of its consultants as required
by Ordinance No. 5640. Documentation supporting such costs
and expenses will be provided prior to payment and the
aggregate amount of such costs and expenses incurred with
respect to the consent and approval of the franchise transfer
and assignment shall not exceed $100,000 for Pueblo and the
cities of Canon City and Florence, Colorado.
Should the Transaction contemplated by the Centel - UtiliCorp
Agreement fail to close for any reason, this Stipulation And
Agreement except the last two sentences of the prior
paragraph shall become null and void, and none of the parties
to this Stipulation And Agreement shall have any obligation
to the other parties under the terms of this Stipulation And
Agreement except Centel shall still be obligated to comply
with the last two sentences of the prior paragraph.
UtiliCorp accepts and agrees to be bound by all the terms,
conditions and provisions of the franchise granted by Pueblo
to Centel by Ordinance No. 5222 (the "Franchise ") and the
Street Lighting Agreement between Centel and Pueblo. If any
provision of this Stipulation And Agreement conflicts with
the Franchise, the provisions of the Franchise shall control.
SECTION 3
Consent and approval is hereby granted to the transfer of
franchise from Centel to UtiliCorp under the terms and conditions
set forth in Section 2 above, consent being effective upon
execution of the above referenced Stipulation And Agreement
incorporating those terms and conditions, but if such Stipulation
And Agreement is not executed within seventy two (72) hours after
the effective date of this Ordinance consent and approval to the
transfer shall be deemed to be and hereby is withdrawn.
SECTION 4
This Ordinance shall become effective immediately upon final
passage. If the Transaction contemplated by the Centel - UtiliCorp
Agreement fails to close for any reason, this Ordinance shall be
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deemed to be repealed.
ATTEST:
C Clerk /
f
INTRODUCED: August 26, 1991
By JOHN CALIFANO
Councilperson
APPROV D:
Pr sident of the City Council
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STIPULATION AND AGREEMENT
UtiliCorp United
( "Centel ") and the City
and agree as follows:
WHEREAS, the City f
from Centel, and
WHEREAS, UtiliCorp
Inc. ( "UtiliCorp "), Centel Corporation
of Pueblo, ( "City" or "Pueblo ") stipulate
resently receives electric utility service
intends to purchase the Colorado electric
utility assets, business and operations of Centel (the "Transac-
tion") and is currently seeking approval of this transfer of
assets under C.R.S. 40 -5 -105 from the Colorado Public Utilities
Commission ( "Commission "), and
WHEREAS, Docket No. 91A -159E is currently pending before the
Commission, the purpose of which is to determine whether the
Commission will approve, under the standards appropriate to C.R.S.
40 -5 -105, the proposed sale of assets from Centel to UtiliCorp,
and
WHEREAS, the City is a party to Docket No. 91A -159E, and
WHEREAS, the City established separate municipal consent
proceedings for the granting or denial of municipal consent to the
proposed transfer as required by the franchise agreement with
Centel, and
NOW, THEREFORE, as a condition to City's consent and approval
of the Transaction and in an attempt to resolve all issues between
the parties with respect to the above -noted matters, the parties
stipulate and agree as follows:
The City will not file exceptions to or otherwise oppose or
seek to appeal Decision No. R91 -1077 as entered in Docket No.
91A -159E.
The City will consent to and approve the transfer of the
Centel franchise to UtiliCorp either directly to UtiliCorp or
through a subsidiary of Centel whose stock will be sold to and
merged into UtiliCorp at the closing of the Transaction which is
anticipated to take place on September 30, 1991.
Immediately after the closing of the Transaction, UtiliCorp
will adopt the electric rates and tariffs currently on file and in
effect for Centel. UtiliCorp agrees to freeze Colorado retail
base rates for a period of three (3) years after the closing date
and, if UtiliCorp seeks to increase base rates, will not implement
increased base rates until the expiration of the three (3) year
period. This rate moratorium specifically excludes the monthly
Electric Cost Adjustment filings, and filings to change rates due
to prospective state and federal tax changes and filings to
implement rate changes resulting from prospective mandatory
legislative, regulatory, or accounting requirements which are
beyond UtiliCorp's control.
During the three year rate moratorium, Pueblo agrees not to
file a complaint with the Commission as to the justness or
reasonableness of retail rates charged by UtiliCorp such that any
action resulting from the complaint could cause an adjustment to
rates before the expiration of the three year moratorium. Pueblo
reserves the right to intervene in any Commission proceedings
concerning any rate change, cost adjustment or other tariff
proceedings instituted or filed by UtiliCorp.
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In any future rate case filed with the Commission, if Utili-
Corp should seek rate recovery of any acquisition premium
associated with the Transaction, any such request will be based
upon measurable benefits to ratepayers resulting from the Trans-
action. Measurable benefits shall not include any savings which
may result from a reduction in employment levels, services or
facilities in Pueblo prior to 2001 or from any savings which may
result from a new wholesale purchase power contract which
UtiliCorp may negotiate or otherwise arrange to replace the
existing purchase power contract between Centel and Public Service
Company of Colorado. UtiliCorp reserves the right, however, to
submit to the Commission as a measurable benefit any savings which
may result from UtiliCorp securing a source of power, other than a
wholesale purchase power contract, but only to the extent that
such savings exceed those which would have resulted from a new
wholesale purchase power contract which could have been entered
into by UtiliCorp at that time.
UtiliCorp will not seek a retail rate increase in Colorado
because of the deferred tax and investment tax consequences of the
asset purchase and Transaction so long as the depreciation and
investment tax credit normalization rules of the Internal Revenue
Code are not violated.
UtiliCorp will continue with its examination of power supply
options to replace the wholesale power currently purchased under
the contract from the Public Service Company of Colorado. These
options include wholesale purchases, life extension of existing
power plants, demand side management programs, cogeneration, and
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construction to interconnect with other sources of energy.
UtiliCorp will select the power supply which in its judgment will
result in the provision of safe and adequate service to its
Colorado customers at just and reasonable rates. The City
reserves all rights to intervene in any Commission proceeding
concerning the power supply source chosen by UtiliCorp.
UtiliCorp will maintain the existing office and service
facilities in Pueblo, and will continue to offer existing services
through these facilities for a minimum period of five (5) years.
UtiliCorp pledges and agrees that no existing Centel Colorado
employee will lose his or her job as a result of this Transaction
and that such existing employees will be employed by UtiliCorp at
their aggregate salary and benefit levels in effect on the date of
closing or better.
UtiliCorp will appoint an executive liaison to cooperate with
the Cities on economic development. UtiliCorp will also join and
remain actively involved in the local chambers of commerce and
other appropriate economic development organizations. UtiliCorp
will also permit the use of its facilities (except generation,
transmission and distribution facilities) for economic development
activities given reasonable notice and subject to availability.
UtiliCorp will establish an advisory panel /board comprised of
community and business leaders from Colorado and Kansas service
territories. This panel /board will be designed to insure that
the citizens located in the Colorado and Kansas service territor-
ies have first -hand input into the operations of the division.
The panel /board will be composed of at least six individuals and
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three will be from Colorado.
UtiliCorp will make every effort to provide the lowest
possible industrial rates consistent with the Colorado Public
Utilities Law.
UtiliCorp will establish a special engineering and audit unit
within its Colorado operating division. This unit may be composed
of existing employees. During the six months following the clos-
ing of the Transaction, this unit will conduct an extensive energy
audit in conjunction with personnel from the City, except to the
extent that seasonal usage patterns prevent an effective audit
during the referenced six month period, the audit may be performed
within the next six months period. The purpose of this audit will
be to examine the electric usage of City's governmental facili-
ties. Site - specific examination of the load centers, including,
for example, pumping and streetlighting facilities, will be
conducted. Based upon the data collected and in coordination with
relevant City engineering officials, UtiliCorp will make specific
recommendations as to how the City can reduce its electric bill-
ings through, for example, scheduling of operations, improved
equipment, and efficiency improvements. UtiliCorp will provide
continuing technical assistance in order to best effectuate the
recommendation.
Centel or UtiliCorp will pay Pueblo the sum of $375,000 as
payment for the franchise transfer fee required by Art. VIII, §2
of the franchise. Centel will reimburse Pueblo the reasonable
costs and expenses of its consultants as required by Ordinance No.
5640. Documentation supporting such costs and expenses will be
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provided prior to payment and the aggregate amount of such costs
and expenses incurred with respect to the consent and approval of
the franchise transfer and assignment shall not exceed $100,000
for Pueblo and the cities of Canon City and Florence, Colorado.
Should the Transaction contemplated by the Centel - UtiliCorp
Agreement fail to close for any reason, this Stipulation And
Agreement except the last two sentences of the prior paragraph
shall become null and void, and none of the parties to this
Stipulation And Agreement shall have any obligation to the other
parties under the terms of this Stipulation And Agreement except
Centel shall still be obligated to comply with the last two
sentences of the prior paragraph.
UtiliCorp accepts and agrees to be bound by all the terms,
conditions and provisions of the franchise granted by Pueblo to
Centel by Ordinance No. 5222 (the "Franchise ") and the Street
Lighting Agreement between Centel and Pueblo. If any provision of
this Stipulation And Agreement conflicts with the Franchise, the
provisions of the Franchise shall control.
IN WITNESS WHEREOF, the City of Pueblo Centel Corporation,
and UtiliCorp United,Inc. have caused this Stipulation And
Agreement to be executed in their respective names by their duly
authorized officers this 9th day of September, 1991.
Pueblo, a Municipal Corporation
2
ATTEST: c By
Ci y Clerk Ti le:President of the ity Council
APPROVED AS TO FORM:
City Atto y
ut ii i I
By
Title
Centel Corpor
By
IL
TJ 55.7 -7-