More on Municipal Rate Case Participation

As reported in the last edition of the Legislative Update, the Texas Railroad Commission (RRC) issued proposed rules this month that would essentially halt municipal participation in gas utility rate cases.  The RRC did so in spite of a clear message from the legislature that the current process is working. 

The RRC has actually proposed two new rules, and the complexity of ratemaking makes it difficult to succinctly convey their harmful effects.  In plain English, the rules are designed to stop cities from keeping investor owned utility rates reasonable. 

Participation by city coalitions on behalf of cities and their citizens have found expenses like the following that utilities tried to make their customers pay for:

  • Hotel expenses of nearly $1,000 per night for executives to stay at a fancy New York City hotel.
  • Tens of thousands of dollars worth of art for the utility’s office.
  • Dinners in New York City, Dallas, and Philadelphia restaurants costing more than $200 per person.  
  • Over $1.5 million in employee "financial incentives."

There’s no reason a private, investor-owned utility shouldn’t pay for things like those listed above.  That’s their prerogative.  The issue is that the company itself (i.e., its shareholders), not the utility customers it serves, should pay for those costs.  It’s unreasonable to ask to raise customer rates to cover that kind of expense, and cities are the first line of defense against such requests.

The comment period on the proposed new rules ends at noon on August 25, 2014.  Detailed information on the proposal, and a link to make online comments, are available at:

Interested city officials can comment on the proposal, but the better course of action for most cities is to contact their legislators with the following message:  Municipal intervention in utility rate cases keeps our utility costs low.  The legislature rejected limits on that participation last session, and a state agency shouldn’t attempt an end run around such clear legislative intent.

The League, along with a number of other organizations, will be submitting comments.

TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.

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