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<br />.;:,.-<.. ()~~ <br /> <br />~~-:f-Y ~~:~/)f' Report <br />-<..<v~ ,yjr:< <br />~,r~"~:';:'> <br /><<,,'. <br /> <br />City of San Marcos <br /> <br />on Requested Rate Increase <br />by ENTE~, Inc. <br /> <br />SUMMARY <br /> <br />I <br /> <br />Entex, Inc. has filed with the City of San Marcos a Statement of <br />Intent to increase its rates to the Residential and Small <br />Commercial customer classes. The requested increase in annual <br />revenues of $122,080 would allow the Company a 7.5% rate of return <br />on the adjusted value rate base of $1,335,270 as computed by the <br />Company. The rates requested will require an increase of 12.67% on <br />the Residential customer bills and 10.81% on the Small Commercial. <br /> <br />The City of San Marcos engaged Deloitte Haskins & Sells to review <br />the Company's filing to evaluate the reasonableness thereof. lNe <br />have reviewed the filing and supporting workpapers at Entex's <br />corporate offices in Houston. <br /> <br />I <br /> <br />Our review supports the Company's position that additional rates <br />are justified, but at a level somewhat below that suggested by the <br />Company. Following guidelines from recent Texas Railroad Comnrrssion <br />decisions (including an Entex case) we conclude that conditions <br />reasonably justify an increase of $34,000. This increase would <br />allow the Company a 5.55% rate of return on a fair value rate base <br />of $1,213,017. This amounts to an 11.82% rate of return on tl1e <br />original cost rate base and a 17.5% return on book common equity. <br />This parallels the Texas Railroad Commission's allowance of a 17.6% <br />return on book common equity in Docket No. 710 which involved the <br />Beaumont distribution system of Entex. If applied to the residential, <br />and small commercial classes this allowance would amount to a 3.3% <br />increase in the customers' total bill and a 10.3% increase in base <br />rates. <br /> <br />. <br />