SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 13, 1996
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-1443 Central and South West Corporation 51-0007707
(A Delaware Corporation)
1616 Woodall Rodgers Freeway
Dallas, TX 75202-1234
(214) 777-1000
0-346 Central Power and Light Company 74-0550600
(A Texas Corporation)
539 North Carancahua Street
Corpus Christi, TX 78401-2802
ITEM 5. OTHER EVENTS
CENTRAL POWER AND LIGHT COMPANY (CPL) RATE CASE
Central and South West Corporation (CSW) and CPL
Background Information
On November 6, 1995, CPL filed with the Public Utility
Commission of Texas (Texas Commission) a request to increase
its retail base rates by $71 million and reduce its annual
retail fuel factors by $17 million. The net effect of these
proposals would be an increase of $54 million, or 4.6%, in
total annual retail revenues based on a test year ended June
30, 1995. CPL is not seeking interim rate relief, but will
implement bonded rates in May 1996, the earliest date
permitted by law. CPL also is seeking to reconcile $229
million of fuel costs incurred during the period July 1,
1994 through June 30, 1995. CPL's previous request to
reconcile fuel costs from March 1, 1990 to June 30, 1994 in
Docket No. 13650 was consolidated with the current rate
review. If the requested increase and other adjustments in
rate structure are approved, CPL will commit not to increase
its base rates prior to January 1, 2001, subject to certain
force majeure events.
CPL is requesting this rate review in large part as a
result of the expiration of the amortization of its Mirror
CWIP liability. The Mirror CWIP liability was amortized to
income in declining amounts over a five-year period from
1991 through 1995 pursuant to rate settlements reached by
CPL in 1990 and 1991. In 1995, Mirror CWIP provided $41
million in non-cash earnings at CPL. Also included in the
request are proposals by CPL to accelerate recovery of
nuclear and regulatory assets as a way to proactively
address certain assets that could possibly be unrecoverable
or stranded in a more competitive electric utility industry.
In a preliminary order issued December 21, 1995, the Texas
Commission expanded the scope of the rate review to address
certain competitive issues facing the electric utility
industry. The competitive issues to be addressed by CPL in
a supplemental filing due April 1, 1996, are (i) the
calculation of rates on an unbundled or functional basis
(i.e., generation, transmission and distribution), (ii) the
current value of CPL's generating assets as compared to
estimates of the market value of such assets under alternate
future industry structures, (iii) the application of
performance based ratemaking, (iv) potential revisions in
the methodology of reconciling and recovering fuel costs and
(v) the Texas Commission's authority to introduce
competition in the electric utility industry under existing
law.
Current Developments
On February 13, 1996, intervening parties filed
testimony in the revenue requirements phase of CPL's base
rate case recommending reductions in CPL's base rates. Among
the parties that filed testimony were the Office of Public
Utility Counsel which recommended a base rate decrease of
approximately $75 million on a total company basis and
cities in CPL's service territory (Cities) which recommended
a base rate reduction of approximately $52 million on a
total company basis. The Texas Commission staff (Staff) and
other parties' recommendations on the fuel portion of the
case are expected to be filed in early March 1996.
On February 20, 1996, the Staff filed testimony
recommending an increase in total company base rates of
approximately $30 million. Certain elements of the Staff's
proposal are described below.
The Staff recommended a return on common stock equity
of 11.35% compared to the 12.25% return on common equity
requested by CPL. The Staff recommended a disallowance of
$16 million in costs billed for administrative services by
Central and South West Services, Inc. (CSWS) to CPL on the
basis that the specific benefits to CPL were not clearly
identified. Additionally, the Staff recommended a $7
million reduction in CPL's current annual depreciation
accrual and a $3 million reduction in CPL's requested
accrual for decommissioning the South Texas Nuclear
Generating Station.
A comparison of the Staff's recommendation for a base
rate increase, compared to CPL's claimed revenue deficiency
is provided below:
Item (millions)
CPL revenue deficiency (1) $103
Return on common equity (21)
CSWS expenses (16)
Depreciation expense (7)
Decommissioning expense (3)
Miscellaneous items (26)
Staff recommended revenue increase (2) $30
(1) The total company rate increase requested by CPL was limited to
$78 million ($71 million allocated to the Texas retail jurisdiction)
pursuant to rate settlements entered into by CPL in 1990 and 1991.
(2) The PUCT Staff recommended that CPL be granted a $23 million
base rate increase and an annual increase of $7 million in customer
service charges.
Rate Case Procedural Matters
After completion of hearings in all phases of the rate
case, which are expected to begin in late February 1996 and
conclude during the third quarter of 1996, the
administrative law judges (ALJs) assigned to hear the case
will issue a proposal for decision for consideration by the
Texas Commission. Testimony filed by parties to the rate
case, including the Staff, is not binding on either the ALJs
or the Texas Commission. A final decision on the rate
request is not anticipated from the Texas Commission prior
to December 1996.
Other Information
Management of CSW and CPL cannot predict the ultimate
outcome of CPL's rate case, although management believes
that the ultimate resolution will not have a material
adverse effect on CPL's or CSW's continuing consolidated
results of operations or financial condition. However, if
CPL ultimately is unsuccessful in obtaining adequate rate
relief, CPL and CSW could experience a material adverse
effect on their results of operations and financial
condition.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized. The signature for each undersigned registrant
shall be deemed to relate only to matters having reference
to such registrant or its subsidiaries.
CENTRAL AND SOUTH WEST CORPORATION
Date: February 21, 1996
By: /s/ Wendy G. Hargus
Wendy G. Hargus
Controller
CENTRAL POWER AND LIGHT COMPANY
Date: February 21, 1996
By: /s/ R. Russell Davis
R. Russell Davis
Controller