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): April 7, 1994
CENTRAL POWER AND LIGHT COMPANY
(Exact name of registrant as specified in its charter)
TEXAS
(State or other jurisdiction of incorporation)
0-346 74-0550600
(Commission File Number) (IRS Employer
Identification No.)
539 N. Carancahua, Corpus Christi, Texas, 78401
(Address of principal executive offices) (zip code)
(512) 881-5300
(Registrant's telephone number, including area code)
Item 5. Other Events
CPL Rate Cases
New Developments
A scheduling and procedural settlement agreement (Agreement) between
Central Power and Light Company (Company) and the other parties to rate
proceedings primarily related to the South Texas Project (STP) Electric
Generating Station outage was approved April 1, 1994 by a Public Utility
Commission of Texas (Texas Commission) administrative law judge. The Agreement
allows the Company more time to prepare a rate case defending its rates as
reasonable and its earnings as being within established regulatory guidelines.
The Agreement will move the filing deadline for the rate case from April 11,
1994 to July 1, 1994 and the start of the hearings from June 8, 1994 to October
31, 1994.
The Agreement was reached in connection with rate litigation initiated by
several parties seeking to reduce rates due to the STP outage. Both generating
units of STP were shut down in February 1993. Unit 1 has restarted and is
proceeding with power-ascension testing at 90 percent power. Unit 2 is in the
early stages of the restart process, having been reloaded with fuel, and is
scheduled to restart in late May 1994.
The parties also agreed that the Company's existing rates will remain in
effect until the Texas Commission's final order in the case. The other parties
thus agreed not to pursue lower interim rates in an interim rate proceeding. As
part of the Agreement, the Company agreed that any reductions in rates, if any
are implemented as a result of the rate case, would be effective retroactive to
June 15, 1994. The Company also agreed not to seek a base rate increase in the
proceeding. The rate case will be based on a test year ending September 30,
1993.
The Company expects that a Texas Commission decision will occur near the
end of the first quarter of 1995.
The Agreement, filed with the Texas Commission March 31, 1994, was
executed by the Company and each of the eight parties to the proceedings. The
eight parties are: a group of 11 cities in the Company's service area (Cities),
the Texas Commission General Counsel, the Office of Public Utility Counsel
(OPUC), Texas Industrial Energy Consumers, the Lower Colorado River Authority,
Occidental Chemical Corporation, the H.E. Butt Grocery Company and James O.
Bryant, a Company customer.
Background
During December 1993 and January 1994, several of the Cities which
together account for approximately 40% of the Company's base revenues, exercised
their rights to require the Company to file rate cases to determine if its rates
are fair, just and reasonable. The Cities informed the Company that this rate
review was precipitated by the outage at STP, leading the Cities to question
whether STP should continue to be included in the Company's rate base. The
governing bodies of these Cities have original jurisdiction over rates only
within their incorporated limits.
In February and March 1994, certain Cities passed resolutions ordering
the Company to reduce rates by amounts ranging from $73 million to $137
million, if applied on a total company basis. The rate reductions are based
on removal of a portion of STP costs from base rates. The orders only affect
the rates of customers who take service within these Cities' limits. The
Company has appealed all of these actions, and intends to timely appeal any
others to the Texas Commission, which has authority to stay their
effectiveness.
Similar challenges to the Company's rates were filed with the Texas
Commission by OPUC, the Texas Commission General Counsel, and affected
customers (collectively Customer Cases). In its complaint, OPUC has alleged
the Company is overearning by amounts ranging from $16 million to $214
million, if applied on a total company basis, based on a range of returns on
common equity, removal of the investment in STP Unit 2 from rate base and
certain other matters. The Texas Commission has exclusive original
jurisdiction over the rates and services of the Company in the areas outside
municipal limits of cities who retain original jurisdiction.
On March 25, 1994, a Texas Commission administrative law judge
consolidated the Company's appeals of the Cities Cases with the Customer Cases
filed at the Texas Commission.
The Company contends that both units of STP belong in rate base because
STP Unit 1 has returned to service and STP Unit 2 should soon return to service
and because of the long-term benefits nuclear generation provides to customers.
There are no Texas Commission precedents addressing the removal of a nuclear
plant from rate base. The Company's base rates were last set in 1990. Based on
inclusion of both units of STP in rate base, the Company believes it is not
collecting excessive revenues, even when considering market rates of return on
common equity that are generally lower than they were in 1990 when base rates
were last set. If the Company ultimately is unsuccessful in maintaining rates
at their current level, the Company could experience a material adverse effect
on its results of operations or financial condition.
Management cannot predict the ultimate outcome of these rate filings,
although management believes that their ultimate resolution will not have
a material adverse effect on the Company's results of operations or
financial condition.
See the Company's annual report on Form 10-K for the year ended December
31, 1993, for additional information relating to STP and regulation and rates.
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.
CENTRAL POWER AND LIGHT COMPANY
Date: April 7, 1994
By: DAVID P. SARTIN
David P. Sartin
Controller, Secretary and
Chief Accounting Officer