R-2375-2-05RESOLUTION NO. 2375-2-051R)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ALLEN, COLLIN
COUNTY, TEXAS, ENDORSING CERTAIN LEGISLATIVE CHANGES TO
SENATE BILL 7 SUPPORTED BY THE CITIES AGGREGATION POWER
PROJECT, INC.; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City of Allen, Texas (City). has historically been active in the process of regulation of
electric utilities: and.
WHEREAS, the City is a member of Cities Aggregation Power Project. Inc. (CAPP) and, as such, made a
decision to join with more than 78 other cities to switch its deregulated municipal electric accounts from its
incumbent provider to a retail electric provider. and.
WHEREAS, CAPP's experience with the deregulated market and contracts with several different retail
electric providers has indicated that the Texas electric retail market has failed to develop into a truly
competitive market as envisioned by Senate Bill 7 in part because congestion zones within the Electric
Reliability Council of Texas (ERGOT) market have allowed certain market players to control enough
generation capacity within a given zone to exercise market power to the detriment of customers and non-
affiliated retail electric providers; and.
WHEREAS, retail electric price competition has not successfully reached residential customers in Texas
communities with populations less than 40.000: and.
WHEREAS, the formula established by Senate Bill 7 to determine the amount to be paid to cities for
electric franchise fees is based upon information from 1998 and fails to account for any increases to keep up
with inflation, impacting municipalities revenue and budgets; and,
WHEREAS, the Public Utility Commission of Texas is considering implementing a nodal market design in
ERCOT that would, as currently contemplated, directly assign congestion costs in a manner that will create
winners and losers among geographic areas of the state and harm economic development in areas receiving
congestion cost surcharges; and,
WHEREAS, the City endorses efforts proposed by CAPP to modify the electric deregulation legislation to
improve competition, implement the original intent of Senate Bill 7. and reduce costs to the City and its
residents.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ALLEN,
COLLIN COUNTY, TEXAS, THAT:
SECTION 1. The following legislative reforms endorsed by CAPP to limit market power, prevent cost
shilling between geographic areas of the state. create effective citizen aggregation, and permit annual
adjustments to municipal franchise fees be supported by the City to:
Require that ERCOT function as one zone or limit the ownership and control of generation within
functional markets (ERCOT zones) and require further Commission action to mitigate market control.
• Authorize citizen aggregation projects that will permit cities and towns with populations less than
' 40.000 to aggregate the load of all of their residents that have not specifically asked to be excluded
from the aggregation project. Changing citizen aggregation from "opt -in- to "opt -out' will enhance
the opportunities for rural residential customers to benefit from deregulation and benefit the entire
state by increasing competition.
• Tie escalation of electric franchise fee amounts to the Consumer Price Index by permitting
municipalities to annually adjust franchise fee amounts by one-half of the annual change to the
' Consumer Price Index, mirroring a provision already in law for telecommunications franchise fees.
Oppose any cost allocation system of nodal pricing costs that would directly assign congestion costs
in a manner that is detrimental to economic development. CAPP and South Texas Aggregation
Project (STAP) question whether ERCOT is capable of handling the massive operational change that
creating a nodal market would require and whether the projected benefits are worth the approximately
$500 million up -from costs to implement. However, if nodal pricing is instituted then congestion
costs should be spread to the entire ERCOT service area rather than increasing electric costs for
customers in certain regions of Texas.
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SECTION 2. A copy of the resolution shall be sent to the elected lawmakers representing the City's
interests in the Texas House and Senate and to the Chairman and Legal Counsel of the Cities Aggregation
Power Project.
SECTION 3. This resolution shall take effect immediately upon its passage.
DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF ALLEN, COLLINN
COUNTY, TEXAS ON THIS THE 22`1) DAY OF FEBRUARY, 2005.
Approved:ZV f (�j�/9
T
Stephen Terrell, MAYOR
APPROVED AS TO FORM:
Peter G. Smith, CITY AVTORNEY Shelley B. GeorgY, TRMC, CITY,4ECRETARY
Resolution No. 2375-2-04R) Page 2