Cap Rock Energy Files Rate Case

Cap Rock Energy Files Rate Case 


MIDLAND, Texas, Feb. 25  /PRNewswire-FirstCall/ -- Cap Rock Energy Corporation 
today announced that in response to an order from the Public Utility Commission
of Texas ("PUCT") it has submitted a rate filing package to the PUCT.  The rate
filing contains an application for a rate increase.  The PUCT order compelled
the filing of the application for a rate increase much earlier than the Company
had originally anticipated.  This was due to recent action by the Texas
Legislature which brought the Company under the regulatory authority of the PUCT
for rate purposes.  This special legislation was sponsored by Senator Troy
Fraser and heavily supported and advanced by St. Lawrence cotton farmers Harold
Hoelscher, Rodney Gully, Glen and Mary Marechek, and County Judge W.E. Bednar,
among others, as well as the St. Lawrence Cotton Growers Association, the Texas
Electric Cooperative Association, the Texas Cotton Ginners Association, and the
Texas Farm Bureau.

The Public Utility Regulatory Act ("PURA") originally provided for Cap Rock to
be regulated as an electric cooperative and have its rates set by its Board of
Directors.  In 2003 the aforementioned individuals and special interest groups,
along with others, launchedan aggressive campaign to change the PURA and they
were successful in passing Senate Bill 1280 which was signed into law on June
22, 2003.  S.B. 1280 provided for Cap Rock's rates to be set by the PUCT
effective September 1, 2003.  During those proceedings Cap Rock leadership
testified that the result of such regulation would be an increase, not a
decrease, in rates.

Prior to the passage of S.B. 1280, Cap Rock had operated using rates set by its
board of directors who utilized independent third-party studies in analyzing and
setting rates.  Because regulatory costs are passed on to ratepayers, this
process was very economical and avoided the extremely high cost of the rate
filing process and ongoing cost of regulatory compliance. This more efficient
model also avoided any significant regulatory lag cost. Prior to S.B. 1280, Cap
Rock was positioned to save the ratepayers millions of dollars.

In 2002, Cap Rock converted from an electric cooperative to a shareholder owned
corporation.  As part of the conversion, Cap Rock's then current and former
members had the option of receiving payment of their ownership interest in the
cooperative by electing to receive cash, credit on their electric bill, if they
were a current customer, or stock in the new company.  "We were very pleased
that the vast majority of our former members elected to take stock and remain
shareholders to this day," stated David W. Pruitt, President/CEO and Co-Chairman
of the Board.  "Our stock began trading on the American Stock Exchange on March
14, 2002.  The stock was issued at $10 per share.  It is now trading at over
$32.  We are extremely proud of that."

After taking cash, electricity credit and even stock, a very vocal minority
group of wealthy irrigation farmers began attempting to "unwind" the conversion.
 This group constituted less than 1% of our customers. Ironically, they never
proposed how they would return the money, credit, or stock they received as part
of the conversion.  As leverage, they intervened in Cap Rock's application to
transfer the "Certificate of Convenience and Necessity" or its license to
operate.  This group was unsuccessful in this effort, but delayed the process
for over two years and cost Cap Rock, and hence its customers, millions of
dollars.

Simultaneously this same group and others who they were able to enlist began
efforts to change the law and have Cap Rock's rates set by the PUCT. Desiring to
have all other customer classes subsidize lower rates for them, they adopted the
mantra "Regulate Cap Rock."  They were successful in these efforts and, as Cap
Rock had predicted, the result will be higher rates for all Cap Rock customers.

Cap Rock's rate filing vehemently opposes subsidizing any particular customer
class.  Its proposedrates are based on the cost of providing services to its
various rate classes and a fair rate of return on the investment required to
provide that quality service.

"We will not be intimidated by this small group of wealthy and powerful
irrigation farmers," stated Mr. Pruitt.  "Our rates are going to have to go up,
but we are trying to keep them as low as possible.  These special interest
groups want to use this rate inquiry to change our rates and penalize our other
customers.  We are going to protect our residential and small business customers
from the bullying tactics being used by these special interest groups.  Frankly,
it would be easier and less expensive to give in to this special interest group
and reduce their rates while increasing the rates of people who have far less
ability to fight and garner political support. However, that would not be the
right thing to do.  We will do the right thing and we expect to prevail.  Our
customers, shareholders and employees expect nothing less."

Cap Rock Energy provides electric distribution services to over 35,000 meters in
28 counties in Texas.  Its corporate office is located in Midland, Texas, with
service divisions in Stanton, Colorado City, Brady and Celeste, Texas.  The
Company also provides management services to the Farmersville Municipal Electric
System.  The Company's predecessor, Cap Rock Electric Cooperative, Inc., was
incorporated as an electric cooperative in the State of Texas in 1939.  Cap Rock
Energy Corporation is the first electric cooperative to convert to a publicly
held corporation and the first electric utility to become a public company in
over 60 years.

All statements, other than statements of historical fact included in this news
release are forward looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995.  Any such forward looking statements
involve risks and uncertainties and actual results, performance or achievements
of Cap Rock Energy may be different from those expressed or implied in the
forward looking statements. 

DATASOURCE: Cap Rock Energy Corporation



CONTACT:  Ronnie Lyon of Cap Rock Energy Corporation, [phone], or

 

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