Title
Consider/Discuss/Act on an Ordinance Approving a Negotiated Resolution Between the Atmos Cities Steering Committee and Atmos Energy Corporation, Mid-Tex Division Regarding the Company's 2013 Annual Rate Review Mechanism Filing
Summary
MEETING DATE: October 15, 2013
DEPARTMENT: Financial Services
CONTACT: Rodney Rhoades, Chief Financial Officer
RECOMMENDED CITY COUNCIL ACTION:
· Approve the ordinance.
ITEM SUMMARY:
· The City, along with approximately 164 other cities served by Atmos Energy Mid-Tex Division ("Atmos Mid-Tex" or "Company"), is a member of the Atmos Cities Steering Committee ("ACSC"). On or about July 15, 2013, Atmos Mid-Tex filed with the City an application to increase natural gas rates pursuant to the Rate Review Mechanism ("RRM") tariff renewed by the City in 2013 as a continuation and refinement of the previous RRM rate review process. This is the first annual RRM filing under the renewed RRM tariff.
· The Atmos Mid-Tex RRM filing sought a $22.7 million rate increase system-wide based on an alleged test-year cost of service revenue deficiency of $25.7 million. The City worked with ACSC to analyze the schedules and evidence offered by Atmos Mid-Tex to support its request to increase rates. The Ordinance and attached rate tariffs are the result of negotiations between ACSC and the Company to resolve issues raised by ACSC during the review and evaluation of Atmos Mid-Tex's RRM filing.
· The Ordinance resolves the Company's RRM filing by authorizing additional revenues to the Company of $16.6 million system-wide. For purposes of comparison, this negotiated result is about $11 million less than what ACSC's consultants calculated that Atmos would have been entitled to if Atmos had filed a case under the Gas Reliability Infrastructure Program ("GRIP") rather than an RRM case. The settlement is expected to increase the average residential customer's bill by approximately $0.74 per month and will be a consumption based increase. The residential customer's base rate will not change. An Average Bill Comparison of base rates has been prepared for residential, commercial, industrial, and transportation customers.
· The ACSC Executive Committee and ACSC legal counsel recommend that all ACSC Cities adopt the Ordinance implementing the rate change.
BACKGROUND INFORMATION:
· The RRM tariff was originally approved by ACSC Cities as part of the settlement agreement to resolve the Atmos Mid-Tex 2007 system-wide rate filing at the Railroad Commission. In early 2013, the City adopted a renewed RRM tariff for an additional five years. Atmos Mid-Tex's July 2013 filing was made pursuant to the renewed RRM tariff.
· The RRM tariff and the process implementing that tariff were created collaboratively by ACSC and Atmos Mid-Tex as an alternative to the legislatively-authorized GRIP surcharge process. ACSC has opposed GRIP because it constitutes piecemeal ratemaking, does not allow any review of the reasonableness of Atmos' expenditures, and does not allow participation by cities or recovery of cities' rate case expenses. In contrast, the RRM process has allowed for a more comprehensive rate review and annual adjustment as a substitute for GRIP filings. ACSC's consultants have calculated that had Atmos filed under the GRIP provisions, it would have received additional revenues from ratepayers in excess of $28 million.
· For the first annual filing under the revised RRM tariff, the Company agreed to forgo any change to the residential customer charge. Therefore, for the 2013 RRM, the result of the filing will not increase the residential base customer charge, and the entirety of the increase to the residential class will be applied to the commodity (natural gas consumption) component of rates.
FINANCIAL SUMMARY:
· Franchise revenue from Atmos Gas is about $1 million per year. There will be no significant change in the current revenue.