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 2015 Annual Rate Review Mechanism Filing
Summary
COUNCIL GOAL: Financially Sound Government
MEETING DATE: June 2, 2015
DEPARTMENT: Financial Services
CONTACT: Rodney Rhoades, Chief Financial Officer
RECOMMENDED CITY COUNCIL ACTION:
· Approve the ordinance.
ITEM SUMMARY:
· The City, along with other similarly situated 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 February 27, 2015, 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.
· Atmos Mid-Tex filed with the City another rate increase request under the RRM Tariff, seeking additional revenues in the amount of $28.762 million (total system) or $24.0 million (affected cities). The City worked with ACSC to analyze the schedules and evidence offered by Atmos Mid-Tex to support its 2015 request to increase rates.
· The Ordinance and attached Settlement Agreement and tariffs are the result of negotiation between the Mid-Tex Executive Committee and the Company to resolve issues raised by ACSC during the review and evaluation of Atmos Mid-Tex's filing. The recommended Settlement Agreement also requires Atmos to abate its appeal of the City's rejection of the 2014 RRM rate increase pending approval by all ACSC cities of the Settlement Agreement. The Agreement requires Atmos to give the City the benefit of the adjustments to the 2014 rate increase recommended by the PFD.
· The Ordinance and Settlement tariffs approve rates that will increase the Company's revenues by $65.7 million for the Mid-Tex Rate Division, effective for bills rendered on or after June 1, 2015.
· The monthly residential customer charge will be $18.60. The consumption charge will change from $0.08819 per Ccf to $0.09931 per Ccf.
· The monthly bill impact for the typical residential customer consuming 60 Ccf will be an increase of $1.14 (about a 1.59% increase in the base bill). The typical commercial customer will see an increase of $2.69 or 0.96%.
· The ACSC Executive Committee and its designated legal counsel and consultants recommend that all Cities adopt the Ordinance approving the negotiated Settlement Agreement resolving both the 2014 and the 2015 RRM filings, and 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 February 2015 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 its 2015 case under the GRIP provisions, it would have received additional revenues from ratepayers in excess of $10 million.
FINANCIAL SUMMARY:
· Franchise revenue from Atmos Gas is forecasted to be $1.2 million in FY 15.