Title
Approving an ordinance on second reading with the caption reading: AN ORDINANCE BY THE CITY OF PFLUGERVILLE, TEXAS ("CITY"), APPROVING A CHANGE IN THE RATES OF ATMOS ENERGY CORPORATION, MID-TEX DIVISION ("ATMOS") AS A RESULT OF A SETTLEMENT BETWEEN ATMOS AND THE ATMOS TEXAS MUNICIPALITIES ("ATM") UNDER THE RATE REVIEW MECHANISM; FINDING THE RATES SET BY THE ATTACHED TARIFFS TO BE JUST AND REASONABLE, DIRECTING ATMOS ENERGY TO REIMBURSE THE CITY'S RATE-CASE EXPENSES, FINDING THAT THE MEETING COMPLIED WITH THE OPEN MEETINGS ACT; DECLARING AN EFFECTIVE DATE; AND REQUIRING DELIVERY OF THE ORDINANCE TO THE COMPANY AND LEGAL COUNSEL.
Summary
An agenda information sheet describing the negotiating process for this proposed settlement is attached to this agenda item along with specific tariff information. Following the establishment of the rate increase computations by the ATM last summer, the law firm representing ATM, Herrera & Boyle, PLLC, began working with Atmos on a rate settlement. Atmos requested a rate increase of $22.7 million, while ATM data indicated that a rate increase of only $8.5 million was appropriate. At this time, the recommendation for ATM is to approve a settlement amount of $16.6 million. Given the cost of litigation which, more than likely, would be borne by the ATM including the city of Pflugerville, and the risks of an unfavorable outcome before the Railroad Commission of Texas, the proposed $16.6 million is within the range of possible outcomes through the appeal process. This proposed rate settlement is 27% less that the original Atmos increase.
Prior City Council Action
On June 11, 2013, a resolution to establish the basis for rate increase computations for Atmos through 2017 for the negotiations that have led to this proposed settlement was approved by the City Council.
This ordinance was approved on first reading by the City Council on October 22, 2013.
Deadline for City Council Action
The agreed rates will be effective for service rendered on and after November 1, 2013. It is important that the ATM approve the ordinance prior to that date. The ordinance has been written to be effective on first reading and the second reading will be considered at the special City Council meeting scheduled for October 29, 2013.
Fiscal Impact
The fiscal impact to the City of Pflugerville will be equal to a 1.01% increase of the cost of natural gas. Based on payments during the 2012-2013 fiscal year totalling $27,928, the increase would be approximately $282. A typical residential customer would see an increase of $0.74/month which is a 1.75% increase.
Staff Recommendation
Approve the ordinance on second reading as the ATM recommends.
Drafter
Lauri Gillam
Assistant City Manager