Title
Approving a resolution with the caption reading: a RESOLUTION 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; FINDING THAT THE MEETING COMPLIED WITH THE OPEN MEETINGS ACT; DECLARING AN EFFECTIVE DATE; AND REQUIRING DELIVERY OF THE RESOLUTION TO THE COMPANY AND LEGAL COUNSEL.
Summary
The City is a member of the Atmos Texas Municipalities (ATM). The ATM group was organized by a number of municipalities served by Atmos and has been represented by the law firm of Herrera & Boyle, PLLC through Mr. Alfred R. Herrera. ATM also retained the services of a consulting firm, Utilitech, Inc. represented by Mr. Mike Brosch and Mr. Steve Carver, to assist in reviewing an application submitted by the Atmos Energy-Mid-Tex Division (Atmos) that seeks to increase its rates and change its rates. Herrera & Boyle, PLLC and Utilitech, Inc. have participated in prior rate cases involving Atmos and have extensive knowledge and experience in rate matters affecting Atmos’ rates, operations, and services.
Attached to this agenda item is an information sheet explaining in more detail the history of the processes that have been followed and the proposed settlement agreement.
On about February 28, 2014, Atmos filed its second request to increase rates under the current iteration of the RRM (the “2014 RRM”) and requested a system-wide increase of about $45.6 million, 9.2% increase in revenue. ATM’s consultants’ preliminary assessment indicated that Atmos warranted at most an increase of $26.6 million. A settlement was not reached; the ATM cities denied Atmos’ proposed increase; and, Atmos appealed ATM’s denial of its revenue increase to the Railroad Commission. On appeal Atmos revised its request downward from $45.6 million to $43.8 million. Atmos implemented the full rates on June 1, 2014, subject to refund. The Commission held a hearing on September 3, 2014, and did not issue the hearing examiner’s proposal for decision (“PFD”) until last week on April 28, 2015. The hearing examiner proposed an increase of $42.9 million, only about $860,000 less than Atmos requested.
On February 27, 2015, Atmos submitted an application under the current RRM seeking a additional system-wide rate increase of $28.7 million (“2015 RRM”), which equates to an increase of about 5.6%. After review of Atmos’ application, and of the Railroad Commission’s proposal for decision on the 2014 RRM , ATM’s Special Counsel and ATM’s consultant, Utilitech, Inc., concluded Atmos merited an increase of no more than about $9.1 million. However, ATM’s consultants completed that report without the benefit of the Commission’s PFD for the 2014 RRM. ATM’s Special Counsel and consultants had hoped to have direction from the Commission on many of the disputes that arose in the 2014 RRM resolved so as to inform their analysis of Atmos’ 2015 RRM. If the Commission adopts the PFD for the 2014 RRM, which is the most likely scenario, many of the recommendations supported by ATM will be eliminated or modified. Therefore, ATM’s Special Counsel and consultants’ preliminary findings of a $9.1 million increase, would have to be adjusted to accommodate the PFD issued in the 2014 RRM and would produce an increase closer to about $23 million.
Because of the risks of an unfavorable outcome at the Railroad Commission, ATM’s special counsel advises the ATM cities to accept a settlement increasing rates by about $21.87 million over the current, interim rates Atmos is charging. Because the current rates Atmos is charging have not been approved by either the cities or the Railroad Commission, the City’s action in effect would be to approve an increase for the 2014 RRM filing and the 2015 RRM filing of about $65.7 million, combined, over Atmos 2013 proposed revenues. The Settlement Agreement is appended as “Attachment A.”
Prior City Council Action
The City Council adopted a resolution on May 13, 2014 denying the increase requested in the February 28, 2014 Atmos filing.
Deadline for City Council Action
May 31, 2015
Fiscal Impact
The proposed settlement agreement approves an increase of about $42.9 million for Atmos' 2014 RRM and an increase of about $21.8 million for Atmos' 2015 RRM. Because Atmos has been charging higher rates under the 2014 RRM on an interim basis and subject to refund, the actual increase ratepayers will see from the proposed settlement is an increase of about $21.8 million, which represents an overall increase in revenue of about 4%. The average residential customer would see an increase of $1.14 per month.
Staff Recommendation
Approve the resolution per the ATM recommendation as described on page 3 of 11 of the agenda information sheet.
Drafter
Lauri Gillam
Assistant City Manager