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. to assist in reviewing an application submitted by the Atmos Energy-Mid-Tex Division (Atmos) that seeks to increase 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.
The City of Pflugerville along with the other ATM cities approved a Rate Review Mechanism (RRM) with Atmos for the evaluation of proposed rate changes. The RRM allows ATM to work with Atmos and have an opportunity to review relevant information related to the rate increase request, provides limited rate increase assurance, and reimburses the ATM cities for any cost to do the review. This RRM review is the last one under the current agreement. ATM will be working with our consultants in the next several months to decide what changes we would like to see in a future RRM including altering the return on equity that is a major component of any rate consideration.
The cities have been communicating about the various options available to us since Atmos' initial filing on March 1, 2017. Various options are: accepting the proposed rate increase of $57 million; agree to Atmos final offer of $48 million which is within the range of settlements and in the low end of what the Railroad Commission would likely approve; approve a lesser amount which could cause an Atmos appeal to the Railroad Commission with the cost of the appeal passed onto our ratepayers. Following these discussions, the consensus of the ATM is to accept the $48 million dollar increase. Tables showing the effect of the increase on various customer classes are attached to this agenda item. Detailed information about this current RRM rate filing is also attached. The resolution authorizing this action has a number of attachments comparing rates and providing additional rate setting information. The attached agenda information sheet provides historical ATM data.
Prior City Council Action
On February 14, 2017, the City Council approved a resolution to authorize intervening in the pending rate proceeding at the Railroad Commission as part of the Atmos Texas Municipalities (ATM) coalition.
Deadline for City Council Action
June 30, 2017.
Projected Future City Council Action
The ATM cities will be working with Atmos to initiate a new RRM.
Fiscal Impact
An increase under the 2017 RRM of $48.0 million over the base-rate revenue Atmos is currently collecting, represents an increase of about 8% in a customer’s bill excluding the cost of gas, and an increase of about 3% - 4% including the cost of gas, as shown in the table attached to this item. Although the cost of natural gas is on a declining trend, Atmos' operational costs are increasing.
Staff Recommendation
ATM’s Special Counsel recommends resolving the 2017 RRM with an increase of $48.0 million. ATM cities, including Pflugerville, agree with this recommendation.
Drafter
Lauri Gillam
Assistant City Manager