Title
Approving a resolution 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 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. This increase is the fourth application under the revised Rate Review Mechanism that was approved by all parties in the summer of 2013.
On about March 1, 2016, Atmos submitted its fourth application under the current RRM seeking a system-wide rate increase of $35.4 million (“2016 RRM”), which equates to an increase of about 6.04%. After review of Atmos’ application, the Railroad Commission’s prior rulings, and Atmos’ responses to requests for information submitted to Atmos by ATM’s Special Counsel and consultants, ATM’s consultants concluded that Atmos merited an increase of about $10.8 million. ATM’s Special Counsel presented its findings to Atmos, with which Atmos disagrees. Following negotiations with Atmos, Atmos agreed to an increase of $29.9 million, which equates to an increase of about 5.5%. Options for city action are explained and evaluated by ATM's special counsel on the attached agenda information sheet.
Deadline for City Council Action
May 31, 2016.
Fiscal Impact
Increases to customers as noted in the tariffs attached to the agenda item.
Recommendation
After a series of negotiations with Atmos, ATM’s Special Counsel recommends resolving the 2016 RRM with an increase of $29.9 million.
If the ATM Cities reject Atmos’ settlement offer, Atmos would likely appeal the cities’ decision to the Railroad Commission. While there are a number of contested issues whose outcome is uncertain in an appeal, based on the Railroad Commission’s history and prior decisions, ATM’s Special Counsel and consultants are of the opinion that the Railroad Commission would reach a result not materially different than the settlement amount of $29.9 million, and perhaps approve a higher increase.
Therefore, because of the risks of a litigated outcome, including the cost of litigation at the Railroad Commission, ATM’s special counsel advises the ATM cities to accept a settlement that increases Atmos’ revenue by about $29.9 million over the current revenue Atmos is collecting.
An increase under the 2016 RRM of about $29.9 million over the base-rate revenue Atmos is currently collecting, represents an increase of about 5.5% in non-gas revenue and the impact on rates on an average customer’s bill would be as follows:
|
Customer Class |
Current Bill |
Proposed Bill |
Difference |
% Increase with Gas Cost |
% Increase without Gas Cost |
|
Residential |
$52.01 |
$53.27 |
$1.26 |
2.43% |
5.05% |
|
Commercial |
$267.17 |
$270.98 |
$3.81 |
1.43% |
5.03% |
|
Industrial |
$5,184.05 |
$5,286.77 |
$102.72 |
1.98% |
5.41% |
|
Transportation |
$3,666.82 |
$3,769.54 |
$102.72 |
2.80% |
5.41% |
Drafter
Lauri Gillam
Assistant City Manager