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Item 4K Atmos Resolution 16-027, Approving a negotiated settlement between Atmos Cities Steering Committee (“ACSC”) and Atmos Energy Corp. Mid-Tex Division June 7, 2016 Hello Mayor and members of the City Council. This item requests City Council approval of Resolution 16-027, approving a negotiated settlement agreement with Atmos Energy 1 City of Southlake Strategy Map The City of Southlake provides municipal services that support the highest quality of life for our residents, businesses, and visitors. We do this by being an exemplary model of balancing efficiency, fiscal responsibility, transparency, and sustainability. C1 Achieve the highest standards of safety & security C2 Provide travel convenience within City & region C3 Provide attractive & unique spaces for enjoyment of personal interests C4 Attract & keep top-tier businesses to drive a dynamic & sustainable economic environment C5 Promote opportunities for partnerships & volunteer involvement Serve our Customers Manage the Business B1 Achieve best-in-class status in all City disciplines B2 Collaborate with select partners to implement service solutions B3 Enhance resident quality of life & business vitality through tourism B4 Provide high quality services through sustainable business practices B5 Enhance service delivery through continual process improvement B6 Optimize use of technology Provide Financial Stewardship Promote Learning and Growth F1 Adhere to financial management principles & budget F2 Invest to provide & maintain high quality public assets F3 Achieve fiscal wellness standards F4 Establish & maintain effective internal controls L1 Ensure our people understand the strategy & how they contribute to it L2 Enhance leadership capabilities to deliver results L3 Attract, develop & retain a skilled workforce L4 Recognize & reward high performers L5 Empower informed decision-making at all levels in the organization C6 Enhance the sense of community by providing excellent customer service and citizen engagement opportunities L6 Foster positive employee engagement Deliver on Our Focus Areas This item supports the City’s strategy through the focus area of Performance Management & Service Delivery and through the corporate objective of B2 collaborate with select partners to implement service solutions 2 Purpose Seek City Council approval of the negotiated settlement between Atmos Cities Steering Committee (“ACSC”) and Atmos Energy Corp. Mid-Tex Division The purpose of this item is to seek City Council approval of the negotiated settlement between Atmos Cities Steering Committee (“ACSC”) and Atmos Energy Corp regarding 2016 rate review mechanism filings. The Atmos Cities Steering Committee is a permanent standing coalition of more than 150 Texas cities that has been authorized, through council resolutions, to represent the interests of municipal and residential consumers in gas utility regulatory matters. The ACSC supports safe service at fair prices. 3 Background 2016 Rate Review Filing Filed March 2016 Filing sought $35.4 million rate increase In March 2016, Atmos filed with the City an application to increase natural gas rates pursuant to the Rate Review Mechanism (“RRM”) tariff. The filing sought a $35.4 million rate increase system-wide.    The City worked with ACSC to analyze the schedules and evidence offered by Atmos to support the request to increase rates.   Resolution 16-027 and the attachments are the results of negotiation between the ACSC Executive Committee and Atmos officials to resolve issues raised during the review and evaluation of Atmos filing. The negotiated settlement reduced Atmos’ request by $5.5 million therefore the system-wide rate increase will generate an increase of $29.9 million as opposed to the $35.4 million originally requested by Atmos. 4 Resolution 16-027 Approves rate increase $5.5 million less than original request Monthly residential customer charge increase $0.50 Consumption charge increase .01447 per Ccf Overall increase $1.26 (2.43%) monthly increase for residential customers $3.81 (1.43%) monthly increase for commercial customers Establishes baseline for pensions and other post-employment benefits for future rate cases The approval of resolution will: approves rates that will increase Atmos’ revenues by $29.9 million which is $5.5 million less than original requested by Atmos;  monthly residential customer charge will increase $.50 from current charge of $18.60 to $19.10   consumption charge will increase .01447 per Ccf.   typical residential customer consuming 47 Ccf will see a monthly increase of $1.26 (about a 2.43% increase)   typical commercial customer will see an increase of $3.81 or 1.43% The resolution also establishes the baseline for Atmos pensions and other post-employment benefits for future rate cases..and requires Atmos to reimburse Cities for reasonable ratemaking costs associated with reviewing and processing the rate filings. 5 Requested Action Approval of Resolution 16-027 ACSC Executive Committee ACSC Legal Counsel The ACSC Executive Committee, ACSC legal counsel and consultants recommend that all cities adopt the Resolution approving the negotiated Settlement Agreement resolving 2016 filings and implementing the rate change. The alternative to approval of the settlement agreement would a contested rate case hearing at the Railroad Commission with resulting rate case expenses borne by ratepayers. 6 Questions? Sharen Jackson 817-748-8042 7 Thank you for your time and attention. If you have any questions, please feel free to contact me at the number shown on the screen.