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Item 4BM E M O R A N D U M August 27, 2019 To: Shana Yelverton, City Manager From: Sharen Jackson, Chief Financial Officer Subject: Resolution No. 19-036, Approving a negotiated settlement between The Atmos Cities Steering Committee and Atmos Energy Corp., Mid-Tex Division regarding the 2019 Rate Review Mechanism Filing; declaring existing rates to be unreasonable; adopting tariffs that reflect rate adjustments consistent with the negotiated settlement Action Requested: Approval of Resolution 18-036, approving a negotiated settlement between Atmos Cities Steering Committee (‘ACSC”) and Atmos Energy Corp. Mid-Tex Division. Background Information: 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. Mid-Tex Division (“Atmos”) regarding 2019 rate review mechanism filings. • April 1, 2019, Atmos filed an application seeking a rate increase. The City, along with over 171 other cities served by Atmos, is a member of the ACSC. This group of cities worked on a settlement agreement with Atmos regarding the rate increase. • Resolution 19-036 and the subsequent attachments are the results of negotiation between the ACSC Executive Committee and Atmos to resolve issues identified during the review and evaluation of Atmos filing. • The proposed settlement agreement for Council approval does the following: o Approves rates that will increase Atmos’ revenues by $35.4 million which is $18.6 million less than original requested by Atmos in the rate request:  monthly residential customer charge will increase $0.72; Item 4B Page 2 of 2  consumption charge will increase .02577 per Centum cubic feet (Ccf.).  A typical residential customer will see a monthly increase of $2.05 (about a 3.7% increase).  A typical commercial customer will see an increase of $6.18 or 2.31%. o Establishes the baseline for Atmos pensions and other post-employment benefits for future rate cases. o Requires Atmos to reimburse Cities for reasonable ratemaking costs associated with reviewing and processing the rate filing. The ACSC Executive Committee, ACSC legal counsel and consultants recommend that all cities adopt the resolution approving the negotiated settlement agreement resolving 2019 filing and implementing the rate change. Financial Considerations: None Strategic Link: B2: Collaborate with select partners to implement service solutions Citizen Input/ Board Review: None required Legal Review: Lloyd Gosselink Rochelle & Townsend, P.C. prepared the ordinance. Alternatives: Deny the ordinance which would result in another contested case hearing on appeal of the 2019 filing Supporting Documents: Resolution No. 19-036 New Tariffs (Exhibit A) Benchmark for pensions for RRM filing (Exhibit B) Amortization of Regulatory Liability (Exhibit C) Staff Recommendation: Approval of Resolution 19-036 Exhibit A Rate Tariffs Effective October 1,2019 MID-TEX DIVISION ATMOS ENERGY CORPORATION RRC Tariff No: RATE SCHEDULE:R -RESIDENTIAL SALES APPLICABLE TO:ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE:Bills Rendered on or after 10/01/2019 PAGE: Application Applicable to Residential Customers for all natural gas provided at one Point of Delivery and measured through one meter. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery,additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and Ccf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $19.55 per month Rider CEE Surcharge $ 0.05 per month' Total Customer Charge $19.60 per month Commodity Charge - AllCcf $0.17423 per Ccf Gas Cost Recovery:Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a)and Part (b),respectively,of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalization calculated in accordance with Rider WNA. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment:Plus an amount for tax calculated in accordance with Rider TAX. Surcharges:Plus an amount for surcharges calculated in accordance with the applicable rider(s). Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. 'Reference Rider CEE -Conservation and Energy Efficiency as approved in GUD 10170.Surcharge billingeffective July 1, 2019. MID-TEX DIVISION ATMOS ENERGY CORPORATION RRC Tariff No: RATE SCHEDULE:C -COMMERCIAL SALES APPLICABLE TO:ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE:Bills Rendered on or after 10/01/2019 PAGE: Application Applicable to Commercial Customers for all natural gas provided at one Point of Delivery and measured through one meter and to Industrial Customers with an average annual usage of less than 30,000 Ccf. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and Ccf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $46.50 per month Rider CEE Surcharge $0.02 permonth^ Total Customer Charge $46.52 per month Commodity Charge -All Ccf $0.09924 per Ccf Gas Cost Recovery;Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a)and Part (b),respectively,of Rider GCR. Weather Normalization Adjustment:Plus or Minus an amount for weather normalization calculated in accordance with Rider WNA. Franchise Fee Adjustment:Plus an amount for franchise fees calculated in accordance with Rider FF,Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment:Plus an amount for tax calculated in accordance with Rider TAX. Surcharges:Plus an amount for surcharges calculated in accordance with the applicable rider(s). Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. 'Reference Rider CEE -Conservation and Energy Efficiency as approved in GUD 10170.Surcliarge billingeffective July 1, 2019. MID-TEX DIVISION ATMOS ENERGY CORPORATION RRC Tariff No: RATE SCHEDULE:1-INDUSTRIAL SALES APPLICABLE TO:ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE:Bills Rendered on or after 10/01/2019 PAGE: Application Applicable to Industrial Custonners with a maximum daily usage (MDU)of less than 3,500 MMBtu per day for all natural gas provided at one Point of Delivery and measured through one meter.Service for Industrial Customers with an MDU equal to or greater than 3,500 MMBtu per day will be provided at Company's sole option and will require special contract arrangements between Company and Customer. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and MMBtu charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Meter $845.50 per month First 0 MMBtu to 1,500 MMBtu $0.3572 per MMBtu Next 3,500 MMBtu $0.2616 per MMBtu All MMBtu over 5,000 MMBtu $0.0561 per MMBtu Gas Cost Recovery:Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a)and Part (b),respectively,of Rider GCR. Franchise Fee Adjustment:Plus an amount for franchise fees calculated in accordance with Rider FF.Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment:Plus an amount for tax calculated in accordance with Rider TAX. Surcharges:Plus an amount for surcharges calculated in accordance with the applicable rider(s). Curtailment Overpull Fee Upon notification by Company of an event of curtailment or interruption of Customer's deliveries. Customer will, for each MMBtu delivered in excess of the stated level of curtailment or internjption,pay Company 200%of the midpoint price for the Katy point listed in Platts Gas Daily published for the applicable Gas Day in the table entitled "Daily Price Survey." Replacement Index In the event the "midpoint" or "common" price for the Katy point listed in Platts Gas Daily in the table entitled "Daily Price Survey"is no longer published,Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authoritative by the natural gas industry and most closely approximating the applicable index. MID-TEX DIVISION ATMOS ENERGY CORPORATION RRC Tariff No: RATE SCHEDULE:1-INDUSTRIAL SALES APPLICABLE TO:ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE:Bills Rendered on or after 10/01/2019 PAGE: Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tarifffor Gas Service. Special Conditions In order to receive service under Rate I,Customer must have the type of meter required by Company. Customer must pay Company all costs associated with the acquisition and installation of the meter. MID-TEX DIVISION ATMOS ENERGY CORPORATION RRC Tariff No: RATE SCHEDULE:T-TRANSPORTATION APPLICABLE TO:ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE:Bills Rendered on or after 10/01/2019 PAGE: Application Applicable,in the event that Company has entered into a Transportation Agreement,to a customer directly connected to the Atmos Energy Corp., Mid-Tex Division Distribution System (Customer)for the transportation of all natural gas supplied by Customer or Customer's agent at one Point of Delivery for use in Customer's facility. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery,additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's bill will be calculated by adding the following Customer and MMBtu charges to the amounts and quantities due under the riders listed below: Charge Amount Customer Charge per Meter $845.50 per month First 0 MMBtu to 1,500 MMBtu $0.3572 per MMBtu Next 3,500 MMBtu $0.2616 per MMBtu All MMBtu over 5,000 MMBtu $0.0561 per MMBtu Upstream Transportation Cost Recovery:Plus an amount for upstream transportation costs in accordance with Part (b) of Rider GCR. Retention Adjustment:Plus a quantity of gas as calculated in accordance with Rider RA. Franchise Fee Adjustment:Plus an amount for franchise fees calculated in accordance with Rider FF.Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment:Plus an amount for tax calculated in accordance with Rider TAX. Surcharges:Plus an amount for surcharges calculated in accordance with the applicable rider(s). Imbalance Fees All fees charged to Customer under this Rate Schedule will be charged based on the quantities determined under the applicable Transportation Agreement and quantities will not be aggregated for any Customer with multiple Transportation Agreements for the purposes of such fees. Monthly Imbalance Fees Customer shall pay Company the greater of (i)$0.10 per MMBtu,or (ii)150% of the difference per MMBtu between the highest and lowest "midpoint" price for the Katy point listed in Platts Gas Daily in the table entitled "Daily Price Survey" during such month, for the MMBtu of Customer's monthly Cumulative Imbalance,as defined in the applicable Transportation Agreement,at the end of each month that exceeds 10%of Customer's receipt quantities for the month. MID-TEX DIVISION RRC Tariff No: ATMOS ENERGY CORPORATION RATE SCHEDULE:T -TRANSPORTATION APPLICABLE TO:ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE:Bills Rendered on or after 10/01/2019 PAGE: Curtailment Overpull Fee Upon notification by Company of an event of curtailment or interruption of Customer's deliveries, Customer will, for each MMBtu delivered in excess of the stated level of curtailment or Interruption,pay Company 200%of the midpoint price for the Katy point listed in Platts Gas Daily published for the applicable Gas Day in the table entitled "Daily Price Survey." Replacement Index In the event the "midpoint" or "common" price for the Katy point listed in Platts Gas Dally in the table entitled "Daily Price Survey"is no longer published,Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authoritative by the natural gas industry and most closely approximating the applicable Index. Agreement A transportation agreement is required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. Special Conditions In order to receive service under Rate T,customer must have the type of meter required by Company. Customer must pay Company all costs associated with the acquisition and installation of the meter. MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER:WNA-WEATHER NORMALIZATION ADJUSTMENT APPLICABLE TO:ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE:Bills Rendered on or after 11/01/2019 PAGE: Provisions for Adjustment The Commodity Charge per Ccf (100 cubic feet) for gas service set forth in any Rate Schedules utilized by the cities of the Mid-Tex Division service area for determining normalized winter period revenues shall be adjusted by an amount hereinafter described,which amount is referred to as the "Weather Normalization Adjustment."The Weather Normalization Adjustment shall apply to all temperature sensitive residential and commercial bills based on meters read during the revenue months of November through April.The five regional weather stations are Abilene,Austin,Dallas,Waco,and Wichita Falls. Computation of Weather Normalization Adjustment The Weather Normalization Adjustment Factor shall be computed to the nearest one-hundredth cent per Ccf by the following fomiula: WNAF Where WNAF1 Ri = HSFj = NDD = ADD Bli Ri (HSFj (NDD-ADD)) (BLj (HSFj X ADD)) any particular Rate Schedule or billing classification within any such particular Rate Schedule that contains more than one billing classification Weather Normalization Adjustment Factor for the i*'^rate schedule or classification expressed in cents per Ccf Commodity Charge rate oftemperature sensitive sales for the i^l^schedule or classification. heat sensitive factor for the i^^schedule or classification divided by the average bill count in that class billingcycle normal heating degree days calculated as the simple ten-year average of actual heating degree days. billing cycle actual heating degree days. base load sales for the i^*^schedule or classification divided by the average bill count in that class The Weather Normalization Adjustment for the jth customer in ith rate schedule is computed as: WNAi = WNAFi x qij Where qy is the relevant sales quantity for the jth customer in ith rate schedule. MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER:WNA -WEATHER NORMALIZATION ADJUSTMENT APPLICABLE TO:ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE:Bills Rendered on or after 11/01/2019 PAGE: Base Use/Heat Use Factors Residential Commercial Weather Station Abilene Base use Ccf 9.77 Heat use Ccf/HDD 0.1487 Base use Ccf 88.49 Heat use Ccf/HDD 0.7036 Austin 9.04 0.1537 201.48 1.0000 Dallas 13.07 0.2202 184.64 1.1385 Waco 8.77 0.1470 135.70 0.7744 Wichita Falls 11.40 0.1468 117.90 0.5943 Weather Normalization Adiustment (WNA)Report On or before June 1 of each year,the company posts on its website at atmosenergy.com/mtx-wna,in Excel format, a Weather Normalization Adjustment (WNA)Report to show how the company calculated its WNAs factor during the preceding winter season.Additionally, on or before June 1 of each year, the company files one hard copy and an Excel version of the WNA Report with the Railroad Commission of Texas'Gas Services Division,addressed to the Director of thatDivision. Exhibit B 2019 Benchmark for Pensions and Retiree Medical Benefits ATMOS ENERGY CORP.,MID-TEX DIVISION PENSIONS AND RETIREE MEDICAL BENEFITS FOR CITIES APPROVAL TEST YEAR ENDING DECEMBER 31,2018 Shared Services Mid-Tex Direct Post-Supplemental Post- Line Pension Employment Pension Executive Benefit Employment Adjustment No.Description Account Plan Benefit Plan Account Plan Plan Benefit Plan Total 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 (a)(b)(c)(d)(e)(f) Proposed Benefits Benchmark - Fiscal Year 2019 Willis Towers Watson Report as adjusted (1) (2) (3)$2.744.088 $2,267.927 $4,724,119 $193,211 $2,621,842 Allocation to Mid-Tex 43.48%43.48%73.88%100.00%73.88% Proposed Benefits Benchmark Costs Allocated to Mid-Tex (Ln1 x Ln2) $1,193,029 $ 100.00% 986,012 $3,490,241 $193,211 $1,937,051 100.00%100.00%100.00% 100.00% (g) O&M and Capital Allocation Factor Proposed Benefits Benchmark Costs to Approve (Ln 3 x Ln 4) (3)$1,193,029 $986,012 $3,490,241 $193,211 $1,937,051 $7,799,544 Summary of Costs to Approve (1): O&M Expense Factor (WP_F-2.3, Ln2) Total Pension Account Plan Total Post-Employment Benefit Plan Total Supplemental Executive Benefit Plan Total (Ln 13 + Ln 14 + Ln 15)$ 81.35% 970,514 970,514 $ 81.35%38.28%16.24% $1,336,038 802,108 $31,377 802,108 $1,336,038 $31,377 $ Notes; 1.Studies not applicable to Mid-Tex or Shared Services are omitted. 2.The Company is requesting that the benchmark amount approved by the RRM Cities for future periods include only the expense amount. The amount attributable to capital would continue to be recorded to utility plant through the overhead process as described in the CAM. 3.SSU amounts exclude cost centers which do not allocate to Mid-Tex for rate making purposes. 38.28% 741,489 2,306,553 1,543,597 31,377 741,489 $3,881,527 Exhibit C 2019 Amortization Schedule for Regulatory Liability Line No. ATMOS ENERGY CORP.,MID-TEX DIVISION RATE BASE ADJUSTMENTS TEST YEAR ENDING DECEMBER 31,2018 AMORTIZATION OF REGULATORY LIABILITY Year Ended Dec.31 Beginning of Year Rate Base Adjustment Amount (1) Annual Amortization (2) End of Year Rate Base Adjustment Amount (a)(b)(c)(d) 1 2018 $290,043,948 $-290,043,948 2 2019 290,043,948 12,085,165 277,958,784 3 2020 277,958,784 12,085,165 265.873,619 4 2021 265,873,619 12,085,165 253,788,455 5 2022 253,788,455 12,085,165 241,703,290 6 2023 241,703,290 12,085,165 229,618,126 7 2024 229,618,126 12,085,165 217,532,961 8 2025 217,532,961 12,085,165 205,447,797 9 2026 205,447,797 12,085,165 193,362,632 10 2027 193,362,632 12,085,165 181,277,468 11 2028 181,277,468 12,085,165 169,192,303 12 2029 169,192,303 12,085,165 157,107,139 13 2030 157,107,139 12,085,165 145,021,974 14 2031 145,021,974 12,085,165 132,936.810 15 2032 132,936,810 12,085,165 120.851,645 16 2033 120,851,645 12,085,165 108.766.481 17 2034 108,766,481 12,085,165 96.681.316 18 2035 96,681,316 12,085,165 84.596.152 19 2036 84,596,152 12,085,165 72.510.987 20 2037 72,510.987 12,085,165 60.425,823 21 2038 60,425,823 12,085,165 48,340,658 22 2039 48,340,658 12,085,165 36.255,494 23 2040 36,255,494 12,085,165 24,170,329 24 2041 24,170,329 12,085,165 12,085,165 25 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 2042 12,085,165 Revenue Related Tax Factor Revenue Related Taxes on Annual Amortization (see WP_B-6.3) Related Taxes (see WP_B-6.3) $ 12,085,165 (0) 6.71%SeeWP_F-5.1 Amortization *Tax 810,653 Factor $12,905,421 Amortization +Taxes Notes: 1.The beginning 2018 balance is the September,2018 balance.The regulatory liabilityfor excess deferred taxes is an estimate.This estimate will be finalized when the Company files its federal tax return in July,2019.To the extent that this estimate changes with the filing of the Company's tax return, the Company will 'true-up'the amount in the 2020 RRM filing. 2.The annual amortization of a 24 year recovery period is based on the Reverse South Georgia Method. 3.The Regulatory Liability is recorded to FERC Account 253,Sub Account 27909.