Item 4G - Memo
M E M O R A N D U M
September 3, 2024
To: Alison Ortowski, City Manager
From: Sharen Jackson, CFO
Item 4G
Subject: Item 4G - Resolution No. 24-027, approving a negotiated settlement between
the Atmos Cities Steering Committee & Atmos Energy Corp., Mid-Tex Division
regarding the 2024 Rate Review Mechanism Filing
Action
Requested: Approval of Resolution No. 24-027, approving a negotiated settlement between
the Atmos Cities Steering Committee & Atmos Energy Corp., Mid-Tex Division
regarding the 2024 Rate Review Mechanism Filing
Background
Information: The City of Southlake, along with 181 other Mid-Texas cities, are served by
Atmos Energy Corporation Mid-Tex Division and are members of the Atmos
Cities Steering Committee (ACSC). The ACSC undertakes activities on behalf
of its city members and their citizens such as participation in rate cases,
rulemakings, advocacy and legislative efforts that impact natural gas rates.
In 2007, ACSC and Atmos Mid-Tex settled a rate application filed by the
Company pursuant to Section 104.301 of the Texas Utilities Code for an interim
rate adjustment commonly referred to as a GRIP filing (arising out of the Gas
Reliability Infrastructure Program legislation). That settlement created a
substitute rate review process, referred to as Rate Review Mechanism (“RRM”),
as a substitute for future filings under the GRIP statute.
Since 2007, there have been several modifications to the original RRM Tariff.
The most recent iteration of an RRM Tariff was reflected in a resolution adopted
by ACSC members in 2018.
On April 1st, 2024, the Company filed a rate request pursuant to the RRM Tariff
adopted by ACSC members. The Company claimed that its cost-of- service in a
test year ending December 31st, 2023, entitled it to additional system-wide
revenues of $196.8 million. Application of the standards set forth in ACSC’s
RRM Tariff reduced the Company’s request to $182.5 million, while the
settlement process yielded a further reduction to $164.7 million.
Resolution No. 24-027 and the subsequent attachments are the results of the
negotiation between the ACSC Executive Committee and Atmos to resolve
issues identified during the review and evaluation of the Atmos filing. The
proposed settlement agreement for Council approval does the following:
• Approves rates that will increase Atmos’ revenues by $164.7 million,
$32.9 million less than originally requested by Atmos in the rate request:
• Typical residential customer will see a monthly increase of $5.52 (or about
6.84% increase)
• Typical commercial customer will see an increase of $13.39 (or about
3.44% increase)
• Requires Atmos to reimburse Cities for reasonable rate-making costs
associated with reviewing and processing the rate filing
• Establishes a benchmark for pensions and retiree medical benefits to be
used in future rate cases or RRM filings
The ACSC Executive Committee, ACSC legal counsel and consultants
recommend that all cities adopt the resolution approving the negotiated
settlement agreement resolving the 2024 filing and implement the rate change.
If approved, the proposed rates would go into effect on October 1, 2024.
Financial
Considerations: None
Strategic Link: This item is specifically linked to the City’s Strategy Map through B2:
Collaborate with select partners to implement service solutions.
Citizen Input/
Board Review: None required.
Legal Review: Lloyd Gosselink Rochelle & Townsend, P.C. prepared this resolution. The
Legislature’s GRIP process allowed gas utilities to receive annual rate
increases associated with capital investments. The RRM process has proven
to result in a more efficient and less costly (both from a consumer rate impact
perspective and from a ratemaking perspective) than the GRIP process. Given
Atmos Mid-Tex’s claim that its historic cost of service should entitle it to recover
$196.8 million in additional system-wide revenues, the RRM settlement at
$164.7 million for ACSC Cities reflects substantial savings to ACSC Cities.
Settlement at $164 million is fair and reasonable. The ACSC Executive
Committee, consisting of city employees of 181 ACSC members, urges all
ACSC members to pass the resolution before October 1, 2024, upon which day
the new rates will go into effect.
Alternatives: Deny the resolution which would result in another contested case hearing on
appeal of the 2024 filing and permits Atmos Energy to implement rates at the
original amount requested (subject to refund) until a resolution is passed.
Staff
Recommendation: Approval of Resolution 24-027, approving a negotiated settlement between the
Atmos Cities Steering Committee (ACSC) and Atmos Energy Corp., Mid-Tex
Division.
Supporting
Documents: Resolution 24-027
New Tariffs (Exhibit A)
Benchmark for pensions for RRM filing (Exhibit B)
Average Bill Comparison – Base Rates (Exhibit C)
Staff Contacts: Sharen Jackson (817) 748-8279
Nick Cornelius (817) 748-8286