Item 6AM E M O R A N D U M
July 28, 2009
To:
Shana Yelverton, City Manager
From:
Sharen Jackson, Finance Director
nd
Subject:
Ordinance No. 959, 2Reading, Approve a negotiated resolution
between the Atmos Cities Steering Committee (“ACSC” or
“Steering Committee”) and Atmos Energy Corp., Mid-Tex Division
("Atmos Mid-Tex" or "Company") regarding the company's rate
review mechanism filing in all cities exercising original jurisdiction;
declare existing rates to be unreasonable; requiring the company to
reimburse cities’ reasonable rate-making expenses; adopt tariffs
that reflect rate adjustments consistent with the negotiated
settlement and finding the rates to be set by the attached tariffs to
be just and reasonable; approve Atmos' proof of revenues; adopt a
savings clause; determine that this ordinance was passed in
accordance with the requirements of the Texas Open Meetings Act;
declare an effective date; and require delivery of this ordinance to
the company and the steering committee’s legal counsel.
Action
Requested:
Approval of Ordinance No. 959.
Background
Information:
The City, along with 150 other cities served by Atmos
Energy Mid-Tex Division ("Atmos"), is a member of the
Atmos Cities Steering Committee ("ACSC"). On March 6,
2009, Atmos filed with the City an application to increase
natural gas rates pursuant to the Rate Review Mechanism
("RRM") tariff. The Atmos’ March RRM filing sought a $20.2
million rate increase. The City worked with ACSC to analyze
the schedules and evidence offered by Atmos to support its
request to increase rates.
The purpose of the Ordinance is to approve rate tariffs
(“Attachment A”) and proof of revenues (“Attachment B”) that
reflect the negotiated rate change pursuant to the RRM
process. In addition to the RRM tariffs, the Ordinance also
approves a revision to the Atmos current Gas Cost Recovery
(“GCR”) tariff to allow Atmos to recover certain hedging
costs associated with natural gas futures through the GCR
tariff.
As a result of the negotiations, ACSC was able to reduce the
Company's requested $20.2 million RRM increase by more
than 70 percent. Approval of the Ordinance will result in
rates that implement a $2.6 million increase in Atmos'
revenues effective August 1, 2009. The monthly bill impact
for the average residential customer will be $0.15 increase.
During the time that the City has retained original jurisdiction
in this case, consultants working on behalf of ACSC cities
have investigated the support for the Atmos’ requested rate
increase. While the evidence does not support the $20.2
million increase requested by Atmos, ACSC consultants
agree that the Company can justify a slight increase in
revenues. The agreement on $2.6 million is a compromise
between the positions of the parties.
The alternative to a settlement would be a contested case
proceeding before the Rail Road Commission on Atmos’
current application, would take several months and cost
ratepayers millions of dollars in rate case expenses and
would not likely produce a request more favorable than that
to be produced by the settlement. The ACSC Executive
Committee recommends that ACSC members take action to
approve the ordinance authorizing new rate tariffs.
Financial
Considerations:
None
Citizen Input/
Board Review:
Public Hearing scheduled for August 4, 2009.
Legal Review:
Ordinance prepared by ACSC attorneys, Lloyd Gosselink
Rochelle & Townsend, P.C.
Alternatives:
Deny Ordinance
Supporting
Documents:
Ordinance No 959
Tariff (Attachment A)
Proof of Revenues (Attachment B)
Staff
Recommendation:
Approve Ordinance No. 959
ORDINANCE NO. 959
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF SOUTHLAKE, TEXAS, ("CITY") APPROVING A
NEGOTIATED RESOLUTION BETWEEN THE ATMOS
CITIES STEERING COMMITTEE (“ACSC” OR
“STEERING COMMITTEE”) AND ATMOS ENERGY
CORP., MID-TEX DIVISION ("ATMOS MID-TEX" OR
"COMPANY") REGARDING THE COMPANY'S RATE
REVIEW MECHANISM FILING IN ALL CITIES
EXERCISING ORIGINAL JURISDICTION; DECLARING
EXISTING RATES TO BE UNREASONABLE; REQUIRING
THE COMPANY TO REIMBURSE CITIES' REASONABLE
RATEMAKING EXPENSES; ADOPTING TARIFFS THAT
REFLECT RATE ADJUSTMENTS CONSISTENT WITH
THE NEGOTIATED SETTLEMENT AND FINDING THE
RATES TO BE SET BY THE ATTACHED TARIFFS TO BE
JUST AND REASONABLE; APPROVING ATMOS' PROOF
OF REVENUES; ADOPTING A SAVINGS CLAUSE;
DETERMINING THAT THIS ORDINANCE WAS PASSED
IN ACCORDANCE WITH THE REQUIREMENTS OF THE
TEXAS OPEN MEETINGS ACT; DECLARING AN
EFFECTIVE DATE; AND REQUIRING DELIVERY OF
THIS ORDINANCE TO THE COMPANY AND THE
STEERING COMMITTEE'S LEGAL COUNSEL.
WHEREAS, the City of Southlake, Texas ("City") is a gas utility customer of Atmos
Energy Corp., Mid-Tex Division ("Atmos Mid-Tex" or " Company"), and a regulatory authority
with an interest in the rates and charges of Atmos Mid-Tex; and
WHEREAS, the City is a member of the Atmos Cities Steering Committee ("ACSC" or
“Steering Committee”), a coalition of more than 150 similarly situated cities served by Atmos
Mid-Tex that have joined together to facilitate the review and response to natural gas issues
affecting rates charged in the Atmos Mid-Tex service area (such participating cities are referred
to herein as "ACSC Cities"); and
WHEREAS, pursuant to the terms of the agreement settling the Company's 2007
Statement of Intent to increase rates, ACSC Cities and the Company worked collaboratively to
Atmos RRM Ordinance
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develop the Rate Review Mechanism ("RRM") tariff that allows for an expedited rate review
process controlled in a three year experiment by ACSC Cities as a substitute to the current GRIP
process instituted by the Legislature; and
WHEREAS, the City took action in 2008 to approve a Settlement Agreement with Atmos
Mid-Tex resolving the Company's 2007 rate case and authorizing the RRM Tariff; and
WHEREAS, the 2008 Settlement Agreement contemplates reimbursement of ACSC
Cities' reasonable expenses associated with RRM applications; and
WHEREAS, on or about March 6, 2009, Atmos Mid-Tex filed with the City its second
application pursuant to the RRM tariff to increase natural gas rates by approximately $20.2
million, such increase to be effective in every municipality that has adopted the RRM tariff
within its Mid-Tex Division; and
WHEREAS, ACSC Cities coordinated its review of Atmos' RRM filing and designated a
Settlement Committee made up of ACSC representatives and assisted by ACSC attorneys and
consultants to resolve issues identified by ACSC in the Company’s RRM filing; and
WHEREAS, the Company has filed evidence that existing rates are unreasonable and
should be changed; and
WHEREAS, independent analysis by ACSC's rate expert concluded that Atmos Mid-Tex
is able to justify a slight rate increase over current rates; and
WHEREAS, the Steering Committee has advocated in other proceedings that Atmos
Mid-Tex hedge natural gas futures in order to mitigate the volatility of natural gas prices, which
are a flow through to customers; and
Atmos RRM Ordinance
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WHEREAS, the ACSC Executive Committee, as well as ACSC lawyers and consultants,
recommend that ACSC members approve the attached rate tariffs ("Attachment A" to this
Ordinance), which will increase the Company's revenue requirement by $2.6 million; and
WHEREAS, the attached tariffs implementing new rates and Atmos' Proof of Revenues
("Attachment B" to this Ordinance) are consistent with the negotiated resolution reached by
ACSC Cities and are just, reasonable, and in the public interest; and
WHEREAS, it is the intention of the parties that if the City determines any rates,
revenues, terms and conditions, or benefits resulting from a Final Order or subsequent negotiated
settlement approved in any proceeding addressing the issues raised in the Company’s RRM
filing would be more beneficial to the City than the terms of the attached tariff, then the more
favorable rates, revenues, terms and conditions, or benefits shall additionally accrue to the City;
and
WHEREAS, the negotiated resolution of the Company's RRM filing and the resulting
rates are, as a whole, in the public interest.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF SOUTHLAKE, TEXAS:
Section 1. That the findings set forth in this Ordinance are hereby in all things approved.
Section 2. That the City Council finds that the existing rates for natural gas service
provided by Atmos Mid-Tex are unreasonable and new tariffs and Atmos' Proof of Revenues,
which are attached hereto and incorporated herein as Attachments A and B, are just and
reasonable and are hereby adopted.
Section 3. That Atmos Mid-Tex shall reimburse the reasonable rate making expenses of
the ACSC Cities in processing the Company's rate application.
Atmos RRM Ordinance
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Section 4. That to the extent any resolution or ordinance previously adopted by the
Council is inconsistent with this Ordinance, it is hereby repealed.
Section 5. That the meeting at which this Ordinance was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code,
Chapter 551.
Section 6. That if any one or more sections or clauses of this Ordinance is adjudged to be
unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remaining
provisions of this Ordinance and the remaining provisions of the Ordinance shall be interpreted
as if the offending section or clause never existed.
Section 7. That if the City determines any rates, revenues, terms and conditions, or
benefits resulting from a Final Order or subsequent negotiated settlement approved in any
proceeding addressing the issues raised in the Company’s RRM filing would be more beneficial
to the City than the terms of the attached tariff, then the more favorable rates, revenues, terms
and conditions, or benefits shall additionally accrue to the City.
Section 8. That the Company's Gas Cost Recovery tariff is revised to permit recovery of
certain costs associated with hedging natural gas futures.
Section 9. That this Ordinance shall become effective from and after its passage with
rates authorized by attached Tariffs to be effective for bills rendered on or after August 1, 2009.
Section 10. That a copy of this Ordinance shall be sent to Atmos Mid-Tex, care of David
Park, Vice President Rates and Regulatory Affairs, at Atmos Energy Corporation, 5420 LBJ
Freeway, Suite 1800, Dallas, Texas 75240, and to Geoffrey Gay, General Counsel to ACSC, at
Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767-1725.
Atmos RRM Ordinance
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PASSED AND APPROVED on first reading this _____ day of _________________,
2009.
___________________________
Mayor
ATTEST:
__________________________
City Secretary
PASSED AND APPROVED ON second reading this _____ day of
_________________, 2009.
__________________________
Mayor
ATTEST:
__________________________
City Secretary
APPROVED AS TO FORM:
__________________________
City Attorney
Atmos RRM Ordinance
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