Item 4HCity of Southlake, Texas
MEMORANDUM
TO: Shang Yelverton, City Manager
FROM: Sharen Jackson, Director of Finance
SUBJECT: Resolution No. 07 -009, Opposing H.B. 651; supporting repeal of Gas Reliability
Infrastructure Program (GRIP) Statue; and joining cities for reasonable gas
rates
Action Requested:
Approval of Resolution No. 07 -009, Opposing H.B. 651; supporting repeal of
Gas Reliability Infrastructure Program (GRIP) Statue; and joining cities for
reasonable gas rates
Background
Information:
This legislative session, there are two natural gas issues that affect the ability
of cities to retain local control over natural gas rates. First, H.B. 651, which
eliminates cities' original jurisdiction over natural gas rates. This means that
Atmos would no longer be required to file rate increases with cities. The most
troubling aspect of H.B. 651 is that it would do away with cities' ability to
investigate whether the rates that Atmos is charging are too high. The Atmos-
backed bill was filed in direct response to the rate investigation initiated by
cities which has resulted in a $23 million rate decrease recommendation issued
this month by Railroad Commission judges. Second, evidence offered in the
recent Atmos rate case demonstrates that the Texas GRIP statue is fatally
flawed. One of the initial purposes of GRIP was to encourage gas utilities to
invest in their systems to ensure system safety and reliability by allowing an
expedited return on that investment, thereby saving all parties the expense of a
full -blown rate case. GRIP actually allows 1) gas utilities to accelerate
recovery of expenses not related to system safety or reliability; 2) allows gas
utilities to earn more than their authorized rate of return by not accounting for
increased revenues, by piggy - backing onto the financial data of other utilities,
and by receiving a return on funds supplied not by investors, but by ratepayers
3) encourages even more rate cases because the courts and the Railroad
Commission have interpreted the statue to (a) completely exclude cities from
the review of GRIP applications and (b) prohibit any review by the cities and
the Commission of the merits of the GRIP applications. These are the most
important issues on the gas utilities' agendas. It is important that our
legislators hear that our city opposes H.B. 651 and the GRIP statue so our
legislator can say that they are acting in the constituents' interests.
Financial
Considerations:
No immediate financial consideration
Citizen Input/
Board Review: None required
Legal Review: Legal counsel (Lloyd Gosselink) for the Cities for Reasonable Gas Rates
(CRGR)
Shang Yelverton, City Manager
February 13, 2007
Page 2
Alternatives: Deny
Supporting
Documents: Resolution No. 07 -009
Staff
Recommendation: Approval of Resolution No. 07 -009
RESOLUTION NO. 07-009
A RESOLUTION OF THE CITY OF SOUTHLAKE, TEXAS, OPPOSING H.B.
651; SUPPORTING REPEAL OF GAS RELIABILITY INFRASTRUCTURE
PROGRAM (GRIP) STATUTE; AND JOINING CITIES FOR REASONABLE
GAS RATES
WHEREAS, the City of Southlake, Texas (City) was granted by statute the authority to
act as the regulatory body to review rates, operations, and services of gas
utilities to ensure that the gas utility provides fair, just and reasonable rates
and adequate and efficient services to the local citizenry to whom the
governing body is responsible; and
WHEREAS, this system of review has successfully provided for local citizen input,
oversight, and scrutiny of the gas utility's rates, services, and actions by
requiring public hearings before the City and this local process has
allowed for the direct participation of customers to voice their concerns
regarding the rates, services and practices of the gas utility; and
WHEREAS, Cities For Reasonable Gas Rates (CRGR), consisting primarily of
members of the Atmos Cities Steering Committee but open to all cities
throughout the State, is an ad hoc committee that supports the vital role
that local governments play in the one hundred year old system of local
review and regulation of rates, operations, and services of gas utilities;
and
WHEREAS, the City always strives to address rate issues efficiently and economically
in collaboration with the utility at the local level. However, when the City
has reason to believe that the utility is abusing its monopoly position, the
City's ability to initiate a rate investigation is crucial to ensuring that
monopoly gas rates are fair; and
WHEREAS, there has been legislation introduced in the 2007 Regular Session of the
80 Legislature, House Bill 651, which would give the gas utility the
option of opting out of local control over natural gas rates; and
WHEREAS, HB 651 hurts Texans and Texas communities by taking away the City's
ability to initiate a rate investigation when the City has reason to believe
that the monopoly utility is charging rates that are unfair and
unreasonable; and
WHEREAS, HB 651 will add unnecessary rate case expenses by compelling rate
changes and citizen complaints that are routinely settled at the local level
without contested hearings and for minimal cost to be resolved in Austin
through a formal, contested case format; and
WHEREAS, the Gas Reliability Infrastructure Program (GRIP) statute approved in the
2003 Regular Session of the 78"' Legislature also eliminates local control
and review over surcharge requests; and
WHEREAS, Texas is the only state out of the twelve states served by Atmos that has a
GRIP statute that allows for piecemeal recovery for any change to
invested capital;
WHEREAS, evidence adduced in the recent Atmos Mid -Tex rate case reveals that
Atmos is abusing the GRIP surcharge process by capitalizing costs that
should be expensed and unreasonably including costs for items like
artwork, lavish meals, limousine service, top of the line office furniture,
luxury accommodations and first -class air travel.
THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
SOUTHLAKE, TEXAS, THAT:
I.
That the City of Southlake joins with other Texas cities to form Cities for Reasonable
Gas Rates.
II.
That the City hereby requests that the Texas Legislature vote against HB 651 because it
eliminates local regulatory control, scrutiny and oversight of the gas utilities by governing bodies
of municipalities.
III.
That the City hereby advocates the repeal of the Texas GRIP statute because it allows
piecemeal recovery for any change to invested recovery and has been abused by Atmos at the
expense of its ratepayers.
IV.
That the City calls upon its state representatives and senator to advocate against HB 651
and the GRIP Statute and any companion or successive legislation that would eliminate or
weaken the efficient and effective system of local control over natural gas rates, services and
operations.
V.
A copy of the resolution shall be sent to the elected lawmakers representing the City's
interests in the Texas House and Senate and to CRGR's legal counsel, Geoffrey Gay at 816
Congress Avenue, Suite 1900, Austin, Texas 78701.
PRESENTED AND PASSED on this day of , 2007, by a vote
of ayes and hays at a regular meeting of the City Council of the City of
, Texas.
Mayor
ATTEST: