Loading...
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: