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Item 4DCity of Southlake, Texas M E M O R A N D U M TO: Shana Yelverton, City Manager FROM: Sharen Jackson, Director of Finance SUBJECT:RESOLUTION NO. 07-043, SUSPENDING THE JULY 30, 2007 EFFECTIVE DATE OF THE PROPOSAL BY ATMOS ENERGY CORP., MID-TEX DIVISION TO IMPLEMENT INTERIM GRIP RATE ADJUSTMENTS FOR GAS UTILITY INVESTMENT IN 2006; AUTHORIZING PARTICIPATION WITH THE ATMOS CITIES STEERING COMMITTEE (“ACSC”) IN A REVIEW AND INQUIRY INTO THE SUFFICIENCY OF THE FILING AND THE BASIS OF THE PROPOSED RATE ADJUSTMENTS; AUTHORIZING INTERVENTION IN ADMINISTRATIVE AND COURT PROCEEDINGS INVOLVING THE PROPOSED GRIP RATE ADJUSTMENTS; REQUIRING REIMBURSEMENT OF REASONABLE LEGAL AND CONSULTANT RATEMAKING COSTS; AND REQUIRING DELIVERY OF THIS RESOLUTION TO THE COMPANY AND LEGAL COUNSEL. __________________________________________________________________________ Action Requested: Approval of Resolution No. 07-043. Background Information: The law mandates that a Gas Reliability Infrastructure Program (GRIP) surcharge request cannot become effective until sixty days following the filing. The effective date may be suspended by a city for 45 days. If the City does not take action to suspend the filing, the Company may begin implementing a monthly surcharge ($0.59 on all residential customers, $1.47 for commercial customers, and $28.74 for industrial customers) after July 30, 2007. The resolution suspends the effective date to the maximum extent permitted by law to allow the cities time to evaluate the filing, determine whether the filing complies with law, and if lawful, to determine what further strategy to pursue. This is particularly important given that the Atmos Cities Steering Committee (ACSC) initiated a rate case (GUD No. 9670) in which it was determined that Atmos had included inappropriate expenditures in its previous GRIP surcharges for rate years 2003, 2004, and 2005. If Cities, through ACSC, and other interveners, not investigated the filings to determine the impropriety of these expenditures and of their inclusion in the GRIP surcharges, this would not have been exposed, and the refund of $2.5 million would not have been ordered. Financial Considerations: No immediate financial consideration. Historically, the Steering Committee which is funded with membership dues will cover the cost of legal and consultant fees then reimbursed pending final determination. Resolution No. 07-043 request reimbursement of any reasonable legal and consultant ratemaking costs from Atmos. Shana Yelverton, City Manager July 9, 2007 Page 2 Citizen Input/ Board Review: None required Legal Review: Legal counsel (Lloyd Gosselink) for ACSC Alternatives: Approve or deny Supporting Documents: Resolution No. 07-043 Staff Recommendation: Approval of Resolution No. 07-043 RESOLUTION NO. 07-043 A RESOLUTION BY THE CITY OF SOUTHLAKE, TEXAS SUSPENDING THE JULY 30, 2007 EFFECTIVE DATE OF THE PROPOSAL BY ATMOS ENERGY CORP., MID-TEX DIVISION TO IMPLEMENT INTERIM GRIP RATE ADJUSTMENTS FOR GAS UTILITY INVESTMENT IN 2006; AUTHORIZING PARTICIPATION WITH THE ATMOS CITIES STEERING COMMITTEE (“ACSC”) IN A REVIEW AND INQUIRY INTO THE SUFFICIENCY OF THE FILING AND THE BASIS OF THE PROPOSED RATE ADJUSTMENTS; AUTHORIZING INTERVENTION IN ADMINISTRATIVE AND COURT PROCEEDINGS INVOLVING THE PROPOSED GRIP RATE ADJUSTMENTS; REQUIRING REIMBURSEMENT OF REASONABLE LEGAL AND CONSULTANT RATEMAKING COSTS; AND REQUIRING DELIVERY OF THIS RESOLUTION TO THE COMPANY AND 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 “the Company”), and a regulatory authority with an interest in the rates and charges of Atmos Mid-Tex; and WHEREAS, Atmos Mid-Tex made filings with the City and the Railroad Commission of Texas (“Railroad Commission”) on or about May 31, 2007, proposing to implement interim rate adjustments (“GRIP rate increases”), pursuant to Texas Utilities Code § 104.301, on all customers served by Atmos Mid-Tex, effective July 30, 2007; and WHEREAS, Atmos Mid-Tex was recently granted a rate increase as a result of its filing in GUD No. 9670, in which the Final Order was only signed on March 29, 2007; and WHEREAS, in GUD No. 9670, it was determined that Atmos Mid-Tex had inappropriately included certain expenditures in its prior GRIP rate increases for rate years 2003, 2004, and 2005; and WHEREAS, it is incumbent upon the City, as a regulatory authority, to examine this latest GRIP filing to determine its compliance with the Texas Utilities Code; and 1 2557\2\res070608gnc Suspending GRIP WHEREAS, ratepayers of Atmos Mid-Tex, including the City and its residents, will be adversely impacted by the proposed GRIP rate increases; and WHEREAS, it is advantageous for the City and its citizens to coordinate the City's response to Atmos' filing with similarly situated municipalities; and WHEREAS, the City has benefited from prior participation with the Atmos Cities Steering Committee ("ACSC"); and WHEREAS, it is efficient and cost beneficial for the City to again coordinate review of the reasonableness of the proposed GRIP rate increases and joint participation in any proceedings at the Railroad Commission related to the proposed GRIP rate increases; and WHEREAS, the Executive Committee of ACSC has recommended suspension and established a budget for evaluation of the Atmos filing; and WHEREAS, a GRIP proceeding involves rate making, entitling cities to reimbursement of reasonable rate case expenses; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS, THAT: 1. The July 30, 2007 effective date of the GRIP rate increases proposed by Atmos Mid-Tex is hereby suspended for the maximum period allowed by law to permit adequate time to investigate the sufficiency of the GRIP Rate Increase filing, review the proposed increases, analyze all necessary information, and take appropriate action related to the proposed increases. 2. The City is authorized to cooperate with ACSC to hire and direct legal counsel and consultants, to negotiate with the Company, to make recommendations to the City regarding the proposed GRIP rate increases, and to direct any administrative proceedings or litigation associated with the proposed GRIP rate increases. 2 2557\2\res070608gnc Suspending GRIP 3. The City is authorized to intervene in any administrative proceedings or litigation associated with the proposed GRIP rate increases. 4. Atmos Mid-Tex shall promptly reimburse the City’s reasonable costs associated with the City’s ratemaking activities related to the proposed GRIP rate increases. 5. A copy of this Resolution shall be sent to Atmos Mid-Tex, care of Charles R. Yarbrough, II, at Atmos Energy Corporation, 5420 LBJ Freeway, Suite 1800, Dallas, Texas 75240, and to Geoffrey Gay, legal counsel to ACSC, at Lloyd Gosselink, 816 Congress Avenue, Suite 1900, Austin, Texas 78701. Signed this ____ day of __________________, 2007. ____________________________________ ATTEST: __________________________ 3 2557\2\res070608gnc Suspending GRIP