Item 9BCity of Southlake, Texas
MEMORANDUM
December 29, 2004
TO: Billy Campbell, City Manager
FROM: Sharen Elam, Director of Finance, Ext. 1713
SUBJECT: Resolution No. 05 -002, Authorizing the City's intervention before the Railroad
Commission of Texas regarding the filing of a gas cost prudence review by Atmos
Energy Corporation, formerly TXU Gas Company; designating a representative
of the City to serve on a steering committee; and requiring reimbursement of
reasonable legal and consultant expenses
Action Requested: City Council approval of Resolution No. 05 -002, Authorizing the City's
intervention before the Railroad Commission of Texas regarding the filing of a
gas cost prudence review by Atmos Energy Corporation, formerly TXU Gas
Company; designating a representative of the City to serve on a steering
committee; and requiring reimbursement of reasonable legal and consultant
expenses
Background
Information: The City recently received notice from, Atmos Energy Corporation (formerly
TXU Gas Company) of the filing at the Railroad Commission of a three -year
gas cost prudence review. This filing is one in a series of triennial filings
required by the Commission as part of the Final Order in Gas Utilities Docket
(GUD) No. 8664, TXU's city gate gas rate case decided in 1997. The purpose
of the filing requirement is to allow a periodic review of the prudence of
TXU's gas purchases. TXU's Gas Cost Review documentation as to its
purchasing practices, as well as the actual amount and cost of gas purchases for
the period of November 1, 2000, to October 31, 2003, was filed at the
Commission on September 24, 2004, and was assigned GUD No. 9530. The
sale of TXU's gas utility operations to Atmos was completed on October 1,
2004, and notice to customers of the filing of GUD No. 9530 was approved on
November 5, 2004 The hearings examiner assigned to the docket ordered
Atmos to begin mailing notices to all cities served by the former TXU Gas
Distribution - Transmission by November 9, 2004.
The filing on or about September 24, 2004 (GUD No. 9530) for a gas cost
prudence review of $2.2 billion in previously incurred and billed gas costs.
These costs are twice the cost of gas purchases included in TXU's filing for the
previous three -year period. This is despite the fact that one of the
representations made by TXU to settle the last prudence review was that it had
renegotiated a gas purchase contract for an expected benefit to ratepayers of
over $20 million. Testimony included with this filing indicates that over half
of all gas supply purchases during this three -year period were made on the spot
market.
Billy Campbell, City Manager
December 29, 2004
When TXU made its last three -year prudence review filing many of the same
cities who participated in GUD NO. 9400 intervened in that docket jointly and
were ultimately successful in achieving a settlement of all issues with TXU.
TXU also reimbursed the cities; expenses.
The attached resolution will ratify the intervention filed on behalf of the City of
Arlington, appoint Sharen Elam as the City's representative on a Cities Steering
Committee, and require Atmos /TXU Gas to reimburse the City any reasonable
costs associated with the participation in GUD No. 9530 or any subsequent
proceeding.
Financial
Considerations: The resolution requires reimbursement of legal and consultant expense from
Atmos. Steering Committee will cover the initial expenses.
Citizen Input/
Board Review: N/A
Legal Review: The City Attorney has reviewed the ordinance.
Alternatives: Approve or deny proposed resolution
Supporting
Documents: Resolution No. 05 -002
Billy Campbell, City Manager
December 29, 2004
RESOLUTION NO. 05 -002
A RESOLUTION BY THE CITY OF SOUTHLAKE, TEXAS
AUTHORIZING INTERVENTION BEFORE THE RAILROAD
COMMISSION OF TEXAS IN GAS UTILITIES DOCKET (GUD) NO. 9530;
AUTHORIZING PARTICIPATION WITH OTHER CITIES SERVED BY
ATMOS ENERGY CORPORATION, FORMERLY KNOWN AS TXU GAS
COMPANY, IN ADMINISTRATIVE AND COURT PROCEEDINGS
INVOLVING A GAS COST PRUDENCE REVIEW RELATED TO A
FILING MADE IN SEPTEMBER OF 2004 AS REQUIRED BY THE FINAL
ORDER IN GUD NO. 8664; DESIGNATING A REPRESENTATIVE OF
THE CITY TO SERVE ON A STEERING COMMITTEE; REQUIRING
REIMBURSEMENT OF REASONABLE LEGAL AND CONSULTANT
EXPENSES
WHEREAS, the City Council of the City of Southlake, Texas is a customer of Atmos Energy
Corporation, formerly known as TXU Gas Company, (Atmos /TXU Gas) and a regulatory authority with an
interest in the rates and charges of Atmos /TXU Gas; and
WHEREAS, Atmos /TXU Gas made a filing at the Railroad Commission of Texas on or about
September 24, 2004, now docketed as GUD No. 9530, for a gas cost prudence review of $2.2 billion in
previously incurred and billed gas costs; and
WHEREAS, the filing made by Atmos /TXU Gas was required by the terms of the Final Order of the
Railroad Commission in GUD No. 8664; and
WHEREAS, ratepayers of Atmos /TXU Gas, including the City of Southlake, and its residents would
be entitled to a pro rata portion of a refiind associated with any costs found to have been unreasonable; and
WHEREAS, the City of Southlake and its residents could benefit from coordination with other Cities
in a review of the reasonableness of the gas costs of Atmos /TXU Gas and the joint participation in the
Railroad Commission proceedings and any subsequent litigation or appeal related to those gas costs; and
WHEREAS, the reasonable costs associated with the participation of Cities in this ratemaking
proceeding are reimbursable from the Company.
Billy Campbell, City Manager
December 29, 2004
THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE,
TEXAS THAT:
Intervention is hereby authorized in GUD No. 9530 and /or any successor docket at the
Railroad Commission of Texas.
2. The City is authorized to cooperate with other Cities within the Atmos /TXU Gas system and
hereby designates Sharen Elam as a representative to a Cities' Steering Committee that shall direct the
efforts of counsel and consultants and the course of settlement and /or litigation before the Railroad
Commission or of an appeal to any court regarding any matter related to the gas cost prudence review filing
made by Atmos /TXU Gas in 2004.
Atmos /TXU Gas shall promptly reimburse the City's reasonable costs associated with the
City's participation in GUD No. 9530 or any subsequent proceeding.
Signed this day of , 2004.
Mayor
ATTEST: