Item 9CCity of Southlake, Texas
MEMORANDUM
December 29, 2004
TO: Billy Campbell, City Manager
FROM: Sharen Elam, Director of Finance, Ext. 1713
SUBJECT: Resolution No. 05 -003, Suspending an interim rate adjustment proposed
by Atmos Energy Corporation, formerly TXU Gas Company; authorizing
participation in a steering committee to review the proposed rate increase
and recommend further action related to the proposed rate increase;
designating a representative of the City to serve on the steering
committee; authorizing intervention in any proceedings related to the
proposed rate increase; and requiring reimbursement of reasonable legal
and consultant expenses
Action Requested: City Council approval of Resolution No. 05 -003, Suspending an interim rate
adjustment proposed by Atmos Energy Corporation, formerly TXU Gas
Company; authorizing participation in a steering committee to review the
proposed rate increase and recommend further action related to the proposed
rate increase; designating a representative of the City to serve on the steering
committee; authorizing intervention in any proceedings related to the proposed
rate increase; and requiring reimbursement of reasonable legal and consultant
expenses
Background
Information: Atmos /TXU Gas made a filing (Distribution GRIP filing) at the City and with
other cities served by Atmos /TXU Gas in December 2004, notifying the cities
of its intent to increase its distribution rates to all customers effective February
15, 2005, pursuant to Texas Utilities Code Section 104.301, because of
investments Atmos /TXU Gas allegedly made in calendar year 2003.
Atmos /TXU Gas made a filing (Pipeline GRIP filing) at the Railroad
Commission of Texas (RRC) on or about December 17, 2004, now docketed as
GUD No. 9560, notifying the RRC of its intent to increase its city gate
transportation rates to all customers, also effective February 15, 2005, pursuant
to Texas Utilities Code Section 104.301, because of investments Atmos /TXU
Gas allegedly made in calendar year 2003.
In its filings, Atmos /TXU Gas claims that net investment in infrastructure
throughout the former TXU service areas increased in 2003 by a total of $43.5
million. If calculated in compliance with the GRIP statue, this claimed
increase would be in addition to the $70 million in annual plant investment
included in the GUD No. 9400 rates. Atmos /TXU Gas is therefore claiming
that investment in plant increase by over sixty percent during 2003.
Billy Campbell, City Manager
December 29, 2004
The proposed GRIP rate increases would increase annual revenues for
Atmos /TXU Gas by $8.5 million. These increases are in addition to the $11.5
million annual increase approved by the RRC in GUD No. 9400, and also in
addition to the $10.1 million recovery sought by Atmos /TXU Gas for rate case
expenses related to GUD No. 9400 Atmos /TXU has publicly stated that it
expects to experience annual cost savings of at least $40 million over the costs
included in rates approved in GUD No. 9400 and said savings are likely to
greatly exceed the annual revenue requirement associated with any reasonable
increases in invested capital that form the basis of the requested GRIP rate
increases. Atmos Energy Corporation has announced a twenty percent
increase in profits for its fiscal year ended September 30, 2004, and projects
further increases in profits in 2005.
The attached resolution will suspend the implementation of the proposed GRIP
rate increases within the city, appoint Sharen Elam as the City's representative
on a Cities' Steering Committee, authorize intervention in any RRC or court
proceedings related to the proposed GRIP rate increases, and require
Atmos /TXU Gas to reimburse the City reasonable costs associated with the
City's review of the GRIP rate increase filings or participation in 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 -003
Billy Campbell, City Manager
December 29, 2004
RESOLUTION NO.
A RESOLUTION BY THE CITY OF - TEXAS
SUSPENDING THE PROPOSAL, BY ATMOS ENERGY CORP. TO
IMPLEMENT INTER.IM GRIP RATE: ADJUSTMENTS FOR GAS UTILITY
INVESTMENT IN 2003; AUTHORIZING PARTICIPATION WITH OTHER
CITIES SERVED BY ATMOS ENERGY CORP -, MID-TEX DIVISION- IN A
REVIEW AND FNQUIRY INTO THE BASIS AND REA O ABLE ESS OF
THE PROPOSED RATE ADJUSTMENTS- AUTHORIZING INTERVENTIO'�
IN ADMINISTRATIN - E ADD COURT PROCEEDINGS INVOLVING THE
PROPOSED GRIP RATE ADJUSTMENTS: DESIG ATING A
REPRESENTATIVE OF THE ( - -Y TO SER'v - E ON A STEERING
COMMIT'TE.E-. REQUIRING REIMD� _.TRSEMENT OF REASONABLE LEGAL
AN CONSULTANT EXPENSE S
WHEREAS- the City- of
Texas ("City 15 a ga , at11141' customer o
Atmos, Ener Corp., Mid -Tex Division ( "Atmos Mid-Tex" or "the Company - - ) and a regulator
authority with an interest in the rates and charges of Atlnos Mid -Tex; and
WHEREAS Atmos Mid -Tex made filings with the City. and the Railroad Commission of
Texas ( "Railroad Commission" in December, 2004 - proposing to implement interim rate
adjustments ("GRIP Rate Increases pursuant to Texas Utilities Code § 104.301 on all
customers served by Atmos Mid -Tex; and
WHEREAS- Atmos Energy Corporation has reported a twenty percent increase in profits
for its fiscal year ended September 30, 2004 and projects fan increases in profits in ?005;
and
WHEREAS, in Mav, 2004, the Railroad Coininission entered its Final Order in GUD
moo- 9400 authorizing a rate increase that will produce additional annual revenues of 11 -5
million for Atmos Mid -Tex, and
WHEREAS, Atmos Mid -Test has projected that it will experience annual cost savings of
at least S40 million over the costs incl uded 111 rates approved 111 GUD Teo. 9400' and said savings
1668'•1 Sivt3em. ion Re tilu# ezx 1
Billy Campbell, City Manager
December 29, 2004
are likely to Rreatly exceed the annual revenue requirement associated with any reasonable
increases in invested capital that form the basis of the proposed GRIP rate increases, and
WHEREAS_ ratepayers of Atinos I_iid -Tex_ including the City and its residents. will be
adversely impacted by the proposed GRIP Rate Increases- and
WHEREAS_. the City and its residents could benefit from coordination with other cities
served by Atmos Mid-Tex ( "Cities ") in a review of the reasonableness of the proposed GRIP
Rate Increases and joint participation ii any proceedings at the Railroad Coinnuission related to
the proposed GRIP Rate Increases and
WHEREAS, the reasonable costs associated with the participation of Cities in this rate
proceeding are reimbursable from Atmos Mid -Tex.
THEREFORE BE IT RESOLVED BY THE CITE' COLENCIL OF THE CITY OF
_ TEXAS. THAT:
1 _ The February 15. 2.005_, effective date of the GRIP Rate Increases proposed by
Atmos Mid-Tex is hereby suspended to perImt adequate time to review the proposed increases,
analyze all necessary information and take appropriate action related to the proposed increases.
2_ The City is authorized to cooperate wi th other Cities to create and participate in a
Steering Committee to hire and direct legal counsel and consultants, to negotiate i ith the
Company, to make recommendations to the City regarding the proposed GRIP Rate Increases,
and to direct and- a €hninistrative proceedings or litigation associated with the proposed GRIP
Rate Increases_
3_ The City is authorized to intervene in any administrative proceedings or litigation .
associated with the proposed GRIP Rate Increases, including GUD No- 9560 the Company's
proposed GIMP rate increase for its pipeline system filed at the Railroad Commission.
1665 %1T.Suspensim Resolu&n 2
Billy Campbell, City Manager
December 29, 2004
4_ The City hereby designates as a representative to a
Cities' Steering Committee that Shall direct the efforts of counsel and consultants-
5- Atmos Mid -Tex shall promptly reilnburse the City's reasonable costs associated
with the City's activities related to the proposed GRIP Rate Increases.
Signed this day of ?0
Mayor
ATTEST:
1668 %I2',Sm,pensisn Resoluti,m 3