Item 4CCITY OF
SOUTH LAKE
MEMORANDUM
August 10, 2011
To: Shana Yelverton, City Manager
From: Sharen Jackson, Finance Director
Subject: Ordnance No. 1011, V Reading, Approving a negotiated resolution
between the Atmos cities steering committee ( "ACSC" or "Steering
Committee ") and Atmos Energy Corp., Mid -Tex Division ( "Atmos
MIDTEV or "company ") regarding the company's fourth annual rate
review mechanism ( "RRM ") filing in all cities exercising original
jurisdiction; declaring existing rates to be unreasonable; adopting
tariffs that reflect rate adjustments consistent with the negotiated
settlement and finding the rates to be set by the attached tariffs to
be just and reasonable; requiring the company to reimburse cities'
reasonable ratemaking expenses;
Action
Requested: Approval of Ordinance No. 1011.
Background
Information: Southlake, along with approximately 154 other cities served
by Atmos Energy Mid -Tex Division ( "Atmos "), is a member of
the Atmos Cities Steering Committee ( "ACSC "). On April 1,
2011, Atmos filed with the City an application to increase
natural gas rates. This is the fourth annual Rate Review
Mechanism ( "RRM ") filing. The Atmos RRM filing sought a
$15.7 million rate increase. The City worked with ACSC to
analyze the schedules and evidence offered by Atmos to
support its request to increase rates.
As a result of the negotiations, ACSC was able to reduce the
Atmos' requested $15.7 million increase to $6.6 million,
allowing only incremental revenues necessary to cover direct
costs associated with the steel service line replacement
program approved by ACSC Cities in 2010 (Ordinance 984
approved October 5, 2010). Approval of this Ordinance
1011 will result in the implementation of new rates that
increase Atmos' revenues effective September 2011. The
average residential customer (using 4.5 Mcf a month) will
have an increase of $0.31 per month or .66% and the
average commercial customer (using 34.8 Mcf a month) will
have an increase of $0.88 per month or 0.88 %.
During the time that the City has retained original jurisdiction
in this case, the consultants working on behalf of ACSC
have investigated the support for Atmos' requested rate
increase. While the evidence does not support the $15.7
million increase requested by the Company, ACSC
consultants agree that the Company can justify an increase
in revenues of $6.6 million, a result consistent with
Southlake's approval of a steel service line replacement
program last year (Ordinance 984 approved October 5,
2010). The agreement on $6.6 million is a compromise
between the positions of the parties.
The Settlement Agreement of 2010 (Ordinance No. 984
approved October 5, 2010) which included an extension of
the RRM process, included an allowance for recovery of
direct costs, excluding overheads, of the steel service line
replacement program. The 2010 Settlement Agreement
contemplated that the steel service line replacement
program would be adjusted annually, but shall be capped at
$0.44 for residential customers and $1.22 for commercial
customers per month. The increase in this case is
consistent with the caps contemplated last year for the steel
service line replacement program.
The alternative to a settlement of the filing would be a
contested case proceeding before the Railroad Commission
on Atmos' current application, would take several months
and cost ratepayers millions of dollars in rate case expenses
and would not likely produce a result more favorable than
that to be produced by the settlement. The ACSC
Settlement Committee recommends that ACSC members
take action to approve the Ordinance authorizing new rate
tariffs.
Financial
Considerations: None
Strategic Link: F1 Adhere to financial management principles and budget
Citizen Input/
Board Review: Public Hearing scheduled for September 6, 2011.
Legal Review: Ordinance prepared by Steering Committee attorneys, Lloyd
Gosselink Rochelle & Townsend, P.C.
Alternatives: Deny Ordinance
Supporting
Documents: Ordinance No. 1011
Tariff (Attachment A)
Staff
Recommendation: Approve Ordinance No. 1011
ORDINANCE NO. 1011
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF SOUTHLAKE, TEXAS, ( "CITY ") APPROVING A
NEGOTIATED RESOLUTION BETWEEN THE ATMOS
CITIES STEERING COMMITTEE ( "ACSC" OR
"STEERING COMMITTEE") AND ATMOS ENERGY
CORP., MID -TEX DIVISION ( "ATMOS MID -TEX" OR
"COMPANY ") REGARDING THE COMPANY'S FOURTH
ANNUAL RATE REVIEW MECHANISM ( "RRM") FILING
IN ALL CITIES EXERCISING ORIGINAL JURISDICTION;
DECLARING EXISTING RATES TO BE
UNREASONABLE; ADOPTING TARIFFS THAT REFLECT
RATE ADJUSTMENTS CONSISTENT WITH THE
NEGOTIATED SETTLEMENT AND FINDING THE RATES
TO BE SET BY THE ATTACHED TARIFFS TO BE JUST
AND REASONABLE; REQUIRING THE COMPANY TO
REIMBURSE CITIES' REASONABLE RATEMAKING
EXPENSES; REPEALING CONFLICTING RESOLUTIONS
OR ORDINANCES; DETERMINING THAT THIS
ORDINANCE WAS PASSED IN ACCORDANCE WITH
THE REQUIREMENTS OF THE TEXAS OPEN MEETINGS
ACT; ADOPTING A SAVINGS CLAUSE; DECLARING AN
EFFECTIVE DATE; AND REQUIRING DELIVERY OF
THIS ORDINANCE TO THE COMPANY AND THE
STEERING COMMITTEE'S 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 " Company "), and a regulatory authority
with an interest in the rates and charges of Atmos Mid -Tex; and
WHEREAS, the City is a member of the Atmos Cities Steering Committee ( "ACSC" or
"Steering Committee "), a coalition of approximately 154 similarly situated cities served by
Atmos Mid -Tex that have joined together to facilitate the review of and response to natural gas
issues affecting rates charged in the Atmos Mid -Tex service area (such participating cities are
referred to herein as "ACSC Cities "); and
WHEREAS, pursuant to the terms of the agreement settling the Company's 2007
Statement of Intent to increase rates, ACSC Cities and the Company worked collaboratively to
1327084 /Atmos Mid -Tex RRM -4 Ordinance 1
develop a Rate Review Mechanism ( "RRM ") tariff that allows for an expedited rate review
process controlled in a three -year experiment by ACSC Cities as a substitute to the current GRIP
process instituted by the Legislature; and
WHEREAS, the City took action in 2008 to approve a Settlement Agreement with Atmos
Mid -Tex resolving the Company's 2007 rate case and authorizing the RRM Tariff, and
WHEREAS, the 2008 Settlement Agreement contemplates reimbursement of ACSC
Cities' reasonable expenses associated with RRM applications; and
WHEREAS, the Steering Committee and Atmos Mid -Tex agreed to extend the RRM
process in reaching a settlement in 2010 on the third RRM filing; and
WHEREAS, on or about April 1, 2011, the Company filed with the city its fourth annual
RRM filing, requesting to increase natural gas base rates by $15.7 million; and
WHEREAS, ACSC coordinated its review of Atmos Mid -Tex's RRM filing by
designating a Settlement Committee made up of ACSC representatives, assisted by ACSC
attorneys and consultants, to resolve issues identified by ACSC in the Company's RRM filing;
and
WHEREAS, independent analysis by ACSC's rate expert concluded that Atmos Mid -Tex
is unable to justify an increase over current rates except for undisputed costs of $6.6 million to
cover the steel service line replacement program initiated in 2010; and
WHEREAS, the ACSC Settlement Committee, as well as ACSC lawyers and consultants,
recommend that ACSC Cities approve the attached rate tariffs ( "Attachment A" to this
Ordinance), which will increase the Company's revenue requirement by $6.6 million to extend
current recovery of incremental direct costs of the steel service line replacement program
authorized by ACSC Cities in ordinances passed in 2010; and
1327084 /Atmos Mid -Tex RRM -4 Ordinance 2
WHEREAS, the attached tariffs implementing new rates are consistent with the
negotiated resolution reached by ACSC Cities and are just, reasonable, and in the public interest.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF SOUTHLAKE, TEXAS:
Section 1. That the findings set forth in this Ordinance are hereby in all things approved.
Section 2. That the City Council finds the existing rates for natural gas service provided
by Atmos Mid -Tex are unreasonable and new tariffs which are attached hereto and incorporated
herein as Attachment A, are just and reasonable and are hereby adopted.
Section 3. That Atmos Mid -Tex shall reimburse the reasonable ratemaking expenses of
the ACSC Cities in processing the Company's rate application.
Section 4. That to the extent any resolution or ordinance previously adopted by the
Council is inconsistent with this Ordinance, it is hereby repealed.
Section 5. That the meeting at which this Ordinance was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code,
Chapter 5 51.
Section 6. That if any one or more sections or clauses of this Ordinance is adjudged to be
unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remaining
provisions of this Ordinance and the remaining provisions of the Ordinance shall be interpreted
as if the offending section or clause never existed.
Section 7. That this Ordinance shall become effective from and after its passage with
rates authorized by attached Tariffs to be effective for bills rendered on or after September 1,
2011.
1327084 /Atmos Mid -Tex RRM -4 Ordinance 3
Section 8. That a copy of this Ordinance shall be sent to Atmos Mid -Tex, care of David
Park, Vice President Rates and Regulatory Affairs, at Atmos Energy Corporation, 5420 LBJ
Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay, General Counsel to ACSC, at
Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767 -1725.
2011.
PASSED AND APPROVED on first reading this day of ,
John Terrell, Mayor
ATTEST:
Alicia Richardson
City Secretary
PASSED AND APPROVED on second reading this day of
2011.
John Terrell, Mayor
ATTEST:
Alicia Richardson
City Secretary
APPROVED AS TO FORM:
City Attorney
Date:
Adopted:
Effective:
1327084 /Atmos Mid -Tex RRM -4 Ordinance 4
MID -TEX DIVISION
ATMOS ENERGY CORPORATION
RATE SCHEDULE:
R — RESIDENTIAL SALES
APPLICABLE TO:
All Cities except the City of Dallas
EFFECTIVE DATE:
Bills Rendered on or after 9/1/2011
Application
Applicable to Residential Customers for all natural gas provided at one Point of Delivery and measured
through one meter.
Type of Service
Where service of the type desired by Customer is not already available at the Point of Delivery, additional
charges and special contract arrangements between Company and Customer may be required prior to
service being furnished.
Monthly Rate
Customer's monthly bill will be calculated by adding the following Customer and Mcf charges to the
amounts due under the riders listed below:
Charge
Amount
Customer Charge per Bill
$ 7.50 per month
Commodity Charge — All Mcf
$ 2.5116 per Mcf
Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated
in accordance with Part (a) and Part (b), respectively, of Rider GCR.
Weather Normalization Adjustment: Plus or Minus an amount for weather normalization
calculated in accordance with Rider WNA.
Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider
FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated
municipality.
Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX.
Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s).
Agreement
An Agreement for Gas Service may be required.
Notice
Service hereunder and the rates for services provided are subject to the orders of regulatory bodies
having jurisdiction and to the Company's Tariff for Gas Service.
MID -TEX DIVISION
ATMOS ENERGY CORPORATION
RATE SCHEDULE:
C — COMMERCIAL SALES
APPLICABLE TO:
All Cities except the City of Dallas
EFFECTIVE DATE:
Bills Rendered on or after 9/1/2011
Application
Applicable to Commercial Customers for all natural gas provided at one Point of Delivery and measured
through one meter and to Industrial Customers with an average annual usage of less than 3,000 Mcf.
Type of Service
Where service of the type desired by Customer is not already available at the Point of Delivery, additional
charges and special contract arrangements between Company and Customer may be required prior to
service being furnished.
Monthly Rate
Customer's monthly bill will be calculated by adding the following Customer and Mcf charges to the
amounts due under the riders listed below:
Charge
Amount
Customer Charge per Bill
$ 16.75 per month
Commodity Charge - All Mcf
$ 1.0217 per Mcf
Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated
in accordance with Part (a) and Part (b), respectively, of Rider GCR.
Weather Normalization Adjustment: Plus or Minus an amount for weather normalization
calculated in accordance with Rider WNA.
Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider
FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated
municipality.
Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX.
Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s).
Agreement
An Agreement for Gas Service may be required.
Notice
Service hereunder and the rates for services provided are subject to the orders of regulatory bodies
having jurisdiction and to the Company's Tariff for Gas Service.
MID -TEX DIVISION
ATMOS ENERGY CORPORATION
RATE SCHEDULE:
I — INDUSTRIAL SALES
APPLICABLE TO:
All Cities except the City of Dallas
EFFECTIVE DATE:
Bills Rendered on or after 91112011
Next 3,500 MMBtu
Application
Applicable to Industrial Customers with a maximum daily usage (MDU) of less than 3,500 MMBtu per day
for all natural gas provided at one Point of Delivery and measured through one meter. Service for
Industrial Customers with an MDU equal to or greater than 3,500 MMBtu per day will be provided at
Company's sole option and will require special contract arrangements between Company and Customer.
Type of Service
Where service of the type desired by Customer is not already available at the Point of Delivery, additional
charges and special contract arrangements between Company and Customer may be required prior to
service being furnished.
Monthly Rate
Customer's monthly bill will be calculated by adding the following Customer and MMBtu charges to the
amounts due under the riders listed below:
Charge
Amount
Customer Charge per Meter
$ 450.00 per month
First 0 MMBtu to 1,500 MMBtu
$ 0.2750 per MMBtu
Next 3,500 MMBtu
$ 0.2015 per MMBtu
All MMBtu over 5,000 MMBtu
$ 0.0433 per MMBtu
Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated
in accordance with Part (a) and Part (b), respectively, of Rider GCR.
Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider
FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated
municipality.
Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX.
Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s).
Curtailment Overpull Fee
Upon notification by Company of an event of curtailment or interruption of Customer's deliveries,
Customer will, for each MMBtu delivered in excess of the stated level of curtailment or interruption, pay
Company 200% of the midpoint price for the Katy point listed in Platts Gas Daily published for the
applicable Gas Day in the table entitled "Daily Price Survey."
MID -TEX DIVISION
ATMOS ENERGY CORPORATION
RATE SCHEDULE:
I — INDUSTRIAL SALES
APPLICABLE TO:
All Cities except the City of Dallas
EFFECTIVE DATE:
Bills Rendered on or after 9/1/2011
Replacement Index
In the event the "midpoint" or "common" price for the Katy point listed in Platts Gas Daily in the table
entitled "Daily Price Survey" is no longer published, Company will calculate the applicable imbalance fees
utilizing a daily price index recognized as authoritative by the natural gas industry and most closely
approximating the applicable index.
Agreement
An Agreement for Gas Service may be required.
Notice
Service hereunder and the rates for services provided are subject to the orders of regulatory bodies
having jurisdiction and to the Company's Tariff for Gas Service.
Special Conditions
In order to receive service under Rate 1, Customer must have the type of meter required by Company.
Customer must pay Company all costs associated with the acquisition and installation of the meter.
MID -TEX DIVISION
ATMOS ENERGY CORPORATION
RATE SCHEDULE:
T— TRANSPORTATION
APPLICABLE TO:
All Cities except the City of Dallas
EFFECTIVE DATE:
Bills Rendered on or after 9!112011
Next 3,500 MM13tu
Application
Applicable, in the event that Company has entered into a Transportation Agreement, to a customer
directly connected to the Atmos Energy Corp., Mid -Tex Division Distribution System (Customer) for the
transportation of all natural gas supplied by Customer or Customer's agent at one Point of Delivery for
use in Customer's facility.
Type of Service
Where service of the type desired by Customer is not already available at the Point of Delivery, additional
charges and special contract arrangements between Company and Customer may be required prior to
service being furnished.
Monthly Rate
Customer's bill will be calculated by adding the following Customer and MMBtu charges to the amounts
and quantities due under the riders listed below:
Charge
Amount
Customer Charge per Meter
$ 450.00 per month
First 0 MMBtu to 1,500 MMBtu
$ 0.2750 per MMBtu
Next 3,500 MM13tu
$ 0.2015 per MMBtu
All MMBtu over 5,000 MMBtu
$ 0.0433 per MMBtu
Upstream Transportation Cost Recovery: Plus an amount for upstream transportation costs in
accordance with Part (b) of Rider GCR.
Retention Adjustment: Plus a quantity of gas as calculated in accordance with Rider RA.
Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider
FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated
municipality.
Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX.
Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s).
Imbalance Fees
All fees charged to Customer under this Rate Schedule will be charged based on the quantities
determined under the applicable Transportation Agreement and quantities will not be aggregated for any
Customer with multiple Transportation Agreements for the purposes of such fees.
MID -TEX DIVISION
ATMOS ENERGY CORPORATION
RATE SCHEDULE:
T — TRANSPORTATION
APPLICABLE TO:
All Cities except the City of Dallas
EFFECTIVE DATE:
Bills Rendered on or after 9/112011
Monthly Imbalance Fees
Customer shall pay Company the greater of (i) $0.10 per MMBtu, or (ii) 150% of the difference per MMBtu
between the highest and lowest "midpoint" price for the Katy point listed in Platts Gas Daily in the table
entitled "Daily Price Survey" during such month, for the MMBtu of Customer's monthly Cumulative
Imbalance, as defined in the applicable Transportation Agreement, at the end of each month that exceeds
10% of Customer's receipt quantities for the month.
Curtailment Overpull Fee
Upon notification by Company of an event of curtailment or interruption of Customer's deliveries,
Customer will, for each MMBtu delivered in excess of the stated level of curtailment or interruption, pay
Company 200% of the midpoint price for the Katy point listed in Platts Gas Daily published for the
applicable Gas Day in the table entitled "Daily Price Survey."
Replacement Index
In the event the "midpoint" or "common" price for the Katy point listed in Platts Gas Daily in the table
entitled "Daily Price Survey" is no longer published, Company will calculate the applicable imbalance fees
utilizing a daily price index recognized as authoritative by the natural gas industry and most closely
approximating the applicable index.
Agreement
A transportation agreement is required.
Notice
Service hereunder and the rates for services provided are subject to the orders of regulatory bodies
having jurisdiction and to the Company's Tariff for Gas Service.
Special Conditions
In order to receive service under Rate T, customer must have the type of meter required by Company.
Customer must pay Company all costs associated with the acquisition and installation of the meter.
Atmos Energy Mid -Tex Division 2011 RRM Settlement Terms
July 19, 2011
• RRM 4
• $6.6 million increase for steel service line program (undisputed).
• There shall be no increase in base rates.
• Rate design changes (R, C, I and T Tariffs attached)
■ $7.50 residential customer charge (inclusive of $0.44 for the steel
service line program)
■ $16.75 commercial customer charge (inclusive of $1.22 for the
steel service line program)
■ Consumption charge based on residential volumes of 80,048,320
Mcf and commercial volumes of 51,011,265 Mcf.
• Report quarterly on the progress of the SSL program, indicating the
cumulative services replaced by location and costs incurred, along with a
narrative discussion of any problems encountered or departures from
budgeted activity levels.
• Put new tariff into effect on September 1, 2011,
Process for Extension of RRM Process
• August 15, 2011
• Company and Cities agree on list of issues to review
• Company and Cities establish working groups for issues that
include company representatives, city settlement committee
representatives and city consultants and attorneys as necessary
• Company and Cities agree on meeting schedule for special review
period
• Special Review Period -September 1 —November 15, 2011
■ Working groups receive and review information related to
identified issues and consider company and consultant
recommendations
• Negotiation Period - November 15, 2011 — December 15, 2011
■ Negotiate extension to RRM process with appropriate treatment of
items from working groups
• If no extension to the RRM is reached, the Company will file a Statement
of Intent with the cities no sooner than January 15, 2012
o If an extension to the RRM is reached, the Company will file RRM no
sooner than April 1, 2012