Item 4HM E M O R A N D U M
May 30, 2012
To:
Shana Yelverton, City Manager
From:
Sharen Jackson, Director of Finance
Subject: Resolution No. 12-015, Denying Atmos Energy Corp., Mid-Tex
Division requested rate change
Action
Requested:
Approval of Resolution No. 12-031, Denying Atmos Energy
Corp., Mid-Tex Division (“Atmos”) requested rate change.
Background
Information:
The City, along with over 150 other cities served by Atmos is
a member of the Atmos Cities Steering Committee (“ACSC”).
Atmos filed a Statement of Intent on January 31, 2012,
seeking to increase system-wide base rates (which exclude
the cost of gas) by approximately $49 million or 11.94%.
However, the Company is requesting an increase of 13.6%,
excluding gas costs, for its residential customers.
Additionally, the application would change the way that rates
are collected, by increasing the residential fixed-monthly (or
customer) charge from $7.50 to $18.00 and decreasing the
consumption charge from $0.25 per 100 cubic feet (“ccf”) to
$0.07 per ccf.
On February 21, 2012, City Council approved Resolution No.
12-015, suspending the effective date of the proposed rate
increase to allow the City, working in conjunction with the
other ACSC cities, time to review Atmos Statement of Intent.
ACSC engaged attorneys and consultants to review Atmos
rate increase. During their review, ACSC’s consultants
found justification that Atmos rate should be decreased.
ACSC and Atmos have engaged in some settlement
discussions but have not yet reached an agreement. The
ACSC Settlement Committee therefore recommends denial
of the Atmos’ proposed rate increase rather than a rate
decrease to facilitate further settlement discussions. Atmos
has expressed a desire for settlement while an appeal from
the cities’ denial of the rate increase is pending at the
Railroad Commission of Texas.
The purpose of the resolution is to deny Atmos proposed
rate increase pending further settlement discussions and to
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prevent Atmos’ proposed rate increase from automatically
taking effect on June 11, 2012.
Financial
Considerations:
Atmos will reimburse the cities for their reasonable rate case
expenses. Legal counsel and consultants approved by
ACSC will submit monthly invoices that will be forwarded to
Atmos for reimbursement. No individual city incurs liability
for payment of rate case expenses by adopting a denial
resolution.
Citizen Input/
Board Review:
None required
Legal Review:
Lloyd Gosselink Rochelle & Townsend, P.C. prepared the
resolution.
Alternatives:
Approve or deny resolution
Supporting
Documents:
Resolution No. 12-031
Staff
Recommendation:
Approval of Resolution No. 12-031
RESOLUTION NO. 12-031
RESOLUTION OF THE CITY OF SOUTHLAKE, TX
DENYING ATMOS ENERGY CORP., MID-TEX
DIVISION’S (“ATMOS MID-TEX”) REQUESTED RATE
CHANGE; REQUIRING THE COMPANY TO REIMBURSE
THE CITY’S REASONABLE RATEMAKING EXPENSES;
FINDING THAT THE MEETING AT WHICH THIS
RESOLUTION IS PASSED IS OPEN TO THE PUBLIC AS
REQUIRED BY LAW; REQUIRING NOTICE OF THIS
RESOLUTION TO THE COMPANY AND ACSC’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 is a regulatory
authority under the Gas Utility Regulatory Act (“GURA”) and under Chapter 104, §104.001 et
seq. of GURA, has exclusive original jurisdiction over Atmos Mid-Tex’s rates, operations, and
services within the City; and
WHEREAS, the City is a member of the Atmos Cities Steering Committee (“ACSC”), a
coalition of over 150 similarly situated cities served by the Company that have joined together to
facilitate the review and response to natural gas issues affecting rates charged in the Atmos Mid-
Tex Division; and
WHEREAS, pursuant to the terms of the agreement settling the Company’s 2007
Statement of Intent to increase rates, ACSC and the Company worked collectively to develop a
Rate Review Mechanism (“RRM”) tariff that allows for an expedited rate review process
controlled in a three-year experiment by ACSC as a substitute to the current GRIP process
instituted by the Legislature; and
WHEREAS, ACSC and the Company agreed to extend the RRM process in reaching a
settlement in 2010 on the third RRM filing; and
WHEREAS, in 2011, ACSC and the Company engaged in good faith negotiations
regarding the continuation of the RRM process, but were unable to come to ultimate agreement;
and
WHEREAS, on or about January 31, 2012, the Company filed a Statement of Intent with
the cities retaining original jurisdiction within its Mid-Tex service division to increase rates by
approximately $49 million; and
WHEREAS, Atmos Mid-Tex proposed March 6, 2012, as the effective date for its
requested increase in rates; and
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WHEREAS, the City suspended the effective date of Atmos Mid-Tex’s proposed rate
increase for the maximum period allowed by law and thus extended the City’s jurisdiction until
June 4, 2012; and
WHEREAS, on April 25, 2012, the Company extended the effective date for its proposed
rates by one week, which similarly extended the City’s jurisdiction until June 11, 2012; and
WHEREAS, the ACSC Executive Committee hired and directed legal counsel and
consultants to prepare a common response to the Company’s requested rate increase and to
negotiate with the Company and direct any necessary litigation; and
WHEREAS, ACSC’s consultants conducted a review of the Company’s requested rate
increase and found justification that the Company’s rates should be decreased; and
WHEREAS, ACSC and the Company have engaged in settlement discussions but will be
unable according to Company representations to reach settlement in sufficient time for cities to
act before June 11, 2012; and
WHEREAS, failure by ACSC members to take action before June 11, 2012 would allow
the Company the right to impose its full request on residents of said ACSC members; and
WHEREAS, the ACSC Settlement Committee recommends denial of the Company’s
proposed rate increase in order to continue settlement discussions pending the Company’s appeal
of cities’ denials to the Railroad Commission of Texas; and
WHEREAS, the GURA § 103.022 provides that costs incurred by cities in ratemaking
activities are to be reimbursed by the regulated utility.
THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
SOUTHLAKE, TEXAS:
1.That the rates proposed by Atmos Mid-Tex to be recovered through its gas rates
charged to customers located within the City limits, are hereby found to be unreasonable and
shall be denied.
2.That the Company shall continue to charge its existing rates to customers within
the City and that said existing rates are reasonable.
3. That the City’s reasonable rate case expenses shall be reimbursed by the
Company.
4. That it is hereby officially found and determined that the meeting at which this
Resolution is passed is open to the public as required by law and the public notice of the time,
place, and purpose of said meeting was given as required.
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5. A copy of this Resolution shall be sent to Atmos Mid-Tex, care of David Park,
Vice President Rates & Regulatory Affairs, at Atmos Energy Corporation, Mid-Tex Division,
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.
PASSED AND APPROVED this __________ day of ___________________, 2012.
_________________________________
Mayor
ATTEST:
__________________________________
City Secretary
APPROVED AS TO FORM:
___________________________________
City Attorney
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