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Item 4H Item 4H Resolution 15-032, approving a negotiated settlement between Atmos Cities Steering Committee (“ACSC”) and Atmos Energy June 2, 2015 Hello Mayor and members of the City Council. This item requests City Council approval of Resolution 15-032, approving a negotiated settlement agreement with Atmos Energy 1 City of Southlake Strategy Map Critical Business Outcomes CBO1 - Continue to implement Southlake 2030 Plan by focusing on short-term initiatives. CBO2 - Become an employer of choice by developing a plan to recruit, develop and retain employees committed to excellence. CBO3 - Develop long-term strategies to address future financial uncertainties and challenges. CBO4 - Improve mobility by proactively completing traffic analysis of key areas. CBO5 -Optimize resources through collaboration and partnerships to reduce costs and add service value. The City of Southlake provides municipal services that support the highest quality of life for our residents, businesses, and visitors. We do this by being an exemplary model of balancing efficiency, fiscal responsibility, transparency, and sustainability. Deliver on Our Focus Areas Performance Management & Service Delivery C1 Achieve the highest standards of safety & security C2 Provide travel convenience within City & region C3 Provide attractive & unique spaces for enjoyment of personal interests C4 Attract & keep top-tier businesses to drive a dynamic & sustainable economic environment C5 Promote opportunities for partnerships & volunteer involvement Serve our Customers Manage the Business B1 Achieve best-in-class status in all City disciplines B2 Collaborate with select partners to implement service solutions B3 Enhance resident quality of life & business vitality through tourism B4 Provide high quality services through sustainable business practices B5 Enhance service delivery through continual process improvement B6 Optimize use of technology Provide Financial Stewardship Promote Learning and Growth F1 Adhere to financial management principles & budget F2 Invest to provide & maintain high quality public assets F3 Achieve fiscal wellness standards F4 Establish & maintain effective internal controls L1 Ensure our people understand the strategy & how they contribute to it L2 Enhance leadership capabilities to deliver results L3 Attract, develop & retain a skilled workforce L4 Recognize & reward high performers L5 Empower informed decision-making at all levels in the organization C6 Enhance the sense of community by providing excellent customer service and citizen engagement opportunities L6 Foster positive employee engagement This item supports the City’s strategy through the focus area of Performance Management & Service Delivery and through the corporate objective of B2 collaborate with select partners to implement service solutions 2 Purpose Seek City Council approval of the negotiated settlement between Atmos Cities Steering Committee (“ACSC”) and Atmos Energy The purpose of this item is to seek City Council approval of the negotiated settlement between Atmos Cities Steering Committee (“ACSC”) and Atmos Energy Corp regarding 2014 and 2015 rate review mechanism filings. The Atmos Cities Steering Committee is a permanent standing coalition of more than 150 Texas cities that has been authorized, through council resolutions, to represent the interests of municipal and residential consumers in gas utility regulatory matters. The ACSC supports safe service at fair prices. 3 Background 2014 Rate Review Filing Filing sought $45.7 million rate increase Resolution 14-029 Railroad Commission of Texas Proposal for Decision 2015 Rate Review Filing Filing sought additional $28.762 million rate increase In February 2014, Atmos filed with the City an application to increase natural gas rates pursuant to the Rate Review Mechanism (“RRM”) tariff. The filing sought a $45.7 million rate increase system-wide. The estimated base rate impact for a residential customer would have been an increase of 9.41%.   ACSC attempted to reach a settlement with Atmos but both parties were too far apart in their positions to reach a compromise.   On the recommendation of the ACSC Executive Committee and ACSC’s legal counsel, City Council adopted Resolution 14-029 denying the requested rate increase.   Atmos appealed the Cities denial to the Railroad Commission of Texas (“Commission”), and revised its requested increase to $43.8 million.   A hearing was held on Atmos’ appeal on September 3, 2014. On April 28, 2015, the Commission’s Hearings Examiner issued a Proposal for Decision (“PFD”) in Atmos’ appeal of the Cities denial of the 2014 rate increase. This PFD was not favorable to ACSC, but did recommend a reduction of approximately $860,000 to Atmos’ adjusted 2014 filing. While the parties were waiting for the PFD from the Hearings Examiner in the appeal of the 2014 filing, On February 27, 2015, Atmos filed another rate increase request. The filing sought additional revenues in the amount of $28.762 million.   The City worked with ACSC to analyze the schedules and evidence offered by Atmos to support its 2015 request to increase rates.   Resolution 15-032 and the attachments are the results of negotiation between the ACSC Executive Committee and Atmos to resolve issues raised during the review and evaluation of Atmos filing. 4 Resolution 15-032 Atmos to abate its 2014 appeal City receives benefit of the 2014 rate case adjustments Approves rate increase $8.7 million less than original request Monthly residential customer charge $18.60 Consumption charge increase .01112 per Ccf $1.14 (1.59%) monthly increase for residential customers $2.69 (0.96%) monthly increase for commercial customers The approval of resolution will: require Atmos to abate its appeal of the City’s rejection of the 2014 rate increase;   require Atmos to give the City the benefit of the adjustments to the 2014 rate increase recommended by the PFD;   approves rates that will increase Atmos’ revenues by $65.7 million which is $8.7 million less than original requested by Atmos in the 2014 and 2015 rate request;   monthly residential customer charge will be $18.60   consumption charge will increase .01112 per Ccf.   typical residential customer consuming 60 Ccf will see a monthly increase of $1.14 (about a 1.59% increase in the base bill)   typical commercial customer will see an increase of $2.69 or 0.96% 5 Requested Action Approval of Resolution 15-032 ACSC Executive Committee ACSC Legal Counsel The ACSC Executive Committee, ACSC legal counsel and consultants recommend that all cities adopt the Resolution approving the negotiated Settlement Agreement resolving both the 2014 and the 2015 filings and implementing the rate change. The alternative to approval of the settlement agreement would be another contested case hearing on appeal of the 2015 filing and continuation of the 2014 appeal with resulting rate case expenses borne by ratepayers. 6 Questions? Sharen Jackson 817-748-8042 7 Thank you for your time and attention. If you have any questions, please feel free to contact me at the number shown on the screen.