2018-022 Approving a Netogiated Settlement between the Atmos Cities Steering committee and Atmos Energy Corp. Regardint he Company's 2018 Rate Review

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August 24, 2018 MODEL STAFF REPORT BACKGROUND AND SUMMARY The City, along with 171 other Mid -Texas cities served by Atmos Energy Corporation, Mid - Tex Division ("Atmos Mid -Tex" or "Company"), is a member of the Atmos Cities Steering Committee ("ACSC"). In 2007, ACSC and Atmos Mid -Tex settled a rate application filed by the Company pursuant to Section 104.301 of the Texas Utilities Code for an interim rate adjustment commonly referred to as a GRIP filing (arising out of the Gas Reliability Infrastructure Program legislation). That settlement created a substitute rate review process, referred to as Rate Review Mechanism ("RRM"), as a substitute for future filings under the GRIP statute. Since 2007, there have been several modifications to the original RRM Tariff. The most recent iteration of an RRM Tariff was reflected in an ordinance adopted by ACSC members earlier this year. On or about April 1, 2018, the Company filed a rate request pursuant to the RRM Tariff adopted by ACSC members. The Company claimed that its cost -of -service in a test year ending December 31, 2017, entitled it to additional system -wide revenues of $42.0 million, Application of the standards set forth in ACSC's RRM Tariff required Atmos to reduce its request to $27.4 million. After review of the consultants' report, the Company offered to settle for a system -wide increase of $25.9 million. Following further negotiations, ACSC's Executive Committee agreed to recommend a system -wide rate increase of $24.9 million. That increase when allocated to ACSC members results in an increase of $17.8 million. The Effective Date for new rates is October 1, 2018. ACSC members should take action approving the Resolution before the end of September. 1