11 - 2020 Atmos Rate Review Mechanism (RRM) Settlement

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Item No. 11 TO: City Council Grayson Path, City Manager FROM: Gene Anderson, Finance Director SUBJECT: 2020 ATMOS RATE REVIEW MECHANISM (RRM) SETTLEMENT DATE: September 14, 2020 BACKGROUND: On March 31, 2020, Atmos made a filing requesting 141.2 million dollars in additional revenues from its customers system wide. This request was later reduced to 136.3 million dollars. Only 98.7 million dollars of the 136.3 million dollars applies to cities that make up the Atmos Cities Steering Committee (ACSC). The rate increase request was reviewed by consultants for the Atmos Cities Steering Committee (ACSC) of which Paris is a member. STATUS OF ISSUE: Negotiations between Atmos and ACSC resulted in an 8.7 million dollars reduction in requested revenues by Atmos. The ordinance before the Council reflects the reduced proposed rates. The typical residential customer will experience a $5.15 per month increase in their bill (9.9%). The typical commercial customer will see a monthly increase of $15.48 or (6.56%). The City has three options: (1) Deny the requested increase, (2) Take no action on the increase request, (3) Approve the ACSC recommended increase. If the City rejects the RRM increase, Atmos will appeal to the Railroad Commission. The procedures for processing an appeal allow the Company to immediately implement the originally requested revenue requirement subject to refund, and then the City would have to attempt to put together a case that improved on the settlement. Rejection would mean City residents pay higher rates than other ACSC members and would then likely be surcharged rate case expenses associated with the appeal. If the City simply ignores the matter and refuses to take action, Atmos' most likely actin would be for the Company to impose the settled rates as if the City had approved the settlement. That action would be based on the fact that the City created the RRM process and passed an ordinance in 2018 that defines the procedure, including an Effective Date for a rate change that is to occur each year until the ordinance is modified or revoked. Doing nothing is better that taking action to specifically deny the increase, but while the most likely result is that Atmos would implement the settlement, no one can guarantee that Atmos will not appeal to the Railroad Commission. A factor that would influence the Company's choice of action would be whether a group of cities took similar action. They might ignore one or two Cities failure to act, but a dozen failures would likely trigger an appeal.