06-F Suspending effective date of Atmos - GRIP

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AGENDA INFORMATION SHEET PROJECT: A resolution suspending the May 30,2006, effective date of the proposal by ATMOS Energy Corp., Mid- Tex Division to implement interim GRIP Rate Adjustments for Gas Utility Investment in 2005 and authorizing participation with the Gas Standing Steering Committee in a review and inquiry into the sufficiency of the filing and the basis and reasonableness of the proposed rate adjustments. BACKGROUND: The law mandates that a Gas Reliability Infrastructure Program (GRIP) surcharge request cannot become effective until sixty (60) days following the filing. The effective date may be suspended by a city for 45 days. If the City does not take action to suspend the filing, the Company may begin implementing a monthly surcharge ($0.51 on all residential customers, $1.75 for commercial customers, and $$78.47 for industrial customers) on or after May 30,2006. The resolution suspends the effective date to the maximum extent permitted by law to allow the cities time to evaluate the filing, determine whether the filing complies with law, and if lawful, to determine whether the surcharge is reasonable. This is particularly important given that the Gas Standing Steering Committee initiated an investigation of the current rates charged by Atmos Mid- Tex and concluded that Atmos already collects sufficient revenues to earn its allowed return without the necessity for a surcharge to recover incremental investment. DESCRIPTION: What is GRIP: GRIP is piecemeal ratemaking and would be illegal under traditional ratemaking that is in the public interest. Atmos persuaded the legislature in 2003 to make an exception to the prohibition against piecemeal ratemaking to encourage increased investment in transmission and distribution pipe by allowing prompt recovery of investment, despite the possibility that increased revenues and declining expenses could more than offset increased investment. Unfortunately, utilities have used the GRIP filings to include other costs unrelated to infrastructure improvements. GRIP surcharges are only allowed until the next general rate case. NOTE: IT IS CRITICAL THAT ALL CITIES PASS THE RESOLUTION TO SUSPEND BEFORE MAY 30,2006. Explanation of "Be It Resolved" Para~raphs: 1. A city is authorized to suspend the effective date for 45 days. However, since the Company controls and can extend its effective date during settlement discussions to increase a city's jurisdiction and the period of time necessary to reach settlement, the resolution refers to suspension "for the maximum period allowed by law" rather than a specific date. 2. This paragraph authorizes participation with the Gas Standing Steering Committee and coordinated control over legal counsel and consultants. Along with paragraph 3, this paragraph avoids the necessity of returning to the City Council with another resolution to authorize efforts related to an appeal of the Council's ultimate decision on the Atmos application.