06-C Denying Atmos request for GRIP rate increase

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AGENDA INFORMATION SHEET PURPOSE: Atmos Mid-Tex filed its third surcharge request under the Gas Reliability Infrastructure Program ("GRIP") statute, seeking to add additional surcharges on top of the 2003 and 2004 GRIP surcharges already approved by the Railroad Commission. The 2005 surcharges are $0.51 on all residential customers, $1.75 for commercial customers, and $78.47 for industrial customers. If this third surcharge were to be approved, the total amount of surcharges resulting from the GRIP statute would be $1.09/month for residential customers, $3.68/month for commercial customers, and $151.96/month for industrial customers. The ordinance denies the 2005 surcharge request on the grounds that it does not comply with the law and is not reasonable, and also because it is duplicative of the Company's Statement of Intent filing for the same period of time. BACKGROUND: GRIP is piecemeal rate-making and would be illegal under traditional rate- making in the public interest. Atmos persuaded the legislature in 2003 to make an exception to the prohibition against piecemeal rate-making to encourage increased investment in distribution pipe by allowing prompt recovery despite the possibility that increased revenues and declining costs would more than offset increased investment. OBSERVATION: The following problems have been identified in this filing: (i) the capital structure and component costs used by Atmos do not represent Atmos Energy's costs, but are proxies based on TXU Gas' circumstances; (ii) the rate base amounts used show enormous and unexplained increases over the amounts in both 2003 and 2004 that are not shown to be reasonable; and (iii) the Statement ofIntent filed today with the Commission and the Cities also includes Atmos' 2005 investment, making the 2005 GRIP filing unnecessary and creating the potential for double- counting and double-recovery for this investment. Once the GRIP surcharge is in place, it is updated annually until the next general rate case; however, that next case can be delayed by the Company for more than five years. On May 31,2006, the Company filed a Statement ofIntent to increase its rates with the Railroad Commission and the Cities. The test year used for that filing is the calendar year ending December 31, 2005, which is the same period of time covered by this latest GRIP filing. Thus, the capital investment made by Atmos during 2005 is the subject oftwo proceedings - this GRIP filing and the Statement ofIntent. Because the 2005 capital investment will be reviewed in the Statement of Intent filing, the GRIP filing for 2005 is superfluous, duplicative, and unnecessary. Explanation of "Be It Resolved" Para~raphs: 2. This paragraph sets out the finding that the Company's request is unreasonable, duplicative, and unnecessary. 3. This paragraph authorizes participation in a Steering Committee and coordinated control over legal counsel and consultants. 4. This paragraph notifies the Company that the City expects reimbursement of its expenses associated with its review of the filing. r"