06-A Denying request by Atmos under GRIP filing

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[8JAction CITY OF PARIS, TEXAS CITY COUNCIL AGENDA REQUEST MEETING DATE: I August 27,2007 D Discussion Dlnformation DRefer to: SUBMITTED BY: I Gene Anderson, Finance Director DESCRIPTION: This resolution denies the request by Atmos Mid-Tex made under its fourth GRIP filing on May 31,2007. It also indicates the City's support for statutory changes to the Texas GRIP statute to ensure fairness for ratepayers and to eliminate piecemeal ratemaking for any change in invested capital. BACKGROUND INFORMATION: GRIP is piecemeal ratemaking and would be illegal under traditional ratemaking that is in the public interest. In 2003 the legislature made 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. GRIP filings have included costs unrelated to infrastructure improvements. Pursuant to its statutory authority. the City suspended the effective date of this surcharge in order to evaluate the filing. determine whether the filing complies with the law. and if unlawful, to determine what course to pursue. The Atmos Cities Steering Committee's rate consultant has identified approximately $3.4 million in expenses included in the GRIP surcharge request that are inconsistent with the statute and/or the Railroad Commission's order in GUD 9670 (the rate case initiated by ACSC that revealed inappropriate expenditures in previous GRIP surcharges). Atmos has recently received a rate increase of $5 million and should be collecting sufficient revenues to earn its allowed return without the necessity of a surcharge to recover incremental costs. LEGAL REVIEW: I~ MANAGER'S RECOMMENDATION: ;2e~