09-B Atmos - Show Cause Res - Laserfiche WebLink

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., MODEL STAFF REPORT ON ATMOS MID-TEX SHOW CAUSE RESOLUTION Purpose of the Resolution: Municipalities have original jurisdiction over gas utility rates within the city. Municipalities have authority under the Gas Utility Regulatory Act ("GURA") to initiate a proceeding to determine whether the existing rates being charged by a gas utility are unreasonable or in violation of the law. This resolution exercises that authority and requires Atmos Mid-Tex Division to file a rate filing package with the City in order for the City to determine whether Atmos' rates are excessive. Why this Resolution is necessary: The last rate case at the Railroad Commission affecting the gas distribution system now owned by Atmos Mid-Tex was GUD No. 9400. At that time, the system was owned by TXU Gas Company, which had very different operating expenses and debt structure from Atmos. The rates currently being charged, therefore, are not based on Atmos' cost of service or on its capital structure. As a result, Atmos is most likely over-earning and receiving a greater return than was authorized by the Commission in GUD No. 9400. Atmos has made numerous public statements regarding the reduction of its operating expenses and the increased revenues it has been making from its Texas systems. The piecemeal ratemaking fostered by the GRIP interim surcharges prevents a thorough, comprehensive review of Atmos' cost of service, and would be illegal under traditional ratemaking in the public interest. 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. Second, while predicated as a surcharge to promptly recover investment in new and replacement infrastructure designed to improve system safety and reliability, a substantial portion of the GRIP requests have been based upon new office furniture, computers and other cost efficiency measures more likely to benefit shareholders than ratepayers. Some of the investments included by Atmos in its GRIP filings have a depreciable life of five years or less. Thus, a rate case over five years after the GRIP surcharge is implemented will be too late to determine the reasonableness of such investments as they will have already been completely depreciated. Explanation of "Be It Resolved" Paraeraphs: 1. This paragraph requires Atmos to file a rate filing package with the City by December 31,2005, based upon a test year ending June 30, 2005. The filing is directed to be on a system-wide basis, meaning that every city in the coalition will receive the same filing and will be able to review the filing jointly. In August 2005, the City of Dallas adopted a show cause resolution and required Atmos to file by November 15, 2005, based upon the same test year. This paragraph also requires Atmos to file an electronic version of its filing package. Although the Company keeps all of its information in electronic form, Atmos has caused delays of weeks ~ i. , 1668\ 13\othO51 0 14 1 T I