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Inemo�andum <br />TO: City Council <br />John Godwin, City Manager <br />FROM: Gene Anderson, Finance Director <br />SUBJECT: ATMOS GAS RATE REVIEW MECHANISM (RRM) TARIFF <br />DATE: May 20, 2013 <br />BACKGROUND: The City, along with 154 other cities served by Atmos Energy Corporation is <br />a member of the Atmos Cities Steering Committee (ACSC). In 2007, ACSC and Atmos agreed <br />to implement an annual rate review mechanism for Atmos known as the Rate Review <br />Mechanism (RRM), as a temporary replacement for the statutory mechanism known as GRIP <br />(Gas Reliability Infrastructure Program). This first RRM tariff expired in 2011, and although <br />ACSC and Atmos met many times to attempt to reach an agreement on a renewed ar replacement <br />tariff, they were unable to do so. Atmos filed a full rate case in 2012. The resulting rates were <br />approved by the Railroad Commission in December 2012 in G.U.D. No. 10170. ACSC and <br />Atmos renewed discussions to develop revisions to the RRM tariff, and have reached a tentative <br />agreement on the form of the RRM tariff to be in effect for a four-year period from 2013 to 2017. <br />If the RRM process is to continue to function as a substitute for the GRIP process, cities that <br />exercise original jurisdiction must adopt a tariff that authorizes the process. The RRM tariff was <br />originally approved by ACSC member cities as part of the settlement agreement resolving the <br />Atmos 2007 system-wide rate filing at the Railroad Commission. The RRM process was created <br />collaboratively by ACSC and Atmos as an alternative to the legislatively-authorized GRIP rate <br />adjustment process. GRIP, like the RRM, is a form of expedited rate relief for gas utilities that <br />avoids the long and costly process of a full rate filing. However, ACSC strongly opposes the <br />GRIP process because it constitutes piecemeal ratemaking, does not allow any review by cities <br />of the reasonableness of capital expenditures, and does not allow participation by cities in the <br />Railroad Commission's review of the annual GRIP filings, or recovery by cities of their rate case <br />expenses. The Railroad Commission undertakes only an administrative review of GRIP filings <br />(instead of a full hearing) and the rate increases go into effect without any material adjustments. <br />In ACSC's view, the GRIP process unfairly raises customers' rates without any real regulatory <br />oversight. In contrast, the RRM process has allowed for a more comprehensive rate review and <br />annual adjustment as a substitute for GRIP filings. <br />STATUS OF ISSUE: The purpose of the proposed Ordinance is to approve the RRM tariff <br />(Attachment A) that reflects the negotiated RRM process. For the RRM process to continue, <br />cities exercising original jurisdiction must approve a tariff that authorizes the process. <br />If cities do not approve the RRM tariff, the Company has stated that it will reinstitute its annual <br />filings under the GRIP provisions. <br />BUDGET: This ordinance changes the manner in which gas rate increases are calculated. For <br />2013, it is expected to save Atmos customers $5,000,000 system wide when compared to the <br />alternative GRIP methodology. <br />RECOMMENDATION: Motion to approve and adopt the RRM Tariff. <br />�. 60 <br />