14 - Adoption of New Atmos Rate Review MechanismItem. No. 14
R M2!
TO: City Council
John Godwin, City Manager
FROM: Gene Anderson, Finance Director
SUBJECT: ORDINANCE ADOPTING NEW ATMOS RATE REVIEW MECHANISM
DATE: February 14, 2018
BACKGROUND: The previously agreed to rate review mechanism (RRM) ended last year. The
RRM is the preferred method by which Atmos Energy interim late 'increase requests are
reviewed for reasonableness.
STATUS OF ISSUE: Negotiations over the past few months by the Steering Committee of Cities
served by Atmos have resulted in. a revised RRM that has been agreed to by Atillos, 'The previous
RRM allowed a rate of return on equity of 10.50%, The revised RRM reduces that to 9.8%. The
revised RRM also captures the reduction in federal income tax rates from 35% to 211YO, and
should result in a rate reduction eff'ective by rilid-March, 2018. The prior RRM allowed Cities
only three months to review the Company's filing, The new RRM expands that time period by
two months. New rate applications by Atmos should be made on or about April I of each year,
with any approved new rates effective October .1.
BUDGET: This ordinance will not have a budgetary 1111pact,
RECOMMENDATION: Motion to approve all ordinance establishing a new rate review
mechanism for Atmos Energy Corporation.
ORDINANCE NO.
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WHEREAS, the City of Paris, Texas ("City") is a gas utility customer of Atmos Energy
Corp., Mid -Tex Division ("Atmos Mid -Tex" or "Company") and a regulatory authority with
an interest in the rates and charges of Atmos Mid-T'ex; and
WHEREAS, the City and similarly -situated laid -Tex municipalities created the
Steering Committee of Cities Served by Atmos to efficiently address all rate and service
matters associated with delivery of natural gas; and.
WHEREAS, the Steering Committee formed an Executive Committee to direct legal
counsel and to recommend certain specific actions to all aligned Mid -Tex Cities, through
resolution or ordinance; and
WHEREAS, pursuant to the terms of a November 2007 agreement between the
Steering Committee and Atmos Mid -Tex that settled the Company's interim rate filing
under Section. 104.301 of the Texas Utilities Code (a "GRIP" rate case), the Steering
Committee and the Company collaboratively developed a Rate Review Mechanism ("RR")
Tariff, ultimately authorized by the City in 2008, that allows for an expedited rate review
process as a substitute for the GRIP process; and
WHEREAS, the City has Dept some form of a RRM Tariff in place until 2017 when it.
adopted an ordinance approving an RRM Tariff filing settlement and specifically calling for
termination of the existing RRM Tariff and negotiation of a replacement RRM Tariff
following the Railroad Commission's decision in a then -pending Atmos Texas Pipeline case
(GUD No. 10580); and.
WHEREAS, the Steering Committee's Executive Committee has recently approved a
settlement with the Company on the attached RRM Tariff that contains certain notable
improvements, from a consumer perspective, over the prior RRM Tariff, including a
reduced rate of return on equity, acceptance of certain expense adjustments made by the
Railroad Commission in the Order in Gills No. 10580, and the addition of two months to the
time for processing a RRM Tariff application; and
WHEREAS, the RRM Tariff contemplates reimbursement of Cities' reasonable
expenses associated with RRM Tariff applications; and
WHEREAS, the Steering Committee's Executive Committee recommends that all
Steering Committee member cities adopt this ordinance and the attached RRM Tariff, and
WHEREAS, the attached RRM Tariff is just, reasonable and in the public interest,
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF
PARIS, TEXAS�:
Section 1. That the findings set forth in this Ordinance are hereby in all things
approved.
Section 2. That the attached RRM Tariff re-establishing a form of Rate Review
Mechanism is just and reasonable and in the public interest, and is hereby adopted.
Section 3. That Atmos Mid -Tex shall reimburse the Cities' reasonable expenses
associated with adoption of this Ordinance and the attached RRM Tariff and in processing
future RRM Tariff applications filed pursuant to the attached tariff.
Section 4. That to the extent any resolution or ordinance previously adopted by the
City is inconsistent with this Ordinance, it is hereby repealed,
Section S. That the meeting at which this Ordinance was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code,
Chapter 551..
Section 6. That if any one or more sections or clauses of this Ordinance, is adjudged
to be unconstitutional or invalid, such judgment shall not affect, impair or invalidate the
remaining provisions of this Ordinance , and the remaining provisions ons of this Ordinance
shall be interpreted as if the offending section or clause never existed.
Section 7. That this Ordinance shall become effective from and after its passage,
Section 8!. That a copy of this Ordinance shall be sent to Atmos Mid -Tex, care of
Chris Felan, Vice President of Rates and Regulatory Affairs, Atmos Energy Corporation,
Mid -Tex Division, 5420 1,13] Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay,
General Counsel to Mid -Tex Cities, at Uoyd Gosselink Rochelle & Townsend, P.C., 816
Congress Avenue, Suite 1900,1Austin, Texas 7870 1.
2
M 0 0 "1 �111 III ii I III III il
ATTEST:
Janice Ellis, City Clerk
APPROVED AS TO FORM:
Stephanie H. Harris, City Attorney
Steven J. Clifford, M,D., Mayor
Rd
NTMOS ENERGY CORPORATION
MID-TEX DIVISION'
. . .............
RRM - Rate Review Mecta-tisn
APPLICABLE TO: I 1 0 9: ML I I 029,;X4,101 kyj We] 1k, F-.Vz 11014101111 MUMMiNWIN AN
...... ..... ........
EFFECTIVE DATE:
...........
3000���
Applicable to Residential, Commercial, Industrial, and Transportation tariff customers
within the city limits of cities identified in Exhibit A that receive service from the Mid -Tex
Division of Atmos Energy Corporation ("Company"). This Rate Review Mechanism
("RRM") provides for an annual adjustment to the Company's Rate Schedules R, C, I
and T ("Applicable Rate Schedules"). Rate, calculations and adjustments required by
this tariff shall be determined on a System -Wide cost basis.
11'. Definitions
"Test Period" is defined as the twelve months ending December 31 of each preceding
calendar year,
The "'Effective Date" is the date that adjustments required by this tariff are applied to
customer bills. The annual Effective Date is October 1.
Unless otherwise provided in this tariff the term Finall Order refers to the final order
issued by the Railroad' Commission of Texas in GUD No. 10170 and elements of GUD
No. 10580 as specified in, Section III below.
The term "System -Wide" means all incorporated and unincorporated areas served by
the Company,
"Review Period" is defined as the period from the Filing Date until the Effective Date.
The "Filing Date" is as early as practicable, but no later than April 1 of each year.
1111. Calculation
The RR M shall calculate an annual, System -Wide cost of service ("COS") that will be
used to adjust applicable rate schedules prospectively as of the Effective Date. The
Company may request recovery of its total cost of service but will include schedules
showing the computation of any adjustments. The annual cost of service will be
calcuilated according to the following formula:
Where -
OM all reasonable and necessary operation and maintenance expenses from t
Test Period adjusted for known and measurable items and pireparl
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM — Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT ATO
THIS RATE SCHEDULE
. . . . ........................... . .... ... . . . . . ................ . . . . .. . ............ . . ......
EFFECTIVE DATE: Billls Rendered on, and after 04/01/2018 [ PAGE: 2
consistent with the rate making treatments approved in the Final Order.
Incentive compensation (Management Incentive Plan, Variable Pay Plan and
Long Term Incentive Plan) related to Atmos' Shared Services Unit will be
applied consistent with treatment approved in GUD 10580, Additionally, O&M
adjustments will be incorporated and applied as modified by a final order, not
subject to appeal, issued by the Railroad Commission of Texas in subsequent
rate cases involving the Atmos, Mid -Tex or West Texas divisions. Known and
measurable adjustments shall be limited to those changes that have occurred
prior to the Filing Date. OM may be adjusted for atypical and non-recurring
items. Shared' Services, allocation factors shall be recalculated each year
based on the latest component factors used during the Test Period, but the
methodology used will be that approved in the Final Order in GUD 10580.
DEP = depreciation expense calculated at depreciation rates approved by the Final
Order. Additionally, if depreciation rates are approved in a subsequent final
order, not subject to appeal), issued by the Railroad Commission of Texas, for
the Mid -Tex division those rates would be appllicable for subsequent RRM
filings.
i
RI return on prudently incurred' investment calculated as the Company's pretax
return multiplied by rate base at Test Period end. Rate base is prepared
consistent with the rate making treatments approved in, the Final Order, and
as in, GUD 10580 as specifically related to capitalized incentive compensation
(Management Incentive Plan, Variable Pay Plan and Long Term Incentive
Plan) for Atmos' Shared Services Unit. However, no post Test Period
adjustments will be permitted. Additionally, adjustments will be incorporated
and applied as modified by a final order, not subject to appeal, issued by the
Railroad Commission of Texas in subsequent rate cases involving, the Atmos
Mid' -Tex or West Texas divisions. Pretax return is the Company's weighted
average cost of capital before income taxes. The Company's weighted
average cost of capital is calculated using the methodology from the Final
Order including the Company"s actual capital structure and long term cost of
debt as of the Test Period end (adjusted for any known, and measurable
changes that have occurred prior to the filing date) and the return on equity of
9.8%. However, in no event will the percentage of equity exceed 58%.
Regulatory adjustments due to prior, regulatory rate base adjustment
disallowances will be maintained'. Cash workiing capital will be calculated
using the lead/lag days approved in the Final Order. 'With respect to pension
and other postemployment benefits, the Company will record a regulatory
asset or liability for these costs until the amounts are included in, the next
annual rate adjustment implementedunder this tariff. Each year, the
Company's filing under this, Rider RRM will clearly state the level of pension
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
APPLICABLE TO: ALL CITIES Irl TAE MIDDIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
...............
. . . . . . . ........................ . . . . . �AFPAG . ...... .. ....
EFFECTIVE DiATE: Bills, Rendered on and after 04101/2018 E 3
and other pIN oyment benefits recovered in rates.
TAX = income tax and taxes oth
known and measurable
the Filing Date, and pre
approved in the Finial 0
for, including establishing
change in tax expense th
the calculation to ensure
tax rates,
er than income tax from the Test Period adjusted for
c
hangles occurring after the Test Period and before
Dared consistent with the rate making treatments,d:er. Atmos Energy shall comprehensively account
a regulatory Inability to account for,, any statutory
at is appflcable to months during the Test Period in,
recovery of tax expense under new and old inicome
CD = interest on customer deposits.
The Company shall provide schedules and work papers supporting the Filing's revenue
deficiency/sufficiency calculations using the methodology accepted in the Final Order.
The result shall be reflected in the proposed new rates to be established for the
effective period, The Revenue Requirement will be apportioned to customer classes in
the same imanner that Company's Revenue Requirement was apportioned in the Final
Order. For the Residential Class, 50% of the increase may be recovered in the
customer charge. However, the increase to the Residential customer charge shall not
exceed $0.60 per month, in the initial filing and $0.70 per month in any subsequent year.
The remainder of the Residential Class increase not collected in the customer charge
will) be recovered in the usage charge. For all other classes, the, change in rates will be
apportioned between the customer charge and the usage charge, consistent with thie
Final Order. Test Period billing determinants shall be adjusted and normalized
according to the methodology utilized in the Finial Order.,
OEM=.
The Company shall file schedules annually with the regulatory authority having original
jurisdiction over the Company's rates on or before the Filing Date, that support the
proposedi rate adjustments, The schedules shall be in the same general format as the
cost of service model and relied -upon files upon which the Final Order was based). A
proof of rates and a copy of current and proposed tariffs shall also be included with the
filing. The filing shall be made in electronic form where practical. The Company's filing
shall conform to Minimum Filing Requirements (to be agreed upon by the parties),
which willl contain a minimum amouint of information that will assist the, regulatory
authority in its review and analysis of the filing. The Company anid regulatory authority
will endeavor to holds a technical conference regarding the filing within twenty (201)
calendar days after the Filing Date.
ATMOS ENERGY CORPORATION
MID-TEX DON
ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
. ....... . ........................ .
1E DATE. �Bffls Rendered on, and after 04/011�/2018 PAGE' 4
A, sworn statement shall be filed by an Officer of the Company affirming that the filed
schedules are in compliance with the, provisions of this Rate Review Mechanism and
are true and correct to the best of hi's/her knowledge, information, and belief.No
testimony shall be filed, but a brief narrative explanation shall be provided of any
changes to, corporate structure, accounting, methodologies, allocation of common costs,
or atypical or non- recurring items included in the filing.
VL Evaluation Procedures
The regulatory authority having original jurisdiction over the Company's rate's !shall
review and render a decision on the Company's proposed rate adjustment prior to the
Effective Date. The Company shall provide all supplemental information requested to
ensure an opportunity for adequate review by the relevant regulatory authority, The
Company shall' not unilaterally impose any limits upon, the provision of supplemental
information, and such information shall be provided within seven (7) working days of the
original request. The regulatory authority may propose any adjustments it determines to
be required to bring the proposed rate adjustment into compliance with the provisions of
thus tariff.
The regulatory authority may disallow any net plant investment that is not shown to be
prudently incurred. Approval by the regulatory authority of net plant investment plursuant
to the provisions of this, tariff shall constitute a finding that such net plant investment
was prudently incurred. Such finding of prudence shall not be subject to further review
in, a subsequent RRM or Statement of Intent filing.
During the Review Period, the Company and the regulatory authority will work
collaboratively and seek agreement on the level of rate adjustments. If, at the end of the
Review Period, the Company and the regulatory authority have not reached agreement,
the regulatory authority shall take action to modify or deny the proposed rate
adjustments. The Company shall have the right to appeal the regulatory authority's
action to the Railroad Commission of Texas. Upon the filing of an appeal of the
regulatory authority's order relating to an annual RRM filing with the Railroad
Commission of Texas, the regulatory authority Ihaving original jurisdiction over the
Company"s rates shall not oppose the implementation of the Company's proposed rates
subject to refund, nor will the regulatory authority advocate for the imposition of a third
party surety bond by the Company. Any refund shall be limited to and determined based
on the resolution of the disputed adjustments) in a final, non -appealable order issued in
the appeal filed by the Company at the Railroad Commission of Texas,
F11,TMOS ENERGY CORPORATION
MID-TEX DIVISIGN
My W 111111 r i i NP111111 "M
APPLICABLE TO:
EFFECTIVE DATE.
In the event that the regulatory authority and Company agree to a rate, adjustmient(s)
that is different from the adjustment(s) requestedin the Company's filling, the Company
shall file compliance tariffs consistent with the agreement. No action on the part of the
regulatory authority shall be required to allow the rate adjustmient(s) to become effective
on October 1. To the extent that the regulatory authority does not take action onl the
Company's RRIVI filing by September 30, the rates proposed in the, Comipany's filing!
shall be deemed approved effective October 1. Notwithstanding the preceding
sentence, a regulatory authority may choose to take affirmative action to approve a rate
adjustment under this tariff. In those instances where such approval cannot reasonably
occur by September 30, the rates finally approved by the regulatory authority shall be
deemed effective as of October 1.
To defray the cost, if any, of regulatory authorities conducting a review of the
Company"s annual RRM filing, the Company shall reimburse the regulatory authorities
on a monthly basis for their reasonable expenses, incurred upon submission of invoices
for such review. Any reimbursement contemplated' hereunder shall be deemed a
reasonable and necessary operating expense of the Company in, the year in which the
reimbursement is made. A regulatory authority seeking reimbursement under this
provision shall submit its request for reimbursement to the Company no later than
December 1 of the year in which the RRM filing is made and the Company shall
reimburse regulatory authorities in accordance with, this provision on or before
December 31 of the year the RRM filing is made.
I I o the extent possible, the provisions of the Final Order shall be applied by the
regulatory authority in determining whether to approve or disapprove of Company's
proposed rate adjustment.
This Rider RRM does not limit the legal rights and duties of a regulatory authority.
Nothing herein shall abrogate the jurisdiction of the regulatory authority to initiate a rate
proceedingi, at any time to review whether rates, charged are just anldl reasonable.
Similarly, the Company retains its right to utilize the provisions of Texas Utilities Code,
Chapter 104, Subchapter C to request a change in rates. The provisions of this Rider
RRM are implemented in harmony with the Gas Utility Regulatory Art (Texas Utilities
Code, Chapters 101-1015).
The annual rate adjustment process set forth in this tariff shall' remain in effect during
the pendency of any Statement of Intent rate filing.
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM — Rate Review Mechanism
APPLICABLE TO- ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04/01/2018 PAGE: 6
Orders issued pursuant to this, mechanism: are ratemaking, orders and shall be subject
to appeal under Sections 102.001(b) and 103.021, et seq., of the Texas Utilities Code
(Vernon 2007).
V111, Notice
Notice of each annual RRM filing shall be provided by including the notice, in
conspicuous form, in the bill of each directly affected customer no later than forty-five
(4 5) days after the Company makes its annual filing pursuant to this tariff.The notice to
customers shall include the following information:
b) the effect the proposed revision of rates is expected to have on the rates
applicable to each customer class and on an average bill for each affected
customer;
c) the service area or areas in which the proposed rates would apply;
d) the date the annual RRM filing was made with the regulatory authority; and
e) the Company"s address, telephone number and website where information
concerning the proposed rate adjustment can be, obtained.
ATMOS ENERGY CORPORATION
MID -TE X DIVISION
RATE SCHEDULE: RRM — Rate Review Mechanism
APPLICABLE TO: ALL CITIES IIH THE MID-T'EX DIVISION AS IDENTIFIED IN EXHIBIT A TO
. . . . ... . ..... ...THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and! after 04/01112'018 �PAGE: 7
Exhibit A
ACSC Cities,
AN�Iene
Addison
Albany
Allen
Alvarado
Angus
Anna
Argyle
Arlington
Aubrey
Azle
Bedford
Bellmead
Benbrook
Beverly Hills
Blossom
Blue Ridge
Bowie
Boyd
Bridgeport
�Brownwood
Buffallo
Burkburnett
Burleson
Caddo Mills
Canton
Carrollton
Cedar Rill
Celeste
Celina
Centerville
Cisco
Clarksville
Cleburne
Clyde
College, Station
ColleyVille
Colorado City
Comanche
Commerce
Coolidge
Coppell
Copperas Cove
Corinth
Crandall
Crowley
Dalworthington Gardens
Denison
Denton
Desoto
Draper
Duncanville
Eastland
Edgecliff Village
Emory
Ennis
Euless
Everman
Fairview
Farmers Branch
Farmersville
Fate
Flower Mound
Forest Rill
Forney
Fort Worth
Frisco
Frost
Gainesville
Garland
Garrett
Grand Prairie
Grapevine
Groesbeck
Gunter
Haltom City
Harker Heights
Haskell
Haslet
Hewitt
Highland Park
Highland Village
Honey Grove
Hurst
Hutto
Iowa Park
Irving
Justin
Kaufman
Keene
Keller
Kemp
Kennedale
Kerens
Kerrville
Killeen
Krum
Lake Worth
Lakeside
Lancaster
Lewisville
Lincoln Park
Little Elm,
Lorena
Madisonville
Malakoff
Mansfield
Mcki:nney
Melissa
Mesquite,
Midlothian
Murphy
Newark
Nocona
North Richland Hills
Northiake
Oak Leaf
ovilla
Palestine
P,antego
Paris
Parker
Pecan Hill
Petrolia
Plano
Ponder
Pottsboro
Prosper
Quitman
Red Oak
Reno (Parker County)
Rhome
Richardson
Richland
Richland Hills
FATMOS—ENERGY CORPORATION
MID-TEX DIVISION
AATE SC E LE: RRM — Rate Review Mechanism,
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04/01/2018 PAGE: 8,
River Oaks
Temple
Roanoke
Terrell
Robinson
The Colony
Rockwall
Trophy Club
�Roscoe
Tyler
Rowlett
University Park
Royse City
Venus
Sachse
Vernon
Saginaw
Waco
Sansom Park
Watauga
Seagoville
Waxahachie
Sherman
Westlake
Snyder
Westover Hills
Southlake
Westworth Village
Springtown
White Settlement
Stamford
Whitesboro
Stephenville
Wichita Falls
Sulphur Sphngs
Wo,odway
Sweetwater
Wylie