07 - Atmos Rate IncreaseItem No. 7
memorandum
TO: City Council
John Godwin, City Manager
FROM: Gene Anderson, Finance Director
SUBJECT: ATMOS RATE INCREASE
DATE: August 28, 2018
BACKGROUND: On April 1, 2018, Atmos filed a rate request pursuant to the rate review
mechanism allowed for interim rate adjustments. The Company claimed that its cost -of -service
in the test year ending December 31, 2017, entitled it to additional system -wide revenues of
$42.0 million.
STATUS OF ISSUE: The Atmos Cities Steering Committee (ACSQ, of which Paris is a
member, hired consultants to review Atmos' rate request. Under the standards set forth in the
rate review mechanism, Atmos reduced its request to $27.4 million. Additional negotiations
resulted in the rate increase being lowered to $24.9 million system wide. ACSC believes the
reduced rate amount is fair to both Atmos and the cities it serves and recommends approval of
the negotiated rate. The Effective Date for new rates would be October 1, 2018.
BUDGET: No impact.
RECOMMENDATION: Motion to approve a resolution authorizing a rate increase for Atmos
Energy Corporation.
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS,
APPROVING A NEGOTIATED SETTLEMENT BETWEEN THE ATMOS CITIES
STEERING COMMITTEE ("ACSC") AND ATMOS ENERGY CORP., MID-TEX
DIVISION REGARDING THE COMPANY'S 2018 RATE REVIEW MECHANISM
FILINGS; DECLARING EXISTING RATES TO BE UNREASONABLE; ADOPTING
TARIFFS THAT REFLECT RATE ADJUSTMENTS CONSISTENT WITH THE
NEGOTIATED SETTLEMENT; FINDING THE RATES TO BE SET BY THE
ATTACHED SETTLEMENT TARIFFS TO BE JUST AND REASONABLE AND IN
THE PUBLIC INTEREST; APPROVING AN ATTACHED EXHIBIT
ESTABLISHING A BENCHMARK FOR PENSIONS AND RETIREE MEDICAL
BENEFITS; APPROVING AN ATTACHED EXHIBIT REGARDING
AMORTIZATION OF REGULATORY LIABILITY; REQUIRING THE COMPANY
TO REIMBURSE ACSC'S REASONABLE RATEMAKING EXPENSES;
DETERMINING THAT THIS RESOLUTION WAS PASSED IN ACCORDANCE
WITH THE REQUIREMENTS OF THE TEXAS OPEN MEETINGS ACT;
ADOPTING A SAVINGS CLAUSE; DECLARING AN EFFECTIVE DATE; AND
REQUIRING DELIVERY OF THIS RESOLUTION TO THE COMPANY AND THE
ACSC'S LEGAL COUNSEL.
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 -Tex; and
WHEREAS, the City is a member of the Atmos Cities Steering Committee ("ACSC"), a
coalition of similarly -situated cities served by Atmos Mid -Tex ("ACSC Cities") that have
joined together to facilitate the review of, and response to, natural gas issues affecting rates
charged in the Atmos Mid -Tex service area; and
WHEREAS, ACSC and the Company worked collaboratively to develop a new Rate
Review Mechanism ("RRM") tariff that allows for an expedited rate review process by ACSC
Cities as a substitute to the Gas Reliability Infrastructure Program ("GRIP") process
instituted by the Legislature, and that will establish rates for the ACSC Cities based on the
system -wide cost of serving the Atmos Mid -Tex Division; and
WHEREAS, the RRM tariff was adopted by the City in a rate ordinance earlier this
year; and
WHEREAS, on about April 1, 2018, Atmos Mid -Tex filed its 2018 RRM rate request
with ACSC Cities based on a test year ending December 31, 2017; and
WHEREAS, ACSC coordinated its review of the Atmos Mid -Tex 2018 RRM filing
through its Executive Committee, assisted by ACSC's attorneys and consultants, to resolve
issues identified in the Company's RRM filing; and
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WHEREAS, the Executive Committee, as well as ACSC's counsel and consultants,
recommend that ACSC Cities approve an increase in base rates for Atmos Mid -Tex of $24.9
million on a system -wide basis ($17.8 million of which is applicable to ACSC members); and
WHEREAS, the attached tariffs (Exhibit A) implementing new rates are consistent
with the recommendation of the ACSC Executive Committee, are agreed to by the Company,
and are just, reasonable, and in the public interest; and
WHEREAS, the Exhibit A rate tariffs incorporate the federal income tax rates that
became effective January 1, 2018; and
WHEREAS, the settlement agreement sets a new benchmark for pensions and
retiree medical benefits (Exhibit B) and
WHEREAS, the settlement agreement establishes an amortization schedule for
regulatory liability (Exhibit C); and
WHEREAS, the RRM Tariff contemplates reimbursement of ACSC's reasonable
expenses associated with RRM applications;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
PARIS, TEXAS:
Section 1. That the findings set forth in this Resolution are hereby in all things
approved.
Section 2. That the City Council finds that the settled amount of an increase in
revenues of $24.9 million on a system -wide basis represents a comprehensive settlement
of gas utility rate issues affecting the rates, operations, and services offered by Atmos Mid -
Tex within the municipal limits arising from Atmos Mid-Tex's 2018 RRM filing, is in the
public interest, and is consistent with the City's authority under Section 103.001 of the
Texas Utilities Code.
Section 3. That the existing rates for natural gas service provided by Atmos Mid -
Tex are unreasonable. The new tariffs attached hereto and incorporated herein as Exhibit
A, are just and reasonable, and are designed to allow Atmos Mid -Tex to recover annually an
additional $24.9 million in revenue on a system -wide basis over the amount allowed under
currently approved rates. Such tariffs are hereby adopted.
Section 4. That the ratemaking treatment for pensions and retiree medical benefits
in Atmos Mid-Tex's next RRM filing shall be as set forth on Exhibit B, attached hereto and
incorporated herein.
Section 5. That amortization of regulatory liability shall be consistent with the
schedule found in attached Exhibit C attached hereto and incorporated herein.
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Section 6. That Atmos Mid -Tex shall reimburse the reasonable ratemaking
expenses of the ACSC in processing the Company's 2018 RRM filing.
Section 7. That to the extent any resolution or ordinance previously adopted by the
Council is inconsistent with this Resolution, it is hereby repealed.
Section 8. That the meeting at which this Resolution was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code,
Chapter 551.
Section 9. That if any one or more sections or clauses of this Resolution is adjudged
to be unconstitutional or invalid, such judgment shall not affect, impair, or invalidate the
remaining provisions of this Resolution, and the remaining provisions of the Resolution
shall be interpreted as if the offending section or clause never existed.
Section 10. That consistent with the City Ordinance that established the RRM
process, this Resolution shall become effective from and after its passage with rates
authorized by attached tariffs to be effective for bills rendered on or after October 1, 2018.
Section 11. That a copy of this Resolution shall be sent to Atmos Mid -Tex, care of
Chris Felan, Vice President of Rates and Regulatory Affairs Mid -Tex Division, Atmos Energy
Corporation, 5420 LJB Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay,
General Counsel to ACSC, at Lloyd Gosselink Rochelle & Townsend, P.C., 816 Congress
Avenue, Suite 1900, Austin, Texas 78701.
PASSED AND APPROVED this 10th day of September, 2018.
ATTEST:
Steven J. Clifford, M.D., Mayor
APPROVED AS TO FORM:
Janice Ellis, City Clerk Stephanie H. Harris, City Attorney
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