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11 - 2020 Atmos Rate Review Mechanism (RRM) SettlementItem No. 11 TO: City Council Grayson Path, City Manager FROM: Gene Anderson, Finance Director SUBJECT: 2020 ATMOS RATE REVIEW MECHANISM (RRM) SETTLEMENT DATE: September 14, 2020 BACKGROUND: On March 31, 2020, Atmos made a filing requesting 141.2 million dollars in additional revenues from its customers system wide. This request was later reduced to 136.3 million dollars. Only 98.7 million dollars of the 136.3 million dollars applies to cities that make up the Atmos Cities Steering Committee (ACSC). The rate increase request was reviewed by consultants for the Atmos Cities Steering Committee (ACSC) of which Paris is a member. STATUS OF ISSUE: Negotiations between Atmos and ACSC resulted in an 8.7 million dollars reduction in requested revenues by Atmos. The ordinance before the Council reflects the reduced proposed rates. The typical residential customer will experience a $5.15 per month increase in their bill (9.9%). The typical commercial customer will see a monthly increase of $15.48 or (6.56%). The City has three options: (1) Deny the requested increase, (2) Take no action on the increase request, (3) Approve the ACSC recommended increase. If the City rejects the RRM increase, Atmos will appeal to the Railroad Commission. The procedures for processing an appeal allow the Company to immediately implement the originally requested revenue requirement subject to refund, and then the City would have to attempt to put together a case that improved on the settlement. Rejection would mean City residents pay higher rates than other ACSC members and would then likely be surcharged rate case expenses associated with the appeal. If the City simply ignores the matter and refuses to take action, Atmos' most likely actin would be for the Company to impose the settled rates as if the City had approved the settlement. That action would be based on the fact that the City created the RRM process and passed an ordinance in 2018 that defines the procedure, including an Effective Date for a rate change that is to occur each year until the ordinance is modified or revoked. Doing nothing is better that taking action to specifically deny the increase, but while the most likely result is that Atmos would implement the settlement, no one can guarantee that Atmos will not appeal to the Railroad Commission. A factor that would influence the Company's choice of action would be whether a group of cities took similar action. They might ignore one or two Cities failure to act, but a dozen failures would likely trigger an appeal. BUDGET: This will have minimal impact on the City budget. RECOMMENDATION: Motion to approve an ordinance and related attachments granting Atmos an increase in revenues from ACSC cities in the amount of 90 million dollars. 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 2020 RATE REVIEW MECHANISM FILING; 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, charges, and services 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 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 current RRM tariff was adopted by the City in a rate ordinance in 2018; and WHEREAS, on about March 31, 2020, Atmos Mid -Tex filed its 2020 RRM rate request with ACSC Cities based on a test year ending December 31, 2019; and WHEREAS, ACSC coordinated its review of the Atmos Mid -Tex 2020 RRM filing through its Executive Committee, assisted by ACSC's attorneys and consultants, to resolve issues identified in the Company's RRM filing; and 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 $90 million applicable to ACSC Cities with an Effective Date of December 1, 2020; and WHEREAS, ACSC agrees that Atmos plant -in-service is reasonable; and WHEREAS, with the exception of approved plant -in-service, ACSC is not foreclosed from future reasonableness evaluation of costs associated with incidents related to gas leaks; and WHEREAS, the two month delayed Effective Date from October 1 to December 1 will save ACSC ratepayers approximately $9 million off new rates imposed by the attached tariffs (Exhibit A), the impact on ratepayers should approximate the reasonable value of the rate filing found by the ACSC Consultants' Report, which was $81 million; 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 2 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 prepared by Atmos Mid -Tex (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 THE CITY OF PARIS, TEXAS: Section 1. That the findings set forth in this Resolution are hereby in all things approved. Section 2. That, without prejudice to future litigation of any issue identified by ACSC, the City Council finds that the settled amount of an increase in revenues of $90 million for ACSC Cities 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 2020 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 despite finding Atmos Mid-Tex's plant -in-service to be reasonable, ACSC is not foreclosed in future cases from evaluating the reasonableness of costs associated with incidents involving leaks of natural gas. Section 4. 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 $90 million from customers in ACSC Cities, over the amount allowed under currently approved rates. Such tariffs are hereby adopted. 3 Section 5. 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 6. That subject to any future settlement or decision regarding the balance of Excess Deferred Income Tax to be refunded to ratepayers, the amortization of regulatory liability shall be consistent with the schedule found in Exhibit C, attached hereto and incorporated herein. Section 7. That Atmos Mid -Tex shall reimburse the reasonable ratemaking expenses of the ACSC in processing the Company's 2020 RRM filing. Section 8. That to the extent any resolution or ordinance previously adopted by the Council is inconsistent with this Resolution, it is hereby repealed. Section 9. 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 10. 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 11. 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 December 1, 2020. Section 12. 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 LBJ Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay, General 4 Counsel to ACSC, at Lloyd Gosselink Rochelle & Townsend, P.C., 816 Congress Avenue, Suite 1900, Austin, Texas 78701. DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS, BY A VOTE OF TO , ON THIS THE 14TH DAY OF SEPTEMBER, 2020. ATTEST: Janice Ellis, City Clerk APPROVED AS TO FORM: Stephanie H. Harris, City Attorney 2557/32/8108360 Steven J. Clifford, M.D., Mayor 5 Exhibit A to 2020 RRM Resolution or Ordinance Mid -Tex Tariffs Effective December 1, 2020 MID—TMID-TEX DIVISIONTadff No: CORPORATIONATMOS ENERGY SCHEDULE'__TR — RESIDENTI AL SALES APPLICABLE TO: Monthly Rate Customees, billwill be calculated by addingthe following CustomerandCof charges amounts due under the riders listed below: w.... Charge Customer Charge per Bill 20.25 per month Rider CEE Surcharge $ 0.05 permonth' Total Customer 20.30 per month Commodity Charge ® All $0.26651 per Cef Gas Cost Recovery: Plus an amount for gas costs and upstreamtransportation Riderin accordance with Part (a) and Part (b), respectively, of calculatedWeather Normalization Adjustment: Plus or Minus an amount for weather normalization FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated Tax Adjustment Plus an amount for tax calculated in accordance with RideT-IAX. Surcharges: surcharges calculated Mice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff r Gas Service. 'Reference Rider CEE - Conservation and Energy Efficiency as approved in GUD 10170. Surcharge billing effective July 1, 2020. MID•TEX DIVISION RRC Tariff No: ATMOS ENERGY CORPORATION RATE SCHEDULE: C — COMMERCIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID TEX DIVISION UNDER THE RRM TARIFF ....... .._ .,,,,,, ......... .... .............. ........_. �. EFFECTIVE DATE Bills Rendered on or after 12101/2020 PAGE ..._.. _. ^^^ Application Applicable to Commercial Customers for all natural gas provided at one Point of Delivery and measured through one meter and to Industrial Customers with an average annual usage of less than 30,000 Ccf. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and Ccf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 54.50 per month Rider CEE Surcharge $ 0.02 per month' Total Customer Charge $ 54.52 per month Commodity Charge — All C $ 0.11728 per Ccf Gas Cost Recovery: Plus an amount for gas costs and upstream transportabon costs calculated calculatedin accordance with Part (a) and Part (b), respectively, of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalization in accordance with Rider WNA. applicableFranchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF, Rider FF is only Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAK Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. 9 Reference Rider CEE - Conservation and Energy Efficiency as approved in GUD 10170. Surcharge billing effective July 1, 2020. charges and special contract arrangementsbetween Companypriorto service being furnished, Monthly `,r calculatedCustomer's monthly bill will be ', B amounts due under the riders listed below: Y Amount ' 1,014.50 per month Next 3,500 MMBtu $0.3044 per MMBtu Curtailment , will,Upon notification by Company of an event of curtailment or interruption of Customees deliveries, Customer each MMBtu deliveredexcess of the stated level of curtailment or interruption, pay "DallyCompany 200% of the midpoint price for the Katy point'listed in Platts Gas Daily published for the applicable Gas Day in the table entitled eventReplacement Index In the € .08 VNM mwOWAAW utilizing a daily price index z, a` approximating MID TEX DIVISION RRC Tariff No: ATMOS ENERGY CORPORATION RATE SCHEDULE: 1— INDUSTRIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF ......... ........2!01/20 ........ .uv.�. .. EFFECTIVE DATE Bills Rendered on or after 1210112020 PAGE: Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. Special Conditions In order to receive service under Rate I, Customer must have the type of meter required by Company. Customer must pay Company all costs associated with the acquisition and installation of the meter. «mdL»»d:§?5 RRC Tariff No: ATMOS ENERGY CORPORATION RATE SCHEDULE: T - TRANSPORTATION APPLICABLEse2 "i - EFFECTIVE directlyApplication Applicable, in the event that Company has entered into a Transportation Agreement, to a customer .a..x«G:::m»x: Energy ©, 2»r,, ? » « w «<»ea>?v«©r«,me25:». transportation of » naturalgas supplied by Customer or Customers one Pointw use in Customer's facility. Monthly Rate S »4:\« billm; m»«e by adding the followinCustomer m«««S: charges � ° , v: x 2< amounts and quantifies due under the riders listed below: Customer Charge per Meter $ 0.4157 per MMBtu Upstream Transportation RecovM: Plus an aa« for upstream transportationcosts in accordance with Part (b) of Rider GCR. Retention Adjustment: Plus 2 quantity of gas as calculated in accordance with Rider RA. . . .,. ..>&a MID-TEX DIVISION RRC Tariff No: ATMOS ENERGY CORPORATION RATE SCHEDULE: T — TRANSPORTATION APPLICABLETO: ALL CUSTOMERS IN THE MID-TEX{ ! ! THE RRM TARIFF .....� c EF T! DATE: BII 1 5 Renderer of to r1 2 M 1 / .. .. . . .... ... ... ...... Curtailment r !1 Fee Upon notification by Company of an event of curtailment or interruption of Customer's deliveries, Customer will, for each MMBtu delivered in excess of the stated level of curtailment or interruption® pay Company 2001® of the midpoint price for the Katy paint listed in Platts Gas Daily published for the applicable Gas Cray in the table entitled "Daily Price Survey." Replacement Index In the event the "midpoint' or "common" price for the Katy point listed in Platte Gas Daily in the table entitled "Daily Brice Survey" is no longer published, Company will calculate the applicable imbalan fees utilizing a daily prig index recognized as authoritative by the natural gas industry and most closely approximating the applicable index, Agreement transportation agreement Is required. Notice providedService hereunder and the rates for services jurisdictionhaving the Company's Gas Service. Special Conditions In order to receive service under Rate customer must have the p, of meter required by Company. Customerinstallation Provisions for Ad'u stment The Commodity Charge per Ccf (100 cubic feet) for gas service set forth in any Rate Schedules utilized by the cities of the Mid -Tex Division service area for determining normalized winter period revenues shall be adjusted by an amount hereinafter described, which amount is referred to as the "Weather Normalization Adjustment." The Weather Normalization Adjustment shall apply to all temperature sensitive residential and commercial bills based on meters read during the revenue months of November through April. The five regional weather stations are Abilene, Austin, Dallas, Waco, and Wichita Falls. Computation of Weather Normalization Adiustment The Weather Normalization Adjustment Factor shall be computed to the nearest one-hundredth cent per Ccf by the following formula: (HSFi x (NDD-ADD) ) WNAFi = Ri (BLi + (HSFi x ADD) ) Where i = any particular Rate Schedule or billing classification within any such particular Rate Schedule that contains more than one billing classification WNAFi = Weather Normalization Adjustment Factor for the ith rate schedule or classification expressed in cents per Ccf Ri - Commodity Charge rate of temperature sensitive sales for the ith schedule or classification. HSFI = heat sensitive factor for the ith schedule or classification divided by the average bill count in that class NDD = billing cycle normal heating degree days calculated as the simple ten-year average of actual heating degree days. ADD = billing cycle actual heating degree days. Bli = base load sales for the Ith schedule or classification divided by the average bill count in that class The Weather Normalization Adjustment for the jth customer in ith rate schedule is computed as: WNA = WNAFi x qq Where qij is the ireievant sales quantity for the jth customer in ith rate schedule, Base Use/Heat Use Factors Weather Nonnalization A °ustment A' Reoort Residential ornrnerclal Base use Heat use Base use Heat use Weather Station Cef CcfIHDD CefCqf/HDD Abilene 10073 0.1545 94,79 0.7284 Austin 9M 0.1489 21116 0.9405 Dallas 1577 01792 19914 0.9395 Waco 9,99 0.1341 145.27 01110 Wichita 11.61 0.1402 120.34 0.5747 Falls Weather Nonnalization A °ustment A' Reoort Exhibit B to 2020 RRM Resolution or Ordinance Mid -Tex 2020 Benchmark for Pensions and Retiree Benefits w 11216 t^` eq Cq I 46 8 CLC co to fis eH its, 8R r• 0 a r- 0 �s , U, a o CL C F 04 t19 c 2 cc u�7 V i 0. to, vev 0 ME �. E we I pr w -W - $$ Ja x ch 0 u C gy 0 EV Q* �ffi B .. a 0 .µx &- Cl. .. IM. E If 9 ILL � PID '""V x x— tffi 0 x l0a gfig 1 42- 'a a n . �. 9L 0) 0 OW � 6 vi Exhibit C to 2020 RRM Resolution or Ordinance Mid -Tex 2020 Schedule for Amortization for Regulatory Liability lNil UffWRIT M, DECEMBERRATE BASE ADJ USTMENTS TEST YEAR ENDING 6 29 Revenue Related Tax Factor Revenue Related Taxes on Annual 0 Amortization 31 Amortization Including Revenue Amortization * Tax ,2; Factor i Amortization +Taxes 32 33 Notes: 34 1. The annual amortization of a 26 year recovery period is based on the 35 Reverse South Beginning Year End of Year Rate asp Rate Bass Corrected Balance Dine Year Ended Adjustment Annual Adjustment for December 31, No. Dec. 31 Amount Amortizatin 1 aunt (2) 2017 (3) () (b) (c) (d) () 1 2017 - 292,266,661 $ 292,266,661 2 2018 292, 266, 661 12, 075, 562 260,193,319 3 2019 260,193,319 12,065,165 266,106,155 4 2020 266,106,155 11,171,173 256,936,962 5 2021 256,936,962 11,171,173 245,765,609 2022 245,7650609 11,171,173 234,594,635 7 2023 234,594,636 11,171,173 223,423,462 6 2024 223,423,462 11,171,173 212,.252®169 2025 212,252,269 11,171,173 201,061,116 10 2026 201,061,1161 11,171,173 169,909,943 11 2027 169, 909,943 11,171,173 176, 736,770 12 2026 1760736,770 11,171,173 167,567,597 13 2029 167,567,597 11,171,173 156,396,424 14 2030 156,396,424 11,171,173 145,225,251 15 2031 145,225,251 11,171,173 134,054,077 16 2032 134,054,077 11,171,173 122,662,904 17 2033 122,662,904 11,171,173 111,711,731 16 2034 111,711,731 11,171,173 100,540,556 19 2035 100,540,556 11,171,173 69,369,365 0 2036 69,369,365 11,171,173 76,196®212 1 2037 78,198,212 11,171,173 67,027,039 22 2036 67,027,039 11,171,173 55,655,666 23 2039 55,655,666 11,171,173 44,6 ,692 24 2040 44,684,692 11,171,173 33,513,519 25 2041 33,513,519 11,171,173 22,342,346 6 2042 22,342,W 11,171,173 11,171,173 7 2043 11,171,173 11,171,173 (0) 6 29 Revenue Related Tax Factor Revenue Related Taxes on Annual 0 Amortization 31 Amortization Including Revenue Amortization * Tax ,2; Factor i Amortization +Taxes 32 33 Notes: 34 1. The annual amortization of a 26 year recovery period is based on the 35 Reverse South August 17, 2020 MODEL STAFF REPORT BACKGROUND AND SUMMARY The City, along with 171 other Mid -Texas cities served by Atmos Energy Corporation, Mid - Tex Division ("Atmos Mid -Tex" or "Company"), is a member of the Atmos Cities Steering Committee ("ACSC"). In 2007, ACSC and Atmos Mid -Tex settled a rate application filed by the Company pursuant to Section 104.301 of the Texas Utilities Code for an interim rate adjustment commonly referred to as a GRIP filing (arising out of the Gas Reliability Infrastructure Program legislation). That settlement created a substitute rate review process, referred to as Rate Review Mechanism ("RRM"), as a substitute for future filings under the GRIP statute. Since 2007, there have been several modifications to the original RRM Tariff. The most recent iteration of an RRM Tariff was reflected in an ordinance adopted by ACSC members in 2018. On or about March 31, 2020, the Company filed a rate request pursuant to the RRM Tariff adopted by ACSC members. The Company claimed that its cost -of -service in a test year ending December 31, 2019, entitled it to additional system -wide revenues of $141.2 million. Application of the standards set forth in ACSC's RRM Tariff required Atmos to reduce its request to $136.3 million, $98.7 million of which would be applicable to ACSC members. ACSC's consultants concluded that the system -wide deficiency under the RRM regime should be $111.5 million instead of the claimed $136.3 million. The amount of the $111.5 million deficiency applicable to ACSC members would be $80.8 million. After the Company reviewed ACSC's consultants' report, ACSC's Executive Committee and the Company negotiated a settlement whereby the Company would receive an increase of $90 million from ACSC Cities, but with a two-month delay in the Effective Date until December 1, 1 2020. This should save ratepayers approximately $9 million such that the case is functionally equivalent to ACSC's consultants' recommendation of $80.8 million. The Executive Committee recommends a settlement at $90 million. The Effective Date for new rates is December 1, 2020. ACSC members should take action approving the Resolution before November 1, 2020. PROOF OF REVENUES Atmos generated proof that the rate tariffs attached to the Resolution will generate $90 million in additional revenues from ACSC Cities. That proof is attached as Attachment 1 to this Staff Report. ACSC consultants have agreed that Atmos' Proof of Revenues is accurate. BILL IMPACT The impact of the settlement on average residential rates is an increase of $5.15 on a monthly basis, or 9.9 percent. The increase for average commercial usage will be $15.48 or 6.56 percent. A bill impact comparison is attached as Attachment 2. SUMMARY OF ACSC'S OBJECTION TO THE UTILITIES CODE SECTION 104.301 GRIP PROCESS ACSC strongly opposed the GRIP process because it constitutes piecemeal ratemaking by ignoring declining expenses and increasing revenues while rewarding the Company for increasing capital investment on an annual basis. The GRIP process does not allow any review of the reasonableness of capital investment and does not allow cities to participate in the Railroad Commission's review of annual GRIP filings or allow recovery of Cities' rate case expenses. The Railroad Commission undertakes a mere administrative review of GRIP filings (instead of a full hearing) and rate increases go into effect without any material adjustments. In ACSC's view, the GRIP process unfairly raises customers' rates without any regulatory oversight. In contrast, the RRM process has allowed for a more comprehensive rate review and annual evaluation of expenses and revenues, as well as capital investment. 2 RRM SAVINGS OVER GRIP While residents outside municipal limits must pay rates governed by GRIP, there are some cities served by Atmos Mid -Tex that chose to remain under GRIP rather than adopt RRM. Additionally, the City of Dallas adopted a variation of RRM which is referred to as DARR. When new rates become effective on December 1, 2020, ACSC residents will maintain a slight economic monthly advantage over GRIP and DARR rates. See Attachment 3. EXPLANATION OF "BE IT RESOLVED" PARAGRAPHS: 1. This section approves all findings in the Resolution. 2. This section adopts the RRM rate tariffs and finds the adoption of the new rates to be just, reasonable, and in the public interest. 3. This section makes it clear that Cities may challenge future costs associated with gas leaks like the explosion in North Dallas or the evacuation in Georgetown. 4. This section finds that existing rates are unreasonable. Such finding is a necessary predicate to establishment of new rates. The new tariffs will permit Atmos Mid -Tex to recover an additional $90 million from ACSC Cities. 5. This section approves an exhibit that establishes a benchmark for pensions and retiree medical benefits to be used in future rate cases or RRM filings. 6. This section approves an exhibit to be used in future rate cases or RRM filings regarding recovery of regulatory liabilities, such as excess deferred income taxes. 7. This section requires the Company to reimburse the City for expenses associated with review of the RRM filing, settlement discussions, and adoption of the Resolution approving new rate tariffs. S. This section repeals any resolution or ordinance that is inconsistent with the Resolution. 3 9. This section finds that the meeting was conducted in compliance with the Texas Open Meetings Act, Texas Government Code, Chapter 551. 10. This section is a savings clause, which provides that if any section is later found to be unconstitutional or invalid, that finding shall not affect, impair, or invalidate the remaining provisions of this Resolution. This section further directs that the remaining provisions of the Resolution are to be interpreted as if the offending section or clause never existed. 11. This section provides for an effective date upon passage. December 1, 2020 represents a two month delay in the Effective Date established by the RRM tariff. 12. This section directs that a copy of the signed Resolution be sent to a representative of the Company and legal counsel for ACSC. CONCLUSION The Legislature's GRIP process allowed gas utilities to receive annual rate increases associated with capital investments. The RRM process has proven to result in a more efficient and less costly (both from a consumer rate impact perspective and from a ratemaking perspective) than the GRIP process. Given Atmos Mid-Tex's claim that its historic cost of service should entitle it to recover $141.2 million in additional system -wide revenues, the RRM settlement at $90 million for ACSC Cities reflects substantial savings to ACSC Cities. ACSC's consultants produced a report indicating that Atmos had justified increased revenues for ACSC Cities of at least $81 million. Settlement at $90 million (equivalent to $81 million with a two-month delay) is fair and reasonable. The ACSC Executive Committee consisting of city employees of 18 ACSC members urges all ACSC members to pass the Resolution before November 1, 2020. New rates become effective December 1, 2020. 2557/32/8105318 4 Attachment 1 to Model Staff Report 2020 RRM Proof of Revenues a N U) O N O O > L a) CL 0 r ti 0 O fA 000 O r-_ ,.........0 M N CO '....... fll r- Q) C\ v M r M o~0 CA CO N - CP fZ W cM Co N It 61� 64 O O OND co O M O D O CO N N 'CO Lf) — a) m rOCflv O CO CO CA co O- N M 6s 69 OO O CA N O O O CO v Cl) 00 a M O LO N CO N N 0 ds O M O N CA r r r O i N NM M c0 to va h 00 Il- N CO - tr) It N N I- N r 00 v IT V) v v It Octto cn Ci O M O 0) 6j. 69 co O M O to 00 O) Cl) OD O M OM O N r 0 44 O v U) N O) (0 O O M= � CO M O W COO v c0 O M v Oct I- O ti It N fI- N M CA .- t0 MN 00000 I- Cl) N r to r CON0L"0....N I- v O O M C0 VL O M q:Vi 00 to 00 CC) l0 �r-CD CO N N N V9. fA U') v N U) O) N � O r � COO CO r- W m O h '0' M 000 0 (0 0000 61!> 6-.�40619, COO r- ON CO � M O 00000 c» 64 ut v> 6% (0). 0 CO O O n m 3 N M C C d O y N U) N O ) N 4) y HHH O)LL d U m m m m m m �m o 2) x A O) L N c p) L 0)( y CML L L N C= 0 ~ U d U mc- U U Uo 2 - C"a L C> U 9 L C > L C C C M> o UO °N •2ca C vW mO jp Q y a) CD 0y 6 CLay y$ y No 'ayc> N O) 0 +�+ 0 C> c ''............ y 3 0 4) f6 pc> £ 7 0 0 !0 y C C 7 7 0 0 0 0 aUUUU�� �UUOC-6 UUUw� C H N Cl) v 0 O n 00 O r r N N N N N Attachment 2 to 2020 RRM Staff Report Bill Impact 0.q 116Y In 0 RJO v 1w v I;t OD 0) 0) 0) LM 0 c to t! - t 2 Im .2 CL ce 'd -e IMP M 2 s, 00 "R al- u- EE u- E U- 0 E 21 AL PS E 0 V- ui 5 m 3 -1 , pppp.3111- 0,0-0 w ui . 3 :2 pp" mm 0 0 c 04 CO vt U) (0 P- 00 0 ov-NMVMW VF C14 N N c"I C'4 (4 ce) In or) m =1 21 CZ C7 C4 O q M OR OR tq T" to N N o 60, 6% 0 P- v 0) 0 p- I' to IR W 0 Q) (n 00 - C M I- Ir- CO OD 0 CM 2 v vr M 0 t- 0 C14 ui v - C14 folk 0* ta 4ork IP III JA 10 Al go Al 01 N Al go 11D go 10 H 111 11 m 00) CY W ) w — I 1491 110 I 014 IN. w V. 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'r- 1w IT r- C4 -t V, C14 If cq If a 0 00 c) c 0 4) ED p :3 IR- 0 0 0 I'M 2) p F- 4D 0 0 OR E D 22 M M < CID MIn tm= 0 0 0 M 0 <( On ol co PM M M R .2 V 0 0 0 :& a •ood— 'd ILL B 0) E E E-00 , V, 0V 8 111 9 W- LL E E E Ecinu U. 0 F E E E (9 S OLE E :3 pu - g w 0 E :1 :3 3 (j, v 0 :3 ID 2 EEO V 8) 8) 8 r d (1 0 u Rx w Ox 0 0 () C) 10 o 0:2 :2 Ol. 00 CD q., cqcn:$w WP -Wm on w Lo Lo ko 8(o w 0 V) . I;r Nr to to Attachment 3 to 2020 RRM Staff Report RRM Monthly Savings Over GRIP and DARR Rates ATMOS ENERGY CORP., MID-TEX DIVISION RESIDENTIAL AVERAGE RATE COMPARISON TEST YEAR ENDING DECEMBER 81, 2018 ACSC DARR ATM Environs Settled Filing Filing Filing Cust Charge $20.25 $23.75 $26.40 $24.60 Monthly Ccf 44.5 44.5 44.5 44.5 Cons Charge $0.26651 $0.19336 $0.14846 $0.18653 Average Mo Bill $32.11 $32.35 $33.01 $32.90