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05-C1 ATMOS Cities Settlement AgreementCITY OF PARIS, TEXAS CITY COUNCIL AGENDA REQUEST MEETING DATE: January 28, 2008 ~Action ❑ Discussion ❑Information ❑Refer to: SUBMITTED BY: Gene Anderson, Finance Director DESCRIPTION: The City of Paris, along with 150 other cities served by Atmos Energy Mid-Tex Division, is a member of the Atmos Cities Steering Committee. Since October, ACSC members have worked diligently with Atmos representatives to explore options to address Atmos' latest request to increase rates by $52 million and to resolve other outstanding issues. This ordinance and related tariffs reflect the agreement reached between ACSC and Atmos Mid-Tex to reduce Atmos' requested increase by more than 80 percent and ensure that the Company is able to provide safe and reliable natural gas service. The Settlement Agreement also provides rate certainty for customers by resolving outstanding appeals, creates a new process for expedited rate review by the cities, eliminates piecemeal ratemaking, reimburses ACSC for rate case expenses associated with the GRIP surcharge cases, and avoids the necessity of costly litigation. The ACSC Executive Committee recommends that ACSC members approve the Settlement Agreement. The purpose of the Ordinance is to endorse the Settlement Agreement between ACSC and Atmos regarding the Company's Statement of Intent to increase rates and to approve tariffs that implement the terms of the Settlement Agreement. Approval of the Ordinance will result in a$10 million increase in Atmos' revenues. This is an 80 percent reduction of the $52 million increase requested by Atmos in its Statement of Intent. tn addition, the tariffs approved by the Ordinance will replace the current piecemeal ratemaking GRIP surcharge system with an expedited rate review process that ensures that cities can review all components of future Company rate change requests. The Settlement Agreement also resolves all outstanding issues between ACSC and Atmos, including six appeals currently pending in Texas courts. BACKGROUND INFORMATION: On September 20, 2007, Atmos filed with the City the Company's Statement of Intent to increase natural gas rates system-wide by approximately $52 million. The City suspended the October 25~' Effective Date to work with other ACSC members to analyze the schedules and evidence offered by Atmos to support its request to increase rates. In order to facilitate approval of this Ordinance and the attached tariffs, Atmos Mid-Tex has agreed to extend the deadline for final city action until March l, 2008. Atmos' rate request represents the seventh increase in natural gas rates for customers in the Atmos Mid-Tex service area since 2004. Four rate increases are the result of Gas Reliability Infrastructure Program (GRIP) surcharges enacted pursuant to the Texas Utilities Code § 104.301. A primary complaint of cities around the state regarding GRIP filings is that it is piecemeal ratemaking and only looks at changes in the utility's invested capital, rather than a more comprehensive review of all components affecting rates charged. Cities thus far have been unsuccessful in defeating GRIP at the Legislature and in court. . _ _ _ . . ~ _ . _ r . CITY OF PARIS, TEXAS CITY COUNCIL AGENDA REQUEST In addition to the four GRIP surcharges, base rates charged to customers served by Atmos Mid- Tex have increased as the result of two system-wide cost of service rate filings since 2004. The Company's current request to increase base rates would be the third system-wide cost of service increase for customers in Atmos Mid-Tex's service area since 2004. In the most recent cost of service rate request, GUD No. 9670, the Railroad Commission of Texas ("RRC" or "Commission") issued an order in March, 2007, approving new system-wide rates for customers of Atmos Mid-Tex. Residential customers were impacted disproportionally by the Commission's final order, with residential rates increasing by $10 million annually, despite an overall system-wide rate increase of $5 million. System-wide rates charged to residential customers in the Atmos Mid-Tex region were also increased by several million dollars in 2004 in GUD No. 9400. In GUD Nos. 9400 and 9670, the hearings examiners that heard the testimony and evaluated the evidence recommended that rates be reduced for customers. However, in both cases, the Railroad Commission reversed key decisions of its own hearings examiners, ultimately issuing final orders that approved rate increases instead of the recommended rate reductions. Reasons Justifying Settlement: During the time that the City has retained original jurisdiction in this case, consultants working on behalf of ACSC members have investigated the support for the Company's requested rate increase. While the evidence does not support the $52 million increase requested by the Company, ACSC consultants agree that the Company can justify an increase in revenues of at least $8 million and that there is a reasonably high probability that the RRC would award an increase of at least $10 million. A contested case proceeding before the RRC on the Company's current application will take several months and cost ratepayers millions of dollars in rate case expenses and would not likely produce a request more favorable than that to be produced by the settlement. The ACSC Executive Committee recommends that ACSC members take action to approve the Settlement Agreement. This Settlement Agreement achieves several desirable outcomes, including: • Reverses rate design decisions that unfairly impact residential ratepayers • Does away with piecemeal ratemaking problems inherent to the GRIP surcharge process • Eliminates exposure to potential court reversal of the multi-million dollar Poly-1 Pipe disallowance (Atmos' issue on appeal in Docket No. 9400) • Avoids uncertainty and potential negative consequences of Railroad Commission rate review (in the two most recent rate cases affecting Atmos Mid-Tex customers, the Commission has reversed rate reductions recommended by its own hearings examiners in favor of rate increases) • Implements an expedited rate review process that includes the cities and allows review of all aspects of Atmos' cost of service CITY OF PARIS, TEXAS CITY COUNCIL AGENDA REQUEST • Requires Atmos to reimburse ACSC for more than $500,000 paid to litigate GRIP surcharge cases • Protects ACSC members and their citizens from the remote possibility that a litigated outcome or settlement with other parties produces a result more favorable than the ordinance passed by ACSC members by including a Most Favored Nations provision in the Settlement Agreement. FISCAL AUTHORITY: Not applicable. LEGAL REVIEW: MANAGER'S RECOMMENDATION: DRAFT attorney\ordwork\current\ATMOS Settlement Ord 2008 January 22, 2008 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS, ("CITY") APPROVING A SETTLEMENT AGREEMENT BETWEEN THE ATMOS CITIES STEERING COMMITTEE AND ATMOS ENERGY CORP., MID-TEX DIVISION ( ATMOS MID-TEX" OR "THE COMPANY") REGARDING THE COMPANY'S STATEMENT OF INTENT TO CHANGE GAS RATES IN ALL CITIES EXERCISING ORIGINAL JURISDICTION; DECLARING EXISTING RATES TO BE UNREASONABLE; ADOPTING TARIFFS THAT REFLECT RATE ADJUSTMENTS CONSISTENT WITH THE SETTLEMENT AGREEMENT AND FINDING THE RATES TO BE SET BY THE ATTACHED TARIFFS TO BE JUST AND REASONABLE; ADOPTING A SAVINGS CLAUSE; DETERMINING THAT THIS ORDINANCE WAS PASSED IN ACCORDANCE WITH THE REQUIREMENTS OF THE TEXAS OPEN MEETINGS ACT; DECLARING AN EFFECTIVE DATE; AND REQUIRING DELIVERY OF THIS ORDINANCE TO THE COMPANY AND LEGAL COUNSEL. WHEREAS, the City of Paris, Texas ("City") is a gas utility customer of Atmos Energy Corp., Mid-Tex Division ("Atmos Mid-Tex" ar"the Company"), and a regulatory authority with an interest in the rates and charges of Atmos Mid-Tex; and, WHEREAS, on or about September 20, 2007, Atmos Mid-Tex, pursuant to Gas Utility Regulatory Act § 104.102 filed with the City a Statement of Intent to increase system-wide gas rates by approximately $52 million, such increase to be effective in all municipalities exercising original jurisdiction within its Mid-Tex Division service area effective on October 25, 2007; and, WHEREAS, the City took action to suspend the October 25, 2007 Effective Date and to coordinate a response to Atmos' filing with more than 150 other similarly situated municipalities through the Atmos Cities Steering Committee ("ACSC") (such participating cities are referred to herein as "ACSC Cities"); and, WHEREAS, Atmos has agreed to extend the October 25, 2007, Effective Date such that the City's jurisdiction over this matter ends March 1, 2008; and. WHEREAS, the Railroad Commission of Texas ("RRC" or the "Commission") in GUD No. 9670, issued an Order approving new system-wide rates for customers of Atmos Energy's Mid-Tex Division in March 2007, which increased residential base rates by approximately $10 million annually; and, t WHEREAS, ACSC and Atmos have each appealed the RRC's decision in Atmos' most recent system-wide rate increase as well as the decision rendered in GUD No. 9400 to the Travis County District Court; and, WHEREAS, Atmos and ACSC have been in continuing disagreement, dispute, and litigation over the application of Section 104.301 of the Texas Utilities Code and the resulting rate increases ("GRIP surcharges") established by the RRC; and, WHEREAS, Atmos filed its application for its fourth GRIP surcharge in four years on May 31, 2007, seeking to increase the rates of all customers by approximately $12 million annually; and, WHEREAS, the ACSC Cities desire to avoid the litigation expense that would result from another lengthy contested rate case proceeding before the RRC as well as the prosecution of the appeals in various courts of the GRIP surcharges and the two previous system-wide rate decisions; and, WHEREAS, ACSC desires to recoup certain costs it previously incurred in connection with GRIP-related proceedings (costs which Atmos contends are not reimbursable rate case expenses under the Texas Utilities Code), as well as costs incuned in connection with this proceeding; and, WHEREAS, on October 18, 2007, more than 60 ACSC members met in Arlington with officers and executives of Atmos to discuss various issues, including rate making, resulting in a mutual pledge to work toward settlement; and, WHEREAS, ACSC members designated a Settlement Committee made up of ACSC representatives to work with ACSC attorneys and consultants to formulate and review reasonable settlement positions to resolve outstanding matters with Atmos, including the pending rate increase request; and, WHEREAS, the Settlement Committee and lawyers representing ACSC met several times with the Company to negotiate a Settlement Agreement resolving the issues raised in the Company's Statement of Intent filing as well as all outstanding appeals of the two prior rate cases and various GRIP filings; and, WHEREAS, the Settlement Committee, as well as ACSC lawyers and consultants believe existing rates are unreasonable and should be changed; and, WHEREAS, the ACSC Executive Committee recommends ACSC members approve the negotiated Settlement Agreement and attached tariffs; and, WHEREAS, the attached tariffs provide for an expedited rate review process as a substitute to the current GRIP process instituted by the Legislature; and, WHEREAS, the expedited rate review process as provided by the Rate Review Mechanism Tariff eliminates piecemeal ratemaking, the ACSC's major objection to the current GRIP process; and, _r__ WHEREAS, the attached tariffs implementing new rates are consistent with the Settlement Agreement and are just, reasonable, and in the public interest; and, WHEREAS, it is the intention of the parties that ACSC Cities receive the benefit of any Settlement Agreement that Atmos enters into with other entities arising out of its Statement of Intent or any associated appeals of a decision entered by the Railroad Commission regarding the Company's request to increase rates; and, WHEREAS, the Settlement Agreement as a whole is 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 City Council finds that the Settlement Agreement, which is attached hereto and incorporated herein as Attachment A, is in the public interest and is hereby endorsed in all respects. Section 3. That existing rates for natural gas service provided by Atmos Mid-Tex are unreasonable and new tariffs, which are attached hereto and incorporated herein as Attachment B, are just and reasonable and are hereby adopted. Section 4. That to the extent any resolution or ordinance previously adopted by the Council is inconsistent with this Ordinance, it is hereby repealed. Section 5. 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 of the Ordinance shall be interpreted as if the offending section or clause never existed. Section 7. That if ACSC Cities determine any rates, revenues, terms and conditions, or benefits resulting from a Final Order or subsequent Settlement Agreement approved in any proceeding addressing the issues raised in Atmos' Statement of Intent would be more beneficial to the ACSC Cities than the terms of the attached Settlement Agreement, then the more favorable rates, revenues, terms and conditions, or benefits shall additionally accrue to the ACSC Cities. However, approval of the attached Rider RRM, Rider CEE, Rider GCR and the Rider WNA shall not be affected by the application of the provisions contained in this section, it being the understanding and the intent of the parties hereto that such tariffs shall continue according to their terms. Section 8. That this Ordinance shall become effective from and after its passage with rates authorized by attached Tariffs to be effective for customer bills delivered on or after March 1, 2008. Section 9. That a copy of this Ordinance shall be sent to Atmos Mid-Tex, care of Joe T. Christian, Director of Rates, at Atmos Energy Corporation, 5420 LBJ Freeway, Suite 1800, Dallas, Texas 75240, and to Geoffrey Gay, General Counsel to ACSC, at Lloyd Gosselink Blevins Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767-1725. PASSED AND APPROVED this 28th day of January, 2008. Jesse James Freelen, Mayor ATTEST; Janice Ellis, City Clerk APPROVED AS TO FORM: W. Kent McIlyar, City Attorney ATTACHMENT A STATEMENT OF INTENT FILED BY ATMOS ENERGY, CORP., MID-TEX DIVISION ON SEPTEMBER 20, 2007 SETTLEMENT AGREEMENT This Settlement Agreement is entered into by and between Atmos Energy Corp.("Atmos" or "the Company") and the Atmos Cities Steering Committee ("ACSC"), whose members include the Cities of Abilene, Addison, Allen, Alvarado, Angus, Anna, Argyle, Arlington, Bedford, Bellmead, Benbrook, Beverly Hills, Blue Ridge, Bowie, Boyd, Bridgeport, Brownwood, Buffalo, Burkburnett, Burleson, Caddo Mills, Carrollton, Cedar Hill, Celeste, Celina, Cisco, Cleburne, Clyde, College Station, Colleyville, Colorado City, Comanche, Coolidge, Coppell, Corinth, Corral City, Crandall, Crowley, Dalworthington Gardens, Denison, DeSoto, Duncanville, Eastland, Edgecliff Village, Emory, Ennis, Euless, Everman, Fairview, Farmers Branch, Farmersville, Fate, Flower Mound, Forest Hill, Fort Worth, Frisco, Frost, Gainesville, Gazland, Garrett, Crrand Prairie, Grapevine, Haltom City, Harker Heights, Haskell, Haslet, Heath, Hewitt, Highland Park, Highland Village, Honey Grove, Hurst, Iowa Park, Irving, Justin, Kaufman, Keene, Keller, Kemp, Kennedale, Kerrville, Killeen, Krum, Lakeside, Lake Worth, Lancaster, Lewisville, Lincoln Park, Little Elm, Malakoff, Mansfield, McKinney, Melissa, Mesquite, Midlothian, Murphy, Newark, Nocona, North Richland Hills, Northlake, Oa1c Leaf, Ovilla, Palestine, Pantego, Paris, Parker, Pecan Hill, Plano, Ponder, Pottsboro, Prosper, Putnam, Quitman, Red Oak, Reno (Parker County), Richardson, Richland Hills, Roanoke, Robinson, Rockwall, Roscoe, Rowlett, Sachse, Saginaw, Seagoville, Sherman, Snyder, Southlake, Springtown, Stamford, Stephenville, Sulphur Springs, Sweetwater, Temple, Terrell, The Colony, Throckmorton, Tyler, University Park, Venus, Vernon, Waco, Watauga, Waxahachie, Westlake, Westworth Village, Whitesboro, White Settlement, Wichita Falls, Woodway, and Wylie (collectively "ACSC Cities"). WHEREAS, the Settlement Agreement resolves all issues relating to the Atmos Energy Corp., Mid-Tex Division Statement of Intent filed with the ACSC Cities on September 20, 2007, in a manner that Atmos and ACSC ("the Signatories") believe is consistent with the public interest, and the Signatories represent diverse interests; WHEREAS, the Signatories believe that a fully contested hearing in the case would be time-consuming and entail substantial additional expense for all parties and that the public interest will be served by adoption of an ordinance consistent with the Settlement Agreement; NOW, THEREFORE, in consideration of the mutual agreements and covenants established herein, the Signatories, through their undersigned representatives, agree to and recommend for approval by the ACSC Cities the following Settlement Terms as a means of fully resolving all issues raised in the September 20, 2007 Statement of Intent filed by Atmos on behalf of its Mid-Tex division: Settlement Terms 1. Atmos and the ACSC Cities agree to the rates, terms and conditions reflected in the tariffs attached to this Settlement Agreement as Exhibit A. Said tariffs should allow Atmos an additional $10 million in annual revenue by implementation of rates shown in . . _ . . . . _ , . . . . . . . . . . . . _...T_ . . , . . . . SETTLEMENT AGREEMENT STATEMENT OF INTENT FILED BY ATMOS ENERGY, CORP., MID-TEX DIVISION ON SEPTEMBER 20, 2007 the proof of revenues attached as Exhibit B. Atmos and the ACSC Cities further agree that the rates, terms, and conditions reflected in Exhibit A to this Settlement Agreement comply with the rate-setting requirements of Chapter 104 of the Texas Utilities Code. The gas rates, terms and conditions established by this Settlement Agreement shall be effective for bills rendered on or after March 1, 2008. 2. The net plant amounts shown in the attached Exhibit B are reasonable for the plant that is used and useful in providing gas utility service. 3. Included as part of Exhibit A is a Rate Review Mechanism ("Rider RRM") that provides for an annual rate adjustment to reflect changes in billing determinants, operating and maintenance expense, depreciation expense, other taxes expense, and revenues as well as changes in capital investment and associated changes in gross revenue related taxes. Atmos agrees that effective with the implementation of the first RRM rate adjustment, Atmos shall file with the ACSC Cities a revised Rate R-Residential Sales Tariff to reduce the customer charge per bill from $10.69 per month to $7.00 per month and to increase the volumetric portion of the rate (shown as $1.271 in Exhibit A) to the appropriate level to reflect reduction in customer charge from $10.69 to $7.00, as well as to reflect any change resulting from the RRM implementation. The first RRM rate adjustment is expected to occw October 1, 2008. Atmos and the ACSC Cities agree that following the initial RRM adjustment any subsequent implementation of RRM adjustments shall be supported as described in the Rider RRM, and shall limit changes to residential and commercial customer charge to no more than 20%. Further, the parties agree that any approved adjustment in excess of the 20% limitation on the residential and commercial customer chaxge shall be recovered through the volumetric portion of the rate. 4. With respect to the RRM, Atmos and the ACSC Cities agree that the rate increase limita.tions set forth in Rider RRM under Calculation of Rate Adjustment, subpart (c) shall not preclude Atmos from recovering any excluded costs during a subsequent Evaluation Period in which the 5% limitation for O&M expenses or net plant investment, respectively, is not reached or in a subsequent Statement of Intent case. To the extent that Atmos seeks to recover any excluded costs during a subsequent Evaluation Period in which the 5% limitation for O&M expenses or net plant investment, respectively, is not reached or in a subsequent Statement of Intent case, Atmos sha11 identify these costs as a specific line item in the schedule accompanying the RRM rate adjustment filing. 5. With respect to the RRM, Atmos further agrees to pay all reasonable and necessary expenses of each entity having original jurisdiction that aze incurred to review the Company's annual RRM filings. Atmos further agrees that in calculating the proposed rate for any Rate Effective Period, the Company shall not include: (1) any external legal, expert, or consultant costs to prepare and/or provide supportive information related to its filing; or (2) reimbursements to original jurisdiction entities. 6. Notwithstanding paragraph 5 of this Settlement Agreement, Atmos and ACSC agree that in the event of an appeal of an original jurisdiction entity's decision regarding a proposed RRM adjustment, recovery of rate case expenses shall be determined according to Chapters 103 and 104, 'IEx. UTIL. CoDE Ar1N. Further, in the event of such appeal(s), 2 ~ . . . _ . . . . _ , SETTLEMENT AGREEMENT STATEMENT OF INTENT FILED BY ATMOS ENERGY, CORP., MID-TEX DIVISION ON SEPTEMBER 20, 2007 Atmos shall recover any reimbursement made to the original jurisdiction entity through a surcharge to customer rates whether such reimbursements are made during the initial review period or appeal period. 7. Atmos agrees that it will make no filings on behalf of its Mid-Tex division under the provisions of'IEx. UTIL. CoDE ANtv. § 104.301 while the Rider RRM is in place, and any such filings pending at the time the RRM is approved will be trued-up for revenue and rate base components prior to implementation of the annual RRM. In the event that a regulatory authority fails to act or enters an adverse decision regarding the proposed annual RRM adjustment, the Railroad Commission of Texas shall, pursuant to the provisions of the Texas Utilities Code, have exclusive appellate jurisdiction to review the action or inaction of the regulatory authority exercising exclusive original jurisdiction over the RRM request. In addition, the Signatories agree that this Settlement Agreement sha11 not be construed as a waiver of the ACSC Cities' right to initiate a show cause proceeding or the Company's right to file a Statement of Intent under the provisions of the Texas Utilities Code. 8. Atmos and the ACSC Cities commit that during the Initial Implementation Period, as defined in the RRM tariff, Atmos and the ACSC Cities will not devote resources or efforts to advocate statutory changes involving rate stabilization mechanisms or the Gas Reliability Infrastructure Plan that is currently codified under TEx. UTtL. CoDE § 104.301. 9. Atmos and the ACSC Cities agree that the gas cost portion of uncollectible expense shall be recovered through the Company's Rider GCR rather than through base rates. The change in accounting for the gas cost portion of uncollectible expense (including both the accrual of expense and write-off of accounts) shall become effective with the implementation of the first RRM rate adjustment. The first RRM rate adjustment is expected to occur October 1, 2008. In calculating the rate for the first Rate Effective Period, the Company sha11 utilize the same methodology as used in the Company's September 20, 2007 Statement of Intent with the only modification being to exclude the effects of the gas cost portion of uncollectible expense from the base rate calculation. 10. Atmos and the ACSC Cities further agree that expense associated with lost and unaccountable gas shall, based on an annual period, be recoverable through the Company's Rider GCR up to a maximum of five (5) percent of the quantity of inetered gas, as provided under Commission Rule 7.5525, Lost and Unaccounted for Gas. Such change shall be effective with the complete 12 month reporting period ending June 30, 2008. 11. Included as part of Exhibit A to this Settlement Agreement is a new gas conservation program tariff (Rider CEE) that will be effective October 1, 2008. Atrnos and the ACSC Cities agree that Atmos will fund $1 million of the allowable expenses incurred annually, with a customer rate component providing the remainder $1 million of funding. All customer-supplied funds will, prior to the commencement of the program, be used toward program implementation efforts and, upon implementation, be applied directly to the gas conservation materials and supplies. 3 . _ . _ . . . . _ . . . . r , - . SETTLEMENT AGREEMENT STATEMENT OF INTENT FILED BY ATMOS ENERGY, CORP., MID-TEX DIVISION ON SEPTEMBER 20, 2007 12. Atmos and the ACSC Cities agree that the Company's requested revision of its weather normalization adjustment ("WNA") mechanism is appropriate, as modified by ACSC, and should be approved as set forth in Exhibit A to this Settlement Agreement. Specifically, the revision excludes non-weather sensitive commercial customers and modifies the WNA mechanism to calculate the WNA adjustment based on weather stations at a regional level rather than under the current practice of associating all customers with a single weather location for purposes of determining the WNA adjustment. 13. Atmos and the ACSC Cities agree that the three-year gas cost review process that is currently in effect for the Mid-Tex division should be eliminated. Atmos and the ACSC Cities further agree to collaborate to establish an alternate process wherein the prudence of gas costs recovered through the R.ider GCR can be addressed. Until an agreed upon replacement mechanism has been established, the current gas cost review process shall remain in effect, unless changed by order of the Commission. 14. It is the intention of the Signatories that the ACSC Cities receive the benefit of any settlement agreement that Atmos enters into with other entities arising out of GUD No. 9672 (consolidated cases) or any associated appeals of GUD No. 9672. Therefore, Atmos agrees that if the rates, revenues, terms and conditions, or benefits accruing to the settling entity would be more beneficial to the ACSC Cities than the terms of this Settlement Agreement, as determined by the ACSC Cities, such more favorable rates, revenues, terms and conditions, or benefits shall additionally accrue to the ACSC Cities. Similazly, if the Final Order in GUD No. 9672 or orders resulting from any associated appeals aze detertnined by the ACSC Cities to result in rates, revenues, terms and conditions, or benefits that are more beneficial than the terms or this Settlement Agreement, such more favorable terms, revenues, terms and conditions shall additionally accrue to the ACSC Cities. However, the Signatories agree that the approval of the Rider RRM, the Rider WNA, the Rider CEE, and the Rider GCR, as shown in Exhibit A hereto, sha11 not be affected by the application of the "most favored nations" provisions contained in this paragraph, it being the understanding and the intent of the Signatories hereto that such tariffs shall continue in effectiveness according to their terms. The Signatories further agree that the agreement reflected in paragraph 10 of this Settlement Agreement shall not be affected by the application of the "most favored nations" provisions contained in this pazagraph. 15. Atmos agrees to reimburse the ACSC Cities previously incurred rate case expenses within 30 days of the date the last ACSC City ordinance approving this Settlement Agreement is entered, and any additional rate case expenses incurred through the date of the entry of the last ACSC City ordinance, within 30 days of receipt of invoices. 16. Atmos agrees to reimburse the ACSC Cities for expenses associated with a112003, 2004, 2005, and 2006 GRIP filings and related court appeals up to $567,213 within 30 days of the date the last ACSC City ordinance approving this Settlement Agreement is entered. 17. Atmos and the ACSC Cities further agree that all expenses reimbursed pursuant to paragraphs 15 and 16 of this Settlement Agreement, as well as all reasonable rate case 4 SETTLEMENT AGREEMENT STATEMENT OF INTENT FILED BY ATMOS ENERGY, CORP,, MID-TEX DIVISION ON SEPTEMBER 20, 2007 expenses directly incurred by Atmos in connection with the September 20, 2007 Statement of Intent filed on behalf of its Mid-Tex Division through February 29, 2008, shall be recoverable through a surcharge to customer rates within the ACSC Cities. With respect to the rate case expenses direcdy incurred by Atmos, the amount to be recovered through the surcharge to customers within the ACSC Cities shall be determined on a pro rata basis, consistent with the ACSC Cities' percentage of total Mid-Tex residential load (52%). The surcharge shall be recovered over a twelve month period beginning in April of 2008. 18. Within 30 days of the date the last ACSC City ordinance approving this Settlement Agreement is entered, Atmos and the ACSC Cities agree to file a Notice of Non-Suit or Motion to Dismiss, whichever is applicable, in the following proceedings: Cause No. D-1-GN-06-000337 (Consolidated), Atmos .Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. This case includes the following cases: a. Cause No. D-1-GN-06-000333; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. b. Cause No. D-1-GN-06-000334; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. c. Cause No. D-1-GN-06-000335; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. d. Cause No. D-1-GN-06-000336; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. e. Cause No. D-1-GN-06-000332; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. f. Cause No. D-1-GN-OS-002182; Atmos Cities Steering Committee v. The Railroad Commission of Tezas, In the 345th District Court, Travis County, Texas. g. Cause No. D-1-GN-06-004206; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. Cause No. D-1-GN-06-001612; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. Cause No. D-1-GN-06-001852; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. Cause No. D-1-GV-06-000603; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. Cause No. D-1-GV-06-000605; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. S SETTLEMENT AGREEMENT STATEMENT OF INTENT FILED BY ATMOS ENERGY, CORP., MID-TEX DIVISION ON SEPTEMBER 20, 2007 Cause No. D-1-GN-06-004518; Atmos Cities Steering Committee v. The Railroad Commission of Texas, In the 345th District Court, Travis County, Texas. Cause Number: 03-06-00580-CV; Atmos Energy Corporation, as successor by merger to TXU Gas Company, Allied Coalition of Cities, and Ciry of Dallas v. Railroad Commission of Texas; In the Third District Court of Appeals at Austin, Texas. Cause No. D-1-GN-07-002871, Atmos Cities Steering Committee v. Railroad Commission of Texas, In the 53rd District Court, Travis County, Texas. Cause No. D-1-GN-07-002796, Atmos Energy Corporation v. Railroad Commission of Texas, In the 250th District Court, Travis County, Texas. Cause No. GV5-00875; Allied Coalition of Cities v. The Railroad Commission of Tezas, In the 345th District Court, Travis County, Texas. 19. Atmos and the ACSC Cities agree that Atmos may make all future filings, including, but not limited to, the annual RRM adjustment and any Statement of Intent filing with the ACSC Cities on an electronic basis, rather than by paper copy. Electronic Filings shall fulfill the requirements of TEx. UTIL. CODE § 104.103. The appropriate ACSC Cities representative sha11 provide a list of the ACSC Cities to Atmos by March 1, 2008, and agrees to notify Atmos of any change in the ACSC Cities Coalition within 30 days of the effective date of any such change in order for Atmos to maintain adequate service records. Atmos further agrees to make paper copies of filings available to any ACSC City that requests a copy. 20. Atmos and the ACSC Cities agree that the ACSC Cities should pass ordinances approving the Settlement Agreement and establish rates and services for the ACSC Cities consistent with those set forth in Exhibit A to this Settlement Agreement. 21. The Signatories agree that the terms of the Settlement Agreement aze interdependent and indivisible, and that if any ACSC City enters an order that is inconsistent with this Settlement Agreement, then any Signatory may withdraw without being deemed to have waived any procedural right or to have taken any substantive position on any fact or issue by viriue of that Signatory's entry into the Settlement Agreement or its subsequent withdrawal. 22. The Signatories agree that all negotiations, discussions and conferences related to the Settlement Agreement are privileged, inadmissible, and not relevant to prove any issues associated with the September 20, 2007 Statement of Intent filed by Atrnos on behalf of its Mid-Tex Division pursuant to Texas law. 23. The Signatories agree that neither this Settlement Agreement nor any oral or written statements made during the course of settlement negotiations may be used for any purpose other than as necessary to support the entry by the ACSC Cities of an order implementing this Settlement Agreement. 6 SETTLEMENT AGREEMENT STATEMENT OF INTENT FILED BY ATMOS ENERGY, CORP., MID-TEX DIVISION ON SEPTEMBER 20, 2007 24. The Signatories agree that this Settlement Agreement is binding on each Signatory only for the purpose of settling the issues set forth herein and for no other purposes, and, except to the extent the Settlement Agreement governs a Signatory's rights and obligations for future periods, this Settlement Agreement shall not be binding or precedential upon a Signatory outside this proceeding. 25. The Signatories agree that this Settlement Agreement may be executed in multiple counterparts and may be filed with facsimile signatures. 7 SF7"1'LEMEN7' AGRET;ivIGN'1' STA'I'EMI:NT OF Th'T.rNT F]LED BY ATMOS LNERGI', (:;GRP., M:[D-TEX DIVCSION ON SLP"1L•MIiER 20, 2UU7 WITII "1"I-IT: ACSC COALITIOh Or CI I'11;5 Agreed to this 9"' day of January, 2008. 11TNIOS ENERUY COR.P., M1:D-TEX DIViSION BY: L-' '=~~✓L''J. Jot A. Paris President, M.id-Tex Division S SETTLEMENT AGREEMENT STATEMENT OF INTENT FILED BY ATMOS ENERGY, CORP., MID-TEX DIVISION ON SEPTEMBER 20, 2007 Agreed to this 9~' day of January, 2008. ATTORNEY FOR ATMOS CITIES STEERING COMMITTEE, WHOSE MEMBERS INCLUDE THE CITIES OF ABILENE, ADDISON, ALLEN, ALVARADO, ANGUS, ANNA, ARGYLE, ARLINGTON, BEDFORD, BELLMEAD, BENBROOK, BEVERLY HILLS, BLUE RIDGE, BOWIE, BOYD, BRIDGEPORT, BROWNWOOD, BUFFALO, BURKBURNETT, BURLESON, CADDO MILLS, CARROLLTON, CEDAR HILL, CELESTE, CELINA, CISCO, CLEBURNE, CLYDE, COLLEGE STATION, COLLEYVILLE, COLORADO CITY, COMANCHE, COOLIDGE, COPPELL, CORINTH, CORR.AL CITY, CRANDALL, CROWLEY, DALWORTHINGTON GARDENS, DENISON, DESOTO, DUNCANVILLE, EASTLAND, EDGECLIFF VILLAGE, EMORY, ENNIS, EULESS, EVERMAN, FAIRVIEW, FARMERS BRANCH, FARMERSVILLE, FATE, FLOWER MOUND, FOREST HILL, FORT WORTH, FRISCO, FROST, GAINESVILLE, GARLAND, GARRETT, GRAND PRAIRIE, GR.APEVINE, HALTOM CITY, HARKER HEIGHTS, HASKELL, HASLET, HEATH, HEWITT, HIGHLAND PARK, HIGHLAND VILLAGE, HONEY GROVE, HURST, IOWA PARK, IRVING, JUSTIN, KAUFMAN, KEENE, KELLER, KEMP, KENNEDALE, KERRVILLE, KILLEEN, KRUM, LAKESIDE, LAKE WORTH, LANCASTER, LEWISVILLE, LINCOLN PARK, LITTLE ELM, MALAKOFF, MANSFIELD, MCKINNEY, MELISSA, MESQUITE, MIDLOTHIAN, MURPHY, NEWARK, NOCONA, NORTH RICHLAND HILLS, NORTHLAKE, OAK LEAF, OVILLA, PALESTINE, PANTEGO, PARIS, PARKER, PECAN HILL, PLANO, PONDER, POTTSBORO, PROSPER, PUTNAM, QUITMAN, RED OAK, RENO (PARKER COUNTY), RICHARDSON, RICHLAND HILLS, ROANOKE, ROBINSON, ROCKWALL, ROSCOE, ROWLETT, SACHSE, SAGINAW, SEAGOVILLE, SHERMAN, SNYDER, SOUTHLAKE, SPRINGTOWN, STAMFORD, STEPHENVILLE, SULPHUR SPRINGS, SWEETWATER, TEMPLE, TERRELL, THE COLONY, THROCKMORTON, TYLER, UNIVERSITY PARK, VENUS, VERNON, WACO, WATAUGA, WAXAHACHIE, WESTLAKE, WESTWORTH VILLAGE, WHITESBORO, WHITE SETTLEMENT, WICHITA FALLS, WOODWAY, AND WYLIE. B Y• Geoffrey ay 9 EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RATE SCHEDULE: TABLE OF CONTENTS APPLICABLE TO: Entire System REVISION DATE: February 1, 2008 EFFECTIVE DATE: PAGE: 1 OF 1 February 1, 2008 1. UTILITY OPERATIONS II. CITIES AND COUNTIES SERVED III. DEFINITIONS IV. GAS SERVICE RATES S RIDERS Rate R - Residential Sales Rate C - Commercial Sales Rate I - Industrial Sales Rate T - Transportation Rider CT - Competitive Transport Rider GCR - Gas Cost Recovery Rider FF - Franchise Fee Adjustment Rider SUR - Surcharges Rate LEP - Line Extension Policy Rate M - Miscellaneous Charges Rider RA - Retention Adjustment Rider TAX - Tax Adjustment . Rider WNA - Weather Normalization Adjustment Rider RRM - Rate Review Mechanism Rider CEE - Conservation and Energy Efflciency V. SERVICE RULES AND REGULATIONS 10 . . . . . . . ..._._...,.1. EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., Mio-TEX DIVISION RATE SCHEDULE: Rate R- Residential Sales APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 1 February 1, 2008 RATE R - RESIDENTIAL SALES Application Applicable to Residential Customers for all natural gas provided at one Point of Delivery and measured through one meter. 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 Mcf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 10.69 per month Commodity Charge - All Mcf $1.2710 per Mcf Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalization calculated in accordance with Rider WNA. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). 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. 11 , , . . . . .._.........V. ._.__..._.-r . EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MIn.TFY 111VISI(1AI RATE SCHEDULE: Rate C- Commercial Sales APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 1 February 1, 2008 RATE C - COMMERCIAL SALES 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 3,000 Mcf. Type of Service Where service of the type desired by Customer is not afready 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 Mcf charges to the amounts due under the riders listed below: Charge I Amount Customer Charge per Bill $ 20.28 per month Commodity Charge - All Mcf $ 0.7104 per Mcf Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Weather Normalization Adjustment: Plus or Minus. an amount for weather normalization calculated in accordance with Rider WNA. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). 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. 12 EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DNISION RATE SCHEDULE: Rate I- Industrial Sales APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 2 February 1, 2008 RATE I - INDUSTRIAL SALES Application Applicable to Industrial Customers with a maximum daily usage (MDU) of less than 3,500 MMBtu per day for all natural gas provided at one Point of Delivery and measured through one meter. Service for Industrial Customers with an MDU equal to or greater than 3,500 MMBtu per day will be provided at Company's sole option and will require special contract arrangements between Company and Customer. 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 MMBtu charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Meter $ 344.75 per month First 0 MMBtu to 1,500 MMBtu $ 0.2200 per MMBtu Next 3,500 MMBtu $ 0.1600 per MMBtu All MMBtu over 5,000 MMBtu $ 0.0493 per MMBtu Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). Curtailment Overpull Fee Upon notfication 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 200% of the midpoint price for the Katy point listed in Platts Gas Daily published for the applicable Gas Day in the table entitled "Daily Price Survey." 13 ......T . ~ EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., nnin_Tl:x niv1c1nw RATE SCHEDULE: Rate I- Industrial Sales APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 2 OF 2 February 1, 2008 Replacement Index In the event the "midpoinY" or "common" price for the Katy point listed in P/afts Gas Daily in the table entitled "Daily Price Survey" is no longer published, Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authoritative by the natural gas industry and most closely approximating the applicable index. 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 Senrice. Special Conditions In order to receive service under Rate I, Customer must have the type of ineter required by Company. Customer must pay Company all costs associated with the acquisition and installation of the meter. 14 . . . . . . . _ T . . . . EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RATE SCHEDULE: Rate T- Transportation APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 2 February 1, 2008 RATE T - TRANSPORTATION Application Appiicable, in the event that Company has entered into a Transportation Agreement, to a customer directly connected to the Atmos Energy Corp., Mid-Tex Division Distribution System (Customer) for the transportation of all natural gas supplied by Customer or Customer's agent at one Point of Delivery for use in Customer's facility. 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. Manthly Rate Customer's bill will be calculated by adding the following Customer and MMBtu charges to the amounts and quantities due under the riders listed below: Charge Amount Customer Charge per Meter $ 344.75 per month First 0 MMBtu to 1,500 MMBtu $ 0.2200 per MMBtu Next 3,500 MMBtu $ 0.1600 per MMBtu All IVIMBtu over 5,000 MMBtu $ 0.0493 per MMBtu Upstream Transportation Cost Recovery: Plus an amount for upstream transportation costs in accordance with Part (b) of Rider GCR. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Retention Adjustment: Plus a quantity of gas as calculated in accordance with Rider RA. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). Imbalance Fees All fees charged to Customer under this Rate Schedule will be charged based on the quantities determined under the applicable Transportation Agreement and quantities will not be aggregated for any Customer with mul6ple Transportation Agreements for the purposes of such fees. Monthly Imbalance Fees Customer shall pay Company the greater of (i) $0.10 per MMBtu, or (ii) 150% of the difference per MMBtu between the highest and lowest "midpoint" price for the Katy point listed in Plafts Gas Daily in the table entitled "Daily Price Survey" during such month, for the MMBtu of Customer's monthly Cumulative 15 . ~ , _ . _r........ . . . _.T. EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RATE SCHEDULE: Rate T- Transportation APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 2 OF 2 February 1, 2008 Imbalance, as defined in the applicable Transportation Agreement, at the end of each month that exceeds 10% of Customer's receipt quantities for the month. Curtailment Overpull 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 200% of the midpoint price for the Katy point listed in P/atts Gas Daily published for the applicable Gas Day in the table entitled "Daily Price Survey." Replacement Index In the event the "midpoinY" or "common" price for the Katy point listed in P/atts Gas Daily in the table entitled "Daily Price Survey" is no longer published, Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authoritative by the natural gas industry and most closely approximating the applicable index. Agreement A transportation agreement is 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 T, customer must have the type of ineter required by Company. Customer must pay Company all costs associated with the acquisition and instatlation of the meter. 16 EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., Min_rGY nnncinki RIDER: Rider GCR - Gas Cost Recovery APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 3 October 1, 2008 Rider GCR - Gas Cost Recoverv Applicable to Rate R, Rate C, and Rate I for all gas sales made by Company, and applicable to Rate R, Rate C, Rate I, and Rate T for recovery of Pipeline System costs. The total gas cost recovery amount due is determined by adding the gas cost calculated in Section (a) below and the pipeline cost calculated in Section (b) below. The amount due for gas cost (Section (a)) is determined by multiplying the Gas Cost Recovery Factor (GCRF) by the Customer's monthly volume. For Customers receiving service under Rate R and Rate C, monthly volume will be calculated on an Mcf basis. For Customers receiving service under Rate I, monthly volume will be calculated on an MMBtu basis and the quantities wiA be adjusted as necessary to recover actual costs. The amount due for pipeline cost (Section (b)) is determined by multiplying the Pipeline Cost Factor (PCF) by the Customer's monthly volume. For Customers receiving service under Rate R and Rate C, monthly volume will be calculated on an Mcf basis. For Customers receiving service under Rate I and ~ Rate T, mcs'nthly volume will bwcalculated on an MltllBtu basis and the quantities will be adjusted as necessary to recover actual costs. (a) Gas Cost Method of Calculation The monthly gas cost adjustment is calculated by the application of a Gas Cost Recovery Factor (GCRF), as determined with the following formula: GCRF = Estimated Gas Cost Factor (EGCF) + Reconciliation Factor (RF) + Taxes (TXS) + Adjustments (ADJ) EGCF = Estimated cost of gas, including lost and unaccounted for gas attributed to residential, commercial, and industrial sales, and any reconcifiation balance of unrecovered gas costs, divided by the estimated total residential, commercial, and industrial sales. RF = Calculated by dividing the difference between the Actual Gas Cost Incurred, inclusive of interest, over the preceding twelve-month period ended June 30 and the Actual Gas Cost Billed over that same twelve-month period by the estimated total residential, commercial, and industrial sales for the succeeding October through June billing months. Actual Gas Cost Incurred = The sum of the costs booked in Atmos Energy Corp., Mid-Tex Division account numbers 80o through 813 and 858 of the NARUC Uniform System of Accounts, including the net impact of injecting and withdrawing gas from storage. Also includes a credit or debit for any out-of-period adjustments or unusual or nonrecurring costs typically considered gas costs and a credit for amounts received as Imbalance Fees or Curtailment Overpull Fees. Actual Gas Cost Billed = EGCF multiplied by the monthly volumes billed to Residential, Commercial and Industrial Sales customers, less the total amount of gas cost determined to have been uncollectible and written off which remain unpaid for each month of the reconciliation period. 17 EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider GCR - Gas Cost Recovery APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 2 OF 3 October 1, 2008 Any amount remaining in the reconciliation balance after the conclusion of the period of amortization will be maintained in the reconciliation balance and included in the collection of the next RF. . Atmos Energy shall file annual reports with the Commission, providing by month the following amounts: Gas Cost Written Off. Margin Written Off, Tax and Other Written Off, Total Written Off, Gas Cost Collected and Margin Collected. TXS = Any statutorily imposed assessments or taxes applicable to the purchase of gas divided by the estimated total residential, commercial, and industrial sales. ADJ = Any surcharge or refund ordered by a regulatory authority, inclusive of interest, divided by the estimated total residential, commercial, and industrial sales. (b) Pipeline Cost Method of Calculation Each month, a Pipeline Cost Factor (PCF) is calculated separately for each Pipeline Cost Rate Class listed below. The formula for the PCF is: PCF = PP / S, where: PP =(P - A) x D, where: P= Estimated monthly cost of pipeline service calculated pursuant to Rate CGS D= Pipeline service allocation factor for the rate class as approved in the Company's most recent rate case, as follows: Pi eline Cost Rate Class Allocation Factor D Rate R - Residential Service .634783 Rate C - Commercial Service .302805 Rate I -Industrial Service and Rate T- Trans ortation Service .062412 A= Adjustment applied in the current month to correct for the difference between the actual and estimated pipeline cost revenue of the second preceding month, calculated by the formula: A = R - (C = A2), where: R= Actual revenue received ftom the application of the PP component in the second preceding month. C= Actual pipetine costs for the second preceding month. A2 = The adjustment (A) applied to the PP component in the second preceding month. S= Estimated Mcf or MMBtu for the rate class for the current billing month. The PCF is calculated to the nearest 0.0001 cent. 18 EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RlDER: Rider GCR - Gas Cost Recovery APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 3 OF 3 October 1, 2008 The Pipeline Cost to be billed is determined by multiplying the Mcf or MMBtu used by the appropriate PCF. The Pipeline Cost is determined to the nearest whole cent. 19 EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DNISION RIDER: Rider WNA - Weather Normalization Adjustment APPLICABLE T0: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 3 November 1, 2008 RIDER WNA - Weather Normalization Adiustment Provisions for Adjustment The base rate per Mcf (1,000,000 Btu) for gas service set forth in any Rate Schedules utitized 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. Computation of Weather Normalization Adjustment The Weather Normalization Adjustment Factor shall be computed to the nearest one-hundredth cent per Mcf by the following formula: (HSFi x (NDD-ADD) ) WNAFi = Ri (BL; + (HSF; 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 = Wea.ther Normalization Adjustment Factor for the ith rate schedule or classification expressed in cents per Mcf Ri = base rate of temperature sensitive sales for the ith schedule or classification approved by the entity exercising original jurisdiction. HSFi = heat sensitive factor for the ith schedule or classification calculated as the slope of the linear regression of average sales per bill (Mc fl and actual heating degree days by month for the test year by schedule or classification afid weather station as part of the RRM filing. 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 calculated as the y- intercept of the linear regression of average sales per bill (Mc fl and actual heating degree days by month for the test year by schedule or classification 20 TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider WNA - Weather Normalization Adjustment APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 2 OF 3 November 1, 2008 and weather station as part of the RRM filing. The Weather Normalization Adjustment for the jth customer in ith rate schedule is computed as: WNA; = WNAF; x q;j Where q;j is the relevant sales quantity for the jth customer in ith rate schedule. Filings with Entities Exercising Original Jurisdiction As part of its annual RRM filing the Company will file (a) a copy of each computation of the Weather Normalization Adjustment Factor, (b) a schedule showing the effective date of each such Weather Normalization Adjustment, (c) a schedule showing the factors of values used in calculating such Weather Normalization Adjustment and (d) a random sample and audit of thirty (30) actual customer bills, with customer information deleted, for each rate schedule or classification to which the WNA was applied in the preceding 12 month period. To the extent that source data is needed to audit the WNA application, such data will be provided by the Company as part of the annual RRM filing. If the RRM is discontinued, as provided in the Rider RRM tariff, the information required herein to be filed with the entities exercising original jurisdiction shall be filed on March 1 of each year. Base Use/Heat Sensitivitv (HSF) Factors Residential Commercial Base use HSF Base use HSF Weather Station Mcf Mcf/HDD Mcf Mcf/HDD Abilene 1.14 .0131 8.11 .0631 Austin 1.31 .0136 18.05 .0669 Dallas 1.57 .0185 18.08 .0925 Waco 1.20 .0138 10.97 .0606 Wichita Fa11s 1.27 .0147 11.58 .0581 2l EXHIB{T A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider WNA - Weather Normalization Adjustment APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 3 OF 3 November 1, 2008 Sample WNAFl Calculation: (.0131 x (30-17) ) 1533 per Mcf = 1.2267 x (1.14 + (.0131 x 17) ) Where i = Residential Single Block Rate Schedule Ri = 1.2267 per MCF (Rate R- Final Order GUD No. 9670) HSFi = .0131 (Residential - Abilene Area) NDD = 30 HDD (Simple ten-year average of Actua) HDD for Abilene Area - 9/15/06 -10/14/06) ADD = 17 HDD (Actual HDD for Abilene Area - 9/15/06 -10/14/06) Bli = 1.14 Mcf (Residential - Abilene Area) 22 . . . . ._._.._...._.T.... . . EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider RRM - Rate Review Mechanism APPLICABLE TO: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 1 of 5 February 1, 2008 RIDER RRM - RATE REVIEW MECHANISM Purpose; This mechanism is designed to provide annua] earnings transparency. If, through the implementation of the provisions of this mechanism, it is determined that rates should be decreased or increased, then rates will be adjusted accordingly in the manner set forth herein. The rate adjustments implemented under this mechanism will reflect annual changes in the Company's cost of service and rate base. lfiis adjustment will be authorized for an Initial Implementation Period. With the conclusion of the final rate adjustment, if any, for the Initial Implementation Period, each entity having original jurisdiction may revoke, amend, or approve Subseyuent Implementation Period(s) for, the mechanism. Definitions a) The Annual Evalaation Date shall be the date the Company will make its annual filing under this mechanism. The Annual Evaluation Date shall be no later than March 1, of each year. This filing shall be effective in electronic form where practicable. The initial filing shall be made March 31, 2008. b) Audited Financial Data shall mean the Company's books and records related to the Company's Mid- Tex operating area and shared services operations. Audited Financial Data shall not require the schedules and information provided under this tariff to undergo a sepazate financial audit by an outside auditing fum similar to the Company's annual financial audit. c) The Evaluation Period is defined as the twelve month period ending December 31, of each calendar year. The initial Evaluation Period shall be calendar year 2007. d) The Rate Effective Period is defined as the earlier of the twelve month period for which rates determined under this mechanism will be in effect or subsequent rates are implemented. e) Per Connection Basis is defined as the average number of connections during the Evaluation Period. f) Initial Implementation Period is defined as the three (3) year period commencing with the Company's filing under this mechanism for the calendar year 2007, effective October 1, 2008, and shall conclude with the implementation of rate adjustments, if any, for the third Rate Effective Period. g) Subsequent Implementation Period is defined as any three (3) year period after the conclusion of the Initial Implementation Period. h) Final Order is defined as the most recent order establishing the Company's latest effective rates for the area in which the mechanism is implemented, and shall include municipal rate ordinances and resolutions. Rate Review Mechanism The Company shall file with each regulatory authority having original jurisdiction over the Company's rates the schedules specified below for the Evaluation Period, with the filing to be made by the Annual 23 EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider RRM - Rate Review Mechanism APPLICABLE T0: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 2 of 5 February 1, 2008 Evaluation Date following the end of the Evaluation Period. The schedules, which will be based upon the Company's Audited Financial Data, as adjusted, and provided in the same format as Atmos' rate filing with municipalities on September 20, 2007, will include the following: a) Company's actual gross plant in service, accumulated depreciation, accumulated deferred income taxes, inventory, working capital, and other rate base components. The ratemaking treatments, principles, findings and adjustments included in the Final Order will apply. Regulatory adjustments due to prior regulatory rate base adjustment disallowances will be maintained where applicable. Cash working capital will be calculated using the lead/lag days approved in the Final Order. b) The Company's depreciation expense, operating and maintenance expense, income taxes, and taxes other than income taxes. Depreciation rates will be those approved in the Final Order, or the rate most recently approved. All calculation methodologies will be those approved in the Final Order, or in the most recent order addressing the methodology. In addition, the Company shall exclude from operating and maintenance expense the type of expenses related to empioyee expense accounts disallowed in the GUD No. 9670 Final Order. c) Return on Equity (ROE) shall be maintained at 9.6%. d) Cost of debt will reflect actual cost. Capital structure wil] be the actual Evaluation Period ending ratio of long-term debt and equity, with percentage equity not to exceed the percentage established in the Final Order in G.U.D. No. 9670 (48.1% equity). e) All applicable accounting and pro forma adjustments along with all supporting workpapers. f) Pro-forma adjustments to update and annualize costs and revenue billing determinants for the Rate Effective Period. g) Pro-forma or other adjustments required to properly account for atypical, unusual, or nonrecurring events. h) Shared Services allocation factors may be recalculated each yeaz based on the latest component factors, but the methodology used will be that approved in the Final Order. Calculation of Rate Adjustment a) The Company shall provide additional schedules indicating the following revenue deficiency/sufficiency calculations using the methodology accepted in the Fina! Order. These schedules shall identify the rate adjustments necessary for both a true-up of revenue for the Evaluation Period and the setting of prospective rates for the Rate Effective Period. The net result of these rate adjustments shall be reflected in the proposed new rates to be established for the Rate Effective Period. In calculating the required rate adjustments, such adjustments will be made pro- ratably to the customer charge and usage chazge based upon actual revenue generated, as adjusted under the Company's approved Weather Normalization Adjustment (WNA) Rider. Provided, 24 _ . , EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider RRM - Rate Review Mechanism APPLICABLE TO: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 3 of 5 February 1, 2008 however, that neither the Residential nor the Commercial customer charges may increase more than 20% per year. b) If Company's earnings during the Evaluation Period exceed 9.6% return on common equity, the Company shall calculate an adjustment to rates to refund the revenue required to achieve a return on equity of 9.6% for the Evaluation Period. If Company's earnings during the Evaluation Period are below 9.6% retum on common equity, the Company shall calculate an adjustment in rates to collect the additional revenue required to increase its return on equity for the Evaluation Period to 9.6%. The Company will calculate an adjustment for the Rate Effective Period to refund or collect this difference. c) The Company will adjust rates for the Rate Effective Period to include recovery of any known and measurable changes to operating and maintenance costs including, but not limited to, all payroll and compensation expense, all benefit expense, all pension expense, insurance costs, materials and supplies, bad debt costs, all medical expense, transportation and building and lease costs for the Rate Effective Period. Additionally, utility plant for the Rate Effective Period will be established by using the Evaluation Period ending balances, inctuding associated changes in depreciation and amortization expense and taxes. In calculating the Company's known and measurable changes for prospective R.RM adjustment purposes, the following limitations will apply, on a Per Connection Basis. 1. Operating and Maintenance expenses for the Rate Effective Period, cannot increase more than 5% per connection per year without specific identification and justification. T'he beginning Operation and Maintenance expense for the 2007 RRM filing (the initial filing) will be $161 million. 2. Net plant investment for the Rate Effective Period cannot increase more than 5% per connection per year without specific identification. However, in performing a cap test to verify compliance, Company shall exclude any changes in net plant investment associated with federal, state, or local mandates related to safety, compliance, or road moves. d) The Company also shall provide a schedule demonstrating the "proof of revenues" relied upon to calculate the proposed rate for the Rate Effective Period. The proposed rates shall conform as closely as is practicable to the revenue allocation principles approved in the Final Order. Attestation A sworn statement shall be filed by the Company's Chief Officer in Charge of Mid-Tex Operations affirming that the filed schedules are in compliance with the provisions of this mechanism and are true and correct to the best of his/her lrnowledge, information and belief. No testimony shall be filed. 25 . _ Y. EXHIBIT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider RRM - Rate Review Mechanism APPLICABLE TO: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 4 of 5 February 1, 2008 Evaluation Procedures The regulatory authority having original jurisdiction over the Company's rates shall have ninety (90) days to review the Company's filed schedules. The Company will be prepared to provide supplemental information as may be requested to ensure 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 ten (10) working days of the original request. The regulatory authority may propose any adjustments it determines to be required to bring the schedules into compliance with the above provisions. During and following the ninety (90) day review period and a thirty (30) day response period, the Company and the regulatory authority will work collaboratively and come to ageement on, the proposed adjustments to the Company's schedule and proposed rates. Once agreement has been reached by the Company and the regulatory authority, the regulatory authority shall authorize an increase or decrease to the Company's rates so as to achieve the revenue levels indicated for both the Evaluation Period and Rate Effective Period. If, at the end of the thiriy (30) day response period, the Company and the regulatory authority have not reached agreement on the proposed adjustments, the Company shall have the right to appeal the regulatory authority's action or inaction to the Railroad Commission of Texas. Upon the filing of any appeal, the Company shall have the right to implement the proposed RRM rate adjustment, subject to refund. If approved by the entity exercising original jurisdiction, the rates established pursuant to the Rate Review Mechanism for the first Rate Effective Period shall be effective on October 1, 2008. Thereafter, rates established pursuant to the Rate Review Mechanism for subsequent Rate Effective Periods, if approved as provided herein, shall be effective on July 15 of each year. Reconsideration and Appeal Orders issued pwsuant 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). Notice Notice of the annual Rate Review Mechanism filing shall be provided to all affected customers of the Atrnos Mid-Tex Division in accordance with the provisions of this section no later than forty-five (45) days after the Company makes its annual filing pursuant to this tariff: Company may provide notice either by mailing or otherwise delivering the notice with its billing statements. Notice by mail shall be presumed to be complete three days after the date of deposit of the paper upon which such notice is written, enclosed in a post-paid, properly addressed wrapper, in a post office or official depository under the caze of the United States Postal Service. The notice to customers shall include the following information: a) a description of the proposed revision of rates and schedules; 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; 26 TARIFF FOR GAS SERVICE EXHIBIT A ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider RRM - Ra.te Review Mechanism APPLICABLE TO: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 5 of 5 February 1, 2008 c) the service area or areas in which the proposed rate adjustment would apply; d) the date the proposed rate adjustment was fited with the regulatory authority; and e) the Company's address, telephone number and website where information concerning the proposed rate adjustment may be obtained. 27 EXHIBlT A TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-7EX DIVISION RIDER: Rider CEE - Conservation 8 Energy Efficiency APPLICABLE T0: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE:1 OF 1 February 7, 2008 RIDER CEE - Conservation & Enerqv Efficiencv Purpose Atmos Energy Mid-Tex is proposing to institute a complete Consenration & Energy Efficiency program which will offer assistance to qualified customer segments in reducing energy consumption and lowering energy utility bills. The proposal is one where Atmos Energy shareholders will fund a percentage of the allowable expenses incurred annuaily, with a customer rate component providing the remainder of the funding. Following is a high-level, concept summary of the proposal. Atmos Energy Mid-Tex Division proposes to work with the communities it serves to develop the details of a new tariff and programs addressing conservation and energy efficiency. Synopsis: Voucher system to provide free energy savings materials and supplies to qualifying customers of Atrnos Mid-Tex. Qualified Customers will receive up to two hundred dollars ($200.00) worth of caulking, weather-stripping, sheathing, sealing, water heater blankets, and like materials, other energy saving devices such as clock-thermostats, set-back devices ("covered items") from approved suppliers / retailers. Company will undertake efforts to enlist support trom community groups, including its own Employee Action Program, to assist customers with installation. If it is determined that professional installation capabilities are necessary, the parties will agree on labor assistance amounts. EligibilitY Low Income - Low-income rate-payers that qualify for heating bill assistance through LIHEAP agencies and all agencies that distribute Atmos "Share the Warmth" funds. Agencies that allocate assistance funds denote customer as Low Income, a status that lasts for one year. Senior Citizen - Primary account holder can request eligibility through ATM call center or web-site. Customer provides primary SSN which is verified through Social Security Administration. And account holder that is or turns 65 years old in that year becomes eligible. Fundina Initial program funding will be at two million dollars ($2,000,000). Atmos Energy shareholders will contribute one million dollars ($1,000,000.00) to this initiative annually with ratepayers providing one million dollars ($1,000,000.00) per year. It is proposed that the program operate on an October 1 through September 30 year, with benefits being capped at the two million dollar level for the initial program period. Administration: A third-party administrator will coordinate qualification of customers, voucher distribution, subsequent verification and reimbursement of eligible expenditures and general program administration. Program administration expenses will be funded from the annual approved budget. Program audits will be conducted and the results provided to any interested party within 120 days of the end of each program year to determine efFectiveness. 28 Q N a 0 7 ~ ti rn ~ U !0 (1) (L C d d ~ C av U) W H m m U ~ c to v N a `t v Q a W 2 H G Z N a N } o g " m m' V W ~ 2 > V o W C_Nfn W m ~ O Q C a ~ LLJ N O Z < '7 W (9 W Z V ~ Z ~ W W ~ c ~ ~ W W V & 2 W~.'FW ~Z~a W a W W OC ~ W ~ W ~ 0 m H C 0 m W O c o J Z qi~ 3° I o op~° I a° o 0p 0 lop 0p o a° N S M M ~ O~~ O O a ~ 88 O O (O O C~O ~ 000 ~ C I~ C O O O O f V O O N ~ h CO ~ M N ~ (O ONO O D N I~ m !h CO ~ ~ N ~ M m m LO ~ ' U, Lo O cq (NO ' ~ M ~ N ' O ~ oi 0 O -n v~ u~ v~ v~ vi v3 69 v~ v~ rn (D~N~ hf~ tfi M COtOM CO CO~ O(O~CI aococ+>n v- ~ co c~ ~ Ln~ o (O h(h t~ CO 41 1n e- N tD fl CO O V yj f~ - CpW M O(Of~ P(OQJN 00 ~O fh00~ CO C aornaom - - - inW - ~ch rn m aorncow ~rnou~ ocov - v_ ov_ V C~(V 0 1 ~~f~N 0 1MN~ t%. 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W tq LLI O ~ lp F- '~y o r_ CD N a U m 8 0 ~ E E v, d l0 N~ ~ tC C y > ~ > C a a~ ~ w li U U o c 2 z ° m o m ~ C7 C7 F~ . 0 U N m O N C C t ll d d m d ~ a Lu y ~ d E ~ ~ t O a GC ~ O F - 0 $ ~ U a ~Nt`7tttn<OI~GDCD Or-NCO RLl9(O f- 000f0 N('7'cf 30 WP J-4 Page 1 of 3 Line ATMOS ENERGY CORP., MID-TEX DIVISlON SUMMARY PROOF OF REVENUE AT PROPOSED RATES TEST YEAR ENDING JUNE 30, 2007 Description Total Reference (a) (b) Rate R 1 Rate Characteristics: 2 Customer Charge $10.69 3 4 Consumption Charge ($/Mcfl $1.2710 5 6 Rider GCR Part A $7.5520 7 Rider GCR Part B $0.5990 $ 9 Billina Units (1): 10 Bills 17,144,647 11 Total MCF 76,798,906 12 13 Present Revenue: 14 Customer Charge $ 183,276,276 15 Consumption Charge 97,611,410 16 Base Revenue $ 280,887,686 17 Rider GCR Part A 579,988,302 18 Rider GCR Part B 46,003,459 19 Subtotal $ 906,879,447 20 Revenue Related Taxes 52,686,332 21 22 Total Proposed Revenue- Rate R $ 959,565,779 23 24 Note 1: See Billing Determinants Study for details. ccs ccs Schedule H Schedule I WP_J-1.1 VVP_J-1.1 31 WP J-4 Page 2 of 3 ATMOS ENERGY CORP., MID-TEX DIVISION SUMRAARY PROOF OF REVENUE AT PROPOSED RATES TEST YEAR ENDING JUNE 30, 2007 Line Description Total (a) (b) Rate C 1 Rate Characteristics: 2 Customer Charge $20.28 3 4 Consumption Charge ($/Mcfl $0.7104 5 6 Rider GCR Part A $7.5520 7 Rider GCR Part B $0.5001 8 9 Billinq Units (1): 10 Bills 1,471,279 11 Total MCF 49,665,131 12 13 Present Revenue: 14 Customer Charge $ 29,837,538 15 Consumption Charge 35,282,109 16 Base Revenue $ 65,119,647 17 Rider GCR Part A 375,072,987 18 Rider GCR Part B 24,837,930 19 Subtotal $ 465,030,564 20 Revenue Related Taxes 27,016,551 21 22 Total Proposed Revenue- Rate C $ 492,047,115 23 24 Note 1: See Billing Determinants Study for details. Reference (c) ccs ccs Schedule H Schedule 1 WP_J-1.2 WP_J-1.2 32 WP J-4 Page 3 of 3 ATMOS ENERGY CORP., MID-TEX DIVISION SUMMARY PROOF OF REVENUE AT PROPOSED RATES TEST YEAR ENDING JUNE 30, 2007 Line Description Total Reference (a) (b) (c) Rate I &T 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Rate Characteristics: Customer Charge $344.75 ccs Block 1 ($/MMBTU) $0.2200 ccs Block 2 ($/MMBTU) $0.1600 cCS Block 3 ($/MMBTU) $0.0493 CCs Rider GCR Part A $7.5520 Schedule H Rider GCR Part B $0.2804 Schedule I Consumqtion Characteristics: Block 1(First 1,500 MMBTU) 0.21691 Block 2(Next 3,500 MMBTU ) 0.24651 Block 3(Over 5,000 MMBTU ) 0.53657 Billinq Units (1): BIllS 11,542 WP_J-1.3 Block 1 9,694,939 WP_J-1.3 Block 2 11,018,084 WP J-1.3 Block 3 23,982,442 WP_J-1.3 Total MMBTU 44,695,465 Sales Volumes 2,858,579 WP J-1.3 Present Revenue: Customer Charge Block 1 Block 2 Block 3 Base Revenue . Rider GCR Part A Rider GCR Part B Subtotal Revenue Related Taxes Total Proposed Revenue- Rate 18T $ 3,979,105 2,132,887 1,762,893 1,182,334 $ 9,057,219 21,082,128 12,534,050 $ 42,673,397 2,479,166 $ 45,152,563 Note 1: See Billing Determinants Study for details. 33 __.T.. TARIFF FOR GAS SERVICE ATTACHMENT B ATMOS ENERGY CORP., MID-TEX DIVISION RATE SCHEDULE: TABLE OF CONTENTS APPLICABLE TO: Entire System REVISION DATE: February 1, 2008 EFFECTIVE DATE: PAGE: 1 OF 1 February 1, 2008 1. UTILITY OPERATIONS II. CITIES AND COUNTIES SERVED III. DEFINITIONS IV. GAS SERVICE RATES & RIDERS Rate R - Residential Sales Rate C - Commercial Sales Rate I - Industrial Sales Rate T - Transportation Rider CT - Competitive Transport Rider GCR - Gas Cost Recovery Rider FF - Franchise Fee Adjustment Rider SUR - Surcharges Rate LEP - Line Extension Policy Rate M - Miscellaneous Charges Rider RA - Retention Adjustment Rider TAX - Tax Adjustment Rider WNA - Weather Normalization Adjustment Rider RRM - Rate Review Mechanism Rider CEE - Conservation and Energy Efficiency V. SERVICE RULES AND REGULATIONS TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., Min_TFx niviainm RATE SCHEDULE: Rate R- Residential Sales APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 1 February 1, 2008 RATE R - RESIDENTIAL SALES Application Applicable to Residential Customers for all natural gas provided at one Point of Delivery and measured through one meter. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, add'itional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Custorner's monthly bill wifl be calcutated by adding the following Customer and Mcf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 10.69 per month Commodity Charge - All Mcf $1.2710 per Mcf Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalization calculated in accordance with Rider WNA. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). 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. TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DNISInN RATE SCHEDULE: Rate C- Commercial Sales APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 1 Febwuary 1, 2008 RATE C - COMMERCIAL SALES 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 3,000 Mcf. 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 Mcf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 20.28 per month Commodity Charge - All Mcf $ 0.7104 per Mcf Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalization calculated in accordance with Rider WNA. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). Agreement An Agreement for Gas Service may be required. Notice Senrice 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. TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., nnin_TFx nnncinN RATE SCHEDULE: Rate I- Industrial Sales APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 2 February 9, 2008 RATE I - INDUSTRIAL SALES Application Applicabie to Industrial Customers with a maximum daily usage (MDU) of less than 3,500 MMBtu per day for all naturat gas provided at one Point of Delivery and measured through one meter. Service for Industrial Customers with an MDU equal to or greater than 3,500 MMBtu per day will be provided at Company's sole option and will require special contract arrangements between Company and Customer. 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 MMBtu charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Meter $ 344.75 per month First 0 MMBtu to 1,500 MMBtu $ 02200 per MMBtu Next 3,500 MMBtu $ 0.1600 per MMBtu All MMBtu over 5,000 MMBtu $ 0.0493 per MMBtu Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Rate Review Mechanism: Plus or Minus an amount for rates as calcutated in accorclance with Rider RRM. Franchise Fee Adjustment: Ptus an amount for franchise fees cafculated in accordance with Rider FF. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). Curtailment Overpull Fee Upon notification by Company of an event of curtailment or inteRUption of Customer's deliveries, Customer will, for each MMBtu delivered in excess of the stated level of curtailment or interruption, pay Company 200% of the midpoint price for the Katy point listed in Plafts Gas Daily published for the applicable Gas Day in the table enMled "Daily Price Survey." TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., nnin_rl=Y niviclnu RATE SCHEDULE: Rate I- Industrial Sales APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 2 OF 2 February 1, 2008 Replacement Index In the event the "midpoinY" or "common" price for the Katy point listed in P/atts Gas Daily in the table entitled "Daity Price Survey" is no longer published, Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authontative by the natural gas industry and most closely approximating the applicable index. Agreement An Agreement for Gas Service may be required. Notice Senrice 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 Senrice. Special Conditions In order to receive service under Rate I, Customer must have the type of ineter required by Company. Customer must pay Company a!I costs associated with the acquisition and installation of the meter. _ . . TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DNISION RATE SCHEDULE: Rate T- Transportation APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 2 February 1, 2008 RATE T - TRANSPORTATION Application Applicable, in the event that Company has entered into a Transportation Agreement, to a customer directly connected to the Atmos Energy Corp., Mid-Tex Division Distribution System (Customer) for the transportation of all natural gas supplied by Customer or Customer's agent at one Point of Delivery for use in Customer's facility. 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 Customers bill will be calculated by adding the following Customer and MMBtu charges to the amounts and quantities due under the riders listed below: Charge Amount Customer Charge per Meter $ 344.75 per month First 0 MMBtu to 1,500 MMBtu $ 0.2200 per MMBtu Next 3,500 MMBtu $ 0.1600 per MMBtu All MMBtu over 5,000 MMBtu $ 0.0493 per MMBtu Upstream Transportation Cost Recovery: Plus an amount for upstream transportation costs in accordance with Part (b) of Rider GCR. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Retention Adjustment: Plus a quantity of gas as calculated in accordance with Rider RA. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). Imbalance Fees All fees charged to Customer under this Rate Schedule will be charged based on the quantities determined under the applicable Transportation Agreement and quantities will not be aggregated for any Customer with muftiple Transportation Agreements for the purposes of such fees. Monthly Imbalance Fees Customer shall pay Company the greater of (i) $0.10 per MMBtu, or (ii) 150% of the difference per MMBtu between the highest and lowest "midpoinY" price for the Katy point listed in Platts Gas Daily in the table entitled "Daily Price Survey° during such month, for the MMBtu of Customer's monthly Cumulative TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RATE SCHEDULE: Rate T- Transportation APPLICABLE TO: Entire System REVISION: DATE: EFFECTNE DATE: PAGE: 2 OF 2 February 1, 2008 Imbalance, as defined in the applicable Transportation Agreement, at the end of each month that exceeds 10% of Customer's receipt quantities for the month. Curtailment Overpull 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 200% of the midpoint price for the Katy point listed in P/atts Gas Daily published for the applicable Gas Day in the table entitled "Daily Price Survey." Replacement Index In the event the "midpoint" or "common" price for the Katy point listed in Platts Gas Daily in the table entitled "Daily Price Survey" is no longer published, Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authoritative by the natural gas industry and most closely approximating the applicable index. Agreement A transportation agreement is 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 T, customer must have the type of ineter required by Company. Customer must pay Company all costs associated with the acquisition and installation of the meter. TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider GCR - Gas Cost Recovery APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 3 October 1, 2008 Rider GCR - Gas Cost Recoverv Applicable to Rate R, Rate C, and Rate I for all gas sales made by Company, and applicable to Rate R, Rate C, Rate I, and Rate T for recovery of Pipeline System costs. The total gas cost recovery amount due is determined by adding the gas cost calculated in Section (a) below and the pipeline cost calculated in Section (b) below. The amount due for gas cost (Section (a)) is determined by multiplying the Gas Cost Recovery Factor (GCRF) by the Customer's monthly volume. For Customers receiving service under Rate R and Rate C, monthly volume will be calculated on an Mcf basis. For Customers receiving service under Rate 1, monthly volume will be calculated on an MMBtu basis and the quantities will be acjusted as necessary to recover actual costs. The amount due for pipeline cost (Section (b)) is determined by multiplying the Pipeline Cost Factor (PCF) by the Customer's monthly volume. For Customers receiving service under Rate R and Rate C, monthly volume will be calculated on an Mcf basis. For Customers receiving service under Rate I and Rate T, monthly volume will be calculated on an MMBtu basis and the quantities will be adjusted as necessary to recover actual costs. (a) Gas Cost Method of Calculation The monthly gas cost adjustment is calculated by the application of a Gas Cost Recovery Factor (GCRF), as determined with the following formula: GCRF = Estimated Gas Cost Factor (EGCF) + Reconciliation Factor (RF) + Taxes (TXS) + Adjustments (ADJ) EGCF = Estimated cost of gas, including lost and unaccounted for gas attributed to residential, commercial, and industrial sales, and any reconciliation balance of unrecovered gas costs, divided by the estimated total residential, commercial, and industrial sales. RF = Calculated by dividing the difference between the Actual Gas Cost Incurred, inclusive of interest, over the preceding twelve-month period ended June 30 and the Actual Gas Cost Billed over that same twelve-month period by the estimated total residential, commercial, and industrial sales for the succeeding October through June billing months. Actual Gas Cost Incurred = The sum of the costs booked in Atmos Energy Corp., Mid-Tex Division account numbers 80o through 813 and 858 of the NARUC Uniform System of Accounts, including the net impact of injecting and withdrawing gas from storage. Also includes a credit or debit for any out-of-period adjustments or unusual or nonrecurring costs typically considered gas costs and a credit for amounts received as Imbalance Fees or Curtailment Overpull Fees. Actual Gas Cost Billed = EGCF multiplied by the monthly volumes billed to Residential, Commercial and Industrial Sales customers, less the total amount of gas cost determined to have been uncollecti'ble and written off which remain unpaid for each month of the reconciliation period. TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVI510N RIDER: Rider GCR - Gas Cost Recovery APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 2 OF 3 October 1, 2008 Any amount remaining in the reconciliation balance after the conclusion of the period of amortization will be maintained in the reconciliation balance and included in the collection of the next RF. Atmos Energy shall file annual reports with the Commission, providing by month the following amounts: Gas Cost Written Off. Margin Written Off, Tax and Other Written Off, Total Written Off, Gas Cost Collected and Margin Collected. TXS = Any statutorily imposed assessments or taxes applicable to the purchase of gas divided by the estimated total residential, commercial, and industrial sales. ADJ = Any surcharge or refund ordered by a regulatory authority, inclusive of interest, divided by the estimated total residential, commercial, and industrial sales. (b) Pipeline Cost Method of Calculation Each month, a Pipeline Cost Factor (PCF) is calculated separately for each Pipeline Cost Rate Class listed below. The formula for the PCF is: PCF = PP / S, where: PP =(P - A) x D, where: P= Estimated monthly cost of pipeline service calculated pursuant to Rate CGS D= Pipeline service allocation factor for the rate class as approved in the Company's most recent rate case, as follows: Pi eline Cost Rate Class Allocation Factor D Rate R - Residential Service .634783 Rate C - Commercial Service .302805 Rate I- Industrial Service and Rate T- Trans rtation Service .062412 A= Adjustment applied in the current month to correct for the difference between the actual and estimated pipeline cost revenue of the second preceding month, calculated by the formula: A = R - (C - A2), where: R= Actual revenue received from the application of the PP component in the second preceding month. C= Actual pipeline costs for the second preceding month. A2 = The adjustment (A) applied to the PP component in the second preceding month. S= Es6mated Mcf or MMBtu for the rate class for the current billing month. The PCF is calculated to the nearest 0.0001 cent. TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., nein_rFY nnncinu RIDER: . Rider GCR - Gas Cost Recovery APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 3 OF 3 October 1, 2008 The Pipeline Cost to be billed is determined by multiplying the Mcf or MMBtu used by the appropriate PCF. The Pipeline Cost is determined to the nearest whole cent. TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider WNA - Weather Normalization Adjustment APPLICABLE T0: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 3 November 1, 2008 RIDER WNA - Weather Normalization Adiustment Provisions for Adjustment The base rate per Mcf (1,000,000 Btu) 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. Computation of Weather Norrnalization Adjustment The Weather Normalization Adjustment Factor shall be cornputed to the nearest one-hundredth cent per Mcf by the following formula: WNAFi = Ri (HSFI x (NDD-ADD) ) Where (BLi + (HSFi x ADD) ) i = any particular Rate Schedule or billing classification within any such particulaz 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 Mcf Ri = base rate of temperature sensitive sales for the ith schedule or classification approved by the entity exercising original jurisdiction. HSFI = heat sensitive factor for the ith schedule or classification calculated as the slope ofthe lineaz regression of average sales per bill (Mcfl and actual heating degree days by month for the test year by schedule or classification and weather station as part of the RRM filing. 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 calculated as the y- intercept of the linear regression of average sales per bill (Mc fl and actual heating degree days by month for the test year by schedule or classification TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider WNA - Weather Normalization Adjustment APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: Z OF 3 November 1, 2008 and weather station as part of the RRM filing. The Weather Normalization Adjustment for the jth customer in ith rate schedule is computed as: WNA; = WNAF; x q;j Where q;j is the relevant sales quantity for the jth customer in ith rate schedule. Filinjzs with Entities Exercisin Original Jurisdiction As part of its annua] RRM filing the Company will file (a) a copy of each computation of the Weather Normalization Adjustment Factor, (b) a schedule showing the effective date of each such Weather Normalization Adjustment, (c) a schedule showing the factors of values used in calculating such Weather Normalization Adjustment and (d) a random sample and audit of thirly (30) actual customer bills, with customer information deleted, for each rate schedule or classification to which the WNA was applied in the preceding 12 month period. To the extent that source data is needed to audit the WNA application, such data wilt be provided by the Company as part of the annual RRM filing. If the RRM is discontinued, as provided in the Rider RRM tariff, the information required herein to be filed with the entities exercising original jurisdiction shall be filed on March 1 of each year. Base Use/Heat Sensitivitv (HSF) Factors Residential Commercial Base use HSF Base use HSF Weather Station Mcf Mcf/HDD Mcf Mcf/NnD Abilene 1.14 .0131 8.11 .0631 Austin 1.31 .0136 18.05 .0669 Dallas 1.57 .0185 18.08 .0925 Waco 1.20 .0138 10.97 .0606 Wichita Falls 1.27 .0147 11.58 .0581 TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., M!D-TEX DIVISION RIDER: Rider WNA - Weather Normalization Adjustment APPLICABLE T0: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 3 OF 3 November 1, 2008 Sample WNAF1 Calculation: (.0131 x (30-17) ) .1533 per Mcf = 1.2267 x (1.14 + (.0131 x 17) ) Where i = Residential Single Block Rate Schedule Ri = 1.2267 per MCF (Rate R- Final Order GUD No. 9670) HSFi _ .0131 (Residential - Abilene Area) NDD = 30 HDD (Simple ten-year average of Actual HDD for Abilene Area - 9/15/06 - 10/14/06) ADD = 17 HDD (Actual HDD for Abilene Area - 9/15/06 - 10/14/06) Bli = 1.14 Mcf (Residential - Abilene Area) TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DNISION RIDER: Rider RRM - Rate Review Mechanism APPLICABLE T0: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 1 of 5 February 1, 2008 RIDER RRM - RATE REVIEW MECHANISM Purpose: This mechanism is designed to provide annual eamings transpazency. If, through the implementation of the provisions of this mechanism, it is determined that rates should be decreased or increased, then rates will be adjusted accordingly in the manner set forth herein. The rate adjustments implemented under this mechanism will reflect annual changes in the Company's cost of service and rate base. T'his adjustment will be authorized for an Initia! lmplementation Period. With the conclusion of the final rate adjustment, if any, for the Initial Implementation Period, each entity having original jurisdiction may revoke, amend, or approve Subsequent Implementation Period(s) for, the mechanism. Definitions a) The Annual Evaluation Date shall be the date the Company will make its annual filing under this mechanism. The Annual Evaluation Date shall be no later than March l, of each year. This filing shall be effective in electronic form where practicable. The initiat filing shall be made March 31, 2008. b) Audited Financial Data shall mean the Company's books and records related to the Company's Mid- Tex operating area and shared services operations. Audited Financial Data shaU not require the schedules and information provided under this tariff to undergo a separate financial audit by an outside auditing firm similaz to the Company's annual financial audit. c) The Evaluation Period is defined as the twelve month period ending December 31, of each calendar year. T'he initiat Evaluation Period shall be calendar year 2007. d) The Rate Effective Period is defined as the earlier of the twelve month period for which rates determined under this mechanism will be in effect or subsequent rates are implemented. . e) Per Connection Basis is defined as the average number of connections during the Evaluation Period. f) Initial Implementation Period is defined as the three (3) year period commencing with the Company's filing under this mechanism for the calendar year 2007, effective October 1, 2008, and shall conclude with the implementation of rate adjustments, if any, for the third Rate Effective Period. g) Subsequent Implementation Period is defined as any three (3) year period after the conclusion of the Initial Implementation Period. h) Final Order is defined as the most recent order establishing the Company's latest effective rates for the area in which the mechanism is implemented, and shall include municipal rate ordinances and resolutions. Rate Review Mechanism The Company shall file with each regulatory authority having original jurisdiction over the Company's rates the schedules specified below for the Evaluation Period, with the filing to be made by the Annual TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider RRM - Rate Review Mechanism APPLICABLE TO: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 2 of 5 February 1, 2008 Evaluation Date following the end of the Evaluation Period. The schedules, which wili be based upon the Company's Audited Financial Data, as adjusted, and provided in the same format as Atmos' rate filing with municipaiities on September 20, 2007, will include the following: a) Company's actual gross plant in service, accumulated depreciation, accumulated deferred income taxes, inventory, working capital, and other rate base components. The ratemaking treatments, principles, findings and adjustments included in the Final Order will apply. Regulatory adjustments due to prior regulatory rate base adjustment disallowances will be maintained where applicable. Cash working capital will be calculated using the lead/lag days approved in the Fina] Order. b) The Company's depreciation expense, operating and maintenance expense, income taxes, and taxes other than income taxes. Depreciation rates will be those approved in the Final Order, or the rate most recently approved. All calculation methodologies will be those approved in the Final Order, or in the most recent order addressing the methodology. In addition, the Company shall exclude from operating and maintenance expense the type of expenses related to employee expense accounts disallowed in the GUD No. 9670 Final Order. c) Return on Equity (ROE) shall be maintained at 9.6%. d) Cost of debt will reflect actual cost. Capital structure will be the actual Evaluation Period ending ratio of long-term debt and equity, with percentage equity not to exceed the percentage established in the Final Order in G.U.D. No. 9670 (48.1% equity). e) All applicable accounting and pro forma adjusiments along with all supporting workpapers. f) Pro-forma adjustments to update and annualize costs and revenue billing determinants for the Rate Effective Period. g) Pro-forma or other adjustments required to properly account for atypical, unusual, or nonrecurring events. h) Shared Services allocation factors may be recalculated each year based on the latest component factors, but the methodology used will be that approved in the Final Order. Calculation of Rate Adiustment a) The Company , shall provide additional schedules indicating the following revenue deficiency/sufficiency calculations using the methodology accepted in the Final Order. These schedules shall identify the rate adjustments necessary for both a true=up of revenue for the Evaluation Period and the setting of prospective rates for the Rate Effective Period. The net result of these rate adjustments shall be reflected in the proposed new rates to be established for the Rate Effective Period. In calculating the required rate adjustments, such adjustments will be made pro- ratably to the customer charge and usage charge based upon actual revenue generated, as adjusted under the Company's approved Weather Normalization Adjustment (WNA) Rider. Provided, TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider R.RM - Rate Review Mechanism APPLICABLE TO: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 3 of 5 February 1, 2008 however, that neither the Residential nor the Commercial customer charges may increase more than 20% per year. b) If Company's earnings during the Evaluation Period exceed 9.6% return on common equity, the Company shall calculate an adjustment to rates to refund the revenue required to achieve a return on equity of 9.6% for the Evaluation Period. If Company's earnings during the Evaluation Period are below 9.6% return on common equity, the Company shall calculate an adjustment in rates to collect the additional revenue required to increase its return on equity for the Evaluation Period to 9.6%. The Company will calculate an adjustment for the Rate Effective Period to refund or collect this difference. c) The Company will adjust rates for the Rate Effective Period to include recovery of any known and measurable changes to operating and maintenance costs including, but not limited to, all payroll and compensation expense, all benefit expense, all pension expense, insurance costs, materials and supplies, bad debt costs, all medical expense, transportation and building and lease costs for the Rate Effective Period. Additionally, utility plant for the Rate Effective Period will be established by using the Evaluation Period ending balances, including associated changes in depreciation and amortization expense and taxes. In calculating the Company's known and measurable changes for prospective RRM adjustment purposes, the following limitations will apply, on a Per Connection Basis. 1. Operating and Maintenance expenses for the Rate Effective Period, cannot increase more than 5% per connection per year without specific identification and justification. The beginning Operation and Maintenance expense for the 2007 RRM filing (the initial filing) wiil be $161 million. 2. Net plant investment for the Rate Effective Period cannot increase more than 5% per connection per yeaz without specific identification. However, in performing a cap test to verify compliance, Company shall exclude any changes in net plant investment associated with federal, state, or local mandates related to safety, compliance, or road moves. d) The Company also shall provide a schedule demonstrating the "proof of revenues" relied upon to calculate the proposed rate for the Rate Effective Period. The proposed rates shall conform as closely as is practicable to the revenue allocation principles approved in the Fina! Order. Attestation A sworn statement shall be filed by the Company's Chief Officer in Chazge of Mid-Tex Operations affirming that the filed schedules are in compliance with the provisions of this mechanism and aze true and correct to the best of his/her knowledge, information and belief. No testimony shall be filed. TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider RRM - Rate Review Mechanism APPLICABLE TO: Entire Mid-Tex Division REVISION DATE: EFFECTNE DATE: PAGE: 4 of 5 February 1, 2008 Evaluation Procedures The regulatory authority having original jurisdiction over the Company's rates shall have ninety (90) days to review the Company's filed schedules. The Company will be prepared to provide supplemental information as may be requested to ensure 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 ten (10) working days of the original request. The regulatory authority may propose any adjustments it determines to be required to bring the schedules into compliance with the above provisions. During and following the ninety (90) day review period and a thirty (30) day response period, the Company and the regulatory authority will work collaboratively and come to agreement on, the proposed adjustments to the Company's schedule and proposed rates. Once agreement has been reached by the Company and the regulatory authority, the regulatory suthority shall authorize an increase or decrease to the Company's rates so as to achieve the revenue levels indicated for both the Evaluation Period and Rate Effective Period. lf, at the end of the thirty (30) day response period, the Company and the regulatory suthority have not reached agreement on the proposed adjustments, the Company shall have the right to appeal the regulatory authority's action or inaction to the Railroad Commission of Texas. Upon the filing of any appeal, the Company shall have the right to implement the proposed RRM rate adjustment, subject to refund. If approved by the entity exercising original jurisdiction, the rates established pursuant to the Rate Review Mechanism for the first Rate Effective Period shall be effective on October l, 2008. Thereafter, rates established pursuant to the Rate Review Mechanism for subsequent Rate Effective Periods, if approved as provided herein, shall be effective on July 15 of each year. Reconsideration and Appeal 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., ofthe Texas Utilities Code (Vernon 2007). Notice Notice of the annual Rate Review Mechanism filing shall be provided to all affected customers of the Atrnos Mid-Tex Division in accordance with the provisions of this section no later than forty-five (45) days after the Company makes its annual filing pursuant to this tariff. Company may provide notice either by mailing or otherwise delivering the notice with its billing statements. Notice by mail shall be presumed to be complete three days after the date of deposit of the paper upon which such notice is written, enclosed in a post-paid, properly addressed wrapper, in a post office or official depository under the care of the United States Postal Service. The notice to customers shall include the following information: a) a description of the proposed revision of rates and schedules; 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; TARIFF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider RRM - Rate Review Mechanism APPLICABLE TO: Entire Mid-Tex Division REVISION DATE: EFFECTIVE DATE: PAGE: 5 of 5 February 1, 2008 c) the service area or areas in which the proposed rate adjustment would apply; d) the date the proposed rate adjustment was filed with the regulatory authority; and e) the Company's address, telephone number and website where information concerning the proposed rate adjustment may be obtained. TAR(FF FOR GAS SERVICE ATMOS ENERGY CORP., MID-TEX DIVISION RIDER: Rider CEE - Conservation & Energy EfFiciency APPLICABLE TO: Entire System REVISION: DATE: EFFECTIVE DATE: PAGE: 1 OF 1 February 1, 2008 RIDER CEE - Conservation & Enerqv Efficiencv Purqose Atmos Energy Mid-Tex is proposing to institute a complete Conservation & Energy Efficiency program which will offer assistance to qualified customer segments in reducing energy consumption and lowering energy utility bills. The proposal is one where Atmos Energy shareholders will fund a percentage of the allowable expenses incurred annually, with a customer rate component providing the remainder of the funding. Following is a high-level, concept summary of the proposal. Atmos Energy Mid-Tex Division proposes to work with the communities it serves to develop the details of a new tariff and programs addressing conservation and energy efficiency. Synopsis: Voucher system to provide free energy savings materials and supplies to qualifying customers of Atmos Mid-Tex. Qualified Customers will receive up to two hundred dollars ($200.00) worth of caulking, weather-stripping, sheathing, sealing, water heater blankets, and like materials, other energy saving devices such as clock-thermostats, set-back devices ("covered items") from approved suppliers / retailers. Company will undertake efforts to enlist support from community groups, including its own Employee Action Program, to assist customers with installation. If it is determined that professional installation capabilities are necessary, the parties will agree on labor assistance amounts. EIigibility Low Income - Low-income rate-payers that qualify for heating bill assistance through LIHEAP agencies and all agencies that distribute Atmos "Share the Warmth" funds. Agencies that allocate assistance funds denote customer as Low Income, a status that lasts for one year. Senior Citizen - Primary account holder can request eligibility through ATM call center or web-site. Customer provides primary SSN which is verified through Social Security Administration. And account holder that is or turns 65 years old in that year becomes eligible. Fundina Initial program funding will be at two million dollars ($2,000,000). Atmos Energy shareholders will contribute one million dollars ($1,000,000.00) to this initiative annually with ratepayers providing one million dollars ($1,000,000.00) per year. It is proposed that the program operate on an October 1 through September 30 year, with benefits being capped at the two million dollar level for the initial program period. Administration: A third-party administrator will coordinate qualification of customers, voucher distribution, subsequent verification and reimbursement of eligible expenditures and general program administration. Program administration expenses will be funded from the annual approved budget. Program audits will be conducted and the results provided to any interested party within 120 days of the end of each program year to determine effectiveness. MODEL STAFF REPORT The City, along with 150 other cities served by Atmos Energy Mid-Tex Division ("Atmos" or "Company"), is a member of the Atmos Cities Steering Committee ("ACSC"). Since October, ACSC members have worked diligently with Atmos representatives to explore options to address Atmos' latest request to increase rates by $52 million and to resolve other outstanding issues. The ordinance and tariffs (Attachment B to the Ordinance) reflect the agreement reached between ACSC and Atmos Mid-Tex to reduce Atmos' requested increase by more than 80 percent and ensure that the Company is able to provide safe and reliable natural gas service. The Settlement Agreement (Attachment A to the Ordinance) also provides rate certainty for customers by resolving outstanding appeals, creates a new process for expedited rate review by the cities, eliminates piecemeal ratemaking, reimburses ACSC for rate case expenses associated with the GRIP surcharge cases, and avoids the necessity of costly litigation. The ACSC Executive Committee recommends that ACSC members approve the Settlement Agreement. Purpose of the Ordinance: The purpose of the Ordinance is to endorse the Settlement Agreement between ACSC and Atmos regarding the Company's Statement of Intent to increase rates and to approve tariffs that implement the terms of the Settlement Agreement. Approval of the Ordinance will result in a$10 million increase in Atmos' revenues. This is an 80 percent reduction of the $52 million increase requested by Atmos in its Statement of Intent. In addition, the tariffs approved by the Ordinance will replace the current piecemeal ratemaking GRIP surcharge system with an expedited rate review process that ensures that cities can review all components of future Company rate change requests. The Settlement Agreement also resolves all outstanding issues between ACSC and Atmos, including six appeals currently pending in Texas courts. Procedural Historv and Backsround on Atmos Rate Increases Since 2004: On September 20, 2007, Atmos filed with the City the Company's Statement of Intent to increase natural gas rates system-wide by approximately $52 million. The City suspended the October 25t' Effective Date to work with other ACSC members to analyze the schedules and evidence offered by Atmos to support its request to increase rates. In order to facilitate approval of this Ordinance and the attached tariffs, Atmos Mid-Tex has agreed to extend the deadline for final city action until March l, 2008. Atmos' rate request represents the seventh increase in natural gas rates for customers in the Atmos Mid-Tex service area since 2004. Four rate increases are the result of Gas Reliability Infrastructure Program (GRIP) surcharges enacted pursuant to the Texas Utilities Code § 104.301. A primary complaint of cities around the state regarding GRIP filings is that it is piecemeal ratemaking and only looks at changes in the utility's invested capital, rather than a more comprehensive review of all components affecting rates charged. Cities thus far have been unsuccessful in defeating GRIP at the Legislature and in court. Atmos Rate Ordinance Staff Report 1 In addition to the four GRIP surcharges, base rates charged to customers served by Atmos Mid-Tex have increased as the result of two system-wide cost of service rate filings since 2004. The Company's current request to increase base rates would be the third system-wide cost of service increase for customers in Atmos Mid-Tex's service area since 2004. In the most recent cost of service rate request, GUD No. 9670, the Railroad Commission of Texas ("RRC" or "Commission") issued an order in Mazch, 2007, approving new system-wide rates for customers of Atmos Mid-Tex. Residential customers were impacted disproportionally by the Commission's final order, with residential rates increasing by $10 million annually, despite an overall system-wide rate increase of $5 million. System-wide rates charged to residential customers in the Atmos Mid-Tex region were also increased by several million dollars in 2004 in GUD No. 9400. In GUD Nos. 9400 and 9670, the hearings examiners that heard the testimony and evaluated the evidence recommended that rates be reduced for customers. However, in both cases, the Railroad Commission reversed key decisions of its own hearings examiners, ultimately issuing final orders that approved rate increases instead of the recommended rate reductions. Reasons Justifving Settlement: During the time that the City has retained original jurisdiction in this case, consultants working on behalf of ACSC members have investigated the support for the Company's requested rate increase. While the evidence does not support the $52 million increase requested by the Company, ACSC consultants agree that the Company can justify an increase in revenues of at least $8 million and that there is a reasonably high probability that the RRC would award an increase of at least $10 million. A contested case proceeding before the RRC on the Company's current application will take several months and cost ratepayers millions of dollars in rate case expenses and would not likely produce a request more favorable than that to be produced by the settlement. The ACSC Executive Committee recommends that ACSC members take action to approve the Settlement Agreement. This Settlement Agreement achieves several desirable outcomes, including: • Reverses rate design decisions that unfairly impact residential ratepayers • Does away with piecemeal ratemaking problems inherent to the GRIP surcharge process • Eliminates exposure to potential court reversal of the multi-million dollar Poly-1 Pipe disallowance (Atmos' issue on appeal in Docket No. 9400) • Avoids uncertainty and potential negative consequences of Railroad Commission rate review (in the two most recent rate cases affecting Atmos Mid-Tex customers, the Commission has reversed rate reductions recommended by its own hearings examiners in favor of rate increases) • Implements an expedited rate review process that includes the cities and allows review of all aspects of Atmos' cost of service Atmos Rate Ordinance Staff Report 2 • Requires Atmos to reimburse ACSC for more than $500,000 paid to litigate GRIP surcharge cases • Protects ACSC members and their citizens from the remote possibility that a litigated outcome or settlement with other parties produces a result more favorable than the ordinance passed by ACSC members by including a Most Favored Nations provision in the Settlement Agreement. Exalanation of "Be It Ordained" Paraeraphs: 1. This paragraph approves all findings in the ordinance. 2. This section adopts the Settlement Agreement in all respects and finds it to be just, reasonable and in the public interest. 3. This section adopts the attached Tariffs in all respects and finds the rates set pursuant to the attached Tariffs to be just, reasonable and in the public interest. Note that only new tariffs or existing tariffs that are being revised are attached to the Ordinance. Existing tariffs that are not being changed in any way are not attached to the Ordinance. 4. This section repeals any resolution or ordinance that is inconsistent with this Ordinance. 5. This section finds that the meeting was conducted in compliance with the Texas Open Meetings Act, Texas Government Code, Chapter 551. 6. This section is a savings clause, which provides that if any section(s) is later found to be unconstitutional or invalid, that finding shall not affect, impair or invalidate the remaining provisions of this Ordinance. This section further directs that the remaining provisions of the Ordinance are to be interpreted as if the offending section or clause never existed. 7. This section is a"Most Favored Nations" clause, which protects the City by mandating that if a Final Order or subsequent settlement agreement approved in any proceeding addressing the issues raised in Atmos' Statement of Intent filing result in rates, revenues, terms and conditions, or benefits that would be more beneficial to the ACSC Cities than the terms of this Settlement Agreement, the City may, at its option, implement and benefit from such more favorable rates, revenues, terms and conditions, or benefits shall additionally accrue to the ACSC Cities. However, the section makes it clear that application of the Most Favored Nations provision does not affect the approval of the Rider RRM, Rider CEE, Rider GCR and the Rider WNA, which shall continue according to their terms. 8. This section provides for an effective date upon passage. Atmos Rate Ordinance Staff Report 3 9. This paragraph directs that a copy of the signed resolution be sent to a representative of the Company and legal counsel for ACSC. Atmos Rate Ordinance Staff Report 4