08-A Atmos Deny Request
DRAFT
F:A TTORNEY\ORDWORK\CURRENT\ A TMOS - Model Ordinance Denying GRIP
October 17,2005
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PARIS,
PARIS, TEXAS, DENYING THE REQUEST OF ATMOS ENERGY
CORP., MID- TEX DIVISION, FOR AN ANNUAL GAS RELIABILITY
INFRASTRUCTURE PROGRAM (GRIP) RATE INCREASE IN THE
CITY OF PARIS, AS A PART OF THE COMPANY'S STATEWIDE GAS
UTILITY DISTRIBUTION SYSTEM; APPROVING COOPERATION
WITH OTHER CITIES WITHIN THE ATMOS ENERGY CORP., MID-
TEX DIVISION DISTRIBUTION SYSTEM AS PART OF THE A TMOS
CITIES STEERING COMMITTEE (ACSC); AUTHORIZING ACSC TO
HIRE LEGAL AND CONSULTING SERVICES AND TO NEGOTIATE
WITH THE CO MP ANY AND DIRECT ANY NECESSARY LITI G A TI ON;
AUTHORIZING INTERVENTION AS PART OF ACSC IN ANY APPEAL
OF THE CITY'S ACTION TO THE RAILROAD COMMISSION;
PROVIDING A REQUIREMENT FOR A PROMPT REIMBURSEMENT
OF COSTS INCURRED BY THE CITY; FINDING THAT THE MEETING
AT WHICH THIS ORDINANCE IS PASSED IS OPEN TO THE PUBLIC
AS REQUIRED BY LAW; PROVIDING FOR NOTICE OF THIS
ORDINANCE TO ATMOS ENERGY CORP., MID-TEX DIVISION;
MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE
SUBJECT; AND DECLARING AN EFFECTIVE DATE.
WHEREAS, on or about September 17, 2005, Atmos Energy Corp., Mid-Tex Division,
(the "Company") filed with the City of Paris ("City"), a request for an annual gas reliability
infrastructure program (GRIP) rate increase for customers on the Company's statewide gas
utility system to be effective November 19,2005; and
WHEREAS, the City has exclusive original jurisdiction to evaluate the Company's
request as it pertains to the distribution facilities located within the City, pursuant to Texas
Utilities Code §§ 102.001(b) and 103.001; and
WHEREAS, it is reasonable for the City of Paris to cooperate with other cities in a
coalition of cities in opposition to the Company's filing at the Railroad Commission
("Commission"), said coalition being known as Atmos Cities Steering Committee ("ACSC"), in
any appeal of the cities' actions to the Commission; and
WHEREAS, the Gas Utility Regulatory Act grants local regulatory authorities the right
to intervene in rate proceedings filed at the Railroad Commission; and
WHEREAS, the Texas Utilities Code § 103.022 provides that costs incurred by the City
in ratemaking activities are to be reimbursed by the regulated utility; and
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WHEREAS, counsel for ACSC, upon review of the Company's filing and upon
consultation with various consultants, recommends finding that the Company's proposal is
unjustified and unreasonable; and
WHEREAS, the Company has publicly stated that it will receive substantial profit in
2005 and that its expenses are substantially below those on which the GUD No. 9400 rates it is
charging were based; and
WHEREAS, the Company's GRIP request fails to account for growth in numbers of
customers, thereby undercounting the revenues it will receive from its proposed GRIP rate
increase; and
WHEREAS, the Company's GRIP request fails to recognize that GUD No. 9400 rates
included profit based on TXU Corporation's capital structure rather than Atmos Energy Corp.'s
current capital structure, which justifies a lower rate of return; NOW, THEREFORE,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS,
TEXAS:
Section 1. That the findings set out in the preamble to this ordinance are hereby in all
things approved.
Section 2. That the Company's GRIP rate increase request is found to be unreasonable
and is therefore denied in all respects.
Section 3. That the City is authorized to cooperate with other Cities within the
Company's Distribution System that have formed ACSC to hire and direct legal counsel and
consultants, negotiate with the Company, make recommendations to the City regarding
reasonable rates and to direct any necessary litigation associated with an appeal of a rate
ordinance and the rate case filed at the Commission.
Section 4. That the costs incurred by the City in reviewing the Company's GRIP request
shall be promptly reimbursed by the Company.
Section 5. That the City is authorized to intervene in any appeal of the City's action filed
at the Commission, and to participate in any such appeal as a member of ACSC.
Section 6. That it is hereby officially found and determined that the meeting at which
this Ordinance is passed is open to the public as required by law and that public notice of the
time, place and purpose of said meeting was given as required.
Section 7. That a copy of this ordinance, constituting final action on the Company's
application, be forwarded to the appropriate designated representative of the Company within 10
days as follows: Richard T. Reis, Atmos Energy Corporation, 5420 LBJ Freeway, Suite 1800,
Dallas, Texas 75240, and to Geoffrey Gay, legal counsel to the coalition of cities, at Lloyd
Gosselink, P.O. Box 1725, Austin, Texas 78767-1725.
Section 8. That this Ordinance shall become effective immediately from and after its
passage, as the law and charter in such cases provide.
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DULY PASSED AND APPROVED by the City Council of the City of Paris, Texas, on
this the 24th day of October, 2005.
ATTEST:
Curtis Fendley, Mayor
Janice Ellis, City Clerk
APPROVED AS TO FORM:
Larry W. Schenk, City Attorney
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MODEL STAFF REPORT
ON A TMOS MID- TEX GRIP DENIAL ORDINANCE
Purpose of the Ordinance:
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The law requires that a Gas Reliability Infrastructure Program (GRIP) surcharge request
cannot become effective until sixty (60) days following a filing. The Company can set the
"effective date" for any date after the 60th day. The effective date may be suspended by a city
for 45 days. The ordinance denies the surcharge request on the grounds that it does not comply
with the law and is not reasonable.
What is GRIP:
GRIP is piecemeal ratemaking and would be illegal under traditional ratemaking in the
public interest. Atmos persuaded the legislature in 2003 to make an exception to the prohibition
against piecemeal ratemaking to encourage increased investment in distribution pipe by allowing
prompt recovery despite the possibility that increased revenues and declining costs would more
than offset increased investment. The "compromise" that Atmos made in 2003 to get the statute
changed was to permit cities an unlimited time for suspension and consideration. Atmos
betrayed its "deal" and successfully persuaded the Legislature (or at least Representative
"Buddy" West and Senator Kenneth Armbrister) to change the statute to allow only 45 days for
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suspenSIon.
NOTE: IF YOU HAVE ALREADY ADOPTED A SUSPENSION RESOLUTION, THIS
DENIAL ORDINANCE NEEDS TO BE PASSED NO LATER THAN JANUARY 3, 2006.
NOTE: IF YOU HAVE NOT ADOPTED A SUSPENSION RESOLUTION, IT IS
CRITICAL THAT YOU PASS THE DENIAL ORDINANCE BEFORE NOVEMBER 19,
2005.
Observations on the Filine:
First, once the GRIP surcharge is in place, it is updated annually until the next general
rate case; however, that next case can be delayed by the Company for more than five years.
Second, while predicated as a surcharge to promptly recover investment in new and replacement
infrastructure designed to improve system safety and reliability, a substantial portion of this
GRIP request is based upon new office furniture, computers and other cost efficiency measures
more likely to benefit shareholders than ratepayers.
Ex lanation of "Be It Resolved" Para ra hs:
1. This paragraph simply sets out the finding that the Company's request is
unreasonable.
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2. This paragraph authorizes participation in a Steering Coffimittee and coordinated
control over legal counsel and consultants.
3. This paragraph notifies the Company that the City expects reimbursement of its
__~xpenses associated with its review of the filing.
4. This paragraph authorizes the City to intervene in the Company's appeal of the
ordinance to the Railroad Commission.
5.
This paragraph provides for an immediate effective date.
6.
This paragraph cites conformance with the open meetings act..
. 7. This paragraph directs that a copy of the signed ordinance be sent to a
representative of the Company and a representative of the coalition of cities.
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