Loading...
09-B Atmos - Show Cause Res DRAFT RESOLUTION NO. F:A TIORNEY\RESWORK\CURREN1ì A NOS Shaw Cause Resolution October 17,2005 A RESOLUTION BY THE CITY COUNCIL OF THE CITY OF P AIDS, PARIS, TEXAS ORDERING ATMOS ENERGY, MID-TEX DIVISION TO SHOW CAUSE REGARDING THE REASONABLENESS OF ITS EXISTING NATURAL GAS DISTRIBUTION RATES WITHIN THE CITY; REQUIRING ATMOS ENERGY, MID-TEX DIVISION TO SUBMIT A RATE PACKAGE BASED ON A RATE YEAR ENDING JUNE 30, 2005; DIRECTING THAT SUCH FILING SHALL BE MADE BY DECEMBER 31, 2005; REQUIRING REIMBURSEMENT OF REASONABLE LEGAL AND CONSULTANT EXPENSES; REQUIRING DELIVERY OF THIS RESOLUTION TO THE COMPANY AND LEGAL COUNSEL; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, the City is a regulatory authority under the Gas Utility Regulatory Act ("GURA") and has original jurisdiction over the gas utility rates of Atmos Mid- Tex; and WHEREAS, the City has the authority under §§ 103.001 and 104.151, GURA, to initiate a proceeding to determine whether the existing rates of a gas utility are unreasonable or in any way in violation of any provision of law; and WHEREAS, upon making a finding of unreasonableness, the City may determine the just and reasonable rates to be charged by Atmos Mid-Tex; and WHEREAS, Atmos Energy Corporation, the parent company of Atmos Mid- Tex has recently experienced system-wide cost reductions due to the doubling of its nationwide customer base with the acquisition of the assets of TXU Gas, and has reported to its investors that it has experienced a significant increase in profits related to its Texas divisions; and WHEREAS, Atmos Mid- Tex is charging rates approved based on the higher expenses and equity-to-debt ratio of TXU Gas, rather than rates that would be justified based on Atmos' lower expenses and equity-to-debt ratio; and WHEREAS, ratepayers of Atmos Mid- Tex, including the City and its residents, will suffer further unreasonable adverse impact from the GRIP rate increases approved by the Texas Railroad Commission and the second GRIP filing recently made by Atmos Mid-Tex; and WHEREAS, the Commission's failure to consider testimony and argument offered by Cities during its consideration of the Company's piecemeal GRIP rate applications leaves Cities no functional choice but to exercise its statutory right to exercise original jurisdiction over Atmos' base rates and compel a comprehensive rate review; and T I WHEREAS, the City has reason to believe that Atmos Mid-Tex is over-earning and that its rates are excessive; and WHEREAS, Cities and their residents are about to experience unprecedented increases in the cost of natural gas during the heating season and protection of the public interest requires a comprehensive review of Atmos' cost of service to determine whether rates and services are just and reasonable; and WHEREAS, Atmos Mid-Tex should be required to justify its rates on a system-wide basis; and WHEREAS, the coalition of cities formed to review Atmos' GRIP filings (the Atmos Cities Steering Committee, or "ACSC") can most efficiently review the Atmos filing on behalf of the City; and WHEREAS, the reasonable costs associated with the City's review of the Company's rates are reimbursable from Atmos Mid- Tex; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS: Section 1. That the findings set out in the preamble to this resolution are hereby in all things approved. Section 2. That Atmos Mid-Tex is hereby directed to show cause regarding the reasonableness of its existing natural gas distribution rates within the City. Atmos shall file with the City information sufficient to determine the Company's rate base, expenses, investment, and rate of return. Such filing shall be on a system-wide basis and shall be based upon a rate year ending June 30, 2005. Atmos Mid- Tex is directed to file its rate filing package to comply, at a minimum, with the regulations and requirements of the Railroad Commission. The filing shall be made with the City on or before December 31, 2005. An electronic copy of the filing shall be made with the City simultaneously with the written filing on December 31, 2005. This filing shall be the same filing as made with the first coalition city to pass the same or similar Show Cause Resolution. Section 3. That the City's designated representatives shall have the right to obtain additional information from Atmos through the filing of written requests for information, to each of which Atmos shall respond in writing within fourteen (14) calendar days from the receipt of each such request for information. Section 4. That a public hearing shall be conducted by the City. Based upon such hearing, the briefing of staff, and the consultants' findings, a determination of the reasonableness of the existing rates of Atmos shall be made by the City and, if necessary, just and reasonable rates shall be determined to be thereafter observed and enforced for all services of Atmos within the City. 1 I Section 5. That the City may, from time to time, amend this procedural schedule and the filing requirements, and enter additional orders as may be necessary in the public interest and to enforce the provisions hereof. Section 6. That Atmos Mid- Tex shall promptly reimburse the City's reasonable monthly costs associated with the City's activities related to the rate review. Section 7. That a copy of this Resolution shall be sent to Atmos Mid- Tex, care of Richard T. Reis, at 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 Resolution shall be effective from and after its date of passage. PASSED AND APPROVED by the City Council of the City of Paris, Texas, on this the 24th day of October, 2005. Curtis Fendley, Mayor ATTEST: Janice Ellis, City Clerk APPROVED AS TO FORM: Larry W. Schenk, City Attorney 1 I ., MODEL STAFF REPORT ON ATMOS MID-TEX SHOW CAUSE RESOLUTION Purpose of the Resolution: Municipalities have original jurisdiction over gas utility rates within the city. Municipalities have authority under the Gas Utility Regulatory Act ("GURA") to initiate a proceeding to determine whether the existing rates being charged by a gas utility are unreasonable or in violation of the law. This resolution exercises that authority and requires Atmos Mid-Tex Division to file a rate filing package with the City in order for the City to determine whether Atmos' rates are excessive. Why this Resolution is necessary: The last rate case at the Railroad Commission affecting the gas distribution system now owned by Atmos Mid-Tex was GUD No. 9400. At that time, the system was owned by TXU Gas Company, which had very different operating expenses and debt structure from Atmos. The rates currently being charged, therefore, are not based on Atmos' cost of service or on its capital structure. As a result, Atmos is most likely over-earning and receiving a greater return than was authorized by the Commission in GUD No. 9400. Atmos has made numerous public statements regarding the reduction of its operating expenses and the increased revenues it has been making from its Texas systems. The piecemeal ratemaking fostered by the GRIP interim surcharges prevents a thorough, comprehensive review of Atmos' cost of service, and would be illegal under traditional ratemaking in the public interest. 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 the GRIP requests have been based upon new office furniture, computers and other cost efficiency measures more likely to benefit shareholders than ratepayers. Some of the investments included by Atmos in its GRIP filings have a depreciable life of five years or less. Thus, a rate case over five years after the GRIP surcharge is implemented will be too late to determine the reasonableness of such investments as they will have already been completely depreciated. Explanation of "Be It Resolved" Paraeraphs: 1. This paragraph requires Atmos to file a rate filing package with the City by December 31,2005, based upon a test year ending June 30, 2005. The filing is directed to be on a system-wide basis, meaning that every city in the coalition will receive the same filing and will be able to review the filing jointly. In August 2005, the City of Dallas adopted a show cause resolution and required Atmos to file by November 15, 2005, based upon the same test year. This paragraph also requires Atmos to file an electronic version of its filing package. Although the Company keeps all of its information in electronic form, Atmos has caused delays of weeks ~ i. , 1668\ 13\othO51 0 14 1 T I and even months in recent filings by refusIng to provide information in electronic form promptly after making paper filings. It is necessary for the consultants to have the filing electronically in order to test the validity of the Company's schedules. As a minimum standard, the rate filing package is required to be filed in conformance with the regulations and requirements of the. Railroad Commission. 2. This paragraph notifies the Company that the City and its consultants will be undertaking discovery to obtain necessary information from the Company, and requires the Company to respond to all discovery requests within fourteen (14) calendar days. This is designed to avoid the unreasonable and unprecedented delays experienced with discovery requests submitted after recent filings. 3. This paragraph sets out the procedure to be followed by the City, including a publ~c hearing. At the end of the City's review, it will make a finding on the reasonableness of the Company's rates, and possibly set new rates. 4. This paragraph gives the City flexibility to amend its procedures and the filing requirements. This flexibility may be necessary in order to counteract dilatory or evasive actions by the Company. 5. This paragraph requires the Company to reimburse the City for its reasonable costs associated with the review of the Company's filing. 6. This paragraph directs that a copy of the signed resolution be sent to a representative of the Company and a representative of the coalition of cities. ~ :{ " 1668\ 13\othO51 0 14 2 T I