13 - ATMOS SETTLEMENT AGREEMENTItem No. 13
memorandum
TO: City Council
John Godwin, City Manager
FROM: Gene Anderson, Finance Director
SUBJECT: ATMOS SETTLEMENT AGREEMENT
DATE: May 11, 2015
BACKGROUND: In February 2014, Atmos Mid -Tex filed its second annual filing under the
Rate Review Mechanism ( "RRM ") Tariff, seeking a rate increase of $45.7 million. Although
ACSC ( Atmos Cities Steering Committee -an organization made up of cities served by Atmos)
attempted to reach a settlement with the Company as it had in past years, the wide differences
between the Company and ACSC's consultants' recommendations made a compromise
impossible. On the recommendation of the ACSC Executive Committee and ACSC's legal
counsel, the City in 2014 adopted a Resolution denying the requested rate increase. The
Company appealed the City's denial to the Railroad Commission of Texas ( "Commission "), and
revised its requested increase to $43.8 million. A hearing was held on the Company's appeal on
September 3, 2014. On April 28, 2015, the Commission's Hearings Examiner issued his
Proposal for Decision ( "PFD ") in the Company's appeal of the City's denial of the 2014 RRM
rate increase. This PFD was not favorable to ACSC, but did recommend a reduction of
approximately $860,000 to the Company's adjusted 2014 filing.
STATUS OF ISSUE: While the parties were waiting for the PFD from the Hearings Examiner
in the appeal of the 2014 RRM filing, on February 27, 2015, Atmos Mid -Tex filed with the City
another rate increase request under the RRM Tariff, seeking additional revenues in the amount of
$28.762 million (total system) or $24.0 million (affected cities). The City worked with ACSC to
analyze the schedules and evidence offered by Atmos Mid -Tex to support its 2015 request to
increase rates. The Resolution and attached Settlement Agreement and tariffs are the result of
negotiation to resolve issues raised by ACSC during the review and evaluation of Atmos Mid -
Tex's filing. The recommended Settlement Agreement requires Atmos to abate its appeal of the
City's rejection of the 2014 RRM rate increase pending approval by all ACSC cities of the
Settlement Agreement. The Agreement requires Atmos to give the City the benefit of the
adjustments to the 2014 rate increase recommended by the PFD. The monthly bill impact for the
typical residential customer consuming 60 Ccf will be an increase of $1.14 (about a 1.59%
increase in the base bill). The typical commercial customer will see an increase of $2.69 or
0.96 %.
BUDGET: There is no impact on the City budget due to this matter.
RECOMMENDATION: Motion to approve the resolution and negotiated settlement agreement
resolving both the 2014 and the 2015 RRM filings, and implementing the rate change.
DRAFT
RESOLUTION NO.
AN RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS,
TEXAS, APPROVING A NEGOTIATED SETTLEMENT BETWEEN THE
ATMOS CITIES STEERING COMMITTEE ( "ACSC ") AND ATMOS
ENERGY CORP., MID -TEX DIVISION REGARDING THE COMPANY'S
2014 AND 2015 RATE REVIEW MECHANISM FILINGS; APPROVING A
SETTLEMENT AGREEMENT WITH ATTACHED RATE TARIFFS AND
PROOF OF REVENUES; DECLARING EXISTING RATES TO BE
UNREASONABLE; ADOPTING TARIFFS THAT REFLECT RATE
ADJUSTMENTS CONSISTENT WITH THE NEGOTIATED
SETTLEMENT; FINDING THE RATES TO BE SET BY THE
SETTLEMENT TARIFFS TO BE JUST AND REASONABLE AND IN THE
PUBLIC INTEREST; REQUIRING THE COMPANY TO REIMBURSE
ACSC'S REASONABLE RATEMAKING EXPENSES; DETERMINING
THAT THIS RESOLUTION WAS PASSED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE TEXAS OPEN MEETINGS ACT; ADOPTING
A SAVINGS CLAUSE; DECLARING AN EFFECTIVE DATE; AND
REQUIRING DELIVERY OF THIS RESOLUTION TO THE COMPANY
AND THE ACSC'S LEGAL COUNSEL.
WHEREAS, the City of Paris, Texas ( "City ") is a gas utility customer of Atmos Energy
Corp., Mid -Tex Division ( "Atmos Mid -Tex" or "Company "), and a regulatory authority with an
interest in the rates and charges of Atmos; and
WHEREAS, the City is a member of the Atmos Cities Steering Committee ( "ACSC "), a
coalition of similarly- situated cities served by Atmos Mid -Tex ( "ACSC Cities ") that have joined
together to facilitate the review of and response to natural gas issues affecting rates charged in
the Atmos Mid -Tex service area; and
WHEREAS, ACSC and the Company worked collaboratively to develop a new Rate
Review Mechanism ( "RRM ") tariff that allows for an expedited rate review process by ACSC
Cities as a substitute to the Gas Reliability Infrastructure Program ( "GRIP ") process instituted by
the Legislature, and that will establish rates for the ACSC Cities based on the system -wide cost
of serving the Atmos Mid -Tex Division; and
WHEREAS, the initial RRM Tariff was in effect for four (4) years; and
WHEREAS, ACSC Cities and Atmos Mid -Tex entered into another settlement
agreement and revised the RRM Tariff, and
WHEREAS, ACSC Cities and Atmos Mid -Tex compromised and reached agreements
on the amount of the rate increases to be in effect for the RRM Tariff filings for 2012 and 2013;
and
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WHEREAS, ACSC Cities and Atmos Mid -Tex were unable to reach an agreement on
the 2014 RRM Tariff filing, resulting in the ACSC Cities' rejection of the 2014 RRM filing; and
WHEREAS, Atmos Mid -Tex appealed the ACSC Cities' actions rejecting its 2014 RRM
filing to the Railroad Commission of Texas ( "Commission "), pursuant to the provisions of the
RRM Tariff; and
WHEREAS, Atmos Mid -Tex and ACSC litigated the appeal of the 2014 RRM filing at
the Commission; and
WHEREAS, on February 27, 2015, Atmos Mid -Tex filed its 2015 RRM Tariff filing,
requesting to increase natural gas base rates system -wide by $28.762 million; and
WHEREAS, ACSC coordinated its review of Atmos Mid -Tex RRM filing through its
Executive Committee, assisted by ACSC's attorneys and consultants, to resolve issues identified
in the Company's RRM filing; and
WHEREAS, Atmos Mid -Tex has agreed to withdraw its appeal of ACSC's rejection of
its 2014 RRM Tariff rate increase; and
WHEREAS, the Executive Committee, as well as ACSC's counsel and consultants,
recommend that ACSC Cities approve the attached Settlement Agreement (Attachment A to this
Resolution) as well as the tariffs attached thereto, resolving both the 2014 and the 2015 RRM
Tariff filings, which together will increase the Company's revenues by $65.7 million over the
amount allowed under City- approved rates set in 2013; and
WHEREAS, the attached tariffs implementing new rates are consistent with the
negotiated Settlement Agreement and are just, reasonable, and in the public interest; and
WHEREAS, the RRM Tariff should be renewed for a period of time commencing in
2016 and continuing until the RRM Tariff is suspended by ordinance of the City; and
WHEREAS, the RRM Tariff contemplates reimbursement of ACSC's reasonable
expenses associated with RRM applications;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF THE CITY OF PARIS, TEXAS:
Section 1. That the findings set forth in this Resolution are hereby in all things approved.
Section 2. That the City Council finds that the Settlement Agreement (Attachment A to
this Resolution) represents a comprehensive settlement of gas utility rate issues affecting the
rates, operations, and services offered by Atmos Mid -Tex within the municipal limits arising
from Atmos Mid - Tex's 2014 and 2015 RRM filings, is in the public interest, and is consistent
with the City's authority under Section 103.001 of the Texas Utilities Code.
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Section 3. That the existing rates for natural gas service provided by Atmos Mid -Tex are
unreasonable. The new tariffs attached hereto and incorporated herein as Attachment C, are just
and reasonable, and are designed to allow Atmos Mid -Tex to recover annually an additional
$65.7 million in revenue over the amount allowed under currently approved rates, or $21 million
over currently- billed rates, as shown in the Proof of Revenues attached hereto and incorporated
herein as Attachment B; such tariffs are hereby adopted.
Section 4. That the ratemaking treatment for pensions and other post - employment
benefits in Atmos' next RRM filing shall be as set forth on Attachment D, attached hereto and
incorporated herein.
Section 5. That in an effort to streamline the regulatory review process, the Atmos Mid -
Tex RRM Tariff is renewed for a period commencing with the Company's March 1, 2016 RRM
filing for calendar year 2015, effective June 1, 2016, and continuing thereafter until such time as
the City adopts an ordinance suspending operation of the RRM Tariff.
Section 6. That Atmos Mid -Tex shall reimburse the reasonable ratemaking expenses of
the ACSC in processing the Company's RRM application.
Section 7. That to the extent any resolution previously adopted by the Council is
inconsistent with this Resolution, it is hereby repealed.
Section 8. That the meeting at which this Resolution was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code,
Chapter 551.
Section 9. That if any one or more sections or clauses of this Resolution is adjudged to
be unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remaining
provisions of this Resolution and the remaining provisions of the Resolution shall be interpreted
as if the offending section or clause never existed.
Section 10. That consistent with the City ordinance that established the RRM process,
this Resolution shall become effective from and after its passage with rates authorized by
attached tariffs to be effective for bills rendered on or after June 1, 2015.
Section 11. That a copy of this Resolution shall be sent to Atmos Mid -Tex, care of Chris
Felan, Vice President of Rates and Regulatory Affairs Mid -Tex Division, Atmos Energy
Corporation, 5420 LJB Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay, General
Counsel to ACSC, at Lloyd Gosselink Rochelle & Townsend, P.C., 816 Congress Avenue,
Suite 1900, Austin, Texas 78701.
PASSED AND APPROVED this day of , 2015.
A.J. Hashmi, M.D., Mayor
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ATTEST:
Janice Ellis, City Clerk
APPROVED AS TO FORM:
W. Kent McIlyar, City Attorney
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