HomeMy WebLinkAboutRes 2012-05-01 Denying ATMOS Energy rate change.pdfRESOLUTION NO. 2012-05-01
RESOLUTION OF THE CITY OF ANNA, TEXAS
DENYING ATMOS ENERGY CORP., MID-TEX
DIVISION'S ("ATMOS MID-TEX") REQUESTED RATE
CHANGE; REQUIRING THE COMPANY TO REIMBURSE
THE CITY'S REASONABLE RATEMAKING EXPENSES;
FINDING THAT THE MEETING AT WHICH THIS
RESOLUTION IS PASSED IS OPEN TO THE PUBLIC AS
REQUIRED BY LAW; REQUIRING NOTICE OF THIS
RESOLUTION TO THE COMPANY AND ACSC'S LEGAL
COUNSEL
WHEREAS, the City of Anna, Texas ("City") is a gas utility customer of Atmos Energy
Corp., Mid -Tex Division ("Atmos Mid -Tex" or "Company"), and is a regulatory authority under
the Gas Utility Regulatory Act ("GURA") and under Chapter 104, §104.001 et seq. of GURA,
has exclusive original jurisdiction over Atmos Mid-Tex's rates, operations, and services within
the City; and
WHEREAS, the City is a member of the Atmos Cities Steering Committee ("ACSC"), a
coalition of over 150 similarly situated cities served by the Company that have joined together to
facilitate the review and response to natural gas issues affecting rates charged in the Atmos Mid -
Tex Division; and
WHEREAS, pursuant to the terms of the agreement settling the Company's 2007
Statement of Intent to increase rates, ACSC and the Company worked collectively to develop a
Rate Review Mechanism ("RRM") tariff that allows for an expedited rate review process
controlled in a three-year experiment by ACSC as a substitute to the current GRIP process
instituted by the Legislature; and
WHEREAS, ACSC and the Company agreed to extend the RRM process in reaching a
settlement in 2010 on the third RRM filing; and
WHEREAS, in 2011, ACSC and the Company engaged in good faith negotiations
regarding the continuation of the RRM process, but were unable to come to ultimate agreement;
and
WHEREAS, on or about January 31, 2012, the Company filed a Statement of Intent with
the cities retaining original jurisdiction within. its Mid -Tex service division to increase rates by
approximately $49 million; and
WHEREAS, Atmos Mid -Tex proposed March 6, 2012, as the effective date for its
requested increase in rates; and
2070343.1
WHEREAS, the City suspended the effective date of Atmos Mid-Tex's proposed rate
increase for the maximum period allowed by law and thus extended the City's jurisdiction until
June 4,2012; and
WHEREAS, on April 25, 2012, the Company extended the effective date for its
proposed rates by one week, which similarly extended the City's jurisdiction until June 11, 2012;
and
WHEREAS, the ACSC Executive Committee hired and directed legal counsel and
consultants to prepare a common response to the Company's requested rate increase and to
negotiate with the Company and direct any necessary litigation, and
WHEREAS, ACSC's consultants conducted a review of the Company's requested rate
increase and found justification that the Company's rates should be decreased; and
WHEREAS, ACSC and the Company have engaged in settlement discussions but will be
unable according to Company representations to reach settlement in sufficient time for cities to
act before June 11, 2012; and
WHEREAS, failure by ACSC members to take action before June 11, 2012 would allow
the Company the right to impose its full request on residents of said ACSC members; and
WHEREAS, the ACSC Settlement Committee recommends denial of the Company's
proposed rate increase in order to continue settlement discussions pending the Company's appeal
of cities' denials to the Railroad Commission of Texas; and
WHEREAS, the GURA § 103.022 provides that costs incurred by cities in ratemaking
activities are to be reimbursed by the regulated utility.
THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
ANNA, TEXAS:
1. That the rates proposed by Atmos Mid -Tex to be recovered through its gas rates
charged to customers located within the City limits, are hereby found to be unreasonable and
shall be denied.
2. That the Company shall continue to charge its existing rates to customers within
the City and that said existing rates are reasonable.
3. That the City's reasonable rate case expenses shall be reimbursed by the
Company.
4. That it is hereby officially found and determined that the meeting at which this
Resolution is passed is open to the public as required by law and the public notice of the time,
place, and purpose of said meeting was given as required.
2070343.1 2
5. A copy of this Resolution shall be sent to Atmos Mid -Tex, care of David Park,
Vice President Rates & Regulatory Affairs, at Atmos Energy Corporation, Mid -Tex Division,
5420 LBJ Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay, General Counsel to
ACSC, at Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767-
1725.
PASSED AND APPROVED this 8th day of May, 2012.
Mayor arren R. D e
ATTEST:
TV--La
Natha Wilkison
APPROVED AS TO FORM:
City Attorney, Clark McCoy
2070343.1 3
oyd
. Gosselink
ATTORNEYS AT L A W
Mr. Gay's Direct Line: (512) 322-5875
Email: ggay@lglawfim.com
MEMORANDUM
TO: Atmos Cities Steering Committee Members
FROM: Geoffrey M. Gay
Georgia Crmnp
Eileen McPhee
DATE: April 30, 2012
816 Congress Avenue, Suite 1900
Austin, Texas 78701
Telephone: (5 12) 322-5800
Facsimile: (512) 472-0532
www.iglawfirm.com
RE: Denial Resolution For Atmos Mid-Tex's Requested Rate Increase
Background on Atmos Mid -Tex Rate Case
On January 31, 2012, Atmos Energy Corporation, Mid -Tex Division ("Atmos Mid -Tex"
or "Company") filed with Atmos Cities Steering Committee ("ACSC") city members that
exercise original jurisdiction a request for a rate increase in excess of $49 million. ACSC
members passed resolutions suspending the effective date of the proposed increase to allow
ACSC attorneys and consultants to study the request. A summary of the consultants' findings is
attached as Exhibit A. The ACSC Settlement Committee has met with Company officials to
negotiate a settlement. While ACSC has given the Company a settlement offer, Atmos Mid -Tex
does not want to provide a written offer before the expiration of city jurisdiction on June 11,
2012.
Timing of City Action
ACSC members with original jurisdiction suspended the proposed effective date of
March 6, 2012, extending city jurisdiction until June 4, 2012. On April 25, 2012, the Company
extended its effective date by a week, which similarly extended the June 4, 2012 deadline to June
11, 2012. It does not appear that settlement could be achieved within a time frame that would
allow the City to take action prior to June 11, 2012. Thus, ACSC members are encouraged to
pass a denial resolution. Atmos Mid -Tex has promised to support the action which does not
preclude a subsequent settlement. If settlement is achieved, ACSC will return to member cities
with a request for approval of the settlement.
2557/17/2056489
Lloyd Gosselink Rochelle & Townsend, P.C.
April 30, 2012
Page 2
Recommendation and Explanation of Denial Resolution
The ACSC Settlement Committee recommends the ACSC cities pass resolutions denying
Atmos Mid-Tex's proposed rate increase. The denial resolution will prevent the Company's
proposed rate increase from automatically taking effect on June 11, 2012, and allow more time to
engage in settlement discussions. Atmos will appeal your denial to the Railroad Commission
which will trigger a 185 -day time frame for action by the Commission. Settlement will
hopefully occur before a hearing takes place. Please contact Geoffrey Gay if you have any
questions or concerns.
2056489.1
Lloyd Gosselinlc Rochelle & Townsend, P.C.
Exhibit A
Following a review of the Company's 2012 Statement of Intent, ACSC consultants found
justification for an approximately $77 million decrease to the Company's requested revenue,
resulting in a $23 million decrease to the current rates charged by Atmos Mid -Tex. ACSC
consultants' recommendation for a rate decrease is based upon the following major components:2
• Lowering the Company's return on equity from 10.9% to 9.5%, resulting in a revenue
requirement decrease of over $30 million
• Removing the Company's improper post-test year adjustment to add plant from January
to March 2012, resulting in a revenue requirement decrease of approximately $5 million
• Removing the Company's proposal for an energy efficiency plan to be funded only by
ratepayers, resulting in a revenue requirement decrease of over $1 million
• Various adjustments to accumulated deferred income tax, resulting in a revenue
requirement decrease of approximately $10 million
• Recognizing new depreciation rates as filed by the Company (without adjustment by
ACSC consultants), resulting in a revenue requirement decrease of approximately $15
million
• Various adjustments to the Company's requested level of operating and maintenance
(O&M) expense, resulting in a revenue requirement decrease of over $8 million
• Reducing rate base to account for ratepayer supplied funds relating to other post -
employment benefits (FASB 106), resulting in a revenue requirement decrease of over
$8 million
• Cap residential customer charge at $9.00, instead of Atmos' requested $18.00.
' All figures are adjustments resulting in a revenue requirement impact to Atmos' filed case system -wide. Factoring
out Dallas, the ACSC cities would see slight decreases in the numbers listed above.
' Please note that the adjustments listed are on a stand-alone basis, and may have a different impact when combined
with the other adjustments.
2070345.1