HomeMy WebLinkAboutItem 13 - Atmos Gas Cost Prudence ReviewitEa s=
MEMO TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
ROGER NELSON, CITY MANAGER
MEETING DATE: JANUARY 18, 2005
SUBJECT: ATMOS GAS COST PRUDENCE REVIEW
RECOMMENDATION:
City council approve a resolution ratifying the City's intervention before the Railroad
Commission of Texas regarding the filing of a gas cost prudence review by Atmos
Energy Corporation, formerly TXU Gas Company; designating a representative to serve
on the steering committee; and requiring reimbursement of reasonable legal and
consultant expenses.
FUNDING SOURCE:
No funding required.
BACKGROUND:
Pursuant to Gas Utilities Docket No. 8664, dates November 25, 1997, Atmos/TXU Gas
was ordered by the Railroad Commission of Texas (RRC) to file a prudence review
every three years to demonstrate that its gas cost were reasonable and necessary.
Atmos made this filing at the RRC on or about September 24, 2004, now docketed as
Gas Utility Docket (GUD) No. 9530, for a gas cost prudence review of $2.2 billion in
previously incurred and billed gas costs.
These costs are twice the cost of gas purchases included in TXU's filing for the previous
three year period. This is despite the fact that one of the representations made by TXU
to settle the last prudence review was that it had renegotiated a gas purchase contract
for an expected benefit to ratepayers of over $20 million. Testimony included with this
filing indicates that over half of all gas supply purchases over this three-year period were
made on the spot market.
When TXU made its last three-year prudence review filing many of the same cities that
participated in GUD No. 9400 intervened in that docket and were ultimately successful in
achieving settlement of all issues with TXU. TXU also reimbursed the cities expenses.
An effort was made recently to negotiate a resolution of the gas prudence docket, as
well as other outstanding regulatory issues with Atmos/TXU Gas. Atmos/TXU Gas
rejected that settlement offer.
January 13, 2005 (8:46AM)