HomeMy WebLinkAboutItem 12 - Atmos Rate Review Mechanism TariffMEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: BRUNO RUMBELOW, CITY MANAGER
MEETING DATE: SEPTEMBER 7, 2021
SUBJECT: APPROVE A SETTLEMENT AGREEMENT FOR THE ATMOS RATE
REVIEW MECHANISM TARIFF
RECOMMENDATION: City Council approve a settlement agreement for the Atmos Rate Review
Mechanism (RRM) Tariff
FUNDING SOURCE: NA
BACKGROUND: The City, along with 171 other Mid -Texas Cities Served by Atmos Energy
Corporation, Mid -Tex Division ("Atmos Mid -Tex" or "Company"), is a
member of the Steering Committee of Cities Served by Atmos ("Cities"). In
2007, the Cities and Atmos Mid -Tex settled a rate application filed by the
Company pursuant to Section 104.301 of the Texas Utilities Code for an
interim rate adjustment commonly referred to as a GRIP filing (arising out
of the Gas Reliability Infrastructure Program legislation). That settlement
created a substitute rate review process, referred to as Rate Review
Mechanism ("RRM"), as a substitute for future filings under the GRIP
statute.
Since 2007, there have been several modifications to the original RRM
Tariff. The most recent iteration of an RRM Tariff was reflected in an
ordinance adopted by ACSC members in 2018. On or about April 1, 2021,
the Company filed a rate request pursuant to the RRM Tariff adopted by
ACSC members. The Company claimed that its cost -of -service in a test
year ending December 31, 2020, entitled it to additional system -wide
revenues of $43.4 million.
Application of the standards set forth in ACSC's RRM Tariff reduces the
Company's request to $40.5 million, $29.3 million of which would be
applicable to ACSC members. ACSC's consultants concluded that the
system -wide deficiency under the RRM regime should be $22.34 million
instead of the claimed $40.5 million. The amount of the $22.34 million
deficiency applicable to ACSC members would be $16.8 million.
After the Company reviewed ACSC's consultants' report, ACSC's
Executive Committee and the Company negotiated a settlement whereby
the Company would receive an increase of $22.78 million from ACSC
Cities, but with a two -month delay in the Effective Date until December 1,
2021. This should save ACSC cities approximately $3.8 million.
The impact of the settlement on average residential rates is an increase of
$1.28 on a monthly basis, or 2.2 percent. The increase for average
commercial usage will be $4.03 or 1.61 percent.
Denial of the settlement would trigger a case that would be decided by the
Texas Railroad Commission.
The Utilities Committee has been briefed on this settlement agreement
and recommends approval.
RESOLUTION NO. 2021-012
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS, APPROVING A NEGOTIATED
SETTLEMENT BETWEEN THE ATMOS CITIES STEERING
COMMITTEE ("ACSC") AND ATMOS ENERGY CORP., MID-TEX
DIVISION REGARDING THE COMPANY'S 2021 RATE REVIEW
MECHANISM FILING; 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
ATTACHED SETTLEMENT TARIFFS TO BE JUST AND
REASONABLE AND IN THE PUBLIC INTEREST; APPROVING AN
ATTACHED EXHIBIT ESTABLISHING A BENCHMARK FOR
PENSIONS AND RETIREE MEDICAL BENEFITS; APPROVING AN
ATTACHED EXHIBIT REGARDING AMORTIZATION OF
REGULATORY LIABILITY; 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 Grapevine, 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, charges, and services of Atmos Mid -Tex; 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 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 current RRM tariff was adopted by the City in a rate ordinance in
2018; and
WHEREAS, on about April 1, 2021, Atmos Mid -Tex filed its 2021 RRM rate request
with ACSC Cities based on a test year ending December 31, 2020; and
WHEREAS, ACSC coordinated its review of the Atmos Mid -Tex 2021 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, the Executive Committee, as well as ACSC's counsel and
consultants, recommend that ACSC Cities approve an increase in base rates for Atmos
Mid -Tex of $22.78 million applicable to ACSC Cities with an Effective Date of December
1, 2021; and
WHEREAS, ACSC agrees that Atmos' plant -in-service is reasonable; and
WHEREAS, with the exception of approved plant -in-service, ACSC is not
foreclosed from future reasonableness evaluation of costs associated with incidents
related to gas leaks; and
WHEREAS, the two month delayed Effective Date from October 1 to December 1
will save ACSC ratepayers approximately $3.8 million off new rates imposed by the
attached tariffs (Exhibit A); and
WHEREAS, the attached tariffs (Exhibit A) implementing new rates are consistent
with the recommendation of the ACSC Executive Committee, are agreed to by the
Company, and are just, reasonable, and in the public interest, and
WHEREAS, the settlement agreement sets a new benchmark for pensions and
retiree medical benefits (Exhibit B); and
WHEREAS, the settlement agreement establishes an amortization schedule for
regulatory liability prepared by Atmos Mid -Tex (Exhibit C); 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 GRAPEVINE, TEXAS:
Section 1. That the findings set forth in this Resolution are hereby in all things
approved.
Section 2. That, without prejudice to future litigation of any issue identified by
ACSC, the City Council finds that the settled amount of an increase in revenues of $22.78
million for ACSC Cities 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 2021 RRM filing, is in the public interest,
and is consistent with the City's authority under Section 103.001 of the Texas Utilities
Code.
Section 3. That despite finding Atmos Mid-Tex's plant -in-service to be reasonable,
ACSC is not foreclosed in future cases from evaluating the reasonableness of costs
associated with incidents involving leaks of natural gas.
Section 4. That the existing rates for natural gas service provided by Atmos Mid -
Tex are unreasonable. The new tariffs attached hereto and incorporated herein as Exhibit
A, are just and reasonable, and are designed to allow Atmos Mid -Tex to recover annually
an additional $22.78 million from customers in ACSC Cities, over the amount allowed
under currently approved rates. Such tariffs are hereby adopted.
Section 5. That the ratemaking treatment for pensions and retiree medical benefits
in Atmos Mid-Tex's next RRM filing shall be as set forth on Exhibit B, attached hereto and
incorporated herein.
Section 6. That subject to any future settlement or decision regarding the balance
of Excess Deferred Income Tax to be refunded to ratepayers, the amortization of
regulatory liability shall be consistent with the schedule found in Exhibit C, attached hereto
and incorporated herein.
Section 7. That Atmos Mid -Tex shall reimburse the reasonable ratemaking
expenses of the ACSC in processing the Company's 2021 RRM filing.
Section 8. That to the extent any resolution or ordinance previously adopted by
the Council is inconsistent with this Resolution, it is hereby repealed.
Section 9. 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 10. 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 11. 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 December 1,
2021.
Section 12. 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 LBJ Freeway, Suite 1862, Dallas, Texas 75240, and to Thomas
Brocato, General Counsel to ACSC, at Lloyd Gosselink Rochelle & Townsend, P.C., 816
Congress Avenue, Suite 1900, Austin, Texas 78701.
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DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS, BY A VOTE OF TO ON THIS THE 7th DAY OF
SEPTEMBER, 2021.
APPROVED:
William D. Tate
Mayor
ATTEST:
Tara Brooks
City Secretary
APPROVED AS TO FORM:
Matthew C.G. Boyle
City Attorney