HomeMy WebLinkAboutItem 12 - Atmos SettlementMEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: BRUNO RUMBELOW, CITY MANAGER
MEETING DATE: SEPTEMBER 20, 2022
SUBJECT: APPROVAL OF ATMOS RATE REVIEW MECHANISM SETTLEMENT
RECOMMENDATION: City Council to consider approval of a resolution approving the Atmos Mid -
Tex RRM (Rate Review Mechanism) Tariff Settlement.
FUNDING SOURCE:
BACKGROUND: The City, along with 181 other Mid -Texas cities served by Atmos Energy
Corporation, Mid -Tex Division is a member of the Atmos Cities Steering
Committee ("ACSC"). In 2007, ACSC 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.
On or about April 1, 2022, 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, 2021, entitled it to
additional system -wide revenues of $141.3 million.
Application of the standards set forth in ACSC's RRM Tariff reduces the
Company's request to $115 million, $83.26 million of which would be
applicable to ACSC members. ACSC's consultants concluded that the
system -wide deficiency under the RRM regime should be $95.8 million
instead of the claimed $141.3 million. The impact of the settlement on
average residential rates is an increase of $4.60 on a monthly basis, or
6.7 percent. The increase for average commercial usage will be $14.34 or
4.3 percent.
The Executive Committee of ASCSC recommends a settlement at $115
million. The Effective Date for new rates is October 1, 2022. The
Committee believes that this is a fair settlement that will avoid a costly
rate case before the Railroad Commission that would likely end with a
less favorable rate for the consumer, which would be the result of a denial.
The City Council Utility Committee has reviewed the recommendation.
RESOLUTION NO. 2022-012
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 2022 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
ATTACHMENT ESTABLISHING A BENCHMARK FOR PENSIONS
AND RETIREE MEDICAL BENEFITS; 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, 2022, Atmos Mid -Tex filed its 2022 RRM rate request
with ACSC Cities based on a test year ending December 31, 2021; and
WHEREAS, ACSC coordinated its review of the Atmos Mid -Tex 2022 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 $115 million on a system -wide basis with an Effective Date of October 1, 2022;
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 attached tariffs (Attachment 1) 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 (Attachment 2); 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 $115
million on a system -wide basis 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 2022 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
Attachment 1, are just and reasonable, and are designed to allow Atmos Mid -Tex to
:Z •7[�ii�•77�[•wziy40i11
recover annually an additional $115 on a system -wide basis, 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 Attachment 2, attached hereto
and incorporated herein.
Section 6. That Atmos Mid -Tex shall reimburse the reasonable ratemaking
expenses of the ACSC in processing the Company's 2022 RRM filing.
Section 7. That to the extent any resolution or ordinance 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 October 1, 2022.
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 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.
DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS, BY A VOTE OF TO ON THIS THE 20th DAY OF
SEPTEMBER, 2022.
APPROVED:
William D. Tate
Mayor
:Z •7[�ii�•77�[•wziy40i11 3
ATTEST:
Tara Brooks
City Secretary
APPROVED AS TO FORM:
Matthew C.G. Boyle
City Attorney
=61mm7101INOW4iYQIXiyK