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HomeMy WebLinkAboutItem 14 - Atmos/TXU GasITEM# �L __ MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: ROGER NELSON, CITY MANAGER.,,, MEETING DATE: JANUARY 18, 2004 SUBJECT: SUSPENSION OF INTERIM RATE ADJUSTMENT PROPOSED BY ATMOS/TXU GAS RECOMMENDATION: City Council approve a resolution suspending an interim rate adjustment (GRIP rate increase) proposed by Atmos Energy Corporation, formerly TXU Gas Company (Atmos/TXU Gas); authorizing participation in a steering committee to review the proposed rate increase, and recommend further action related to the proposed rate increase; authorizing the City Manger to appoint a staff member to serve on the steering committee; authorizing intervention in any proceedings related to proposed rate increases; and requiring reimbursement of reasonable legal and consultant expenses. FUNDING SOURCE: No funding required. BACKGROUND: In late 2004 Atmos gas made two filings that would impact customer rates. Both of these filings were made under the GRIP (Gas Reliability Infrastructure Program) statute. This program allows utilities to recover additional infrastructure costs without filing a full rate case. The first filing, related to distribution infrastructure cost recover, was made with the Cities served my Atmos in mid-December. The filing notified the cities of its intent to increase its distribution rates to all customers effective February 15, 2005, because of investments Atmos/TXU Gas allegedly made in calendar year 2003. The second filing related to pipeline investments cost recovery, was made at the Railroad Commission (RRC) or about December 17, 2004. The filing notified the RRC of the company's intent to increase its City gate and transportation rates to all customers, also effective February 15, 2005, because of investments Atmos/TXU Gas has allegedly made in calendar year 2003. January 13, 2005 (8:37AM) In its filings, Atmos/TXU Gas claims that net investment in infrastructure throughout the former TXU service areas increased in 2003 by a total of $43.5 million. If calculated in compliance with the GRIP statute, this claimed increase would be in addition to the $70 million in annual plant investment included in the Gas Utility Docket (GUD) No. 9400 rates. Atmos/TXU Gas is therefore claiming that the investment in plant increased by over 60% during 2003. The proposed GRIP rate increases would increase annual revenues for Atmos/TXU gas by $8.5 million. These increases are in addition to the $11.5 million annual increase approved by the RRC in GUD No. 9400, and also in addition to the $10.1 million recovery sought by Atmos/TXU gas for rate case expenses related to GUD No. 9400. Atmos/TXU Gas has publicly stated that it expects to experience annual cost savings of at least $40 million over the costs included in the rates approved in GUD No. 9400 and said savings are likely to greatly exceed the annual revenue requirement associated with any reasonable increase in invested capital that form the basis of the requested GRIP rate increases. Atmos Energy Corporation has announced a 20 percent increase in profits for its fiscal year ended September 30, 2004, and projects further increases in profits in 2005. The attached resolution authorizes the City to join a steering committee that will engage counsel and consultants to assess the GRIP filing. It also authorizes the City Manager to appoint a staff member to serve on the steering committee. Finally, it requires Atmos to reimburse the steering committee for reasonable costs related to the steering committee's examination. Staff recommends approval. JCH January 13, 2005 (8:49AM) RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS SUSPENDING THE PROPOSAL BY ATMOS ENERGY CORP. TO IMPLEMENT INTERIM GRIP RATE ADJUSTMENTS FOR GAS UTILITY INVESTMENT IN 2003; AUTHORIZING PARTICIPATION WITH OTHER CITIES SERVED BY ATMOS ENERGY CORP., MID - TEXAS DIVISION, IN A REVIEW AND INQUIRY INTO THE BASIS AND REASONABLENESS OF THE PROPOSED RATE ADJUSTMENTS; AUTHORIZING INTERVENTION IN ADMINISTRATIVE AND COURT PROCEEDINGS INVOLV- ING THE PROPOSED GRIP RATE ADJUSTMENTS; DESIGNATING A REPRESENTATIVE OF THE CITY TO SERVE ON A STEERING COMMITTEE; REQUIRING REIMBURSEMENT OF REASONABLE LEGAL AND CONSULTANT EXPENSES AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City of Grapevine, Texas ("City") is a gas utility customer of Atmos Energy Corp., Mid -Tex Division, ("Atmos Mid -Tex" or "the company") and a regulatory authority with an interest in the rates and charges by Atmos Mid -Tex; and WHEREAS, Atmos Mid -Tex made filings with the City and the Railroad Commission of Texas ("Railroad Commission") in December, 2004, proposing to implement interim rate adjustments ("GRIP Rate Increases") pursuant to Texas Utilities Code 10.301 on all customers served by Atmos Mid -Tex; and WHEREAS, Atmos Energy Corporation has reported a twenty percent increase in profits for its fiscal year ended September 30, 2004 and projects further increases in profits in 2005; and WHEREAS, in May, 2004, the Railroad Commission entered its final order in GUD No. 9400 authorizing a rate increase that will produce additional annual revenues for Atmos Mid -Tex; and WHEREAS, Atmos Mid -Tex has projected that it will experience annual cost savings of at least $40 million over the costs included in rates approved in GUD No. 9400 and said savings are likely to greatly exceed the annual revenue requirement associated with any reasonable increases in invested capital that for the basis of the proposed GRIP rate increases; and WHEREAS, ratepayers of Atmos Mid -Tex, including the City and its residents, will be adversely impacted by the proposed GRIP rate increases; and WHEREAS, the City and its residents could benefit from coordination with other cities served by Atmos Mid -Tex ("Cities") in a review of the reasonableness of the proposed GRIP rate increases and joint proceedings at the Railroad Commission related to the proposed GRIP Rate Increases; and WHEREAS, the reasonable costs associated with the participation of cities in this rate proceeding are reimbursable from Atmos Mid -Tex. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: Section 1. That all matters stated in the above preamble are true and correct and are incorporated herein as if copied in their entirety. Section 2. That the February 15, 2005, effective date of the GRIP Rate Increases proposed by Atmos Mid -Tex is hereby suspended to permit adequate time to review the proposed increases, analyze all necessary information and take appropriate action related to the proposed increases. Section 3. That the City is authorized to cooperate with other cities to create and participate in a Steering Committee to hire and direct legal counsel and consultants, to negotiate with the company, to make recommendations to the City regarding the proposed GRIP Rate Increases, and to direct any administrative proceedings or litigation associated with the proposed GRIP Rate Increases. Section 4. That the City is authorized to intervene in any administrative proceedings or litigation associated with the proposed GRIP Rate Increases, including GUD No. 9560, the Company's proposed GRIP rate increase filed at the Railroad Commission. Section 5. That the City Council authorizes the City Manager to designate a staff member as a representative to the Cities' Steering Committee that shall direct the efforts of counsel and consultants. Section 6. That Atmos Mid -Tex shall promptly reimburse the City's reasonable costs associated with the City's activities related to the proposed GRIP Rate Increases. Section 7. That this resolution shall take effect from and after the date of its passage. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS on this the 18th day of January, 2005. RES. NO. 2 F..Ntu:m