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HomeMy WebLinkAboutItem 05 - ATMOSMEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: BRUNO RUMBELOW, CITY MANAGER MEETING DATE: SEPTEMBER 15, 2026 SUBJECT: ATMOS RATE SETTLEMENT RECOMMENDATION: Council to consider a resolution concerning the Rate Review Mechanism (RRM) settlement with Atmos Energy Mid -Tex based on the recommendation of the Atmos Cities Steering Committee. FUNDING SOURCE: N/A 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). The Cities opposed the GRIP statute because it allowed the company to pass along costs related to capital expenditures to ratepayers with minimal oversight by the Railroad Commission. That settlement that created the RRM process constitutes a rate review process, as a substitute for future filings under the GRIP statute. This process allows the cities to negotiate rates based on both capital investments and operating expenses. Earlier this year, 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, 2025, entitled it to additional system -wide revenues of $291.1 million. Application of the standards set forth in ACSC's RRM Tariff reduces the Company's request to $273.6 million. After reviewing the filing and conducting discovery, ACSC's consultants concluded that the system -wide deficiency under the RRM regime should be $253.4 million instead of the claimed $291.1 million. After several settlement meetings, the parties have agreed to settle the case for $260.5 million. This is a reduction of over $30 million to the Company's initial request. This includes payment of ACSC's expenses. The Effective Date for new rates is October 1, 2026. ACSC members should take action approving the Resolution/Ordinance before October 1, 2026. BILL IMPACT The impact of the settlement on average residential rates is an increase of $13.37 on a monthly basis, or 14.15%. The increase for average commercial usage will be $44.82 or 9.90%. Atmos provided bill impact comparisons containing these figures. RRM SAVINGS OVER GRIP While residents outside municipal limits must pay rates governed by GRIP, there are some cities served by Atmos Mid -Tex that chose to remain under GRIP rather than adopt RRM. Additionally, the City of Dallas adopted a variation of RRM which is referred to as DARR. When new rates become effective on October 1, 2026, ACSC residents will maintain an economic monthly advantage over GRIP and will be comparable to DARR rates. Comparison to Other Mid -Tex Rates (Residential) Average Bill Compared to RRM Cities RRM/ ACSC Cities: $66.18 DARR (Dallas): $66.07 $0.11 ATM Cities (GRIP): $67.02 ($0.84) Environs (Outside City Limits): $66.07 $0.11 Note: ATM Cities and Environs rates are as -filed. Also note that DARR uses a test year ending in September rather than December. CONCLUSION The Legislature's GRIP process allowed gas utilites to receive annual rate ncreases associated with capital investments. The RRM process has proven to result in a more efficient and less costly (both from a consumer rate impact perspective and from a ratemaking perspective) than the GRIP process. Given Atmos Mid-Tex's claim that its historic cost of service should entitle it to recover $291.1 million in additional system -wide revenues, the RRM settlement at $260.5 million for ACSC members reflects substantial savings to ACSC cities. Settlement at $260.5 million is fair and reasonable. The ACSC Executive Committee consisting of city employees of 18 ACSC members urges all ACSC members to pass the Resolution/Ordinance before October 1, 2026. New rates become effective October 1, 2026. The alternative to accepting the settlement is to let the proposed rates go into effect while appealing to the Texas Railroad Commission. which would be a lengthy and expensive process borne by the City. The City Council Utilities Committee has been briefed on the proposed settlement. RESOLUTION NO. 2026-018 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 2026 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, 2026, Atmos Mid -Tex filed its 2026 RRM rate request with ACSC Cities based on a test year ending December 31, 2026; and WHEREAS, ACSC coordinated its review of the Atmos Mid -Tex 2026 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 $260.5 million on a system -wide basis with an Effective Date of October 1, 2026-land 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. WHEREAS, all constitutional and statutory prerequisites for the approval of this ordinance have been met, including but not limited to the Open Meetings Act and Chapter 211 of the Local Government Code; and WHEREAS, the City Council deems the adoption of this ordinance to be in the best interests of the health, safety, and welfare of the public. 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 $260.5 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 2026 RRM filing, is in the public interest, and is consistent with the City's authority under Section 103.001 of the Texas Utilities Code. Resolution No. 2026-018 2 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 recover annually an additional $260.5 million 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 2026 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, 2026. 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. Resolution No. 2026-018 3 DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS, BY A VOTE OF TO ON THIS 15th DAY OF SEPTEMBER, 2026. APPROVED: William D. Tate Mayor ATTEST: Tara Brooks City Secretary APPROVED AS TO FORM: Matthew C.G. Boyle City Attorney Resolution No. 2026-018 4 MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: R — RESIDENTIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Application Applicable to Residential Customers for all natural gas provided at one Point of Delivery and measured through one meter. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and Ccf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 24.35 per month Rider CEE Surcharge $ 0.05 per month' Total Customer Charge $ 24.40 per month Commodity Charge — All Ccf $ 1.03839 per Ccf Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalization calculated in accordance with Rider WNA. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. 'Reference Rider CEE - Conservation and Energy Efficiency as approved in GUD 19196. Surcharge billing effective July 1, 2026. MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: C — COMMERCIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Application Applicable to Commercial Customers for all natural gas provided at one Point of Delivery and measured through one meter and to Industrial Customers with an average annual usage of less than 30,000 Ccf. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and Ccf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 115.50 per month Rider CEE Surcharge $ 0.00 per month' Total Customer Charge $ 115.50 per month Commodity Charge — All Ccf $ 0.27784 per Ccf Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalization calculated in accordance with Rider WNA. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. Presumption of Plant Protection Level For service under this Rate Schedule, plant protection volumes are presumed to be 10% of normal, regular, historical usage as reasonably calculated by the Company in its sole discretion. If a customer believes it needs to be modeled at an alternative plant protection volume, it should contact the company at l rl tX_C ;V_t'o-9e_J ))11)t() Reference Rider CEE - Conservation and Energy Efficiency as approved in GUD 19196. Surcharge billing effective July 1, 2026. MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: I — INDUSTRIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Application Applicable to Industrial Customers with a maximum daily usage (MDU) of less than 200 MMBtu per day for all natural gas provided at one Point of Delivery and measured through one meter. Service for Industrial Customers with an MDU equal to or greater than 200 MMBtu per day will be provided at Company's sole option and will require special contract arrangements between Company and Customer. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and MMBtu charges to the amounts due under the riders listed below: Charge Customer Charge per Meter First 0 MMBtu to 1,500 MMBtu Next 3,500 MMBtu All MMBtu over 5,000 MMBtu Amount $ 2,304.50 per month $ 0.9582 per MMBtu $ 0.7018 per MMBtu $ 0.1505 per MMBtu Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). Curtailment Overpull Fee Upon notification by Company of an event of curtailment or interruption of Customer's deliveries, Customer will, for each MMBtu delivered in excess of the stated level of curtailment or interruption, pay Company 200% of the midpoint price for the Katy point listed in Platts Gas Daily published for the applicable Gas Day in the table entitled "Daily Price Survey." Replacement Index In the event the "midpoint" or "common" price for the Katy point listed in Platts Gas Daily in the table entitled "Daily Price Survey" is no longer published, Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authoritative by the natural gas industry and most closely approximating the applicable index. MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: I — INDUSTRIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. Special Conditions In order to receive service under Rate I, Customer must have the type of meter required by Company. Customer must pay Company all costs associated with the acquisition and installation of the meter. Presumption of Plant Protection Level For service under this Rate Schedule, plant protection volumes are presumed to be 10% of normal, regular, historical usage as reasonably calculated by the Company in its sole discretion. If a customer believes it needs to be modeled at an alternative plant protection volume, it should contact the company at MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: T — TRANSPORTATION APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Application Applicable, in the event that Company has entered into a Transportation Agreement, to a customer directly connected to the Atmos Energy Corp., Mid -Tex Division Distribution System (Customer) for the transportation of all natural gas supplied by Customer or Customer's agent at one Point of Delivery for use in Customer's facility. This tariff is not available to customers with a maximum daily demand of 1,000 MMBtu or greater and a daily/annual load factor of 10% or less. Load factor is calculated as follows: annual usage / (maximum daily connected demand X 365). Load factors will be recalculated once each year to determine appropriate eligibility for Rate T. Type of Service Company's receipt and delivery of all gas quantities under the applicable Transportation Agreement will be on a wholly interruptible basis subject to the Terms and Conditions incorporated in the Transportation Agreement. If Customer is an Industrial Customer, then Customer may elect, at the reasonable discretion of Company, to contract for Plant Protection transportation quantities defined as the minimum natural gas required to prevent physical harm and/or protect critical safety to the plant facilities, plant personnel, or the public when such protection cannot be achieved through the use of an alternate fuel. Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's bill will be calculated by adding the following Customer and MM13tu charges to the amounts and quantities due under the riders listed below: Charge Customer Charge per Meter First 0 MMBtu to 1,500 MMBtu Next 3,500 MMBtu All MM13tu over 5,000 MM13tu FIT, 17.7 MITI $ 2,304.50 per month $ 0.9582 per MMBtu $ 0.7018 per MMBtu $ 0.1505 per MMBtu Upstream Transportation Cost Recovery: Plus an amount for upstream transportation costs in accordance with Part (b) of Rider GCR. Retention Adjustment: Plus a quantity of gas as calculated in accordance with Rider RA. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable rider(s). MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: T — TRANSPORTATION APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Imbalance Fees All fees charged to Customer under this Rate Schedule will be charged based on the quantities determined under the applicable Transportation Agreement and quantities will not be aggregated for any Customer with multiple Transportation Agreements for the purposes of such fees. Monthly Imbalance Fees Customer shall pay Company the greater of (i) $0.10 per MMBtu, or (ii) 150% of the difference per MMBtu between the highest and lowest "midpoint" price for the Katy point listed in Platts Gas Daily in the table entitled "Daily Price Survey" during such month, for the MMBtu of Customer's monthly Cumulative Imbalance, as defined in the applicable Transportation Agreement, at the end of each month that exceeds 10% of Customer's receipt quantities for the month. Overpull Fee Upon notification by Company of an event of interruption of Customer's deliveries, Customer will, for each MMBtu delivered in excess of the stated level of interruption, pay Company 200% of the midpoint price for the Katy point listed in Platts Gas Daily published for the applicable Gas Day in the table entitled "Daily Price Survey." Replacement Index In the event the "midpoint" or "common" price for the Katy point listed in Platts Gas Daily in the table entitled "Daily Price Survey" is no longer published, Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authoritative by the natural gas industry and most closely approximating the applicable index. Agreement A transportation agreement is required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. Special Conditions In order to receive service under Rate T, customer must have the type of meter required by Company. Customer must pay Company all costs associated with the acquisition and installation of the meter. MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: SUR — SURCHARGES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Application This Rider is applicable to customer classes in the incorporated areas under the RRM tariff as authorized by the state or any governmental entity, a municipality, or a regulatory authority pursuant to any statute, ordinance, order, rule, contract, or agreement. Monthly Calculation Surcharges will be calculated in accordance with the applicable statute, ordinance, order, rule, contract, or agreement. FASB ASC 740-10 (Fin48) Refund Applicable to Customers taking service under Rate Schedules R — Residential, C — Commercial, I — Industrial and T — Transportation. To ensure that gas utility customers receive the benefit associated with the changes in the Company's Uncertain Tax Positions ("UTPs") arising from recognition of Texas Margin Tax returns. The decrease shall be calculated as follows: Beginning with implementation of rates from the negotiated RRM Tariff, and annually thereafter, the portion of UTP liabilities identified in Schedule FIN48-1.1 for the prior fiscal year shall be allocated based on the final class allocations of GUD No. 10170 as per the RRM Tariff, divided by the annual bill count to derive rates to be refunded through Rider SUR in the subsequent fiscal year. Each year's calculation will include a true -up (+ or - ) due to account for over/under collections. Amounts identified in Schedule FIN48-1 shall be adjusted to reflect any audit adjustments received from the Texas Comptroller of Public Accounts. No action on the part of the Regulatory Authority is required to give effect to the amount to be refunded to customers. However, any amount refunded to customers shall be fully subject to review for reasonableness and accuracy in the gas utility's next statement of intent proceeding with the Railroad Commission of Texas, and if applicable, the gas utility shall be required to reconcile any discrepancies. The following refund as authorized in the most recent negotiated RRM Tariff shall be refunded to each Rate Schedules R — Residential, C — Commercial, I — Industrial and T — Transportation customer's monthly bill in each month for a 12-month period. The refund amount by month by Rate Schedule is shown in the table below: Rate Schedules Rate Rate R — Residential Sales $ (0.14) Rate C — Commercial Sales $ (0.49) Rate I — Industrial Sales $ (10.47) Rate T — Transportation $ (10.47) MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: SUR — SURCHARGES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Unprotected Excess Deferred Income Tax Amortization The allocated RRM Cities balance of the Unprotected portion of the Excess Deferred Income Taxes ("EDIT") remaining after implementation of rates at October 1, 2026 shall be applied to each Rate Schedules R — Residential, C — Commercial, 1— Industrial and T — Transportation customer's monthly bill for a one -month period. The refund amount by Rate Schedule is shown in the table below: Rate Schedules Rate Rate R — Residential Sales $ (4.45) Rate C — Commercial Sales $ (14.80) Rate I — Industrial Sales $ (319.02) Rate T — Transportation $ (319.02) Maximum Allowable Operating Pressure ("MAOP") Hvdrostatic Testing Cost Recovery The allocated RRM Cities balance of the MAOP Hydrostatic Testing Cost as of December 31, 2025 is to be recovered through a monthly rate. This monthly rate shall be applied to each Rate Schedules R — Residential, C — Commercial, 1 — Industrial and T — Transportation customer's monthly bill for approximately twelve (12) months or until all approved costs are recovered from the applicable customer classes. The monthly recovery rate by Rate Schedule is shown in the table below: Rate Schedules Rate Rate R — Residential Sales $ 0.30 Rate C — Commercial Sales $ 0.98 Rate I — Industrial Sales $ 21.17 Rate T — Transportation $ 21.17 MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: WNA — WEATHER NORMALIZATION ADJUSTMENT APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Provisions for Adiustment The Commodity Charge per Ccf (100 cubic feet) for gas service set forth in any Rate Schedules utilized by the cities of the Mid -Tex Division service area for determining normalized winter period revenues shall be adjusted by an amount hereinafter described, which amount is referred to as the "Weather Normalization Adjustment." The Weather Normalization Adjustment shall apply to all temperature sensitive residential and commercial bills based on meters read during the revenue months of November through April. The five regional weather stations are Abilene, Austin, Dallas, Waco, and Wichita Falls. Computation of Weather Normalization Adiustment The Weather Normalization Adjustment Factor shall be computed to the nearest one -hundredth cent per Ccf by the following formula: (HSFi x (NDD-ADD) ) WNAFi = Ri (BLi + (HSFi x ADD) ) Where i = any particular Rate Schedule or billing classification within any such particular Rate Schedule that contains more than one billing classification WNAFi = Weather Normalization Adjustment Factor for the ith rate schedule or classification expressed in cents per Ccf Ri = Commodity Charge rate of temperature sensitive sales for the ith schedule or classification. HSFi = heat sensitive factor for the ith schedule or classification divided by the average bill count in that class NDD = billing cycle normal heating degree days calculated as the simple ten-year average of actual heating degree days. ADD = billing cycle actual heating degree days. Bli = base load sales for the ith schedule or classification divided by the average bill count in that class The Weather Normalization Adjustment for the jth customer in ith rate schedule is computed as: WNA; = WNAFi x q;j Where q;j is the relevant sales quantity for the jth customer in ith rate schedule. MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: WNA — WEATHER NORMALIZATION ADJUSTMENT APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2026 Base Use/Heat Use Factors Residential Commercial Base use Heat use Base use Heat use Weather Station Ccf Ccf/HDD Ccf Ccf/HDD Abilene 9.78 0.1448 91.89 0.8018 Austin 9.07 0.1318 213.26 0.9418 Dallas 12.87 0.1937 192.49 1.1269 Waco 9.39 0.1261 159.17 0.8068 Wichita 10.61 0.1364 133.65 0.6965 Falls Weather Normalization Adiustment (WNA) Report On or before June 1 of each year, the company posts on its website at www.atmosenergy.com/MTXtariffs, in Excel format, a Weather Normalization Adjustment (WNA) Report to show how the company calculated its WNAs factor during the preceding winter season. Additionally, on or before June 1 of each year, the company files one hard copy and an Excel version of the WNA Report with the Railroad Commission of Texas' Gas Services Division, addressed to the Director of that Division. Line No. Description (a) ATMOS ENERGY CORP., MID-TEX DIVISION MID-TEX RATE REVIEW MECHANISM PENSIONS AND RETIREE MEDICAL BENEFITS FOR CITIES APPROVAL TEST YEAR ENDING DECEMBER 31, 2025 1 Proposed Benefits Benchmark - Fiscal Year 2026 Willis Towers Watson Report as adjusted (1) (2) (3) 2 Allocation Factor 3 Proposed Benefits Benchmark Costs Allocated to Mid -Tex (Ln 1 x Ln 2) 4 O&M and Capital Allocation Factor 5 Proposed Benefits Benchmark Costs to Approve (Ln 3 x Ln 4) 6 7 O&M Expense Factor (WP_F-2.3, Ln 2) 8 9 Summary of Costs to Approve (1): 10 Total Pension Account Plan 11 Total Post -Employment Benefit Plan 12 Total Supplemental Executive Benefit Plan 13 Total (Ln 10 + Ln 11 + Ln 12) Shared Services Mid -Tex Direct Post- Post- Supplemental Pension Employment Pension Employment Executive Benefit Adjustment Account Plan Benefit Plan Account Plan Benefit Plan Plan Total (b) (c) (d) (e) (f) (g) $ 200,382 $ (490,197) $ 951,536 $ (3,288,240) $ 72,926 46.66% 46.66% 87.00% 87.00% 100.00% $ 93,490 $ (228,707) $ 827,882 $ (2,860,928) $ 72,926 100.00% 100.00% 100.00% 100.00% 100.00% $ 93,490 $ (228,707) $ 827,882 $ (2,860,928) $ 72,926 $ (2,095,337) 80.27% 80.27% 36.19% 36.19% 8.73% $ 75,047 $ 299,646 $ 374,693 $ (183,588) $ (1,035,492) (1,219,080) $ 6,367 6,367 $ 75,047 $ (183,588) $ 299,646 $ (1,035,492) $ 6,367 $ (838,020)