Title
Resolution - A Resolution of the City Council of the City Of Mansfield, Texas, Approving A Negotiated Settlement Between the Atmos Cities Steering Committee (“ACSC”) and Atmos Energy Corp., Mid-Tex Division Regarding the Company’s 2019 Rate Review Mechanism Filing
Requested Action
Consider approval of the attached resolution, thus ratifying the settlement established by the executive committee of the Atmos Cities Steering Committee to apply to the City of Mansfield.
Recommendation
Staff recommends that council approve the attached resolution.
Description/History
The City of Mansfield, 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 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, 2019, 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, 2018, entitled it to additional system-wide revenues of $70 million. Application of the standards set forth in ACSC’s RRM Tariff required Atmos to reduce its request to $54 million, $39.3 million of which would be applicable to ACSC members. ACSC’s consultants concluded that the system-wide deficiency under the RRM regime should be $38.7 million instead of the claimed $54 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 $35.4 million from ACSC Cities.
The Executive Committee recommends a settlement at this amount. The Effective Date for new rates is October 1, 2019. ACSC members should take action approving the Resolution before the end of September.
Justification
The Legislature’s GRIP process allowed gas utilities to receive annual rate increases 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 $70 million in additional system-wide revenues, or $54 million from ACSC Cities, the RRM settlement at $35.4 million for ACSC Cities reflects substantial savings to ACSC Cities in the amount of $18.6 million. ACSC’s consultants produced a report indicating that Atmos had justified increased revenues for ACSC Cities of at least $32.7 million. Settlement at $35.4 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 before September 30, 2019. New rates become effective October 1, 2019.
Funding Source
N/A
Prepared By
Jeff Price, Director of Utilities
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