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Item # 5.

Council Meeting

Meeting Date:	09/22/2020
Department:	City Manager

AGENDA CAPTION:

Consider Action on a Resolution to Approve a Negotiated Settlement Between the Atmos Cities Steering Committee and Atmos Energy Corp., Mid-Tex Division Regarding the Company's 2020 Rate Review Mechanism.

BACKGROUND:

The Town, along with 171 other 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 rate review process, referred to as Rate Review Mechanism (“RRM”), as a substitute for future filings under the GRIP statute.

On March 31, 2020, the Company filed a rate request pursuant to the RRM Tariff adopted by ACSC members. The Company claimed that its cost-of-service in the test year ending December 31, 2019, entitled it to additional system-wide revenues of $141.2 million. Application of the standards set forth in ACSC’s RRM Tariff required Atmos to reduce its request to $136.3 million, $98.7 million of which would be applicable to ACSC members. ACSC’s consultants concluded that the system-wide deficiency under the RRM regime should be $111.5 million instead of the claimed $136.3 million. The amount of the $111.5 million deficiency applicable to ACSC members would be $80.8 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 $90 million from ACSC Cities, but with a two-month delay in the Effective Date until December 1, 2020. This should save the ratepayers approximately $9 million such that the case is functionally equivalent to the ACSC consultant's recommendation of $80.8 million.

The ACSC Executive Committee recommended a settlement at $90 million. The Effective Date for new rates is December 1, 2020. ACSC members should take action approving the resolution before November 1, 2020.

The average residential bill will increase by approximately $5.15 per month, or 9.9%.

RECOMMENDATION:

Administration recommends approval.

Attachments
Resolution - Atmos Rate Review Mechanism 2020
Rate Review Mechanism (RRM) FAQs