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HomeMy WebLinkAboutOrdinance 19354-09-2010s ORDINANCE NO 19354-09-2010 AN ORDINANCE ESTABLISHING MAXIMUM PERMITTED RATES AND CHARGES THAT ATMO.S ENERGY CORP., MID-TEX DIVISION, MAY ASSESS CUSTOMERS IN THE CITY OF FORT WORTH, APPROVING AND RATIFYING A RELATED SETTLEMENT AND RESOLUTION BETWEEN ATMOS ENERGY CORP., MID-TEX DIVISION, AND THE ATMOS CITIES STEERING COMMITTEE, OF WHICH THE CITY IS A MEMBER, ADOPTING DECLARATIONS AND FINDINGS RELATED TO RATES AND CHARGES ASSESSED TO CUSTOMERS IN THE CITY OF FORT WORTH, REPEALING ANY PREVIOUSLY ADOPTED ORDINANCES IN CONFLICT HEREWITH, PROVIDING FOR SEVERABILITY, AND ESTABLISHING AN EFFECTIVE DATE. -~ WHEREAS, on May 16 2006 the City Council adopted Resolution No 3348-OS-2006 authorizing participation by the Crty of Fort Worth (the "City") m the Atmos Cities Steering Committee (the "Steering Committee") for assistance m rate cases involving Atmos Energy Corp Mid Tex Division ("Atmos"), including the retention of consultants and outside legal counsel associated with such assistance and WHEREAS, on September 20 2007 Atmos filed with the City Secretary a `Statement of Intent to Increase Gas Utility Rates" (the "2007 Rate Filing") under which proposed increased rates charged by Atmos would go into effect m the City on October 25 2007 and WHEREAS, on February 19 2008, the City Council adopted Ordinance No 17989-02 2008 approving a Settlement Agreement between Atmos and the Steering Committee as to disputed matters in the 2007 Rate Filing and certain other matters identified m that Ordinance, including, but not limited to two previous rate cases (styled GUD No 9400 and GUD No 9670), which were then pending on appeal in the Travis County District Court from orders by the Railroad Commission, as well as continuing disagreement, disputes, and litigation over the application of and basis for Gas Rehabilrty Infrastructure Program (GRIP) surcharges, as provided in Section 104.301 of the Texas Utilities Code (the "Settlement Agreement") and Page 1 of 7 Atmos RRM Ordinance (2009) WHEREAS, m accordance with the Settlement Agreement, pursuant to Ordinance No 17989-02 2008 the City Council established maximum permitted rates and charges that Atrnos could charge customers m the City m lieu of the then-existing rates and the rates proposed in the 2007 Rate Filing and approved an expedited rate review mechanism ("RRM") for future rate proceedings involving Atrnos for at least the next three (3) years, and WHEREAS, in accordance with the process outlined m the Settlement Agreement, on or about March 15 2010 Atrnos filed with the City its third application pursuant to the RRM tariff to increase natural gas rates by approximately $70.2 million (the "2010 RRM Filing"), such zncrease to be effective m every mumcipalrty that adopted the RRM tariff as part of their approval of the Settlement Agreement; and WHEREAS, the Steering Committee and its lawyers and consultants have reviewed the 2010 RRM Filing and concluded that the evidence provided by Atrnos in support of its 2010 RRM Filing does not justify the proposed rate increase; and WHEREAS Atrnos Mid-Tex has commenced a program to replace steel service lines based on a relative leak repair risk analysis, and WHEREAS the Steering Committee has entered a Settlement Agreement ("Attachment C" to this Ordinance) with Atrnos Mid Tex to (1) increase base rate revenues by $27 million; (2) extend the RRM process, with modifications for an additional two cycles and to thereafter require the filing of a system-wide Statement of Intent rate case on or before June 1 2013 and (3) m the interim to allow current recovery of incremental direct costs of the steel service line replacement program in rates set via this ordinance and m future RRMs, and WHEREAS, on the basis of the review and analysis of Atrnos 2010 RRM Filing undertaken by the Steering Committee s lawyers and consultants, the Steering Committee s Page 2 of 7 Atrnos RRM Ordinance (2009) executive committee has recommended that the City Council adopt the rate tariffs attached hereto as Attachment "A," which 1s hereby made a part of this Ordinance for all purposes, resulting m an increase of approximately $27 million m Atmos revenue requirements m all municipalities that adopted the RRM tariff as part of their approval of the Settlement Agreement; and WHEREAS, the attached tariffs implementing new rates and Atmos proof of revenues, as set forth in Attachment "B," which is hereby made a part of this Ordinance for all purposes, are consistent with the Settlement Agreement and negotiated resolution reached by and between Atmos and the Steering Committee; and WHEREAS, rt is the intention of the parties to the Settlement Agreement that the City receive the benefit of any other settlement agreement that Atmos enters into with other entities arising out of its RRM filing or any associated appeals entered by the Railroad Commission of` Texas regarding Atmos request to increase rates, with acknowledgment by the City that the exercise of this right is conditioned upon the City's acceptance of all rates, revenues, terms and conditions of any other settlement agreement or associated appeals arising out of such filing in toto and WHEREAS, the negotiated resolution of the 2010 RRM Filing and the resulting rates are, as a whole, m the public interest; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FORT WORTH, TEXAS Section 1. FINDINGS. Page 3 of 7 Atmos RRM Ordinance (2009) That the City Council, pursuant to its exclusive original jurisdictional authority over the rates, operations and services of Atmos wrthm the City and m the exercise of rts sound legislative discretion, makes the following findings of fact: 1.1 The statements set forth in the Recitals above are true and correct and are hereby incorporated as part of the findings herein. 1.2. Based on all information previously provided to and before the Crty Council, the City Council hereby finds that the rates proposed by Atmos m its 2010 RRM Filing are unreasonable. 1.3. The tariffs attached hereto as Attachment "A" and Atmos proof of revenues attached hereto as Attachment "B" are dust and reasonable and in the public interest. Section 2. RATES AND CHARGES ORDERED That based on the findings of fact set forth in Section 1 of this Ordinance and all other information before the City Council, Atmos is hereby authorized and ordered to implement the tariffs attached hereto as Attachment "A." Section 3. SETLEMENT AGREEMENT RATIFIED The Settlement Agreement, attached as Attachment C which includes m addition to resolution of the Third RRM. (1) extension of a modified RRM process, Page 4 of 7 Atmos RRM Ordinance (2009) (2) requirement that Atmos Mid Tex file a system wide Statement of Intent rate case on or before June 1 2013 and (3) current recovery of incremental direct costs for a steel service line replacement program, is hereby ratified. Section 4. RESERVATION OF RIGHTS. That notwrthstandmg anything to the contrary herein, if the City determines that any rates, revenues, terms and conditions, or benefits resulting from a final order or subsequent negotiated settlement approved m any proceeding involving Atmos RRM filing would be more beneficial to the City than the terms of the attached tanff, then the more favorable rates, revenues, terms and conditions, or benefits shall additionally accrue to the City Exercise of this nght is conditioned upon the City's acceptance of all rates, revenues, terms, and conditions of any other settlement agreement or associated appeals ansmg out of such RRM filing in toto Section 5. REPEAL OF ORDINANCES IN DIRECT CONFLICT That if any provisions or conditions of this Ordinance directly conflict with any provisions or conditions of other Ordinances previously adopted by the City Council, the conflicting provisions of such previously adopted Ordinances are hereby repealed. Section 6. COMPLIANCE WITH OPEN MEETINGS ACT REQUIREMENTS. Page 5 of 7 Ahnos RRM Ordinance (2009) That the meeting m which this Ordinance was adopted was in all things conducted m stnct compliance with the Texas Open Meetings Act, as codified at Chapter 551 Texas Government Code. Section 7 SEVERABILITY That if any portion, section or part of a section of this Ordinance is subsequently declared invalid, inoperative or void for any reason by a court of competent ~unsdiction, the remaining portions, sections or parts of sections of this Ordinance shall be and remain in full force and effect and shall not in any way be impaired or affected by such decision, opinion or judgment. Page 6 of 7 Atmos RRM Ordinance (2009) Section 8. EFFECTIVE DATE. That this Ordinance shall take effect and be m full force and effect from and after the date of its adoption. The City Secretary is hereby directed to deliver a certified copy of this Ordinance to Atmos, care of David Park, Vice President Rates and Regulatory Affairs, Atmos Energy Corporation, 5420 LBJ Freeway Suite 1800, Dallas, TX 75240 and to the Steering Committee s outside legal counsel, Geoffrey Gay Lloyd Gosselmk Rochelle & Townsend, P C P O Box 1725 Austin, TX 78767 1725 AND IT IS SO ORDAINED ADOPTED AND EFFECTIVE September 21, 2010 APPROVED AS TO FORM AND LEGALITY B / Y Peter Vaky Assistant Crty Attorney I3a~e• G - l?OS/ ~-2l -/D Page 7 of 7 Atmos RRM Ordinance (2009) ATMOS ENERGY CORPORATION MID-TEX DIVISION Exhibit A to Settlement Agreement Attachment A to Ordinance RATE SCHEDULE: R -RESIDENTIAL SALES APPLICABLE TO• All Cities except the City of Dallas and all unincorporated areas EFFECTIVE DATE: Bilts Rendered on or after 10/01/2010 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 Mcf charges to the amounts due under the riders listed below Charge: Y~nount Customer Charge per Bill $ 7 15 per month Commodity Charge -All Mcf $2.5246 per Mcf Gas Cost Recovery Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (bj respectively of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalizafion calculated in accordance with Rider WNA. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. 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 muniapality 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 n:quired. 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. ATMOS ENERGY CORPORATION MID-TEX DNISION EaChibit A to Settlement Agreement Attachment A to Ordinance RATE SCHEDULE. C -COMMERCIAL SALES APPLICABLE TO• All Cities except the City of Dallas and all unincorporated areas EFFECTNE DATE. Bills Rendered on or after 10/01/2010 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 3,000 Mcf. 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 iumished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and Mcf charges to the amounts due under the riders listed below Charge Amount Customer Charge per Bill $ 13.91 per month Commodity Charge All Mcf $ 1 0796 per Mcf 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. Rate Review Mechanism: Plus or Minus an amount for rates as ca~ulated in accordance with Rider RRM. 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{5). 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. ATMOS ENERGY CORPORATION MID-TEX DNISION Exhibit A to Settlement A~eement Attachment A to Ordinance RATE SCHEDULE: 1-INDUSTRIAL SALES APPLICABLE TO: All Cities except the City of Dallas and all unincorporated areas EFFECTNE DATE. Bills Rendered on or after 10!01!2010 Application Applicable to Industrial Customers with a maximum daily usage (MDU) of less than 3,500 MMBtu per day for aq 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 3,500 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 .Amount Customer Charge per Meter $ 450 00 per month First 0 MMBtu to 1,500 MMBtu $ 0.2750 per MMBtu Next 3,500 MMBtu $ 0.2015 per MMBtu All MMBtu over 5,000 MMBtu $ 00433 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. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. 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 ATMOS ENERGY CORPORATION MID•TEX DNISION Exhibit A to Settlement Agreement Attachment A to Ordinance RATE SCHEDULE: 1-INDUSTRIAL SALES APPLICABLE TO: All Cities except the City of Dallas and all unincorporated areas EFFECTNE DATE: Bills Rendered on or after 10101/2010 Replacement Index In the event the "midpoint" or "common" price for the Katy point listed in Pla[fs 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 An Agreement for Gas Service may be required. Notice Service hereunder and the rates far 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 ATMOS ENERGY CORPORATION MID TEX DIVISION Exhibit A to Settlement Agrcement Attachment A to Ordinance RATE SCHEDULE. T -TRANSPORTATION APPLICABLE TO• All Cities except the City of Dallas and all unincorporated areas EFFECTNE DATE. Bills Rendered on or after 10/0112010 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 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 bill will be calculated by adding the following Customer and MMBtu charges to the amounts and quantities due under the riders {fisted below - ,::. Cltatage ;, 'Amount-- Customer Charge per Meter $ 450 00 per month First 0 MMBtu to 1,500 MMBtu $ 0.2750 per MMBtu Next 3,500 MMBtu $ 0.2015 per MMBtu All MMBtu over 5,000 MMBtu $ 0.0433 per MMBtu Upstream Transportation Cost Recovery Plus an amount for upstream transportation costs in accordance with Part (b) of Rider GCR. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. 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). )mbalance Fees All fees charged to Customer under this"rRate 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. ATMOS ENERGY CORPORATION MID-TEX DMSION Exhibit A to SettMment Agreement Attachment A to Ordinance RATE SCHEDULE: T -TRANSPORTATION APPLICABLE TO• Ail Cities except the City of Dallas and all unincorporated areas EFFECTNE DATE: Bills Rendered on or after 10/01!2010 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 P/afts 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. Curtailment Overpull Fee Upon notification by Company of an event of curtailment or intereuption 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 P/atts 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 Plaits 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 ATMOS ENERGY CORPORATION MID TEX DNISION Exhibit A to Settlement Agreement Attachment A to Ordinance RIDER: WNA -WEATHER NORMALIZATION ADJUSTMENT APPLICABLE TO: All Cltfes except the City of Dallas and all unincorporated areas EFFECTNE DATE: Bills Rendered on or after 10/01/2010 Provisions for Adjustment 'The base rate per Mcf (1,000 000 Btu) 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 shat) apply to all temperature sensitive residential and commercial bills based on meters read during the revenue months of November through Aprit. The five regional weather stations are Abilene, Austin, Dallas, Waco, and Wichita Falls. Computation of Weather Normalization Adjustment The Weather Normalization Adjustment Factor shall be computed. to the nearest one-hundredth cent per Mcf by the following formula: V11NAFi = RI Where {HSFi x (NDD-ADD) ) (BLi + (HSFi x ADD) ) i = any particu{ar Rate Schedule or bitting classification within any such particular Rate Schedule that contains more than one billing classification WNAFi = Weather Normalization Adjustment Factor for the i~ rate schedule or classification expressed in cents per Mcf Ri = base rate of temperature sensitive sales for the ith schedule or classification approved by the entity exercising original jurisdiction. HSFi - heat sensitive factor for the ith schedule or classification calculated as the slope of the linear regression of average sales per bill (Mcf) and actual heating degree days by month for the test year by schedule or classification and weather station as part of the RRM filing. 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 calculated as the y- intercept of the linear regression of average sales per bill (Mcf) and actual heating degree days by month for the test year by schedule or classification and weather station as part of the RRM filing. The Weather Normalization Adjustment for the jth customer in ith rate schedule is computed as: WNPy = WNAF, x q,t ATMOS ENERGY CORPORATION MID-TEX DIVISION Exhibit A to Settlement Agreement Attachment A to Ordinance RIDER: WNA -WEATHER NORMALIZATION ADJUSTMENT APPLICABLE TO: All Cities except the Clty of Dallas and all unincorporated areas EFFECTIVE DATE: Bills Rendered on or after 10/0112010 Where qq is the relevant sales quantity for the jth customer in ith rate schedule. Filings with Entities Exeroisino Original Jurisdiction A5 part of its annual RRM filing the Company will file (a} a copy of each computation of the Weather Nommalization Adjustment Factor (b) a schedule showing the effective date of each such Weather Normalization Adjustment, (c) a schedule showing the factors of values used in calculating such Weather Normalization Adjustment and (d) a random sample and audit of thirty {30) actual customer bills, with customer information deleted, for each rate schedule or classification to which the WNA was applied in the preceding 12 month period. To the extent that source data is needed to audit the WNA application, such data will be provided by the Company as part of the annual RRM filing If the RRM is discontinued, as provided in the Rider RRM tariff, the information required herein to be filed with the entities exercising original jurisdiction shall be filed on March 1 of each year Base Use/Heat Use Factors Residential Commercial Base use Heat use Base use Heat use Waathar SMatinn Mrf nn,~iunn ~Anf ~e..F~unn - Abilene 106 0131 9 03 .0588 Austin 1 17 .0138 19.39 0674 Dallas 1 49 0191 20.37 .0872 Waco 1 13 0137 11.81 .0610 Wichita Falls 1 19 0136 11.21 .0549 Sample WNAFj Calculation: ( 0131 x (30-1 ~ ) 3352 per Mcf = 2.5246 x (1 06 + (0131 x 17) ) Where i = Residential Single Block Rate Schedule Ri - 2.5246 per MCF HSFi = 0131 (Residential Abilene Area) NDD = 30 HDD (Simple ten-year average of Actual HDD for Abilene Area - 9/15/06 -10/14/06) ADD = 17 HDD (Actual HDD for Abilene Area - 9/15/06 -10/14/06) Bli - 1 06 Mcf (Residential Abilene Area) ATMOS ENERGY CORPORATION MID-TEX DMSION Exhibit A to Settlement Agreement Attachment A to Ordinance RIDER: RRM -RATE REVIEW MECHANISM APPLICABLE TO: All Cities except the City of Dallas and all uriincorporatedxreas EFFECTME DATE: Bills Rendered on or after 10/01/2010 1. Purpose: This mechanism is designed to provide annual earnings transparency All rate calculations under this tariff shall be made on a system wide basis. If, through the implementation of the provisions of this mechanism, it is determined that rates should be decreased or increased,. then rates will be adjusted accordingly in the manner set forth herein: The rate adjustments implemented under this mechanism will reflect annual changes in the Company's cost of service and rate base. This Rider RRM will be effective for the period commencing with the Company's RRM filing on April 1 2011 and concluding with the implementation of new final rates established pursuant to the general rate case that Atmos will file on or before June 1 .2013 II. Definitions a} The Annual Evaluation Date shall be the date the Company will make its annual filing under this mechanism. The Annual Evaluation Date shall be no later than April 1 of each year This filing shall be effective in electronic form where practicable. b) Audited Financial Data shall mean the Company's books and records related to the Company's Mid- Tex operating area and shared services operations. Audited Financial Data shall not require the schedules .and information provided under this tariff to undergo a separate financial audit by an outside auditing firm similar to the Company's annual financial audit. c) The Evaluation Period is defined as the twelve month period ending December 31 of each calendar year d) The Rate Effective Period is defined as the later of the twelve month period for which rates determined under this mechanism will be in effect or subsequent rates are implemented. e) Per Connection Basis is defined as the existing average number of Mid-Tex active meters to customers during the Evaluation Period. f) Final Order is defined as the most recent order establishing the Company's latest effective rates for the area in which the mechanism is implemented, and shall include municipal rate ordinances and resolutions. III. Rate Review Mechanism The Company shall file with each regulatory authority having original jurisdiction over the Company's rates the schedules specified below for the Evaluation Period, with the filing to be made by the Annual Evaluation Date following the end of the Evaluation Period. The schedules, which will be based upon the Company's Audited Flnancia! Data, as adjusted, and provided in the same format as Atmos' RRM filing with municipalities on March 15, 2010 will exclude atrue-up computation, but will include the following: a) Evaluation Period ending balances for actual gross plant in service, accumulated depreciation, accumulated deferred income taxes, inventory working capital, and other rate base components will be used for the calculation of rates for the Rate Effective Period. The ratemaking treatments, principles, findings and adjustments included in the Final Order will apply Regulatory adjustments due to prior regulatory rate base adjustment disaAowances will be maintained. Cash working capital will be calculated using the lead/lag days approved in the Final Order Accumulated deferred income taxes (ADIT) will be calculated using the methodology used in the Final Order The RRM Schedules & Information section of this tariff identifies those ADIT components to be included in the calculation of rate base for both the Evaluation Period and Rate Effective Period calculations. ATMOS ENERGY CORPORATION MID-TEX DIVISION Exhibit A to Settlement Agreement Attachment A to Ordinance RIDER: RRM -RATE REVIEW MECHANISM APPLICABLE TO' All Cities except the City of Dallas and all unincorporated areas EFFECTNE DATE: Bills Rendered on or after 10/0112010 b) Depreciation rates booked in the period will be those approved in the Final Order or the rate most recently approved. All calculation methodologies will be those approved in the Final Order except where noted or included in this tariff, or in the most recent order addressing the methodology in addition, the Company shall exclude from operating and maintenance expense the discretionary costs to be disallowed from Rider RRM filings listed in the RRM Schedules and Information section of this tariff. c) Retum on Equity (ROE) shall be maintained at 9.7%. d} Cost of debt will reflect actual cost for the Evaluation Period. Evaluation Period ending balances for cost of debt and cap'dal structure will be used for the calculation of rates for the Rate Effective Period: Capital structure will be the actual Evaluation Period ratio of long-term debt and equity with percentage equity not to exceed 50% based on the calculation methodology outcomes used above. e) All applicable accounting adjustments along with all supporting work papers. Such adjustments may include: 1) Pro-forma adjustments to update and annualize costs and revenue billing determinants for the Rate Effective Period. 2) Pro-forma or other adjustments required to properly account for atypical, unusual, or nonrecurring events recorded during the Evaluation Period. f) Shared Services allocation factors shall be recalculated each year based on the latest component factors used during the Evaluation Period, but the methodology used will be that approved in the Final Order g) Any changes to corporate structure or allocation of common costs will include narrative explanations with the filing. N. Calculation of Rate Adiustment a) The Company shall provide additional schedules indicating the following revenue deficiency/sufficiency calculations using the methodology accepted in the Final Order with the exception of any allowance for atrue-up component in the April 1 2011 or the April 1 2012 RRM filings. Evaluation Period ending balances will be used for the caculation of rates for the Rate Effective Period. These schedules shall identify the rate adjustments necessary for the setting of prospective rates for the Rate Effective Period. The result shall be reflected in the proposed new rates to be established for the Rate Effective Period. In calculating the required rate adjustments, such adjustments will be made pro-ratably to the customer charge and usage charge based upon actual revenue generated, as adjusted under the Company's approved Weather Normalization Adjustment (WNA) Rider Provided, however that neither the Residential nor the Commercial customer charges may increase more than 20% per year b) The Company may also adjust rates for the Rate Effective Period to include recovery of any known and measurable changes to operating and maintenance costs including, but not limited to, payroll and compensation expense, benefit expense, pension expense, insurance costs, materials and supplies, bad debt costs, medical expense, transportation and building and lease costs for the Rate Effective Period Provided, however that adjustments may only be made for costs that are reasonable and necessary Additionally utility plant and rate base for the Rate ATMOS ENERGY CORPORATION MID TEX DIVISION Exhibit A to Settlement Agreement Attachment A to Ordinance RIDER: RRM -RATE REVIEW MECHANISM APPLICABLE TO: All Cities except the City of Gallas and all unincorporated areas EFFECTIVE DATE, Bllts Rendered on or after 10/01/2010 Effective Period will be established by using the Evaluation Period ending balances, Including associated changes in depreciation and amortization expense and taxes. In calculating the Company's known and measurable changes for prospective RRM adjustment purposes, the following limitations will apply on a Per Connection Basis. Operating and Maintenance expenses per connection for the Rate Effective Period cannot increase more than 5% per year without specific identification and justification. Any proposed adjustment above 5% per year is subject to the provisions of the Evaluation Procedures of this tariff. Such procedures provide that the regulatory authority will review the proposed adjustment and that the Company and regulatory authority will work collaboratively to seek agreement on the proposed adjustments to the Company's schedules and proposed rates. Justification for such expendifiares over the cap shall include an event or combination of events beyond the control of the Company The beginning adjusted Operation and Maintenance expense per connection for the 2007 RRM Evaluation Period will be limited to not exceed $151 million divided by the connections for the period. The increase in adjusted Operation and Maintenance expenses per connection for .the 2008 Rate Effective Period and the subsequent Rate Effective periods cannot exceed 5% per year without specific identification and justification 2. Net plant investment per connection for the Rate Effective Period cannot increase more than 5% per year without specific identification and justification. Any proposed adjustment above 5% per year is subject to the provisions of the Evaluation Procedures of this tariff. Such procedures provide that the regulatory authority will review the proposed adjustment and that the Company and regulatory authority wifl work collaboratively to seek agreement on the proposed adjustments to the Company's schedules and proposed rates. However in performing a cap test to verify compliance, the Company shall exclude any changes iri net plant investment associated with federal, state, or local mandates related to safety compliance, or road moves, including steel service line replacement program costs incurred prior to October 1 2010. The initial 2008 rate will be set using net plant limited to not exceed ($1,243,607,206 divided by average active meters for the 12 months ended June 30 2007] times 1 025 times the average acctive meters for calendar year 2007 Subsequent filing calculations of net plant investment will be made using the same method used in the Company's September 20, 2007 Statement of Intent except that Evaluation Period ending balances will be used for net plant in the calculation of rates for the Rate Effective Period. The rate increase limitations set forth in this tariff shall not preclude the Company from recovering any excluded net plant costs during a subsequent Evaluation Period in which the 5% limitation for net plant investment is not reached or in a subsequent Statement of Intent case. To the extent that the Company seeks to recover any excluded net plant costs during a subsequent Evaluafion Period in which the 5% limitation for net plant investment is not reached or in a subsequent Statement of Intent case, the Company shall identify these costs as a specific line item in the schedule accompanying the RRM rate adjustment filing. The regulatory authority may disallow any net plant investment that is not shown to be prudently incurred. Approval by the regulatory authority of net plant investment pursuant to the provisions of this tariff shall constitute a finding that such net plant investment was prudently incurred. Such finding of prudence shall not be subject to further review in a subsequent Evaluation Period or Statement of Intent filing. ATMOS ENERGY CORPORATION MID TEX DNiSiON Exhibit A to Settlement Agreement Attachment A to Ordinance RIDER: RRM -RATE REVIEW MECHANISM APPLICABLE TO: All Ctties except the City of Dallas and alt unincorporated areas EFFECTNE DATE: Bills Rendered on or after 10101!2010 c) Notwid~standing the limitations in subparts IV (a) through (b) of this tariff, the Company shall be entitled to separately adjust rates for the Rate Effective Period to include recovery for direct incremental costs associated with a steel service line replacement program incurred on and after October 1 2010 a return on equity of 9.0% for such incremental costs as capitalized, depreciation, and applicable taxes. Capital structure will be the actual Evaluation Period ratio of long-term debt and equity with percentage equity not to exceed 50%, based on the calculation methodology outcomes used above. Rate recovery associated with a steel service line replacement program shall be recovered through the Residential and Commercial customer charges and shall not be subject to or included in the rate increase limitations set forth in IV (a) through (b) of this tariff. Current year recovery factors are presumed to be $0 15 for residential customers and $0.41 for commercial customers. The rates will be adjusted annually however in no case wil! the per customer monthly cost recovery factors attributable to a steel service line replacement program exceed $0.44 for residential customers or $1.22 for commercial customers, prior to or during the pendency of the Company's next Statement of Intent case. Moreover the per customer amount attributable to cost recovery for a steel service line replacement program shall be subject to review by the regulatory authority in a subsequent Evaluation Period and all costs associated with a steel service line replacement program wiN be subject to a prudence/reasonableness review in the Company's next Statement of Intent rate case. d) The Company shall provide a schedule demonstrating the °proof of revenues" relied upon to calculate the proposed rate for the Rate Effective Period. The proposed rates shall conform as closely as is practicable to the revenue allocation principles approved in the Final Order V. Attestation A sworn statement shall be filed by the Company's Chief Officer in Charge of Mid-Tex Operations affirming that the filed schedules are in compliance with the provisions of this mechanism and are true and correct to the best of hisfier knowledge, information and belief. No testimony shall be filed, but a brief narrative explanation shall be provided of any changes to corporate structure or allocation of common costs. VI. Evaluation Procedures The regulatory authority having original jurisdiction over the Company's rates shall have no less than ninety (90) days to review the Company's filed schedules and work papers. The Company will be prepared to provide all supplemental information as may be requested to ensure adequate review by the relevant regulatory authority The Company shall not unilaterally impose any limits upon the provision of supplemental inforrrtafron and such information shall be provided within ten (10) working days of the original request. The regulatory authority may propose any adjustments it determines to be required to bring the schedules into compliance with the above provisions. During and following the ninety (90) day review period and a thirty (30) day response period, the Company and the regulatory authority will work collaboratively and seek agreement on, the proposed adjustments to the Company's schedule and proposed rates. If agreement has been reached by the Company and the regulatory authority the regulatory authority shall authorize an increase or decrease to the Company's rates so as to achieve the revenue levels indicated for the Rate Effective Period. lf, at the end of the thirty (30) day response period, the Company and the regutatory authority have not reached agreement on the proposed adjustments, the Company shall have the right to appeal the regulatory authority's action or inaction to the Railroad Commission of Texas. Upon the filing of any appeal, the Company shall have the right to implement the proposed RRM rate adjustment, including the adjustment attributable to steel service Ilne replacement program costs, subject to refund. ATMOS ENERGY CORPORATION MID-TEX DMSION Eahlbit A to Settlement Agreement Attachment A to Ordi'inance RIDER: RRM -RATE REVIEW MECHANISM APPLICABLE TO• All Cities except the City of Dallas and all unincorporated areas EFFECTNE DATE: Bills Rendered on or after 10!0112010 Rates established pursuant to the Rate Review Mechanism, if approved as provided herein, shall be effective on August 15 of each year VII. Reconsideration and Aooeal Orders issued pursuant to this mechanism are ratemaking orders and shall be subject to appeal under Sections 102.001(b) and 103.021 et seq., of the Texas Utilities Code (Vernon 2007). VIII. Notice Notice of the annual Rate Review Mechanism filing shall be provided pursuant to Section 104103, Tex. UTIL. CODE ANN. no later than forty-five (45) days after the Company makes its annual filing pursuant to this tariff. The notice to customers shall include the following information: a) a description of the proposed revision of rates and schedules; b) the effect the proposed revision of rates is expected to have on the rates applicable to each customer Bass and on an average bill for each affected customer c) the service area or areas in which the proposed rate adjustment would apply d) the date the proposed rate adjustment was filed with the regulatory authority and e) the Company's address, telephone number and website where information concerning the proposed rate adjustment may be obtained. IX. RRM Schedules and Information a_Accumulated Deferred Income Tax ("ADIT") Items To Be Recognized in Rate Base The following list identifies those ADlT components to be included in the calculation of rate base for both the Evaluation Period and Rate Effective Period calculations: Mid-Tex: Gas Plant in Service Insurance Accruals Benefit Accruals Deferred Expense Projects Allowance for Doubtful Accounts Customer Advances UNICAP Section 263A Costs (which shalt be removed from Atmos Mid-Tex when these costs are transferred to Atmos Pipeline Texas) Regulatory Asset Mid Tex Regulatory Liability Mid-Tex Other Plant SSU Customer Support: Gas Plant in Service ATMOS ENERGY CORPORATION MID TEX DNISION Exhibit A to Settlement Agreement Attachment A to Ordinance RIDER: RRM -RATE REVIEW MECHANISM APPLICABLE TO: All Cities except tine City of Dallas and all unincorporated areas EFFECTNE DATE: Bills Rendered on or after 10/01/2010 SSU General Office: Gas Plant in Service Insurance Accruals Benefits Accruals Deferred Expense Projects Prepaid Expenses Regulatory Liability Atmos 109 FAS 115 Adjustment Treasury Lock Adjustment Revenue Agent Report Carrytonxard Adjustments 1990-1985 Tax Net Operating Loss Credit Carryforwards State Bonus Depreciation R & D Credit Valuation Allowance Other Plant b. Discretionary Costs to Be Disallowed from Rider RRM filings The following types of employee reimbursed expenses and directly incurred costs are to be removed from all expense and rate base amounts included within Rider RRM filings for the Evaluation Period and for the Rate Effective Period: Amounts incurred for travel, meals or entertainment of employee spouses. Amounts for air travel that exceed published commercial coach airfares. Amounts incurred for hotel rooms exceeding $250 per night inclusive of taxes and fees assessed on such rooms. Amounts for alcoholic beverages. Amounts paid for admission to entertainment, sports, art or cultural events, and all event sponsorship costs. Amounts for social club dues or fees. Exhibit B to Settlement Agreement Attachment B to Ordinance Line No. ATMOS ENERGY CORP MID TEX DIVISION SUMMARY OF CURRENT AND PROPOSED RATE STRUCTURE TEST YEAR ENDING DECEMBER 31 2009 (2010 RRM SETTLEMENT PROPOSAL) 1 2 3 4 5 s 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Rate R Proposed (Beginning Current Oct 1) Customer Charge per month $7 00 Consumption Charge per MCF $2.2647 2008 RRM True-up per MCF $0.0000 2009 RRM True-up per MCF 0.0060 Total Consumption Charge per MCF $2.2707 Rate C Customer Charge per month $13.50 Consumption Charge per MCF 2008 RRM True-up per MCF 2009 RRM True-up per MCF Total Consumption Charge per MCF Rate 18 T Customer Charge per month Consumption Charge per MMBTU First 1,500 MMBTU Next 3 500 MMBTU Over 5,000 MMBTU 2008 RRM True-up per MMBTU First 1,500 MMBTU Next 3,500 MMBTU Over 5 000 MMBTU 2009 RRM True-up per MMBTU First 1,500 MMBTU Next 3 500 MMBTU Over 5,000 MMBTU $7.00 $2.5246 $o oooa 0.0000 $2.5246 $13.50 $0 9825 $1 0796 $0 0000 $o oooa 0.0052 0.0000 $0 9877 $1 0796 $425.00 $450.00 $0.2496 $0.2750 $01820 $0.2015 $0 0390 $0 0433 $0 0087 $0 0000 $0 0064 $0 0000 $0 0014 $0 0000 $0 0000 $a o000 $0 0000 $0 0000 $o.oooo 0.0000 Total Consumption Charge per MMBTU First 1500 MMBTU $0.2583 $0.2750 Next 3,500 MMBTU $01884 $0.2015 Over 5,000 MMBTU $0 0404 $0 0433 Exhibit B to 5ettlemeat Agreement Attachment B to Ordinance ATMOS ENERGY CORP MID-TEX ONISION AVERAGE BILL COMPARISON-OCTOBER 1, 2010 TEST YEAR ENDING DECEMBER 31 2005 Line OCTOBER 1, 2010 1 B tu R ~4.ti AAtf CURRENT PROPOSED CNANOE 2 Customer charge S 7.00 3 Crxteump5on dterge 4.6 MCF X 52.2707 10.31 4 RlderGCRP~tA 4.5 MCF X 54.8303 21.03 5 Rider GCR Pert B 4.5 MCF X 50.8811 3.00 8 7 SOMala S 41.34 8 Rider FF tt Rber TAX 541.34 X 0.07477 3.09 9 Tote) 10 11 Cuatanerd>srge 47.00 12 Cortsumptlar dl8rge 4.6 MCF X 52.6246 11.46 13 Rker GCR PaR A 4.5 MCF X 54.6303 21.03 14 Rider GCR Pert 6 4.5 MCF X 50.6811 3.00 18 18 $abtetal (42.49 17 Reverwo-rotated Tau Reimhur69meM 542.49 X 0.07477 3.18 18 Total X456 51.24 19 2,7946 20 21 Rete C ~ 34,2 Mcf CURRENT .PROPOSED CNANOE 22 Crmomer rharpa 513.50 23 Consumption charge 34.2 MCF X 50.9877 33.82 24 RldarGCRPertA 34.2 MCF X Sd.6303 158.67 2b RIOerGCR Part B 34.2 MCF X 50.5542 18.98 28 a7 28 Sutmtaf S2T4.ST 29 Revantretelated Tax ReimlwreemeM 5224.87 X 0.07477 18.81 30 Total 31 32 CustoRwrthafge 513.50 33 Consumptlan drerge 34.2 MCF X 41.0798 38.97 34 RMer GCR Pert A 34.2 MCF X 54.6303 158.57 35 Rider GCR PaR B 34.2 MCF X (0.6542 18.98 38 37 SuMotal 5228.02 38 Revenuedeleted Tax Relrtawtsement 5228.02 X 0.074T! 17.05 39 Toth ~'~ 1.40% ~ CURRENT PROPOSED CHANOE 41 R 42 elo t x}467 MMBTU Customer charge 5425.00 43 Cartstanp0ondterge 1,600 MMBTU X 50.2583 3874b 44 Consumptlorr charge 1,957 MMBTU X 50.18&1 388.69 45 Consranp8at gram 0 MMBTU X 50.0404 0.00 48 RlderGCRPartA 3,467 MMBTU X 54.6303 16,006.67 47 Rider GCR Part B 3,457 MMBTU X 50.3062 1,068.42 48 49 9ubtotai 518,24823 50 Revehue•related Tax ReimbuwemeM 518,248.23 X 0.07477 1,4.20 51 Total 579,810.43 52 63 Cuetenler tlfatge 5450.00 54 Cottsumptlondterge 1,500 MMBTU X 50.2750 412.61 55 Camump8on dtarge 1,957 MMBTU X 50.2015 394.31 68 Consumptlonrherge 0 MMBTU X 50.0433 0.00 57 RtderGCRPaRA 3,x57 MMBTU X 54.63Q3 16,008.87 68 Rider GCRPeAB 3,467 MMBTU X 50.3062 1.058.42 59 Subtotal 518,321.91 80 Revertueteleted Tex Relmbursenrent 518,321.81 X 0.07477 1.369.88 Bt Total S~ .89®.77 181.34 ~ 0.41% g3 R ate T ®3460 MMBTU CURRENT PROPOSED CNANOE 84 Customer charge 5425.00 6b Catsumptkmdterge 1,600 MMBTU X 50.2583 38745 68 ConsumPibndrer9e 1,967 MMBTU X 40.1884 388.69 87 Corxiump5ondierge 0 MMBTU X (0.0404 0.00 68 Rider GCR PaA B 3,457 MMBTU X 50.3062 1.058.42 89 70 S~tom1 52,239.58 71 Ravenue•related Tex Reimbursement 52,239.58 X 0,07477 167.44 407 00 T2 Totai . . , 73 74 Castanet d7er98 5460.00 525.00 75 CcRStatpOen charge 5,500 MMBTU X 50.2750 41251 525.08 78 Consumpdahrxrarge 1,957 MMBTU X 50.2015 394.37 525.82 77 Consurtp5onehetga 0 MMBTU X 50.0433 0.00 78 Ridor GCR Part B 3,4b7 MMBTU X 50.3062 t•D58.42 79 Subtotal 52,315.24 80 Revenue+eta0sd Tex Reimtnrsemertt 52,315.24 X 0.07477 173.10 81 Total ~ 581.34 3.39Yo Exhibit B to Settlement Agreement Attachment B to Ordmance ATMOS ENERGY CORD MID-TEX DNISION CUSTOMER IMPACT OF PROPOSED RATES COMPARED TO CURRENT RATES TEST YEAR ENDING DECEMBER 31 2009 (2010 RRM SETTLEMENT PROPOSAL) Line Prosp®ctive No Description Rate Increase (ay {by 1 Rats R 2 Consumption Charge per MCF 3 Change from Current Rate $0.2539 4 Blling Units for Specified Period 78,500,000 5 Total Change in Base Revenue $19,934,212 6 Assocated Revenue Taxes $1.490.401 7 Total Rate Impact $21 424,613 8 Number of Bills for Specifred Period 17,287,740 9 Average Impact per Bill $1.24 10 Rate C 11 Consumption Charge per MCF 12 Change from Current Rate $0.0919 13 Billing Units for Specified Period 49,500,000 14 Total Change in Base Revenue $4,547.060 15 Associated Revenue Taxes 16 Total Rate Impact $4,887.026 17 Number of Bills for Speed Perod 1445,436 18 Average Impact per Bill 53.38 19 Rates 1ST Customer Charge 20 Customer Charge 21 Change from Current Rate 526.00 22 Billing Units for Specified Period 10,985 23 Total Change in Base Revenue $274,625 24 Associated Revenue Taxes 2 533 25 Total Rate Impact $295,157.61 26 Ratas }&T 1st block 27 Consumption Charge per MGF 28 Change from Current Rate $0.0167 29 8itling Un'~ts for Specfied Period 10,597,655 30 Total Change in Base Revenue 5177,031 31 Associated Revenue Taxes 1~ 3236 32 Total Rate Impact $190,266 33 Rates IST 2nd block 34 Consumption Charge per MCF 35 Change from Current Rate $0.0131 36 Billing Units for Specified Period 10,791,216 37 Total Change in Base Revenue $141,297 38 Associated Revenue Taxes 10564 39 Total Rate Impact 5151,862 40 Rates 1&T 3rd block 41 Consumption Charge per MCF 42 Change from Current Rate $0.0029 43 Billing Units for Specified Period 16,585,623 44 Total Change in Base Revenue $47,655 45 Associated Revenue Taxes 3 563 46 Total Rate Impact $51,21.8 47 Rates t&T Total 48 Total Rate Impact 5688,504 49 Number of Bills for Specified Period 10,985 50 Average Impact per Bi11 562.68 51 52 Total Change in Baae Revenue $25,121,880 53 Total Rate Impact {Inc. Rev. Taxesy 527,000,142 Exhibit B to Settlement Agreement Attachment B to Ordinance ATMOS ENERGY CORP MID-TEX DIVISION CUSTOMER IMPACT OF PROPOSED RATES COMPARED TO CURRENT RATES (STEEL SERVICE REPLACEMENT PROGRAM} Line Prospective No. DescriQtlon Rate Increase (a} (b} 9 10 11 12 13 14 15 16 17 18 19 ao 21 22 23 24 25 28 27 zs 29 30 31 32 33 34 35 36 37 38 39 40 41 a2 43 44 45 46 47 48 49 50 51 52 53 Ram R Monthly Customer Charge Change from Current Rate $0.15 Billing Units for Specified Period 17,287,740 Total Change in Base Revenue $2,593,161 Associated Revenue Taxes $Z9~ $$4 Total Rate Impact $2,787,041 Number of Bills for Specified Period 17,287,740 Average Impact per Bill $0.16 Rate C Monthry Customer Charge Change from Current Rate $0.41 Billing Units for Specified Period 1 445,436 Total Change in Base Revenue $592,629 Associated Revenue Taxes $ Total Rate Impact $636,937 Number of Bills for Specified Period 1 445,436 Average Impact per Bill $0•~ Total Change in Base Revenue $3,185,790 Total Rate Impact (lnc. Rev Taxes) $3,423,979 SETTLEMENT AGREEMENT BETWEEN ATMOS ENERGY CORP.,. MID-TEX DIVISION AND ATMOS CITIES STEERING COMMITTEE WHEREAS this settlement agreement is entered into by Atmos Energy Corp sMid- Tex Division and Atmos Cities Steering Committee ("ACSC") whose members include the Cities of Abilene, Addison, Allen, Alvarado; Angus, Anna, Argyle, Arlington, Bedford, Bellmead, Benbrook, Beverly Hills, Blossom, Blue Ridge, Bowie, Boyd, Bridgeport, Brownwood, Buffalo, Burkburnett, Burleson, Caddo Mills, Carrollton, Cedar Hill, Celeste, Celina, Cisco Cleburne, Clyde, College Station, Colleyville, Colorado Crty Comanche, Coolidge, Coppell, Corinth, Corral City Crandall, Crowley Dalworthington Gardens, Denison, Desoto Duncanville, Eastland, Edgechff Village, Emory Ennis, Euless, Everman, Fairview Farmers Branch, Farmersville, Fate, Flower Mound, Forest Hill, Fort Worth, Frisco Frost, Gainesville, Garland, Garrett, Grand Prairie, Grapevine, Haltom Crty Harker Heights, Haskell, Hewitt, Highland Park, Highland Village, Honey Grove, Hurst, Iowa Park, Irving, Justin, Kaufman, Keene, Keller Kemp, Kennedale, Kerrville, Killeen, Krum, Lakeside, Lake Worth, Lancaster Lewisville, Lincoln Park, Little Elm, Lorena, Malakoff, Mansfield, McKinney Melissa, Mesquite, Midlothian, Murphy Nocona, North Richland Hills, Northlake, Oakleaf, Ovilla, Palestine, Pantego Paris, Parker Pecan Hill, Plano Ponder Pottsboro Prosper Quitman, Red Oak, Reno (Parker County), Richardson, Richland, Richland Hills, Roanoke, Robinson, Rockwall, Roscoe, Rowlett, Sachse, Saginaw Seagoville, Sherman, Snyder Southlake, Springtown, Stamford, Stephenville, Sulphur Springs, Sweetwater Temple, Terrell, The Colony Tyler University Park, Venus, Vernon, Waco Watauga, Waxahachie, Westlake, Whrtesboro White Settlement, Wichita Falls, Woodway and Wylie. WHEREAS on March 15 2010 Atmos filed with the ACSC Cities an application, hereafter referred to as the 2010 RRM filing, to adjust rates pursuant to Rider RRM Rate Review Mechanism, and WHEREAS ACSC has hired experts and lawyers to analyze the rates proposed by Atmos Energy Corp s, Mid Tex Division ("Atmos" or `Company") in its 2010 RRM filing; and WHEREAS the Settlement Agreement resolves all issues between Atmos and ACSC ("the Signatories") regarding the 2010 RRM filing, which is currently pending before the ACSC Cities, m a manner that the Signatories believe is consistent with the public interest, and the Signatories represent diverse interests, and WHEREAS the Signatories believe that the resolution of the issues raised m the 2010 RRM filing can best be accomplished by each ACSC Crty approving this Settlement Agreement and the rates, terms and conditions reflected in the tariffs attached to this Settlement Agreement as Exhibit A, NOW THEREFORE, m consideration of the mutual agreements and covenants established herein, the Signatories, through their undersigned representatives, agree to the following Settlement Terms as a means of fully resolving all issues between the ACSC Cities and Atmos involving the 2010 RRM filing: 1 Settlement Terms 1 Upon the execution of this Settlement Agreement, Atmos and the counsel for the ACSC cities will recommend that an ordinance or resolution be adopted to approve this Settlement Agreement and implement the rates, terms and conditions reflected in the tariffs attached to this Settlement Agreement as Exhibit A. (Attachment A to the Ordinance ratifying this Agreement) Said tariffs should allow Atmos an additional, prospective $27 million m annual revenue by implementation of rates shown m the proof of revenues attached as Exhibit B (Attachment B to the Ordinance ratifying this Agreement) The uniform implementation of gas rates, terms and conditions established by this Settlement Agreement shall be effective for bills rendered on or after October 1 2010 2. In an effort to streamline the regulatory review process, Atmos and ACSC have agreed to renew the Rate Review Mechanism ("Rider RRM") for a_period comrnencmg with the Company's April 1 2011 filing under this mechanism for the calendar year 2010 effective August 15 2011 and concluding upon the implementation of new final rates established pursuant to the general rate case that Atmos will file on or before June 1 2013 Rider RRM provides for an annual rate adjustment to reflect changes in billing determinants, operating and maintenance expense, depreciation expense, other taxes expense, and revenues as well as changes m capital investment and associated changes m gross revenue related taxes. The revised RRM tariff is included m Exhibit A. 3 Notwithstanding the RRM rate adjustments that will occur pursuant to paragraph 2 of this Settlement Agreement, Atmos and ACSC agree that on or before June 1 2013 Atmos shall file a general, system-wide rate case for the Mid Tex Division. Dunng the pendency of the general rate case, Atmos and AC5C agree that rate adjustments associated with the RRM filing for calendar year 2011 shall be implemented on August 15 2012, and shall remain in effect until the earlier of either the issuance of a final order by the Railroad Commission of Texas in the general rate case to be filed on or before June 1 2013 or the entry of an agreed upon order resolving all issues involved m the general rate case. The adjustments made or requested m the 5`" year RRM shall not be considered precedent during the general rate case 4 Atmos and ACSC further agree that for the period commencing March 1 2010 through September 30 2012, Atmos will expand its existing steel service line replacement program to complete the replacement of 100 000 steel service lines within its Mid Tex Division during this period. Atmos and ACSC agree that a risk based approach should be adopted to allow replacement of the highest priority steel service lines within this time period. Atmos agrees to provide the ACSC cities with quarterly reports providing the number and location of the lines replaced during the quarter Atmos agrees to coordinate with ACSC member cities to mmimzze disruption to cities rights of way without compromising the safety of residents of the cities. 5 Atmos and ACSC agree that costs incurred to replace steel service lines prior to October 1 2010 shall be included in the RRM rate adjustment calculation for the 2010 calendar year and shall not be subject to or included m the rate cap limitations set forth m subsection IV (a)-(b) of the Rider RRM tariff. 2 6 Atmos and ACSC agree that the projected incremental direct costs incurred to replace steel service lines on or after October 1 2010 shall be separately identified and shall not be subject to or included m the rate cap limitations set forth m subsection IV (a)- (b) of the Rider RRM tariff. Atmos and ACSC further agree that such projected direct incremental costs incurred to replace steel service lines after October 1 2010 shall be separately calculated and recovered as a discrete component of customer charges m the Company's annual RRM filings as set forth below a. Atmos and ACSC agree that Atmos shall be entitled to separately adjust rates for the Rate Effective Period as defined in the Rider RRNI tariff to allow recovery of the projected annual revenue requirement associated with direct incremental costs to be incurred in connection with a steel service line replacement program, that are not otherwise included within the RRM cost of service, including a return on equity of 9 0% within the overall weighted cost of capital applied to net investment (net plant additions, less accumulated depreciation and accumulated deferred income taxes), depreciation expense and applicable taxes, b Atmos and ACSC further agree that the capital structure used to calculate the steel service line replacement rate adJustment will be the actual Evaluation Period (as defined m the Rider RRM tariff J ratio of long term debt and equity with an equity percentage not to exceed 50%, c Rate recovery associated with a steel service line replacement program shall occur through an adjustment to the Residential and Commercial customer charges. Current year recovery factors as of October 1 2010 shall be $0 15 for residential customers and $0 41 for commercial customers. The rates will be adjusted annually however Atmos and ACSC agree that m no case will the per customer monthly cost recovery factors attributable to a steel service line replacement program exceed $0 44 for residential customers or $1.22 for commercial customers, either prior to or during the pendency of the general rate case Atmos will file on or before June 1 2013 d. Atmos and ACSC further agree that any per customer amount attributable to cost recovery for a steel service line replacement program shall be subject to review by the regulatory authority in a subsequent Evaluation Period as defined in the Rider RRM tariff and all incremental costs associated with a steel service line replacement program shall be subject to a prudence/reasonableness review in the general rate case to be filed by Atmos on or before June 1 2013 7 With respect to the Company's annual RRM filings, Atmos agrees to pay all reasonable and necessary expenses of each entity having original jurisdiction that are incurred to review the Company's annual RRM filings. Atmos further agrees that m calculating the proposed rate for any Rate Effective Period, the Company shall not include (1) any external legal, expert, or consultant costs to prepare and/or provide supportive information related to its filing; or (2) reimbursements to original jurisdiction entities. Notwithstanding paragraph 7 of this Settlement Agreement, Atmos and AC5C agree that m the event of an appeal of an original jurisdiction entity's decision regarding a proposed RRM adjustment, recovery of rate case expenses shall be determined according to Chapters 103 and 104 TEx. UTIL. CODE Alvty Further in the event of such appeal(s), Atmos shall recover any reimbursement made to the original jurisdiction entity through a surcharge to all customer rates that are subject to the Commission s jurisdiction m that proceeding or proceedings that might be domed therewith, regardless of whether such reimbursements are made during the initial review period or appeal period. 9 The ACSC Cities agree that they will not challenge the legal basis of the rates, terms, and conditions reflected m Exhibit A, or any annual RRM adjustment that is implemented pursuant to Rider RRM. 10 Atmos and the ACSC Cities further agree that the express terms of the Rider RRM are supplemental to the filing, notice, regulatory review or appellate procedural process of the ratemaking provisions of Chapter 104 of the Texas Utilities Code If the statute requires a mandatory action on behalf of the municipal regulatory authority or Atmos, the parties will follow the provisions of such statute. If the statute allows discretion on behalf of the municipal regulatory authority the ACSC Cities agree that they shall exercise such discretion m such a way as to implement the provisions of the RRM tariff. If Atmos appeals an action or inaction of an ACSC Crty regarding an RRM filing to the Railroad Commission, the ACSC Cities agree that they will not oppose the implementation of interim rates or advocate the imposition of a bond by Atmos consistent with the RRM tariff. Atmos agrees that rt will make no filings on behalf of its Mid-Tex division under the provisions of TEx. UTIL. CODE Alvly § 104 301 while the Rider RRM is m place In the event that.a regulatory authority fails to act or enters an adverse decision regarding the proposed annual RRM adjustment, the Railroad Commission of Texas shall, pursuant to the provisions of the Texas Utilities Code, have exclusive appellate jurisdiction to review the action or inaction of the regulatory authority exercising exclusive original ~urisdichon over the RRM request. In addition, the Signatories agree that this Settlement Agreement shall not be construed as a waiver of the ACSC Cities right to initiate a show cause proceeding or the Company's right to file a Statement of Intent under the provisions of the Texas Utilities Code 11 Atmos and ACSC further agree that the ordinance or resolution adopting this Settlement Agreement shall include a provision authorizing Atmos to establish regulatory asset account(s) for costs related to working gas in storage Atmos and ACSC further agree that the language authorizing these regulatory asset account(s) shall be the same as that set forth in the 4th Ordering Paragraph (Page 10 of 11) of the Final Order Nunc Pro Tunc issued by Railroad Commission of Texas m GUD No 9869 on February 23 2010 This language states as follows IT IS FURTHER ORDERED that Atmos shall be allowed to establish a regulatory asset for the ad valorem taxes related to working gas m storage In addition, Atmos shall be allowed to establish a regulatory asset for (1) the costs associated with Accumulated Deferred Income Tax for UNICAP Section 263A, (2) the WACOG to FIFO change, and (3) an amount equal to the rate of return approved m this RRM Proceeding for the Accumulated Deferred Income Tax items related to working gas m storage Atmos shall record these amounts m Other Regulatory Assets (Account 182.3) These deferred items shall be considered, along with the 4 investment m working gas, for consideration and possible inclusion in rates for Atmos Pipeline Texas m that entity's next filed rate case If the Commission determines that such deferred items are not properly included in the rates of Atmos Pipeline -Texas, the items shall be further deferred until the next Atmos Mid Tex rate case filed after the final decision in the Atmos Pipeline Texas rate case for inclusion with the working gas investment m the Atmos Mid-Tex rates. 12 Atmos and ACSC agree that each ACSC city should approve this Settlement Agreement and adopt an ordinance or resolution to implement for the ACSC Cities the rates, terms, and conditions reflected in the tariffs attached to this Settlement Agreement as Exhibit A, as well as the regulatory asset authorization language discussed in paragraph 12 of this Settlement Agreement. 13 The Signatories agree that the terms of the Settlement Agreement are interdependent and indivisible, and that if any ACSC city enters an order that is inconsistent with this Settlement Agreement, then any Signatory may withdraw without being deemed to have waived any procedural right or to have taken any substantive position on any fact or issue by virtue of that Signatory's entry into the Settlement Agreement or its subsequent withdrawal. If any ACSC city rejects this Settlement Agreement, then this Settlement Agreement shall be void ab initio and counsel for the ACSC Cities shall thereafter only take such actions as are m accordance with the Texas Disciplinary Rules of Professional Conduct. 14 The Signatories agree that all negotiations, discussions and conferences related to the Settlement Agreement are privileged, inadmissible, and not relevant to prove any issues associated with Atmos 2010 RRM filing. 15 The Signatories agree that neither this Settlement Agreement nor any oral or written statements made during the course of settlement negotiations may be used for any purpose other than as necessary to support the entry by the ACSC Cities of an ordinance or resolution implementing this Settlement Agreement. 16 The Signatories agree that this Settlement Agreement is binding on each Signatory only for the purpose of settling the issues set forth herein and for no other purposes, and, except to the extent the Settlement Agreement governs a Signatory's rights and obligations for future periods, this Settlement Agreement shall not be bmdmg or precedential upon a Signatory outside this proceeding. 17 The Signatories agree that this Settlement Agreement may be executed in multiple counterparts and may be filed with facsimile signatures. Agreed to this _ day of August, 2010 ATMOS ENERGY CORP MID-TEX DIVISION By. John A. Paris President, Mid-Tex Division Agreed to this day of August 2010 ATTORNEY FOR ATMOS TEXAS MUNICIPALITIES WHOSE MEMBERS INCLUDE THE CITIES OF ABILENE, ADDISON ALLEN ALVARADO ANGUS ANNA, ARGYLE, ARLINGTON BEDFORD BELLMEAD BENBROOK, BEVERLY HILLS BLOSSOM, BLUE RIDGE, BOWIE, BOYD BRIDGEPORT BROWNWOOD BUFFALO BURKBURNETT BURLESON CADDO MILLS CARROLLTON CEDAR HILL, CELESTE, CELINA, CISCO CLEBURNE, CLYDE, COLLEGE STATION COLLEYVILLE, COLORADO CITY COMANCHE, COOLIDGE, COPPELL, CORINTH, CORRAL CITY CRANDALL, CROWLEY DALWORTHINGTON GARDENS DENISON DESOTO DUNCANVILLE, EASTLAND EDGECLIFF VILLAGE, EMORY ENNIS EULESS EVERMAN FAIRVIEW FARMERS BRANCH, FARMERSVILLE, FATE, FLOWER MOUND FOREST HILL, FORT WORTH, FRISCO FROST GAINESVILLE, GARLAND GARRETT GRAND PRAIRIE, GRAPEVINE, HALTOM CITY HARKER HEIGHTS HASKELL, HEWITT HIGHLAND PARK, HIGHLAND VILLAGE, HONEY GROVE, HURST IOWA PARK, IRVING JUSTIN KAUFMAN KEENE, KELLER, KEMP KENNEDALE, KERRVILLE, KILLEEN KRUM, LAKESIDE, LAKE WORTH, LANCASTER, LEWISVILLE, LINCOLN PARK, LITTLE ELM, LORENA, MALAKOFF MANSFIELD MCKINNEY MELISSA, MESQUITE, MIDLOTHIAN MURPHY NOCONA, NORTH RICHLAND HILLS NORTHLAKE, OAKLEAF OVILLA, PALESTINE, PANTEGO PARIS PARKER, PECAN HILL, PLANO PONDER, POTTSBORO PROSPER, QUITMAN RED OAK, RENO (PARKER COUNTY), RICHARDSON RICHLAND RICHLAND HILLS ROANOKE, ROBINSON ROCKWALL, ROSCOE, ROWLETT SACHSE, SAGINAW SEAGOVILLE, SHERMAN SNYDER, SOUTHLAKE, SPRINGTOWN STAMFORD STEPHENVILLE, SULPHUR SPRINGS SWEETWATER, TEMPLE, TERRELL, THE COLONY TYLER, UNIVERSITY PARK, VENUS VERNON WACO WATAUGA, WAXAHACHIE, WESTLAKE, WHITESBORO WHITE SETTLEMENT WICHITA FALLS WOODWAY AND WYLIE By• Geoffrey Gay* * Subject to approval by ACSC Crty Councils 7 Exhibit A-1 COMPARATIVE GAS BILL STUDY RESIDENTIAL MONTHLY BILL AT BILL AT CONSUMPTION PRESENT PROPOSED MCF RATE RATE INCREASE 0 $7 67 $7 83 2.1 1 $18 79 $19.23 2.4% 2 $29.90 $30 62 2.4% 3 $4102 $42.02 2.4% 6 $74.39 $76.21 2.5% 5 $63.26 $64.81 2.5% 6 $74.38 $76.21 2.5% 7 $85.50 $87 61 2.5°l0 8 $96 62 $99 00 2.5% 9 $107 73 $.110.40 2.5% 10 $118 85 $121 80 2.5% Cost of Gas (GCR) is $7 88 per mcf in this example Taxes and fees are included Exhibit A-2 COMPARATIVE GAS BILL STUDY COMMERCIAL MONTHLY BILL AT BILL AT CONSUMPTION PRESENT PROPOSED MCF RATE RATE CHANGE 0 $14 79 $15.24 3.0% 2 $34.21 $34.86 1 9% 4 $53.64 $54 49 1 6% 6 $73.07 $74.12 1.4% 8 $92.49 $93.75 1 4°10 10 $111.92 $113.37 1,3% 15 $160 48 $162.44 1.2% 20 $209 05 $211.51 1.2% 25 $257 62 $260 58 1.2% 30 $306 18 $309 65 1 1 35 $354 75 $358.72 1 1 40 $403.31 $407 79 1 1 50 $500.44 $505.93 1 1 60 $597.58 $604 06 1 1 70 $694 71 $702.20 1 1 80 $791 84 $800.34 1 1 90 $888.97 $898.48 1 1 100 $9$6 10 $996.62 1 1 200 $1,957 42 $1 978 00 1 1% 300 $2,928.73 $2,959.38 1 0% 400 $3,900 05 $3,940 76 1 0% 500 $4,871.36 $4,922.14 1 0°l0 1000 $9 727 93 $9,829 04 1 0°l0 Cost of Gas (GCR) is $7.88 per mcf in this example Taxes and fees are included City of Fort Worth, Texas Mayor and Council Communication COUNCIL ACTION: Approved on 9/21/2010 -Ord. No. 19354.-09-2010 DATE Tuesday September 21 2010 REFERENCE NO *G-17051 LOG NAME 12ATMOS 2010 RRM SUBJECT Adopt Ordinance Establishing Maximum Permitted Rates and Charges that Atmos Energy Corporation Mid-Tex Division May Assess Customers in the City of Fort Worth RECOMMENDATION It is recommended that the City Council adopt the attached ordinance establishing maximum permitted rates and charges that Atmos Energy Corporation Mid-Tex Division may assess customers in the City of Fort Worth pursuant to a negotiated settlement and resolution of Atmos's proposed rate increase under its 2010 Rate Review Mechanism filing DISCUSSION On May 16 2006 the City Council adopted Resolution No 3348-05-06 which authorized participation with other cities in the Atmos Energy Corporation (Atmos) service area to form a standing steering committee with the authority to act on behalf of its members in any proceeding relating to gas utility regulation (M&C G-15202) This committee is known as the Atmos Cities Steering Committee (the Steering Committee). On September 20 2007 Atmos filed with the City of Fort Worth ("City") a Statement of intent to Increase Gas Utility Rates within the Incorporated Areas Served by the Mid-Tex Division The Steering Committee and Atmos representatives negotiated an agreement to settle this case that included a provision for three annual rate reviews. The Rate Review Mechanism (RRM) was intended to expedite the rate review process by the cities without costly litigation On February 19 2008 the City Council adopted Ordinance No 17989-02 2008 approving the Settlement Agreement and authorizing the RRM tariff On March 15 2010 Atmos filed an application to increase natural gas rates pursuant to the RRM tariff in accordance with the Settlement Agreement The application requested approximately $70.2 million in additional revenue The Steering Committee designated a negotiation committee made up of city representatives which included the Utility Administrator for the City of Fort Worth assisted by the Steering Committee's attorney and consultant, to resolve issues identified in Atmos s RRM filing The negotiating committee and Atmos reached an agreement to increase Atmos' revenue requirement by $27 million for the reasons stated below Under pressure from the Railroad Commission to establish a comprehensive program to replace service lines that contain steel which is subject to corrosion and leaks, the Steering Committee has worked with Atmos Mid-Tex to establish arisk-based approach to steel service line replacement that accomplishes the following goals 1 Replace all service lines throughout the Mid-Tex Region with the highest degree of risk within two years Logname. 12ATMOS 2010 RRM Page 1 of 3 2 Coordination between Steering Committee city members and Atmos Mid-Tex to minimize disruption of rights-of-way without compromising safety 3 To minimize and spread the rate impact on customers of the replacement program the service lines with little relative risk of leaks should be replaced over a 10-year period and 4 Current recovery of incremental (above and beyond normal maintenance and repair addressed in RRM proceedings) direct (excluding Atmos Mid-Tex overheads) cost of service line replacement should be permitted as an adder to customer charges. Pursuant to the Settlement Agreement, 100 000 steel service lines will be replaced prior to September 30 2012. The Steering Committee recommends that its members approve the attached rate tariffs and find that the rates therein are just, reasonable and in the public interest. Under the proposed settlement, average residential gas bills will increase by $1 24 per month (rather than $3.24 under Atmos's original request) and average commercial gas bills will increase by $3 38 per month (rather than $8 87 under Atmos's original request). The following table shows the current and recommended rates Residential Present Recommended Customer Charge $ 7 0000 $ 7 15 All Mcf $ 2.2707 $ 2 5246 Industrial Present Recommended Customer Charge $ 13 5000 $ 13 91 All Mcf $ 0 9877 $ 1 04796 Industrial Present Recommended Customer Charge $ 425 00 $ 450 00 First 1 500 MMBtu $ 0.2583 $ 0.2750 Next 2 500 MMBtu $ 0 1884 $ 0.2015 All over 5 000 MMBtu $ 0 0404 $ 0 0433 Transportation Present Recommended Customer Charge $425 00 $450 00 First 1 500 MMBtu $0.2583 $0 2750 Next 3 500 MMBtu $0 1884 $0.2015 All over 5 000 MMBtu $0 0404 $0 0433 Bill comparison of current proposed and recommended residential and commercial rates are attached (Exhibits A-1 and A-2) Upon adoption of the attached ordinance the rate schedule set forth in Attachment A of the ordinance will take effect with bills rendered after October 1 2010 Logname: 12ATMOS 2010 RRM Page 2 of 3 FISCAL INFORMATION /CERTIFICATION The Financial Management Services Director certifies that this action will have no material effect on City funds FUND CENTERS TO Fund/Account/Centers CERTIFICATIONS Submitted for City Manager's Office bv: Originating Department Head. Additional Information Contact: FROM Fund/Account/Centers Charles Daniels (6199) David Yett (7623) Bridgette Garrett (8518) Logname: 12ATMOS 2010 RRM Page 3 of 3