HomeMy WebLinkAboutOrdinance 23149-03-2018 ORDINANCE NO. 23149-03-2018
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
FORT WORTH, TEXAS, APPROVING A TARIFF AUTHORIZING
AN ANNUAL RATE REVIEW MECHANISM AS A
SUBSTITUTION FOR THE ANNUAL INTERIM RATE
ADJUSTMENT PROCESS DEFINED BY SECTION 104.301 OF
THE TEXAS UTILITIES CODE, AND AS NEGOTIATED
BETWEEN ATMOS ENERGY CORP., MID-TEX DIVISION AND
THE STEERING COMMITTEE OF CITIES SERVED BY ATMOS;
REQUIRING ATMOS ENERGY CORP., MID-TEX DIVISION TO
REIMBURSE REASONABLE RATEMAKING EXPENSES;
ADOPTING A SAVINGS CLAUSE; DETERMINING THAT THIS
ORDINANCE WAS PASSED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE OPEN MEETINGS ACT; DECLARING
AN EFFECTIVE DATE; AND REQUIRING DELIVERY OF THIS
ORDINANCE TO ATMOS ENERGY CORP., MID-TEX DIVISION
AND LEGAL COUNSEL FOR THE STEERING COMMITTEE.
WHEREAS, the City of Fort Worth, 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 and charges of Atmos Mid-Tex; and
WHEREAS, the City and similarly-situated Mid-Tex municipalities (collectively, Mid-
Tex Cities") created the Steering Committee of Cities Served by Atmos (the "Steering
Committee") to efficiently address all rate and service matters associated with delivery of natural
gas; and
WHEREAS, the Steering Committee formed an Executive Committee to direct legal
counsel and to recommend certain specific actions to all aligned Mid-Tex Cities through
resolution or ordinance; and
WHEREAS, pursuant to the terms of a November 2007 agreement between the Steering
Committee and Atmos Mid-Tex that settled the Company's interim rate filing under Section
104.301 of the Texas Utilities Code (a "GRIP" rate case), the Steering Committee and the
Pagel of 4
Company collaboratively developed a Rate Review Mechanism Tariff (the "RRM Tariff'),
ultimately authorized by the City in 2008, that allows for an expedited rate review process as a
substitute for the GRIP process; and
WHEREAS, the City has kept some form of a RRM Tariff in place until 2017 when it
adopted an ordinance approving an RRM Tariff filing settlement specifically calling for
termination of the existing RRM Tariff and negotiation of a replacement RRM Tariff following
the Railroad Commission's decision in a then-pending Atmos Texas Pipeline case (GUD No.
10580); and
WHEREAS, the Steering Committee's Executive Committee has recently approved a
settlement with the Company on the attached RRM Tariff that contains certain notable
improvements from a consumer perspective over the prior RRM Tariff, including a reduced rate
of return on equity, acceptance of certain expense adjustments made by the Railroad
Commission in the Order in GUD No. 10580, and the addition of two months to the time for
processing a RRM Tariff application; and
WHEREAS, the RRM Tariff contemplates reimbursement of cities' reasonable expenses
associated with RRM Tariff applications; and
WHEREAS, the Steering Committee's Executive Committee recommends that all
Steering Committee member cities adopt this ordinance and the attached RRM Tariff; and
WHEREAS, the attached RRM Tariff is just, reasonable and in the public interest.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF FORT WORTH, TEXAS:
SECTION 1.
That the findings set forth in this Ordinance are hereby in all things approved.
Page 2 of 4
SECTION 2.
That the RRM Tariff, which is attached hereto as Attachment A and incorporated herein,
re-establishing a form of Rate Review Mechanism is just and reasonable and in the public
interest, and is hereby adopted.
SECTION 3.
That Atmos Mid-Tex shall reimburse reasonable expenses associated with adoption of
this Ordinance and the attached RRM Tariff and in processing future RRM Tariff applications
filed pursuant to the attached RRM Tariff.
SECTION 4.
That to the extent any resolution or ordinance previously adopted by the City is
inconsistent with this Ordinance, it is hereby repealed.
SECTION 5.
That the meeting at which this Ordinance was approved was in all things conducted in
strict compliance with the Texas Open Meetings Act, Texas Government Code, Chapter 551.
SECTION 6.
That if any one or more sections or clauses of this Ordinance is adjudged to be
unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remaining
provisions of this Ordinance , and the remaining provisions of this Ordinance shall be interpreted
as if the offending section or clause never existed.
SECTION 7.
That this Ordinance shall become effective from and after its passage.
Page 3 of 4
SECTION 8.
That a copy of this Ordinance shall be sent to Atmos Mid-Tex, care of Christopher Felan,
Vice President of Rates and Regulatory Affairs, Atmos Energy Corporation, Mid-Tex Division,
5420 LBJ Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay, General Counsel to
Mid-Tex Cities, at Lloyd Gosselink Rochelle & Townsend, P.C., 816 Congress Avenue, Suite
1900, Austin, Texas 78701.
PASSED AND APPROVED thit day of ' 2018.
f
Mayor
ATTEST: ;-' '� APPROVED AS TO FORM:
l�-
Mary J. e ,. ity Wecretary Sarah Fulle r, City Attorney
Page 4 of 4
ATMOS ENERGY CORPORATION lAttachment
MID-TEX DIVISION
RATE SCHEDULE: RRM—Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04/01/2018 PAGE: 1
I. Applicability
Applicable to Residential, Commercial, Industrial, and Transportation tariff customers
within the city limits of cities identified in Exhibit A that receive service from the Mid-Tex
Division of Atmos Energy Corporation ("Company"). This Rate Review Mechanism
("RRM") provides for an annual adjustment to the Company's Rate Schedules R, C, I
and T ("Applicable Rate Schedules"). Rate calculations and adjustments required by
this tariff shall be determined on a System-Wide cost basis.
II. Definitions
"Test Period" is defined as the twelve months ending December 31 of each preceding
calendar year.
The "Effective Date" is the date that adjustments required by this tariff are applied to
customer bills. The annual Effective Date is October 1.
Unless otherwise provided in this tariff the term Final Order refers to the final order
issued by the Railroad Commission of Texas in GUD No. 10170 and elements of GUD
No. 10580 as specified in Section III below.
The term "System-Wide" means all incorporated and unincorporated areas served by
the Company.
"Review Period" is defined as the period from the Filing Date until the Effective Date.
The "Filing Date" is as early as practicable, but no later than April 1 of each year.
III. Calculation
The RRM shall calculate an annual, System-Wide cost of service ("COS") that will be
used to adjust applicable rate schedules prospectively as of the Effective Date. The
Company may request recovery of its total cost of service but will include schedules
showing the computation of any adjustments. The annual cost of service will be
calculated according to the following formula:
COS = OM + DEP + RI + TAX + CD
Where:
OM = all reasonable and necessary operation and maintenance expenses from the
Test Period adjusted for known and measurable items and prepared
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM—Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04/01/2018 PAGE: 2
consistent with the rate making treatments approved in the Final Order.
Incentive compensation (Management Incentive Plan, Variable Pay Plan and
Long Term Incentive Plan) related to Atmos' Shared Services Unit will be
applied consistent with treatment approved in GUD 10580. Additionally, O&M
adjustments will be incorporated and applied as modified by a final order, not
subject to appeal, issued by the Railroad Commission of Texas in subsequent
rate cases involving the Atmos Mid-Tex or West Texas divisions. Known and
measurable adjustments shall be limited to those changes that have occurred
prior to the Filing Date. OM may be adjusted for atypical and non-recurring
items. Shared Services allocation factors shall be recalculated each year
based on the latest component factors used during the Test Period, but the
methodology used will be that approved in the Final Order in GUD 10580.
DEP = depreciation expense calculated at depreciation rates approved by the Final
Order. Additionally, if depreciation rates are approved in a subsequent final
order, not subject to appeal, issued by the Railroad Commission of Texas for
the Mid-Tex division those rates would be applicable for subsequent RRM
filings.
RI = return on prudently incurred investment calculated as the Company's pretax return
multiplied by rate base at Test Period end. Rate base is prepared consistent
with the rate making treatments approved in the Final Order, and as in GUD
10580 as specifically related to capitalized incentive compensation
(Management Incentive Plan, Variable Pay Plan and Long Term Incentive
Plan) for Atmos' Shared Services Unit. However, no post Test Period
adjustments will be permitted. Additionally, adjustments will be incorporated
and applied as modified by a final order, not subject to appeal, issued by the
Railroad Commission of Texas in subsequent rate cases involving the Atmos
Mid-Tex or West Texas divisions. Pretax return is the Company's weighted
average cost of capital before income taxes. The Company's weighted average
cost of capital is calculated using the methodology from the Final Order
including the Company's actual capital structure and long term cost of debt
as of the Test Period end (adjusted for any known and measurable
changes that have occurred prior to the filing date) and the return on equity of
9.8%. However, in no event will the percentage of equity exceed 58%.
Regulatory adjustments due to prior regulatory rate base adjustment
disallowances will be maintained. Cash working capital will be calculated
using the lead/lag days approved in the Final Order. With respect to pension
and other postemployment benefits, the Company will record a regulatory
asset or liability for these costs until the amounts are included in the next
annual rate adjustment implemented under this tariff. Each year, the
Company's filing under this Rider RRM will clearly state the level of pension
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM—Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04/01/2018 PAGE: 3
and other postemployment benefits recovered in rates.
TAX = income tax and taxes other than income tax from the Test Period adjusted for
known and measurable changes occurring after the Test Period and before
the Filing Date, and prepared consistent with the rate making treatments
approved in the Final Order. Atmos Energy shall comprehensively account
for, including establishing a regulatory liability to account for, any statutory
change in tax expense that is applicable to months during the Test Period in
the calculation to ensure recovery of tax expense under new and old income
tax rates.
CD = interest on customer deposits.
IV. Annual Rate Adjustment
The Company shall provide schedules and work papers supporting the Filing's revenue
deficiency/sufficiency calculations using the methodology accepted in the Final Order.
The result shall be reflected in the proposed new rates to be established for the
effective period. The Revenue Requirement will be apportioned to customer classes in
the same manner that Company's Revenue Requirement was apportioned in the Final
Order. For the Residential Class, 50% of the increase may be recovered in the customer
charge. However, the increase to the Residential customer charge shall not exceed
$0.60 per month in the initial filing and $0.70 per month in any subsequent year. The
remainder of the Residential Class increase not collected in the customer charge will
be recovered in the usage charge. For all other classes, the change in rates will be
apportioned between the customer charge and the usage charge, consistent with the
Final Order. Test Period billing determinants shall be adjusted and normalized
according to the methodology utilized in the Final Order.
V. Filing
The Company shall file schedules annually with the regulatory authority having original
jurisdiction over the Company's rates on or before the Filing Date that support the
proposed rate adjustments. The schedules shall be in the same general format as the
cost of service model and relied-upon files upon which the Final Order was based. A
proof of rates and a copy of current and proposed tariffs shall also be included with the
filing. The filing shall be made in electronic form where practical. The Company's filing
shall conform to Minimum Filing Requirements (to be agreed upon by the parties),
which will contain a minimum amount of information that will assist the regulatory
authority in its review and analysis of the filing. The Company and regulatory authority
will endeavor to hold a technical conference regarding the filing within twenty (20)
calendar days after the Filing Date.
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM—Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04/01/2018 PAGE: 4
A sworn statement shall be filed by an Officer of the Company affirming that the filed
schedules are in compliance with the provisions of this Rate Review Mechanism and
are true and correct to the best of his/her knowledge, information, and belief. No
testimony shall be filed, but a brief narrative explanation shall be provided of any
changes to corporate structure, accounting methodologies, allocation of common costs,
or atypical or non- recurring items included in the filing.
VI. Evaluation Procedures
The regulatory authority having original jurisdiction over the Company's rates shall
review and render a decision on the Company's proposed rate adjustment prior to the
Effective Date. The Company shall provide all supplemental information requested to
ensure an opportunity for adequate review by the relevant regulatory authority. The
Company shall not unilaterally impose any limits upon the provision of supplemental
information and such information shall be provided within seven (7) working days of the
original request. The regulatory authority may propose any adjustments it determines to
be required to bring the proposed rate adjustment into compliance with the provisions of
this tariff.
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 RRM or Statement of Intent filing.
During the Review Period, the Company and the regulatory authority will work
collaboratively and seek agreement on the level of rate adjustments. If, at the end of the
Review Period, the Company and the regulatory authority have not reached agreement,
the regulatory authority shall take action to modify or deny the proposed rate
adjustments. The Company shall have the right to appeal the regulatory authority's
action to the Railroad Commission of Texas. Upon the filing of an appeal of the regulatory
authority's order relating to an annual RRM filing with the Railroad Commission of
Texas, the regulatory authority having original jurisdiction over the Company's rates shall
not oppose the implementation of the Company's proposed rates subject to refund, nor
will the regulatory authority advocate for the imposition of a third party surety bond by
the Company. Any refund shall be limited to and determined based on the resolution of
the disputed adjustment(s) in a final, non-appealable order issued in the appeal filed by
the Company at the Railroad Commission of Texas.
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM—Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04101/2018 PAGE: 5
In the event that the regulatory authority and Company agree to a rate adjustment(s)
that is different from the adjustment(s) requested in the Company's filing, the Company
shall file compliance tariffs consistent with the agreement. No action on the part of the
regulatory authority shall be required to allow the rate adjustment(s) to become effective
on October 1. To the extent that the regulatory authority does not take action on the
Company's RRM filing by September 30, the rates proposed in the Company's filing
shall be deemed approved effective October 1. Notwithstanding the preceding
sentence, a regulatory authority may choose to take affirmative action to approve a rate
adjustment under this tariff. In those instances where such approval cannot reasonably
occur by September 30, the rates finally approved by the regulatory authority shall be
deemed effective as of October 1.
To defray the cost, if any, of regulatory authorities conducting a review of the
Company's annual RRM filing, the Company shall reimburse the regulatory authorities
on a monthly basis for their reasonable expenses incurred upon submission of invoices
for such review. Any reimbursement contemplated hereunder shall be deemed a
reasonable and necessary operating expense of the Company in the year in which the
reimbursement is made. A regulatory authority seeking reimbursement under this
provision shall submit its request for reimbursement to the Company no later than
December 1 of the year in which the RRM filing is made and the Company shall
reimburse regulatory authorities in accordance with this provision on or before
December 31 of the year the RRM filing is made.
To the extent possible, the provisions of the Final Order shall be applied by the regulatory
authority in determining whether to approve or disapprove of Company's proposed
rate adjustment.
This Rider RRM does not limit the legal rights and duties of a regulatory authority.
Nothing herein shall abrogate the jurisdiction of the regulatory authority to initiate a rate
proceeding at any time to review whether rates charged are just and reasonable.
Similarly, the Company retains its right to utilize the provisions of Texas Utilities Code,
Chapter 104, Subchapter C to request a change in rates. The provisions of this Rider
RRM are implemented in harmony with the Gas Utility Regulatory Act (Texas Utilities
Code, Chapters 101-105).
The annual rate adjustment process set forth in this tariff shall remain in effect during
the pendency of any Statement of Intent rate filing.
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM—Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04/01/2018 PAGE: 6
VII. Reconsideration, Appeal and Unresolved Items
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 each annual RRM filing shall be provided by including the notice, in
conspicuous form, in the bill of each directly affected customer 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 class and on an average bill for each affected customer;
c) the service area or areas in which the proposed rates would apply;
d) the date the annual RRM filing was made with the regulatory authority; and
e) the Company's address, telephone number and website where information
concerning the proposed rate adjustment can be obtained.
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM—Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 04/01/2018 PAGE: 7
Exhibit A
ACSC Cities
Abilene Cleburne Frost Lincoln Park
Addison Clyde Gainesville Little Elm
Albany College Station Garland Lorena
Allen Colleyville Garrett Madisonville
Alvarado Colorado City Grand Prairie Malakoff
Angus Comanche Grapevine Mansfield
Anna Commerce Groesbeck Mckinney
Argyle Coolidge Gunter Melissa
Arlington Coppell Haltom City Mesquite
Aubrey Copperas Cove Harker Heights Midlothian
Azle Corinth Haskell Murphy
Bedford Crandall Haslet Newark
Bellmead Crowley Hewitt Nocona
Benbrook Dalworthington Gardens Highland Park North Richland Hills
Beverly Hills Denison Highland Village Northlake
Blossom Denton Honey Grove Oak Leaf
Blue Ridge Desoto Hurst Ovilla
Bowie Draper Hutto Palestine
Boyd Duncanville Iowa Park Pantego
Bridgeport Eastland Irving Paris
Brownwood Edgecliff Village Justin Parker
Buffalo Emory Kaufman Pecan Hill
Burkburnett Ennis Keene Petrolia
Burleson Euless Keller Plano
Caddo Mills Everman Kemp Ponder
Canton Fairview Kennedale Pottsboro
Carrollton Farmers Branch Kerens Prosper
Cedar Hill Farmersville Kerrville Quitman
Celeste Fate Killeen Red Oak
Celina Flower Mound Krum Reno(Parker County)
Centerville Forest Hill Lake Worth Rhome
Cisco Forney Lakeside Richardson
Clarksville Fort Worth Lancaster Richland
Frisco Lewisville Richland Hills
ATMOS ENERGY CORPORATION
MID-TEX DIVISION
RATE SCHEDULE: RRM—Rate Review Mechanism
APPLICABLE TO: ALL CITIES IN THE MID-TEX DIVISION AS IDENTIFIED IN EXHIBIT A TO
THIS RATE SCHEDULE
EFFECTIVE DATE: Bills Rendered on and after 0410112018 PAGE: 8
River Oaks Temple
Roanoke Terrell
Robinson The Colony
Rockwall Trophy Club
Roscoe Tyler
Rowlett University Park
Royse City Venus
Sachse Vernon
Saginaw Waco
Sansom Park Watauga
Seagoville Waxahachie
Sherman Westlake
Snyder Westover Hills
Southlake Westworth Village
Springtown White Settlement
Stamford Whitesboro
Stephenville Wichita Falls
Sulphur Springs Woodway
Sweetwater Wylie
City of Fort Worth, Texas
Mayor and Council Communication
COUNCIL ACTION: Approved on 3/20/2018 - Ordinance No. 23149-03-2018
DATE: Tuesday, March 20, 2018 REFERENCE NO.: G-19246
LOG NAME: 21ATMOS 2018 RRM
SUBJECT:
Adopt Ordinance Approving a Tariff Authorizing an Annual Rate Review Mechanism as a Substitution for
the Annual Interim Rate Adjustment Process Filed by Atmos Energy Corporation d/b/a Atmos Energy
Corporation, Mid-Tex Division, to Govern the Process of Annual Rate Adjustments (ALL COUNCIL
DISTRICTS)
RECOMMENDATION:
It is recommended that the City Council adopt the attached ordinance approving a tariff authorizing an
annual Rate Review Mechanism as a substitution for the annual interim rate adjustment process filed by
Atmos Energy Corporation d/b/a Atmos Energy Corporation, Mid-Tex Division, to govern the process of
annual rate adjustment proceedings for customers within the City of Fort Worth.
DISCUSSION:
Under the Gas Utilities Regulatory Act, the City of Fort Worth has original rate regulatory authority over
utilities providing retail natural gas to customers in the City. The purpose of this Mayor and Council
Communication is to adopt an ordinance approving an agreed Rate Review Mechanism (RRM) tariff as
filed by Atmos Energy Corporation, Mid-Tex Division (Atmos) that will provide an orderly process for the
City annually to review Atmos' rates for its customers within the City of Fort Worth. The RRM is an annual
rate review mechanism that serves as an alternative to the rate adjustment mechanism established by
state law and known as the Gas Reliability Infrastructure Program (GRIP). This RRM has been negotiated
between Atmos and the Atmos Cities Steering Committee (Steering Committee), a cooperative coalition of
171 cities served by Atmos, of which the City of Fort Worth is a member.
Adoption of this tariff will establish the criteria used in calculating future rate adjustments, but it will not
change the rates currently being paid by Atmos customers in the City of Fort Worth.
Prior Council Action
On May 16, 2006, City Council adopted Resolution No. 3348-05-06, which authorized the participation
with other cities in the Atmos Energy Corporation 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).
On June 4, 2013, City Council adopted Ordinance No. 20782-06-2013, approving an agreed upon RRM
tariff as filed by Atmos to govern the process for future annual rate adjustments proceedings for customers
within the City of Fort Worth through 2017.
Background
Logname: 21ATMOS 2018 RRM Page 1 of 3
Prior to 2003, in order to recover costs of capital investments, a gas utility had to initiate a full ratemaking
proceeding. In order to relieve gas utilities of having to go through a full rate making process, the
legislature enacted GRIP in 2003 to allow a gas utility to annually adjust rates to account for capital
improvements made between rate cases, with all adjustments being subject to a "true up" process as part
of utility's next ratemaking process. While the GRIP did allow gas utilities a more rapid recovery of capital
investments, the process focused solely on the cost of the investments and did not take into account any
changes in the utility's other operating costs or its revenue and did not provide cities with a meaningful
opportunity to participate or the ability to recover their rate case expenses. Additionally, the
administrative nature of the GRIP did not include any type of regulatory review or oversight before rate
adjustments went into effect.
Unlike GRIP, the RRM process provides for rate adjustments that are based on a more comprehensive
rate review that takes into account revenues and other operating expenses rather than focusing solely on
the cost of capital investments.
In order for the RRM process to continue to function as an alternative to the GRIP process, Fort Worth
and other cities that exercise original jurisdiction must adopt a tariff that authorizes the RRM process.
Recommendation of RRM
The Steering Committee and its legal counsel recommend approval of the new RRM tariff by all Steering
Committee member cities for the reasons discussed below.
The RRM process takes into account not only capital investment costs but also a utility's revenues (that
may be increasing) and expenses (that may be declining), which could result in a lower overall cost to
customers. In addition, the RRM can alter how costs are ultimately passed through to customers. Under
a GRIP process, Atmos would be authorized to pass all adjustments for its capital investment costs
through to its customers in the form of an increase in the fixed monthly customer charge. The RRM tariff
provides customers with a measure of protection against increases in their fixed monthly charges that
would not be available under the GRIP process. In addition, the RRM tariff provides a mechanism for
cities to review Atmos annual expenses and capital investments and to make adjustments, or
disallowances, for expenses or investments considered to be unreasonable or unnecessary, with the
cities' costs (including fees associated with hiring expert consultants and legal counsel) being reimbursed
by Atmos on a monthly basis.
The RRM tariff on which the 2017 rates were based allowed a rate of return on equity of 10.50 percent.
The revised RRM tariff reduces that to 9.8 percent. The revised RRM tariff also captures the reduction in
federal income tax rates from 35 percent to 21 percent, and should result in a rate reduction effective by
mid-March, 2018. Prior RRM tariffs allowed Cities only three months to review the Company's filing. The
new revised tariff expands that time period by two months. New applications by the Company should be
made on or about April 1 of each year, with new rates effective October 1. A rate order from the Railroad
Commission in an Atmos pipeline rate case adopted the position of the Steering Committee with regard to
incentive compensation related to Atmos' Shared Services Unit that reduced allowed expenses, and that
reduced level of expenses will be applicable under the new RRM tariff.
It should be noted that failure to adopt the revised RRM tariff, Atmos would make annual GRIP filings with
the Railroad Commission, which would result in an administrative review of the rate application and deny
any participation by the City.
Staff agrees with the Steering Committee's position and recommends that the City Council adopt the
attached ordinance authorizing the revised RRM tariff for 2018. As noted above, adoption of this RRM
tariff will not affect the rates that are currently being charged to Atmos customers in the City.
Logname: 21ATMOS 2018 RRM Page 2 of 3
This M&C does not request approval of a contract with a business entity.
FISCAL INFORMATION / CERTIFICATION:
The Director of Finance certifies that this action will have no material effect on City funds.
FUND IDENTIFIERS (FIDs):
TO
Fund Department ccoun Project Program ctivity Budget Reference # moun
ID ID Year Chartfield 2
FROM
Fund Department ccoun Project Program ctivity Budget Reference # moun
ID ID Year (Chartfield 2)
CERTIFICATIONS:
Submitted for City Manager's Office by: Jay Chapa (5804)
Originating Department Head: Steve Cooke (5118)
Additional Information Contact: Roger Venables (6334)
Logname: 21ATMOS 2018 RRM Page 3 of 3