HomeMy WebLinkAboutOrdinance 17765-09-2007ORDINANCE NO. 17765-09-2007
AN ORDINANCE DENYING THE RATE ADJUSTMENTS PROPOSED
BY ATMOS ENERGY CORP., 1VIID-TEX DIVISION, AS REFLECTED IN
THE "ANNUAL GAS RELIABILITY INFRASTRUCTURE RATE
ADJUSTMENT" FILED BY ATMOS ENERGY CORP., MID-TEX
DIVISION ON MAY 31, 2007; AUTHORIZING THE PARTICIPATION IN
THE ATMOS CITIES STEERING COMIVIITTEE AND THE HH2ING OF
CONSULTANTS AND ATTOFIVEYS BY SUCH COMMITTEE IN
RESPONDING TO ANY LITIGATION OR APPEAL TO TILE TEXAS
RAILROAD COMMISSION; APPROVING COSTS INCUI7:RED BY THE
CO1VIlViITTEE THUS FAR AS REASONABLE AND DIltECTING THAT
ATMOS ENERGY CORP.,11~-TEX DIVISION REIlVTBURSE THE CITY
FOR ALL PAST AND FUTURE REASONABLE EXPENSES; ADOPTING
DECLARATIONS AND FINDINGS IN THE PREAMBLE; PROVIDING A
SEVERABILITY CLAUSE; PROVIDING FOR AN EFFECTIVE DATE;
AND DIRECTING THAT CERTIFIED COPIES OF THIS ORDINANCE
BE DELIVERED TO ATMOS ENERGY CORP., MID-TEX DIVISION
FOLLOWING ITS ADOPTION.
WHEREAS, on or about May 31, 2007 Atmos Energy Corp., Mid-Tex Division
("Atmos") filed with the City Secretary an "Annual Gas Reliability Infrastructure Rate
Adjustment" ("Rate Filing") pursuant to Texas Utilities Code, Section 104.301, under which
adjusted rates of Atmos would go into effect in the City on July 30, 2007; and
WHEREAS, under Texas law, the City has exclusive original jurisdiction over the rates,
operations and services of any gas utility operating within the City; and
WHEREAS, as authorized by and in accordance with Texas Utilities Code, Section
104.301, in order to analyze the Rate Filing, on July 10, 2007 the City Council adopted
Ordinance No. 17631-07-2007 suspending implementation of the adjusted rates proposed by
Atmos in the Rate Filing until adoption by the City Council of a final order or decision in
response to the Rate Filing; and
WHEREAS, the City has participated in a steering committee (the Atmos Cities Steering
Committee, hereinafter referred to as the "Steering Committee"), which has hired and directed
legal counsel and consultants to make recommendations to participating municipalities,
including the City, regarding the Rate Filing and to direct any administrative proceedings or
litigation associated with the Rate Filing; and
WHEREAS, an analysis of the Rate Filing and all other applicable information by the
Steering Committee's legal counsel and consultants indicates that the basis for the adjusted rates
proposed by Atmos in its Rate Filing includes certain claimed costs by Atmos that, in accordance
Texas Utilities Code, Section 104.301, should not have been factored into the Rate Filing, as
more specifically set forth in that certain August 3, 2007 memorandum to the Steering
Committee from R.J. Covington Consulting, LLC, which memorandum is a public document that
has been provided to the City Council (the "Consultant Memorandum"); and
WIiER]EAS, accordingly, the adjusted rates proposed by Atmos in its Rate Filing would
result in improper over-earning by Atmos.
NOW, THEREFORE BE IT ORDAINED BY THE CITY COUNCIL OF THE
CITY OF FORT WORTH, TEXAS THAT:
Section 1.
FINDINGS.
The City Council, pursuant to its exclusive original jurisdictional authority over the rates,
operations and services of Atmos within the City and in the exercise of its sound legislative
discretion, makes the following findings of fact based on all information before it:
l.l. The statements set forth in the recitals above are true and correct.
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1.2. As more specifically set forth in the Consultant Memorandum, the adjusted rates
proposed by Atmos in its Rate Filing are unjustified, unreasonable and not within
compliance of Texas Utilities Code, Section 104.301.
1.3. Accordingly, the adjusted rates proposed by Atmos in its Rate Filing should be,
and are hereby, denied.
Section 2.
CONTINUED PARTICIPATION IN THE STEERING COI\iIlVIITTEE.
The City Manager or his authorized designee is hereby authorized to continue to
cooperate with other participating municipalities in the Steering Committee to hire and direct
legal counsel and consultants to make recommendations to participating municipalities,
including the City, regarding the Rate Filing and to direct any administrative proceedings or
litigation associated with the Rate Filing, subject to the City's right to terminate such
participation at any time by written notice to the steering committee and to act independently in
the exercise of its regulatory authority.
Section 3.
REIMBURSEMENT OF EXPENSES.
Expenses incurred by the Steering Committee, of which the City is a member, are
reasonable, have been necessary and should be reimbursed by Atmos. In accordance with
Section 103.022(b) of the Texas Utilities Code, Atmos is hereby directed to reimburse the City
for these expenses and all future reasonable costs and expenses of any rate consultants,
accountants, auditors, attonieys and engineers retained by the City or a steering committee of
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which the City is a member, including the Steering Committee, and incurred in the course of the
City's and/or the Steering Committee's involvement in any review of the Rate Filing, any
litigation and any appeal to the Railroad Commission of Texas of the denial of the adjusted rates
proposed in the Rate Filing. The City is hereby authorized to intervene in any such litigation or
appeal before the Railroad Commission of Texas.
Section 4.
INCORPORATION OF RECITALS AND FINDINGS.
All of the declarations and findings contained in the preamble of this Ordinance are made
a part hereof and shall be fully effective as part of the ordained subject matter of this Ordinance.
Section 5.
SEVERABLLITY.
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 jurisdiction, 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.
Section 6.
EFFECTIVE DATE.
This Ordinance shall take effect and be in full force and effect from and after the date of
its adoption.
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Section 7.
DELIVERY OF ORDINANCE TO ATMOS.
The City Secretary is hereby directed to deliver certified copies of this Ordinance to
Atmos as follows: Charles R. Yarbrough, Atmos Energy Corp., Mid-Tex Division, 5420 LBJ
Freeway, Suite 1800, Dallas, TX 75240.
AND IT IS SO ORDAINED.
ADOPTED AND EFFECTIVE: September 11, 2007
APPROVED AS TO FORM AND LEGALITY:
By: ~~2~~ --
Peter Vaky
Assistant City Att ey
M&C G-15864
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~Jc
August 3, 2007
MEMOTO: Geoffrey Gay, Kristen Doyle, Georgia Crump
FROM : Karl Nalepa
SUBJECT : Atmos Energy Mid Tex 2006 GRIP Review
On May 31, 2007, Atmos Energy Mid Tex (Atmos or Company) filed its latest request
for an interim rate adjustment for calendar year 2006 under the Gas Reliability
Infrastructure Program (GRIP). The Company's proposed increase to current customer or
meter charges is summarized in Table 1:
Table 1
Rate Schedule Char e er Month
Rate R -Residential Sales $0.59
Rate C -Commercial Sales $1.48
Rate I - Industrial Sales $28.90
Rate T -Trans ortation $28.90
RJ Covington Consulting (RJC) has reviewed this GRIP filing and has confirmed that
Atmos has removed certain costs that were disallowed by the Texas Railroad
Commission (RRC) in Atmos' most recent rate proceeding.l However, RJC has identified
several other items which we believe are inappropriate to be recovered from ratepayers
through this interim rate adjustment.
Costs Removed
The costs removed by Atmos in this filing2 consistent with the RRC order in the most
recent rate proceeding are summarized in Table 2:
Table 2
Adjustment Amount
Remove SSU 2006 Additions for Ancillary $ (107,520)
E ui ment (office furniture)
Remove Mid-Tex 2006 Additions for Ancillary (100,317)
E ui ment (artwork, office furniture, a ui ment)
.Adjustment for Changes in SSU Cost Centers (2,764,894)
2006 Overhead Allocations to Mid-Tex3
i GUD No. 9670, Order on Rehearing, June 13, 2007.
z Workpaper/Schedule A
RJ. Covington Consulting, LLC (512) 331-4949
11044 Research Boulevard, Suite A-325 Fax: (512) 331-5743
Austin, Texas 78759 www.RTCovington.co~n
September 12, 2007
Reduction of Mid-Tex 2006 Capitalized (20,718,589)
Overheads to 13.5%
Remove Direct Expense Account Costs Included (254,511)
in SSU 2006 Additions (see Table 3 for details)
Remove Direct Expense Account Charges (26,130)
Included in Mid-Tex 2006 Additions (see Table 3)
Remove Expense Account Charges within SSU (219,956)
Overheads Included in Mid-Tex 2006 Additions
(see Table 3)
Remove Expense Account Charges within (235,404)
Business Unit Overheads Included in Mid-Tex
2006 Additions (see Table 3)
Total $ (24,427,321
The amount of capitalized expense removed from the filing, detailed by type of
expenditure,4 is shown in Table 3:
Table 3
Meals & Misc. Other Personal Travel Total Mid-Tex
Lod ing Entertain. Ex enses Ex enses Vehicle Ex ense (Ca ital) Allocated
SSU 243,162 119,196 51,818 11,916 2,134 224,832 653,059 254,511
Direct
Mid-Tex 10,986 9,210 0 2,545 1,095 2,294 26,130 26,130
Direct
SSU 333,567 505,954 395,624 10,967 0 654,093 585,196 219,956
Overhead
Mid-Tex 45,445 51,369 13,987 4,551 49,139 70,913 235,404 235,404
Overhead
Additional Adjustments
While Atmos did remove significant categories of costs disallowed by the Order in GUD
9670, it still included other costs that should be removed. These costs are summarized in
Table 4:
Table 4
Pro'ectNumber Descri tion Amount
080.19238 Purchase and install $46,638
telecommunication and security
system for the Hillsboro Service
Center
080.19239 Purchase and install $48,267
telecommunication and security
system for the Gainesville
Service Center
s 1203 -Amarillo Customer Support Center, 1210 -Waco Customer Support Center, 1904 -Dallas
Performance Plan, 1908 -Dallas Supplemental Executive Benefits Plan
a Response to ACSC 1-5.
September 12, 2007
080.19806 Purchase furniture for the Boyd
Facility $147,382
010.11055 Purchase computer equipment-
hardware & software $555,187
ADMIN 080
(retirement) Asset transfer from Atmos
Pi eline & Stora e to Mid-Tex $1,964,272
Ad'ustments General Office $140,756
Ad'ustments Customer Service $493,791
Total $3,396,293
Project 080.19238
According to Atmos' response to ACSC 1-12, this project is actually to purchase
furniture and fixtures for the Hillsboro Service Center. Atmos has removed similar costs
and hasn't shown why these particular costs remain in the filing.
Project 080.19239
According to Atmos' response to ACSC 1-12, this project is actually to purchase
furniture and fixtures for the Gainesville Service Center. Atmos has removed similar
costs and hasn't shown why these particular costs remain in the filing.
Project 080.19806
Atmos has removed similar furniture purchases, and hasn't shown why these particular
costs should remain in the filing.
Project 010.11055
According to Atmos' response to ACSC 1-23, this project relates to the purchase of
computer equipment allocated to Mid Tex. The project was described as items purchased
during the Mid Tex integration. While no invoices were provided, the acquisition of Mid
Tex occurred in October 2004, with the transition occurring through 2005 - at least a year
prior to the 2006 GRIP year. Based on the description of the assets, these purchases were
made prior to the GRIP test year and should be removed.
Project ADMIN 080
This project involves the transfer of existing assets from Atmos Pipeline to Mid-Tex.
First, these plant costs were incurred prior to the GRIP test year, and are therefore
ineligible under the GRIP statutes Second, even if the costs should be included, they
represent the cost of retirement. Transferring an asset that is no longer used and useful to
Mid-Tex just so its customers can bear the cost of retirement is not reasonable.
s TEX UTIL CODE § 104.301 (b).
September 12, 2007
Adjustments to General Office and Customer Service
According to Atmos' responses to ACSC 1-28 and 31, Atmos claims adjustments to
General Office and Customer Service plant in the amounts of $140,756 and $493,791,
respectively, for a total adjustment of $634,547. This adjustment is the result of the
change in the shared services allocations factors between 2005 and 2006. The 2005
factors for General Office and Customer Service were 36.95% and 48.50%, while the
2006 factors were 36.88% and 49.02%. Atmos revised the allocation factors based on
changes in the component factors for 2006.6 This raises the question of whether
allocation factors can be revised under GRIP. All other factors (such as return,
depreciation, taxes, and class allocations) are fixed until the next full rate proceeding, so
it would be reasonable to expect that the factors used to allocate shared services expenses
also be fixed from the last proceeding.
Results
Removing these additional categories of costs results in a reduction to 2006 net plant
investment of $3.4 million. Applying this reduction to the rates as proposed by Atmos
yields the revised charges reflected in Table 5:
Table 5
Rate Schedule Revised Char e er Month Difference
Rate R-Residential Sales $0.57 ($0.02)
Rate C -Commercial Sales $1.44 ($0.04)
Rate I -Industrial Sales $28.07 ($0.83)
Rate T -Trans ortation $28.07 ($0.83)
Atmos also proposed a revised methodology to calculate ad valorem taxes based on
actua12006 tax payments due to the recent changes in property tax law. If this alternative
methodology is adopted, property-related taxes are reduced by $67,368, and the interim
adjustment is reduced by a further $0.01 for commercial customers and $0.16 for
industrial and transportation customers. The adjustment is too small to materially affect
residential customers.
Let me know if you have any questions.
e Response to ACSC 1-6.
~ TEX UTIL CODE § 104.301 (d).
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City of Fort UVorth, 7"exas
Mayor and Council Communication
COUNCIL ACTION: Approved on 9/11/2007 -Ord. No. 17765-09-2007
DATE: Tuesday, September 11, 2007
LOG NAME: 03GRIP04 REFERENCE NO.: G-15864
SUBJECT:
Adopt Ordinance Denying Interim Rate Adjustments Proposed by Atmos Energy Corporation, Mid-
Tex Division
RECOMMENDATION:
It is recommended that the City Council adopt the attached ordinance denying the implementation of the
Interim Rate Adjustments filed with the City by Atmos Energy Corporation, Mid-Tex Division on May 31,
2007.
DISCUSSION:
On May 16, 2006, the City Council authorized participation with other cities in the Atmos Energy 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 (ACSC). Member cities may opt out of any proposed rate case action.
On May 31, 2007, Atmos Energy Corporation, Mid-Tex Division (Atmos Energy), filed with the City of Fort
Worth ("City") the 2006 Gas Reliability Infrastructure Program Rate Adjustment (G.R.I.P). G.R.I.P. filings
are adjustments to existing rates to allow a gas utility to recover additional invested capital without
considering increased revenues or decreased expenses that may be associated with that investment.
The City Council has original jurisdiction over rates, operations and services of any gas utility operating in
the City. Pursuant to Ordinance No. 17631-07-2007 (M&C G-15766 approved July 10, 2007) the City
Council previously suspended the original effective date of the proposed rates and authorized the City
Manager to participate with the other cities in ASCS to hire and direct legal counsel and consultants,
negotiate with the Company, make recommendations to the City regarding reasonable rates and to direct
any necessary litigation associated with the Interim Rate Adjustments filed with the City or with the Railroad
Commission.
Counsel for ACSC, upon review of the Company's filing and upon consultation with various consultants, has
concluded that Atmos Energy improperly included certain capital costs in its G.R.I.P. filing and that the
proposed rate adjustments are not permissible under the G.R.I.P. statute (Texas Utilities Code §
104.301). A report prepared by ACSC's consultant is attached. Accordingly, staff recommends that the
City Council deny the proposed rate adjustments.
FISCAL INFORMATION/CERTIFICATION:
Logname: 03GRIP04 Page 1 of 2
The Finance Director certifies that this action will have no material effect on City funds.
TO Fund/Account/Centers
Submitted for City Manager's Office b~
Originating Department Head:
Additional Information Contact:
FROM Fund/AccountlCenters
Karen Montgomery (6222)
Bridgette Garrett (8518)
Danny Reed (6145)
Logname: 03GRIP04 Page 2 of 2