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HomeMy WebLinkAboutOrdinance 27946-09-20251 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF FORT WORTH, TEXAS, APPROVING A NEGOTIATED SETTLEMENT BETWEEN THE ATMOS CITIES STEERING COMMITTEE (“ACSC”) AND ATMOS ENERGY CORP., MID-TEX DIVISION REGARDING THE COMPANY’S 2025 RATE REVIEW MECHANISM FILING; DECLARING EXISTING RATES TO BE UNREASONABLE; ADOPTING TARIFFS THAT REFLECT RATE ADJUSTMENTS CONSISTENT WITH THE NEGOTIATED SETTLEMENT; FINDING THE RATES TO BE SET BY THE ATTACHED SETTLEMENT TARIFFS TO BE JUST AND REASONABLE AND IN THE PUBLIC INTEREST; APPROVING AN ATTACHMENT ESTABLISHING A BENCHMARK FOR PENSIONS AND RETIREE MEDICAL BENEFITS; REQUIRING THE COMPANY TO REIMBURSE ACSC’S REASONABLE RATEMAKING EXPENSES; DETERMINING THAT THIS ORDINANCE WAS PASSED IN ACCORDANCE WITH THE REQUIREMENTS OF THE TEXAS OPEN MEETINGS ACT; ADOPTING A SAVINGS CLAUSE; DECLARING AN EFFECTIVE DATE; AND REQUIRING DELIVERY OF THIS ORDINANCE TO THE COMPANY AND THE ACSC’S LEGAL COUNSEL. 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, charges, and services of Atmos Mid-Tex; and WHEREAS, the City is a member of the Atmos Cities Steering Committee (“ACSC”), a coalition of similarly situated cities served by Atmos Mid-Tex (“ACSC Cities”) that have joined together to facilitate the review of, and response to, natural gas issues affecting rates charged in the Atmos Mid-Tex service area; and WHEREAS, ACSC and the Company worked collaboratively to develop a Rate Review Mechanism (“RRM”) tariff that allows for an expedited rate review process by ACSC Cities as a substitute to the Gas Reliability Infrastructure Program (“GRIP”) process instituted by the 2 Legislature, and that will establish rates for the ACSC Cities based on the system-wide cost of serving the Atmos Mid-Tex Division; and WHEREAS, the current RRM tariff was adopted by the City in a rate ordinance in 2018; and WHEREAS, on about April 1, 2025, Atmos Mid-Tex filed its 2025 RRM rate request with ACSC Cities based on a test year ending December 31, 2024; and WHEREAS, ACSC coordinated its review of the Atmos Mid-Tex 2025 RRM filing through its Executive Committee, assisted by ACSC’s attorneys and consultants, to resolve issues identified in the Company’s RRM filing; and WHEREAS, the Executive Committee, as well as ACSC’s counsel and consultants, recommend that ACSC Cities approve an increase in base rates for Atmos Mid-Tex of $205.6 million on a system-wide basis with an Effective Date of October 1, 2025; and WHEREAS, ACSC agrees that Atmos’ plant-in-service is reasonable; and WHEREAS, with the exception of approved plant-in-service, ACSC is not foreclosed from future reasonableness evaluation of costs associated with incidents related to gas leaks; and WHEREAS, the attached tariffs (Attachment 1) implementing new rates are consistent with the recommendation of the ACSC Executive Committee, are agreed to by the Company, and are just, reasonable, and in the public interest; and WHEREAS, the settlement agreement sets a new benchmark for pensions and retiree medical benefits (Attachment 2); and WHEREAS, the RRM Tariff contemplates reimbursement of ACSC’s reasonable expenses associated with RRM applications. 3 NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FORT WORTH, TEXAS THAT: Section 1. The findings set forth in this Ordinance are hereby in all things approved. Section 2. The City Council, without prejudice to future litigation of any issue identified by ACSC, finds that the settled amount of an increase in revenues of $205.6 million on a system- wide basis represents a comprehensive settlement of gas utility rate issues affecting the rates, operations, and services offered by Atmos Mid-Tex within the municipal limits arising from Atmos Mid-Tex’s 2025 RRM filing, is in the public interest, and is consistent with the City’s authority under Section 103.001 of the Texas Utilities Code. Section 3. ACSC, despite finding Atmos Mid-Tex’s plant-in-service to be reasonable, is not foreclosed in future cases from evaluating the reasonableness of costs associated with incidents involving leaks of natural gas. Section 4. The existing rates for natural gas service provided by Atmos Mid-Tex are unreasonable. The new tariffs attached hereto and incorporated herein as Attachment 1, are just and reasonable, and are designed to allow Atmos Mid-Tex to recover annually an additional $205.6 million on a system-wide basis, over the amount allowed under currently approved rates. Such tariffs are hereby adopted. Section 5. The ratemaking treatment for pensions and retiree medical benefits in Atmos Mid-Tex’s next RRM filing shall be as set forth on Attachment 2, attached hereto and incorporated herein. Section 6. Atmos Mid-Tex shall reimburse the reasonable ratemaking expenses of the ACSC in processing the Company’s 2025 RRM filing. 4 Section 7. To the extent any resolution or ordinance previously adopted by the Council is inconsistent with this Ordinance, it is hereby repealed. Section 8. 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 9. 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 the Ordinance shall be interpreted as if the offending section or clause never existed. Section 10. Consistent with the City Ordinance that established the RRM process, this Ordinance shall become effective from and after its passage with rates authorized by attached tariffs to be effective for bills rendered on or after October 1, 2025. Section 11. A copy of this Ordinance shall be sent to Atmos Mid-Tex, care of Chris Felan, Vice President of Rates and Regulatory Affairs Mid-Tex Division, Atmos Energy Corporation, 5420 LBJ Freeway, Suite 1862, Dallas, Texas 75240, and to Thomas Brocato, General Counsel to ACSC, at Lloyd Gosselink Rochelle & Townsend, P.C., 816 Congress Avenue, Suite 1900, Austin, Texas 78701. PASSED AND APPROVED THIS DAY OF , 2025. APPROVED AS FORM AND LEGALITY: By: _________________________________ Larry Collister, Sr. Asst. City Attorney ATTEST: By: _________________________________ Jannette S. Goodall, City Secretary Adopted: MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: R – RESIDENTIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 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 Ccf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 23.65 per month Rider CEE Surcharge $ 0.03 per month 1 Total Customer Charge $ 23.68 per month Commodity Charge – All Ccf $ 0.74748 per Ccf 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. 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). 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. 1Reference Rider CEE - Conservation and Energy Efficiency as approved in GUD 10170. Surcharge billing effective July 1, 2025. MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: C – COMMERCIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 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 30,000 Ccf. 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 Ccf charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 94.00 per month Rider CEE Surcharge $ 0.01 per month 1 Total Customer Charge $ 94.01 per month Commodity Charge – All Ccf $ 0.22261 per Ccf 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. 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). 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. Presumption of Plant Protection Level For service under this Rate Schedule, plant protection volumes are presumed to be 10% of normal, regular, historical usage as reasonably calculated by the Company in its sole discretion. If a customer believes it needs to be modeled at an alternative plant protection volume, it should contact the company at mdtx-div-plantprotection@atmosenergy.com. 1 Reference Rider CEE - Conservation and Energy Efficiency as approved in GUD 10170. Surcharge billing effective July 1, 2025. MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: I – INDUSTRIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 Application Applicable to Industrial Customers with a maximum daily usage (MDU) of less than 200 MMBtu per day for all 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 200 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 $ 1,848.75 per month First 0 MMBtu to 1,500 MMBtu $ 0.7678 per MMBtu Next 3,500 MMBtu $ 0.5623 per MMBtu All MMBtu over 5,000 MMBtu $ 0.1206 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. 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.” Replacement Index In the event the “midpoint” or “common” price for the Katy point listed in Platts 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. MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: I – INDUSTRIAL SALES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 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. 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. Presumption of Plant Protection Level For service under this Rate Schedule, plant protection volumes are presumed to be 10% of normal, regular, historical usage as reasonably calculated by the Company in its sole discretion. If a customer believes it needs to be modeled at an alternative plant protection volume, it should contact the company at mdtx-div-plantprotection@atmosenergy.com. MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: T – TRANSPORTATION APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 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. This tariff is not available to customers with a maximum daily demand of 1,000 MMBtu or greater and a daily/annual load factor of 10% or less. Load factor is calculated as follows: annual usage / (maximum daily connected demand X 365). Load factors will be recalculated once each year to determine appropriate eligibility for Rate T. Type of Service Company’s receipt and delivery of all gas quantities under the applicable Transportation Agreement will be on a wholly interruptible basis subject to the Terms and Conditions incorporated in the Transportation Agreement. If Customer is an Industrial Customer, then Customer may elect, at the reasonable discretion of Company, to contract for Plant Protection transportation quantities defined as the minimum natural gas required to prevent physical harm and/or protect critical safety to the plant facilities, plant personnel, or the public when such protection cannot be achieved through the use of an alternate fuel. 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 listed below: Charge Amount Customer Charge per Meter $ 1,848.75 per month First 0 MMBtu to 1,500 MMBtu $ 0.7678 per MMBtu Next 3,500 MMBtu $ 0.5623 per MMBtu All MMBtu over 5,000 MMBtu $ 0.1206 per MMBtu Upstream Transportation Cost Recovery: Plus an amount for upstream transportation costs in accordance with Part (b) of Rider GCR. 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). MID-TEX DIVISION ATMOS ENERGY CORPORATION RATE SCHEDULE: T – TRANSPORTATION APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 Imbalance Fees All fees charged to Customer under this Rate 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. 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 Platts 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. Overpull Fee Upon notification by Company of an event of interruption of Customer’s deliveries, Customer will, for each MMBtu delivered in excess of the stated level of 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.” Replacement Index In the event the “midpoint” or “common” price for the Katy point listed in Platts 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. MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: SUR – SURCHARGES APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 Application This Rider is applicable to customer classes in the incorporated areas under the RRM tariff as authorized by the state or any governmental entity, a municipality, or a regulatory authority pursuant to any statute, ordinance, order, rule, contract, or agreement. Monthly Calculation Surcharges will be calculated in accordance with the applicable statute, ordinance, order, rule, contract, or agreement. FASB ASC 740-10 (Fin48) Refund Applicable to Customers taking service under Rate Schedules R – Residential, C – Commercial, I – Industrial and T – Transportation. To ensure that gas utility customers receive the benefit associated with the changes in the Company’s Uncertain Tax Positions (“UTPs”) arising from recognition of Texas Margin Tax returns. The decrease shall be calculated as follows: Beginning with implementation of rates from the negotiated RRM Tariff, and annually thereafter, the portion of UTP liabilities identified in Schedule FIN48-1.1 for the prior fiscal year shall be allocated based on the final class allocations of GUD No. 10170 as per the RRM Tariff, divided by the annual bill count to derive rates to be refunded through Rider SUR in the subsequent fiscal year. Each year’s calculation will include a true-up (+ or - ) due to account for over/under collections. Amounts identified in Schedule FIN48-1 shall be adjusted to reflect any audit adjustments received from the Texas Comptroller of Public Accounts. No action on the part of the Regulatory Authority is required to give effect to the amount to be refunded to customers. However, any amount refunded to customers shall be fully subject to review for reasonableness and accuracy in the gas utility’s next statement of intent proceeding with the Railroad Commission of Texas, and if applicable, the gas utility shall be required to reconcile any discrepancies. The following refund as authorized in the most recent negotiated RRM Tariff shall be refunded to each Rate Schedules R – Residential, C – Commercial, I – Industrial and T – Transportation customer’s monthly bill in each month for a 12-month period. The refund amount by month by Rate Schedule is shown in the table below: Rate Schedules Rate Rate R – Residential Sales $ (0.12) Rate C – Commercial Sales $ (0.41) Rate I – Industrial Sales $ (8.68) Rate T – Transportation $ (8.68) MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: TAX – TAX ADJUSTMENT APPLICABLE TO: Entire Division as Set Forth Below EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 PAGE: Application Applicable to Customers taking service under Rate R, Rate C, Rate I, and Rate T, except for exempt State Agency Customers, to the extent of state gross receipts taxes only. 1. State Gross Receipts Taxes Applicability - Entire Division except for Unincorporated Areas Each monthly bill shall be adjusted for Miscellaneous state gross receipts taxes imposed by Sections 182-021 - 182-025 of the Texas Tax Code. Entire Division Each monthly bill shall also be adjusted by an amount equivalent to the amount of all applicable taxes and any other governmental impositions, rentals, fees, or charges (except state, county, city, and special district ad valorem taxes and taxes on net income) levied, assessed, or imposed upon or allocated to Company with respect to the Gas Service provided to Customer by Company, and any associated facilities involved in the performance of such Gas Service. Each monthly bill shall also be adjusted by an amount equivalent to the proportionate part of any increase or decrease of any tax and any other governmental imposition, rental, fee, or charge (except state, county, city, and special district ad valorem taxes and taxes on net income) levied, assessed, or imposed subsequent to the effective date of this tariff, upon or allocated to Company's operations, by any new or amended law, ordinance, or contract. 2. Federal or State Tax Law or Rate Changes: Applicability – All Customers in the Mid-Tex Division (“MTX”) Under the RRM Tariff Applicable to Customers taking service under Rate R, Rate C, Rate I, and Rate T. To ensure that gas utility customers receive the benefits or costs associated with the changes in tax rates at a federal or state level, MTX shall establish and accrue on its books and records, as of the effective date of the federal or state tax law or rate change: 1) regulatory liabilities to reflect the impact of a decrease in federal corporate income tax rates or state margin tax rates; or, 2) regulatory assets to reflect the impact of an increase in federal corporate income tax rates or state margin tax rates. The gas utility may not change rates to give effect to a change in Federal or State Tax law or rates through the Rider TAX unless and until the city issues final authorization, an Accounting Order, or other express guidance authorizing such recovery through the RRM process. Company may also not change rates to capture the impacts associated with the effects of Public Law 117-169, 136 STAT. 1818 of August 16, 2022 (“Tax Act 2022”) and certain other tax-related costs that will change from the amounts included in the most recent base revenue requirement established through an RRM filing unless and until the city issues a final authorization, an Accounting Order, or other express guidance authorizing such recovery. Upon receipt of authorization from the city through an Accounting Order, final authorization or other express guidance, the calculation applicable to the aforementioned federal or state tax rate or law changes are as follows; however, to the extent there is a conflict between the calculation or methodology MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: TAX – TAX ADJUSTMENT APPLICABLE TO: Entire Division as Set Forth Below EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 PAGE: prescribed by an Accounting Order, final authorization, or other express guidance, and those contained in this rate schedule, the Accounting Order, final authorization, or other express guidance controls: Calculations 1. With regard to changes in the tax rates at a federal or state level, the increase or decrease shall be calculated as follows: a. A portion of the gas utility’s revenue representing the difference between: 1) the cost of service as approved by the Commission or the applicable regulatory authority in the gas utility’s most recent statement of intent or other rate proceeding, and 2) the cost of service that would have resulted had the rates been based on the new federal income tax rate (increase or decrease) or state margin taxes (increase or decrease), as of the effective date of the change; b. If applicable, the portion of the gas utility’s revenue representing the difference between: 1) each Interim Rate Adjustment surcharge approved by the regulatory authority since the gas utility’s most recent statement of intent or other rate proceeding, and 2) each Interim Rate Adjustment surcharge that would have resulted had the surcharges been based on the new federal income tax rate (increase or decrease) or state margin taxes (increase or decrease), as of the effective date of the change; and c. The excess or deficient deferred tax reserve, including any associated gross up in taxes, caused by the reduction or increase in the federal corporate income tax rate or state related tax increases, as of the effective date of the change. Upon the receipt of authorization from the Commission or applicable regulatory authority, the gas utility shall separately refund to customers based on a decrease in federal or state tax rates or separately collect from customers based on an increase in federal or state tax rates within twelve (12) months or, pursuant to applicable Internal Revenue Code (“IRC”) rules and regulations, as follows: d. The amount collected/refunded by the gas utility that reflects the difference in base rates between: 1) the cost of service approved by the regulatory authority in the gas utility’s most recent statement of intent rate proceeding, and 2) the cost of service that would have resulted had the rates been based upon the new federal or state tax rates, between the effective date of this order and the effective date of the changes. e. If applicable, the amount collected/refunded by the gas utility that reflects the difference between: 1) each Interim Rate Adjustment surcharge approved by the Commission or the regulatory authority since the gas utility’s most recent statement of intent rate proceeding, and 2) each Interim Rate Adjustment surcharge that would have resulted had the rates been based upon the new federal or state tax rates, between the effective date of this order and the effective date of the changes. f. The amount collected/refunded by the gas utility that reflects the difference in the excess or deficient deferred tax reserve included in base rates between: 1) the cost of service approved by the Commission or the regulatory authority in the gas utility’s most recent statement of intent rate proceeding, and 2) the cost of service that would have resulted had the rates been based upon the new federal or state tax rates, between the effective date of this order and the effective date of the changes. These amounts shall be refunded or collected from customers based upon IRC rules and regulations if applicable. MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: TAX – TAX ADJUSTMENT APPLICABLE TO: Entire Division as Set Forth Below EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 PAGE: 2.With regard to the Tax Act 2022 and certain other tax-related costs that will change from the amounts included in the base revenue requirement established through an RRM filing, any change in rates shall be calculated as follows: (a) The amount shall be calculated as the product of Company’s grossed-up rate of return authorized in the cost of service as approved by the Commission or the applicable regulatory authority in the gas utility’s most recent statement of intent or other rate proceeding times the Corporate Alternative Minimum Tax deferred tax asset (“CAMT DTA") estimated at September 30 of the fiscal year or applicable quarter-end within a fiscal year prior to the annual change in the rates pursuant to this tariff, less the income tax credits received in accordance with IRC requirements applicable to the Tax Act 2022 grossed-up for income taxes to a revenue equivalent. (b) The estimated CAMT DTA and the related effects on the rider revenue requirements shall be trued up to the actual effects in the following year and the over/under recovery amortized over the twelve months that each year’s recalculated tariff rates are in effect. The over/under recovery shall include a grossed-up rate of return as authorized in Company’s most recent statement of intent or other rate proceeding. (c) The methodology for computing Company's CAMT is as follows: i. Confirm when Atmos Energy Corporation and its affiliates are subject to CAMT as an “applicable corporation” as defined the Tax Act 2022, then there will be MTX’s CAMT DTA in the tariff. ii. Calculate the Mid-Tex Division’s (MTX) contribution to Adjusted Financial Statement Income (“AFSI”) on a stand-alone basis. MTX’s AFSI is calculated by adjusting MTX’s applicable financial statement income by adjustments to depreciation, pension costs and federal income tax to arrive at AFSI. AFSI is intended to be computed consistent with applicable IRC requirements. iii. Compare MTX’s CAMT stand-alone amount with MTX’s regular stand-alone tax liability. If the stand alone CAMT is in excess of the stand-alone regular tax, the CAMT DTA is recorded to MTX. If the Internal Revenue Service issues new guidance related to the Tax Act 2022, Company shall have the right to make additional filings to recognize such adjustments. Any Commission filing made to give effect to Federal or State Tax Law or Rate Changes shall be filed within 12-months following the enactment of a tax rate change with the Commission’s Oversight and Safety Division or as part of a Statement of Intent. Any city filing made to give effect to Federal or State Tax Law or Rate Changes shall be filed within 12- months following the enactment of a tax rate change and addressed to the city official at the address of record with the Mid-Tex Division. With the exception of the authorization required from the Commission to allow the gas utility to recognize the new federal income tax rate (increase or decrease) or state taxes (increase or decrease) or the impacts associated with the effects of the Tax Act 2022 and certain other tax-related costs that will change from the amounts included in the base revenue requirement in the last approved RRM Tariff filing, no action on the part of the regulatory authority is required to give effect to the amount to be refunded or MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: TAX – TAX ADJUSTMENT APPLICABLE TO: Entire Division as Set Forth Below EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 PAGE: collected from customers. However, any amount refunded or collected from customers shall be fully subject to review for reasonableness and accuracy in the gas utility’s next statement of intent proceeding, and if applicable, the gas utility shall be required to reconcile any discrepancies. Regulatory 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). Rate changes subject to the provisions of this tariff may be implemented upon the filing of an appeal to the relevant authority. MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: WNA – WEATHER NORMALIZATION ADJUSTMENT APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 Provisions for Adjustment The Commodity Charge per Ccf (100 cubic feet) 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 shall apply to all temperature sensitive residential and commercial bills based on meters read during the revenue months of November through April. 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 Ccf by the following formula: (HSFi x (NDD-ADD) ) WNAFi = Ri (BLi + (HSFi x ADD) ) Where i = any particular Rate Schedule or billing classification within any such particular Rate Schedule that contains more than one billing classification WNAFi = Weather Normalization Adjustment Factor for the ith rate schedule or classification expressed in cents per Ccf Ri = Commodity Charge rate of temperature sensitive sales for the i th schedule or classification. HSFi = heat sensitive factor for the i th schedule or classification divided by the average bill count in that class 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 i th schedule or classification divided by the average bill count in that class The Weather Normalization Adjustment for the jth customer in ith rate schedule is computed as: WNA i = WNAF i x q ij Where q ij is the relevant sales quantity for the jth customer in ith rate schedule. MID-TEX DIVISION ATMOS ENERGY CORPORATION RIDER: WNA – WEATHER NORMALIZATION ADJUSTMENT APPLICABLE TO: ALL CUSTOMERS IN THE MID-TEX DIVISION UNDER THE RRM TARIFF EFFECTIVE DATE: Bills Rendered on or after 10/01/2025 Base Use/Heat Use Factors Residential Commercial Base use Heat use Base use Heat use Weather Station Ccf Ccf/HDD Ccf Ccf/HDD Abilene 9.61 0.1476 91.65 0.7406 Austin 8.19 0.1394 183.99 1.1581 Dallas 12.74 0.2017 193.53 1.1001 Waco 9.23 0.1277 148.26 0.7631 Wichita Falls 10.43 0.1387 122.94 0.7038 Weather Normalization Adjustment (WNA) Report On or before June 1 of each year, the company posts on its website at www.atmosenergy.com/MTXtariffs, in Excel format, a Weather Normalization Adjustment (WNA) Report to show how the company calculated its WNAs factor during the preceding winter season. Additionally, on or before June 1 of each year, the company files one hard copy and an Excel version of the WNA Report with the Railroad Commission of Texas' Gas Services Division, addressed to the Director of that Division. Line No. DescriptionPension Account PlanPost-Employment Benefit PlanPension Account PlanPost-Employment Benefit PlanSupplemental Executive Benefit PlanAdjustment Total(a)(b)(c)(d)(e)(f)(g)1Proposed Benefits Benchmark - Fiscal Year 2025 Willis Towers Watson Report as adjusted572,372$ (649,253)$ 882,931$ (3,920,499)$ 65,943$ 2 Allocation Factor 46.27% 46.27% 84.14% 84.14% 100.00%3Proposed Benefits Benchmark Costs Allocated to Mid-Tex (Ln 1 x Ln 2)264,856$ (300,432)$ 742,888$ (3,298,664)$ 65,943$ 4 O&M and Capital Allocation Factor 100.00% 100.00% 100.00% 100.00% 100.00%5Proposed Benefits Benchmark Costs to Approve (Ln 3 x Ln 4)264,856$ (300,432)$ 742,888$ (3,298,664)$ 65,943$ (2,525,408)$ 67 O&M Expense Factor 76.41% 76.41% 39.54% 39.54% 10.97%89Summary of Costs to Approve:10Total Pension Account Plan202,374$ 293,727$ 496,101$ 11Total Post-Employment Benefit Plan(229,557)$ (1,304,242)$ (1,533,799) 12Total Supplemental Executive Benefit Plan7,231$ 7,231 13Total (Ln 10 + Ln 11 + Ln 12)202,374$ (229,557)$ 293,727$ (1,304,242)$ 7,231$ (1,030,467)$ ATMOS ENERGY CORP., MID-TEX DIVISIONMID-TEX RATE REVIEW MECHANISMPENSIONS AND RETIREE MEDICAL BENEFITS FOR CITIES APPROVALTEST YEAR ENDING DECEMBER 31, 2024Shared Services Mid-Tex Direct City of Fort Worth, Mayor and Texas Council Communication DATE: 09/16/25 M&C FILE NUMBER: M&C 25-0873 LOG NAME: 21ADOPTION OF ATMOS 2025 RRM SUBJECT (ALL) Adopt Ordinance Approving Negotiated Settlement and Establishing Maximum Permitted Rates and Charges that Atmos Energy Corporation d/b/a Atmos Energy Corporation, Mid-Tex Division, May Assess Customers in the City of Fort Worth Effective October 1, 2025 RECOMMENDATION: It is recommended that the City Council adopt the attached Ordinance establishing maximum permitted rates and charges that Atmos Energy Corporation, d/b/a Atmos Energy Corporation, Mid-Tex Division, may assess customers in the City of Fort Worth, effective October 1, 2025, pursuant to a negotiated settlement of Atmos' proposed rate increase under its 2025 Rate Review Mechanism filing. DISCUSSION: The purpose of this Mayor and Council Communication (M&C) is to approve a negotiated settlement with Atmos Energy Corporation, d/b/a Atmos Energy Corporation, Mid-Tex Division (Atmos or Company), regarding Atmos' 2025 filing under the Rate Review Mechanism (RRM). The settlement was negotiated and is recommended by the Executive Committee of the Atmos Cities Steering Committee (ACSC), a coalition of 181 cities including Fort Worth (ACSC Members), which work cooperatively to provide members with more effective and efficient representation on natural gas-related issues. The RRM Settlement; most recently adopted in 2024 (Ordinance 27127-09-2024), served as an alternative rate adjustment mechanism to the default process outlined in state law. Like the state-law adjustment mechanism, the RRM allows Atmos to adjust rates to recover capital improvement costs, but unlike state law, the RRM considers Atmos' overall financial situation, including operating costs and revenues and allows cities, as regulatory entities, to review filings and identify expenses or investments considered to be unreasonable or unnecessary that should be reduced or disallowed. Since 2007, there have been several modifications to the original RRM Tariff. The RRM process has generally resulted in rate increases that are less than Atmos would have been entitled to implement under the default state-law adjustment mechanism. On or about April 1, 2025, Atmos filed a rate request under the RRM Tariff. Given Atmos' claim that its cost-of-service in a test year ending December 31, 2024, entitled it to $245.2 million in additional system-wide revenues. After reviewing the filing and conducting discovery, ACSC's consultants concluded that the system-wide deficiency under the RRM regime should be $185.6 million instead of the claimed $245.2 million. Application of the standards set forth in ACSC's RRM Tariff reduces the Company's request to $225.6 million, $163.5 million of which would be applicable to ACSC members. After several settlement meetings, ACSC and Atmos have agreed to settle the case for $205.6 million. This is a reduction of $20 million to the Company's request reduced by the RRM tariff. This includes payment of ACSC's expenses. City staff concur with the ACSC Executive Committee in their recommendation that the City take action to approve the negotiated settlement rates and charges before October 1, 2025; new rates become effective October 1, 2025. The attached Ordinance reflects the terms of a negotiated settlement between ACSC and Atmos to resolve issues raised by ACSC during the review and evaluation of Atmos' filing. Under the Ordinance, Atmos will generate $205.6 million in additional revenues from ACSC Cities. Fort Worth vs. Atmos Mid-Tex Division RRM Tariff— Settlement Comparison: The average monthly residential consumption in Fort Worth is 38.8 Centum Cubic Feet (CCF), which is less than the 42.1 CCF average for Atmos residential customers. This corresponds to an average monthly residential bill of $87.13 in Fort Worth, which is 6% lower than the average bill of $92.33 for Atmos residential customers. Conversely, the average monthly commercial consumption in Fort Worth is 475.0 CCF, which is higher than the 367.6 CCF average for all commercial customers in the incorporated areas of Atmos Mid-Tex Division. This corresponds to an average monthly commercial bill of $510.94 in Fort Worth, which is 22% higher than the average bill of $418.10 for all commercial customers in the incorporated areas of Atmos Mid Tex. These are average base rate bills, including cost of gas and taxes. Fort Worth — Current vs. Settlement Atmos Customer lass for Fort WoH idential imercial Current Average Settlement Percentage Average Settlement Monthly Bill with Average Monthly Increase with Gas Consumption Gas Cost Bill with Gas Cost Monthly Change Cost 38.8 CCF $79.85 $87.13 $7.28 9.1 % 475.0 CCF $481.50 $510.94 $29.44 6.11 % Atmos Mid-Tex Division RRM Tariff On approval of the attached Ordinance, the rates shown in Exhibit A of the Ordinance will be effective for bills rendered on or after October 1, 2025. Key elements of rate changes are as follows: Tariff Rate - Customer Class Current RRM Settlement Residential Customer Charge $22.95 $23.65 Consumption Charge/CCF $0.59 $0.75 Commercial Customer Charge $81.75 $94.00 Consumption Charge/CCF $0.19 $0.22 Industrial CustomerCharge $1,587.75 $1,848.75 Consumption Charge Tier 1 /MMBtu $0.66 $0.77 Consumption Charge Tier 2 /MMBtu $0.48 $0.56 Consumption Charge Tier 3 /MMBtu $0.10 $0.12 Transportation CustomerCharge $1,587.75 $1,848.75 Consumption Charge Tier 1 /MMBtu $0.66 $0.77 Consumption Charge Tier 2 /MMBtu $0.48 $0.56 Consumption Charge Tier 3 /MMBtu $0.10 $0.12 The ACSC staff report includes the Company's Average Bill Comparison base rates on average monthly bills for Atmos Mid-Tex Division customers, by Customer Class; Base Rates Test Year Ending December 31, 2024. As stated above, Fort Worth residential consumption is lower than the average while its commercial consumption is higher. The following table represents the average bill impact across all of the ACSC. Atmos Mid -Tex Bill Impact (ACSC� ACSC Tariff Rate- Current Average Settlement Percentage Average Settlement Customer Class Monthly Bill with Average Monthly Increase with Gas Average Bill Consumption Gas Cost Bill with Gas Cost Monthly Change Cost Residential 42.1 CCF $84.49 $92.33 $7.84 928% Commercial 367.6 CCF $392.36 $418.10 $25.74 6.56% Industrial 1,277 MMBtu $6,632.29 $7,064.20 $431.91 6.51% Transportation 4,534 MMBtu $8,604.01 $9,329.51 $725.50 8.43% A Form 1295 is not required because: This M&C does not request approval of a contract with a business entity. FISCAL INFORMATION / CERTIFICATION: The Director of Finance certifies that approval of this recommendation will have no material effect on City funds. Submitted for City Manager's Office bk Valerie Washington 6199 Originating Business Unit Head: Marilyn Marvin 7708 Additional Information Contact: Juanita Rigsby 8518 Expedited