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HomeMy WebLinkAboutOrdinance 21240-05-2014 ORDINANCE NO. 21.240-05-201-4 DENYING RATE INCREASE REQUESTED BY ATMOS ENERGY CORPORATION, D/B/A ATMOS ENERGY CORPORATION, MID-TEX DIVISION, IN COMPANY'S 201.4 ANNUAL 'RATE REVIEW MECHANISM (RPM) FILING; REQUIRING COMPANY TO REIMBURSE REASONABLE RATEMAKJNG EXPENSES PERTAINING TO REVIEW OF THE RRM; AUTHORIZING CITY'S PARTICIPATION WITH ATMOS CITIES STEERING COMMITTEE IN ANY APPEAL, FILED BY COMPANY AT RAILROAD COMMISSION OF TEXAS; REQUIRING COMPANY TO REIMBURSE REASONABLE RATEMAKING EXPENSES IN ANY SUCH APPEAL AND TO ISSUE REFUNDS, IF REQUIRED, IN ACCORDANCE WITH ORDER RE SILTING FROM SUCH APPEAL; DETERMINING THAT THIS ORDINANCE WAS PASSED IN ACCORDANCE WITH THE REQUIREMENTS OF THE TEXAS OPEN MEETINGS ACT; PROVIDING FOR A SAVINGS CLAUSE; PROVIDING FOR DELIVERY OF ORDINANCE TO COMPANY AND THE STEERING COMMITTEE'S LEGAL COUNSEL; AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City of Fort Worth, Texas ("City") is a gas utility customer of Atmos Energy Corporation, d/b/a Atmos Energy Corporation, 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 is a member of the Atmos Cities Steering Committee ("ACSC"), a coalition of approximately 164 similarly situated cities served by Atmos Mid-Tex 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, pursuant to the terms of the agreement settling the Company's 2007 Statement of Intent to increase rates, ACSC Cities and the Company worked collaboratively to develop a Rate Review Mechanism ("RRM") tariff that allowed for an expedited rate review process in a three-year experiment by ACSC Cities as a substitute to the Gas Reliability Infrastructure Program ("GRIP") process instituted by the Legislature; and WHEREAS, the City took action In 2008 to approve a Settlement Agreement with Atrnos Mid-Tex resolving the Company's 2007 rate case and authorizing the RRM tariff, and Ordinance No.21240-05-2014 Page 1 of 4 WHEREAS, in 2013, ACSC and the Company negotiated a renewal of the RRM tariff process for an additional five years; and WHEREAS, on June 14, 2013, the City Council. adopted Ordinance No. 20782-06-2013 (M&C G-17912), renewing the RRM tariff process for the City for an additional. five years; and WHEREAS, the RRM renewal tariff contemplates reimbursement of ACSC Cities' reasonable expenses associated with RRM applications; and WHEREAS, on or about February 28, 2014, the Company filed with the City its second annual RRM filing under the renewed RRM tariff, requesting to increase natural gas base rates by $45.7 million system-wide (the "Filing"); and WHEREAS, ACSC coordinated its review of the Filing through its Executive Committee, assisted by ACSC attorneys and consultants, to investigate issues identified by ACSC in the Filing-, and WHEREAS, ACSC's consultants have concluded that the Company's levels of operating and maintenance expenses requested in the Filing have dramatically risen without Sufficient documentation in either the Filing or the subsequent review process; and WHEREAS, ACSC attorneys and consultants have concluded that the Company is unable to justify a rate increase of the magnitude requested in the Filing; and WHEREAS, ACSC and the Company were unable to reach a compromise on the amount of additional revenues that the Company should recover under the 2014 RRM filing; and WHEREAS, accordingly the ACSC Executive Committee, as wet.], as ACSC's Counsel and consultants, recommend that ACSC Cities deny the requested rate increase; and WHEREAS, the Company's current rates are determined to be just, reasonable, and in the public interest. 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 approved. Ordinance No.21240-05-2014 Page 2 of 4 SECTION 2. The City Council finds that Atmos Mid-Tex was unable to justify the appropriateness or the need for the increased revenues requested in the Filing, that the rate increase proposed in the Filing is hereby denied, and that existing rates for natural gas service provided by Atmos Mid- Tex are just and reasonable. SECTION 3. Atmos Mid-Tex shall reimburse the reasonable ratemaking expenses of the ACSC Cities in processing the Company's RRM application. SECTION 4. In the event the Company files an appeal of this denial of the rate increase proposed in the Filing to the Railroad Commission of 'Texas, the City is hereby authorized to intervene in such appeal and shall participate in such appeal in conjunction with the ACSC membership. Further, in such event Atmos Mid-Tex shall reimburse the reasonable expenses of the ACSC Cities in participating in the appeal. of this and other ACSC City rate actions resulting from the Filing. SECTION 5. In accordance with the RRM tariff contained in Ordinance No. 20782-06-2013, in the event the Company files an appeal of this denial of rate increase to the Railroad Commission of Texas and implements its proposed rates pending the outcome of such appeal, the implemented rates shall be subject to refund based on the resolution of any disputed adjustments in accordance with the final order issued in the appeal by the Railroad Commission of Texas. SECTION 6. The meeting at which this Ordinance was adopted was conducted in compliance with the Texas Open Meetings Act, Texas Government Code, Chapter 551. SECTION 7. Ordinance No.2 1 240-05-20 1 4 Page 3 of 4 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 8. The City Secretary is directed to send a copy of this Ordinance to Atmos Mid-Tex, care of Chris Felan, Manager of Rates and Regulatory Affairs, at Atmos Energy Corporation, 5420 LBJ Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay, General Counsel to ACSC, at Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767-1725. SECTION 9. This ordinance shall take effect upon adoption. APPROVED AS TO FORM AND LEGALITY: ATTEST: Assistant Cit y Att��Jm y Mar y J. Icy er, Cify Secretary ADOPTED: May 13, 2014 EFFECTIVE Ordinance No.21240-05-2014 Page 4 of 4 City of Fort Worth, Texas Mayor and Council COt1'1MUnication COUNCIL ACTION: Approved on 5/13/2014 - Ordinance No. 21240-05-2014' DATE: Tuesday, May 13, 2014 REFERENCE NO.: G-18203 LOG NAME: 12DENY ATMOS RATE INCREASE 2014 SUBJECT: Conduct a Public Hearing and Adopt Ordinance Denying Rate Increase Proposed by Atmos Energy Corporation d/b/a Atmos Energy Corporation, Mid-Tex Division (ALL COUNCIL DISTRICTS) RECOMMENDATION: It is recommended that the City Council adopt the attached ordinance denying the rate increase proposed by Atmos Energy Corporation d/b/a Atmos Energy Corporation Mid-Tex Division, in its 2014 Annual Rate Review Mechanism Filing, which was filed with the City on February 28, 2014. 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. In accordance with that authority on June 4, 2013, the City Council adopted Ordinance No. 20782-06-2013 (M&C G-17912) approving an agreed Rate Review Mechanism (RRM) Tariff filed by Atmos Energy Corporation d/b/a Atmos Energy Corporation, Mid- Tex Division (Atmos). The RRM was negotiated and agreed to by Atmos and cities that Atmos serves in order to provide a mechanism to govern annual rate adjustments and to provide an alternative to the mechanism established by state law and known as the Gas Reliability Infrastructure Program or GRIP. On February 28, 2014, Atmos filed its 2014 Annual Rate Review Mechanism Filing (RRM Filing) with the City of Fort Worth (City). In the RRM Filing, Atmos sought a $45.7 million rate increase system-wide based on an alleged test-year cost of service revenue deficiency of$49 million. Working with and through the Atmos Cities Steering Committee (ACSC), in which the City has been a participating stakeholder since 2006 (Resolution No. 3348-05-06; M&C G-15202), the City analyzed the schedules and evidence offered by Atmos in support of its requested rate increase, determining that the evidence did not support the full amount of the proposed increase and instead only supported an increase of $19 million system-wide. In an effort to reach an amicable solution, the ACSC Executive Committee authorized a settlement offer considerably above the consultants' recommendation, but the settlement amount was ultimately insufficient to meet the Company's expectations. The magnitude of the requested increase under the 2014 RRM Filing, the wide difference between that amount and both the ACSC consultants' recommendation and the ACSC settlement offer, and the fact that Atmos was seeking approximately fifty percent more in additional revenue than the $31.5 million it would have been entitled to under a GRIP filing made a compromise much more difficult and ultimately impossible. Therefore, the ACSC Executive Committee and ACSC legal counsel recommend that all ACSC Cities deny the requested rate increase. Following the denial, Atmos is expected to appeal to the Railroad Commission (RRC), which will make a final determination of the amount of authorized increase. Please note that under the terms of the RRM Tariff approved last year, even though the City will be denying the increase, once Atmos files its appeal to the RRC, the Company will be allowed to implement up to the full amount of its requested increase while the appeal is pending. However, any such increase Logname: 12DENY ATMOOS RATE 1-NCREASE 2014 Page 1 ot.'2 will be subject to Atmos being required to make refunds to customers if the RRC denies the appeal or awards a smaller increase than Atmos is seeking. If Atmos's appeal seeks the full amount of the increase requested under the RRM Filing, the impact for the average customer system-wide would be as follows: Current New Current New Current New Customer Customer Customer Commodity Commodity Total Bill Total Charge Charge Charge Charge (avg. Bill (avg. Difference, Class user user) Residential $17.72* $ 18.22* $0.05831/Ccf $0.08998 48.09 50.11 2.02 Ccf Commercial $ 35.85* $38.85* $0.06893/Ccf $0.07678 254.85 260.91 6.06 Ccf Industrial $620.00 $675.00 declining declining 4,680.30 4,837.10 156.80 I . block block I Transportationj $620.00 1 $675.00 declining declining 2,836.84 2,993.64 156.80 block bloc *These customer charges include a surcharge of$0.02 per residential customer and $0.10 per commercial customer in accordance with the Conservation and Energy Efficiency Rider (Rider CEE) that was approved by the RRC in Gas Utility Docket 10170. Atmos has indicated that it may not seek the full amount of the RRM Filing increase in its appeal, meaning actual charges may be lower than those shown above. In addition, because the average residential consumption in Fort Worth is slightly less than in the system overall, the average Fort Worth residential customer is expected to experience an overall increase of$1.92 per month compared to the $2.02 shown. In addition to denying the RRM Filing increase, the attached ordinance authorizes ACSC and the City to participate in the appeal process and finds the expenses incurred by ACSC consultants to be reasonable and subject to reimbursement by Atmos in accordance with state law. 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 FROM Fund/Account/Centers CERTIFICA-riONS: Submitted for City Manager's Office by: Charles W. Daniels (6199) Originating Department Head: Sarah Fullenwider (7623) Additional Information Contact: Bridgette Garrett (8518) Logname: 12DENY ATMOS RATE INCREASE 2014 Page 2 of 2