HomeMy WebLinkAboutOrdinance 17019-06-2006ORDINANCE NO 17019-06-2006
AN ORDINANCE DENYING THE RATE ADJUSTMENTS PROPOSED
BY ATMOS ENERGY CORP MID-TEX DIVISION AS REFLECTED IN
THE ANNUAL GAS RELIABILITY INFRASTRUCTURE RATE
ADJUSTMENT" FILED BY ATMOS ENERGY CORP MID-TEX
DIVISION ON MARCH 31, 2006, AUTHORIZING THE PARTICIPATION
IN THE ATMOS CITIES STEERING COMMITTEE AND THE HIRING
OF CONSULTANTS AND ATTORNEYS BY SUCH COMMITTEE IN
RESPONDING TO ANY LITIGATION OR APPEAL TO THE TEXAS
RAILROAD COMMISSION APPROVING COSTS INCURRED BY THE
COMMITTEE THUS FAR AS REASONABLE AND DIRECTING THAT
ATMOS ENERGY CORP MID-TEX DIVISION REIMBURSE 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 March 31 2006 Atmos Energy Corp Mid-Tex Division ("Atmos")
filed with the City Secretary an Annual Gas Rehabilrty Infrastructure Rate Adjustment" ("Rate
Filing") pursuant to Section 104.301 of the Texas Utilities Code, under which adjusted rates of
Atmos would go into effect m the City on May 30 2006 and
WHEREAS under Texas law the City has exclusive original ~unsdiction over the rates,
operations and services of any gas utility operating wrthm the City and
WHEREAS, the City has participated m a steering committee (the Atmos Cities Steenng
Committee, hereinafter referred to as the `Steering Committee"), which has hired and direct
legal counsel and consultants to make recommendations to participating mumcipalrties, including
the City regarding the Rate, Filing and to direct any admimstrahve 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 Atmos has actually decreased
per-customer investment m infrastructure; and
WHEREAS, Atmos has publicly stated that rt will receive substantial profits m 2005
over those approved by the Texas Railroad Commission in GUD No 9400• and
WHEREAS, Atmos s Rate Filing fails to account for growth in numbers of customers,
thereby undercounting the revenues rt will receive from the proposed rate adjustment under the
Rate Filing; and
WHEREAS, Atmos s Rate Filing fails to recognize that rates authorized by the Texas
Railroad Commission m GUD No 9400 included profit based on TXU Corporation s capital
structure rather` than on Atmos Energy Corporation s current capital structure, which justifies a
lower rate of return than that which would be received under GUD No 9400 and
WHEREAS, information provided by Atmos m response to the Steering Committee s
requests for information indicates that implementation of the proposed rates under Atmos s Rate
Filing would result in further over-earning by Atmos above that approved by the Texas Railroad
Commission in GUD No 9400• and
WHEREAS, on May 31 2006 Atmos filed a Statement of Intent to increase gas utility
rates m the City charged by Atmos, using calendar year 2005 as its test year and
WHEREAS, the capital investment made by Atmos during calendar year 2005 will be
reviewed m the ratemakmg proceeding generated by the May 31 2006 Statement of Intent filing,
making this Rate Filing superfluous, duplicative and unnecessary and
WHEREAS, as a result of the above facts, counsel for the Steering Committee, upon
review of the Rate Filing and upon consultation with various consultants, recommends that
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municipalities participating m the Steering Committee find that the adjusted rates proposed by
Atmos m rts Rate Filing are unjustified, unreasonable and not wrtlun compliance of Section
104.301 of the Texas Utilities Code;
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 rts exclusive original ~unsdictional authority over the rates,
operations and services of Atmos wrtlun the City and m the exercise of its sound legislative
discretion, makes the following findings of fact based on all information before it:
1.1 The statements set forth m the recitals above are true and correct.
1.2. Atmos included m the calculation of its proposed adjusted rates under the Rate
Filing projects unrelated to the improvement of rts system.
1.3. In calculating its proposed adjusted rates under the Rate Filing, Atmos failed to
recognize the increased revenues rt is now receiving due to increased rates
approved by the Texas Railroad Commission m GUD No 9400 and due to
customer growth.
1.4. Approval of the adjusted rates proposed by Atmos m rts Rate Filing would result
in over-earning by Atmos in the year of implementation.
1.5. The factors allegedly ~ushfymg the adjusted rates proposed by Atmos m rts Rate
Filing will be taken into consideration m the ratemalcmg proceeding generated by
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Atmos's May 31 2006 filing of a Statement of Intent of increase gas utility rates
charged m the Czty by Atmos.
Section 2.
CONTINUED PARTICIPATION IN THE STEERING COMMITTEE.
The Crty Manager or his authorized designee is hereby authorized to continue to
cooperate with other participating mumcipalrties m 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
lrt~gation 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 m
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, attorneys and engineers retained by the City or a steering committee of
which the City is a member including the Steering Committee, and incurred m the course of the
City's and/or the Steering Committee s involvement m any review of the Rate Filing, any
litigation and any appeal to the Railroad Commission of Texas of the denial of the adjusted rates
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proposed m 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
apart hereof and shall be fully effective as part of the ordained subject matter of this Ordinance.
Section 5.
SEVERABILITY
If any portion, section or part of a section of this Ordinance is subsequently declared
mvahd, 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 m full force and
effect and shall not m any way be impaired or affected by such decision, opinion or }udgment.
Section 6.
EFFECTIVE DATE.
This Ordinance shall take effect and be m full force and effect from and after the date of
rts adoption.
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Section 7
DELIVERY OF ORDINANCE TO ATMOS.
This Ordinance shall take effect and be m full force and effect from and after the date of
rts adoption. The City Secretary is hereby directed to deliver certified copies of this Ordinance to
Atmos as follows. Richard Reis, Manager Gas Regulation, Atmos Energy Corp Mid-Tex
Division, Lincoln Center II, 18th Floor 5420 LBJ Freeway Dallas, TX 75240
AND IT IS SO ORDAINED.
ADOPTED AND EFFECTIVE. June 20, 2006
APPROVED AS TO FORM AND LEGALITY
By~
Peter Vaky
Assistant City Attorney
M&C G 15254
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City of Fort Worth, Texas
Mayor and Council Communication
RECOMMENDATION
It is recommended that the City Council adopt the attached ordinance denying the implementation of the
Gas Reliability Infrastructure Program Rate Adjustments filed with the City by Atmos Energy Corp Mid-Tex
Division on March 31 2006
DISCUSSION
On March 31 2006 Atmos Energy Corporation (Atmos} formerly known as TXU Gas Company filed with
the City of Fort Worth ("City") the third Gas Reliability Infrastructure Program Rate Adjustment (GRIP)
within the last twelve months. The first G R.I P adjustment filed December 19 2004 was denied by the City
Council on July 26 2005 (M&C G-14875 Ordinance No 16524) It was later granted by the Railroad
Commission The second G R.a P adjustment filed September 19 2005 was denied by the City Council on
November 15 2005 (M&C G-15002 Ordinance No 16712) It, also was granted by the Railroad
Commission
With the first G R.I P filing the City Council authorized the City Manager to join with other cities affected by
the rate increase to form Atmos Cities Steering Committee ("Steering Committee') that would hire and
direct legal counsel and consultants, negotiate with the Company make recommendations to the City
regarding reasonable rates, and direct any administrative proceedings or litigation associated with the
Interim Rate Adjustments filed with the City or with the Railroad Commission
G R.I P filings are a departure from previous rate cases in that they are adjustments to existing rates to
allow a utility to recover additional invested capital without filing a full rate case Increased revenues and
declining costs that may have occurred over the same period are not considered Information provided by
Atmos in response to the Steering Committees requests for information indicates that Atmos actually
decreased per-customer investment in infrastructure Atmos fails to account for growth in numbers of
customers thereby undercounting the revenues it will receive from its proposed GRIP rate
increase Atmos s GRIP requests fail to recognize that current rates include profit based on TXU
Corporation s capital structure rather than Atmos s current capital structure which justifies a lower rate of
return
Counsel and consultants for the Steering Committee, upon review of the Atmos's filing recommend finding
that Atmos's proposal is unjustified and unreasonable
FISCAL INFORMATION/CERTIFICATION
The Finance Director certifies that this action will have no material effect on City funds
Logname• 03GRIP03 Page 1 of 2
TO Fund/AccountlCenters
FROM Fund/Account/Centers
Submitted for City Manager's Office ~ Richard Zavala (Acting) (6222)
Originating Department Head. Bridgette Garrett (8518)
Additional Information Contact: Danny Reed (6145)
Logname 03GRIP03
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