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HomeMy WebLinkAboutOrdinance 16712-11-2005ORDINANCE NO. ~/~ ~ / I-~~ AN ORDINANCE DENYING THE RATE ADJUSTMENTS PROPOSED BY ATMOS ENERGY CORD MID-TEX DIVISION AS REFLECTED IN THE ANNUAL GAS RELIABILITY INFRASTRUCTURE RATE ADJUSTMENT" FILED BY ATMOS ENERGY CORP MID-TEX DIVISION ON SEPTEMBER 19 2005, 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 TEXA'S 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 CORD MID-TEX DIVISION FOLLOWING ITS ADOPTION WHEREAS, on September 19 2005 Atmos Energy Corp., Mid-Tex Division ("Atmos") filed with the Crty Secretary an Annual Gas Reliability 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 in the City on November 19 2005 and WHEREAS under Texas law the City has exclusive ongmal ~unsdiction over the rates, operations and services of any gas utility operating within the City and WHEREAS the City has participated in a steeruig committee (the Atmos Cities Steering Committee, hereinafter referred to as the `Steering Committee"), which has hired 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; and WHEREAS, an analysis of the Rate Filing and all other applicable information by the Steennng Commnttee s legal counsel and consultants nndncates that Atmos has actually decreased per-customer nnvestment nn nnfrastructure; and WHEREAS, Atmos has publicly stated that rt will receive substantial profits in 2005 over those approved by the Texas Railroad Commission nn GUD No 9400• and WHEREAS, Atmos s Rate Filing fails to account for growth nn numbers of customers, thereby undercounting the revenues it 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 nn GUD No 9400 nncluded 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 in 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, as a result of the above facts, counsel for the Steering Committee, upon review of the Rate Filing and upon consultation wrath various consultants, recommends that municipalities participating in the Steering Committee find that the adjusted rates proposed by Atmos in its Rate Filing are unjustified, unreasonable and not within 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• 2 Section 1. FINDINGS. The City Council, pursuant to its exclusive original jurisdictional authority over the rates, operations and services of Atmos withm the City and in 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 in the recitals above are true and correct. 1.2. Atmos improperly calculated its 2004 rate base. 1.3. Atmos included in the calculation of its proposed adjusted rates under the Rate Filing projects unrelated to the improvement of its system. 1.4. In calculating its proposed adjusted rates under the Rate Filing, Atmos failed to recognize the increased revenues it is now receiving due to increased rates approved by the Texas Railroad Commission in GUD No. 9400 and due to customer growth. 1.5. Approval of the adjusted rates proposed by Atmos in its Rate Filing would result m over-earning by Atmos in the year of implementation. Section 2. CONTINUED PARTICIPATION IN THE STEERING COMMITTEE. 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 mumcipalities, including the City regarding the Rate Filing and to direct any admivstrative proceedings or litigation 3 associated with the Rate Filing, subject to the City's right to terminate such participation at any time by wntten 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 duected 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 ~s 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 ~ 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. 4 Section 5. SEVERABILITY 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 ~unsdiction, 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 unpaired or affected by such decision, opinion or judgment. Section 6. DELIVERY OF ORDINANCE TO ATMOS. This Ordinance shall take effect and be in full force and effect from and after the date of its adoption. The City Secretary is hereby directed to deliver certified copies of thus 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. ~(I0t/~e~.-ib~er- JS~~ts" APPROVED AS TO FORM AND LEGALITY By Peter Vaky Assistant City Attorney 5 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 Interim Rate Adjustments filed with the City by Atmos Energy Corp Mid-Tex Division formerly known as TXU Gas Distribution on September 19 2005 DISCUSSION On September 19 2005 Atmos Energy Corporation Mid-Tex Division (Atmos Energy) formerly known as TXU Gas Company filed with the City of Fort Worth its second proposed Gas Reliability Infrastructure Program (G R.I P) rate adjustment within the last twelve months. The first G R.I P rate adjustment, filed on December 19 2004 was denied by the City Council on July 26 2005 (M&C G-14875 and Ordinance No 16524) and was appealed to the Railroad Commission On October 4 2005 the Railroad Commission granted Atmos Energy the full rate adjustment requested in that first filing Wth 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 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.1 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 the Company in response to the Steering Committee s requests for information indicates that the Company has decreased per-customer investment in infrastructure The Company has publicly stated that it will receive substantial profit in 2005 over that approved by the Railroad Commission The Company fails to account for growth in numbers of customers thereby undercounting the revenues it will receive from its proposed G R.I P rate increase Among other things, the Company's latest G R.I P filing fails to recognize that current rates include profit based on TXU Corporation s capital structure rather than Atmos Energy's current capital structure which justifies a lower rate of return. Counsel for the Steering Committee upon review of the filing and upon consultation with various consultants recommends that the City Council deny Atmos Energy's requested G R.I P rate adjustment on grounds that it is unjustified and unreasonable FISCAL INFORMATION/CERTIFICATION The Finance Director certifies that this action will have no material effect on City funds. Logname 03ATMD Page 1 of 2 TO Fund/AccountlCenters FROM Fund/Account/Centers Submitted for City Manager's Office b~ Richard Zavala (Acting) (6222) Originating Department Head. Bridgette Garrett (8518) Additional Information Contact: Danny Reed (6145) Logname 03ATMD Page 2 of 2