R-10-10-28-10D5 - 10/28/2010RESOLUTION NO. R -10-10-28-10D5
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROUND
ROCK, TEXAS AUTHORIZING THE INTERVENTION AT THE
RAILROAD COMMISSION OF TEXAS CONCERNING THE FILING FOR
AN INCREASE IN RATES BY ATMOS PIPELINE — TEXAS; REQUIRING
ATMOS PIPELINE TO REIMBURSE REASONABLE RATE CASE
EXPENSES; AUTHORIZING THE RETENTION OF COUNSEL AND RATE
CONSULTANTS; FINDING THAT THE MEETING AT WHICH THIS
RESOLUTION WAS APPROVED COMPLIED WITH THE OPEN
MEETINGS ACT; MAKING SUCH OTHER FINDINGS AND OTHER
PROVISIONS RELATED TO THE SUBJECT; AND PROVIDING FOR AN
EFFECTIVE DATE
WHEREAS, on or about September 17, 2010, Atmos Pipeline — Texas ("APT" or
"Company"), a division of Atmos Energy Corporation, filed with the Railroad Commission of
Texas ("RCT") a request to increase its city gate service ("CGS") rates and its pipeline
transportation ("PT") rates; and
WHEREAS, APT's request will increase revenues by approximately $38.9 million but
because of the manner in which APT proposes to recover the increase from its wholesale customers,
rates APT charges to Atmos Energy Corporation — Mid -Tex Division will increase by about $43
million, which represents an increase of approximately 41.2% in the CGS rate, which will
ultimately be recovered from retail customers; and
WHEREAS, APT is requesting a return on equity of 12.75%, which is materially higher
than any utility has requested or that the RCT has approved; and
WHEREAS, APT seeks formal approval of certain investments made under the Gas
Utility Regulatory Act (GURA), § 104.301, often referred to as the "GRIP Statute," in the
amount of about $482 million for expenditures made during the period of January 2003 through
March 2010; and
WHEREAS, several accounting adjustments during that time period related to APT's
operation and maintenance expenses that APT proposes, require detailed examination; and
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WHEREAS, APT is part of a larger corporation, which raises numerous issues regarding
APT's affiliate transactions; and
WHEREAS, utility law is a complex area of law requiring specialized expertise in the
examination of APT's books and records; and
WHEREAS, given that APT has proposed an October 22, 2010 effective date for this
increase, it is important to act promptly to intervene at the Railroad Commission of Texas; and
WHEREAS, the City of Round Rock has participated as a member of a coalition of cities
known as the Atmos Texas Municipalities (ATM) in matters regarding Atmos Mid-Texas, and
has benefitted from its participation and membership in such coalition; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ROUND ROCK,
TEXAS:
Section 1. That the statements and findings set out in the preamble to this resolution are
hereby in all things approved and adopted.
Section 2. That subject to the right to terminate employment at any time, the City
employs the Herrera & Boyle law firm to represent the City in Railroad Commission GUD Docket
No. 10000 and with regard to any administrative proceedings or court actions related thereto, and
the City authorizes counsel to employ, with the approval of the ATM Steering Committee, such rate
experts as are necessary to assist them with regard to the review, investigation and possible filing of
testimony in GUD Docket No. 10000.
Section 3. The City authorizes counsel to intervene on behalf of the City in GUD
Docket No. 10000.
Section 4. Atmos shall on a monthly basis reimburse the City, by payment to the
designated City representing ATM for this purpose, for the reasonable costs of attorneys and
consultants and expenses related thereto as provided in Texas Utility Code, Section 103.022, upon
the presentation of invoices reviewed by the Steering Committee.
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Section 5. The meeting at which this resolution was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code,
Chapter 551.
Section 6. This resolution shall take effect immediately from and after its passage.
RESOLVED this 28th day of October, 2010.
ATTEST:
21A4t/t/
SARA L. WHITE, City Secretary
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ALAN McGRAW, Mayor
ROUND ROCK, TEXAS
PURPOSE. PASSION. PROSPERITY
Agenda Item No. 10D5.
City Council Agenda Summary Sheet
Consider a resolution authorizing the intervention of the Railroad Commission of Texas
Agenda Caption: concerning the filing for an increase in rates by Atmos Pipeline —Texas.
Meeting Date: October 28, 2010
Department: Finance
Staff Person making presentation: Cheryl Delaney
Finance Director
Item Summary:
Atmos Pipeline — Texas (APT) filed a request with Railroad Commission of Texas on September 17, 2010 to increase wholesale
rates by approximately $38.9 million for its city -gate services (CGS) and its pipeline -transportation (PT) services.
Because APT proposes to reduce the rates to provide service to the industrial pipeline -transportation customers, rates APT
charges to Atmos Energy Corporation — Mid -Tex Division, will increase by about $43 million. These increases will in turn be
passed on to Atmos -Mid -Tex Division's retail customers.
APT's application raises numerous issues regarding its proposed increase, including the following:
• The amount of the increase requested and the allocation of an increase to Atmos — Mid Tex but a reduction to the
industrial PT customers.
• Overall rate increase proposed is $38.9 million, but with $43 million (more than 100%) going to Mid -Tex due to rate
reductions proposed for directly served industrial Pipeline Transportation (Rate PT) customers, summarized as follows:
APT Proposed Rate Changes
Revenues Percent
PT Class $ (5,066,025) -56.9%
CGS Customers
Mid -Tex 43,086,138 41.2%
Cosery 1,556,598 59.5%
Rising Star (24,000) -68.2%
West Texas (23,896) -71.9%
Total CGS 44,594,840 41.6%
Total
$ 39,528,815 34.0%
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ROUND ROCK, TEXAS
PURPOSE. PASSION. PROSPERITY
City Council Agenda Summary Sheet
• The total Cost of Service asserted by Atmos Pipeline -Texas is $234 million (see COS Schedule A) which is offset by
competitive opportunity sales margins to competitive customers in the proposed amount of $78 million. A new "Rider
REV" Tracking mechanism is proposed for APT's competitive "Other Revenue" customer class, which would pass
through 75% of difference between actual and this proposed test year margin revenue between rate cases.
o Test year margins of $78.1 million are net of APT's $11.5 million adjustment reducing recorded margins to
reflect known changes.
o Significant policy issues are raised by the risk shifting and sharing attributes of this sharing proposal. APT
argues it is "risky" to serve these customers, such that a higher ROE of 12.75% is justified (with other risks
cited as well), but the rider would shift most risks to ratepayers if approved.
• A return on equity of 12.75%.
• Approval of the Company's $482 million "GRIP" investments from January 2003 through March 2010.
• Several accounting adjustments in areas that have been controversial in Atmos Mid -Tex' cases (including incentive
compensation plans, labor costs, deferred taxes, franchise taxes).
• Affiliate transactions:
o How are customers and assets transferred between APT and Atmos Mid -Tex?
o Are APT competitive transportation prices fairly negotiated for Atmos Energy Marketing customers within
bundled gas supply deals?
o Blue Flame captive insurance affiliate premiums are excessive, relative to the small risk layer insured.
• APT's new depreciation rate study.
RATE CASE EXPENSES:
Pursuant to the provisions of Section 103.022 of the Texas Utilities Code cities are entitled to have their reasonable rate case
expenses reimbursed.
RECOMMENDATION:
It is recommended that the City intervene in the proceeding at the Railroad Commission to represent the City's interests in that
proceeding and in any related proceedings.
Strategic Plan Relevance:
Cost: N/A
Source of Funds: N/A
Date of Public Hearing (if required): N/A
Recommended Action: Approval