R-11-08-11-8C2 - 8/11/2011RESOLUTION NO. R -11-08-11-8C2
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROUND ROCK,
TEXAS, ("CITY") APPROVING A SETTLEMENT BETWEEN ATMOS
ENERGY CORP'S MID-TEX DIVISION ("ATMOS") AND ATMOS TEXAS
MUNICIPALITIES ("ATM") RESULTING IN NO CHANGE IN BASE RATES
AND APPROVING TARIFFS WHICH REFLECT COSTS RELATED TO THE
STEEL PIPE REPLACEMENT PROGRAM; FINDING THE RATES SET BY
THE ATTACHED TARIFFS TO BE JUST AND REASONABLE; REQUIRING
DELIVERY OF THE RESOLUTION TO THE COMPANY AND LEGAL
COUNSEL; DETERMINING THAT THE MEETING AT WHICH THIS
RESOLUTION WAS APPROVED COMPLIED WITH THE OPEN MEETINGS
ACT; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE
SUBJECT; AND DECLARING AN EFFECTIVE DATE.
WHEREAS, the City is a regulatory authority under the Gas Utility Regulatory Act ("GURA")
and under § 103.001 of GURA has exclusive original jurisdiction over Atmos Energy Corporation —
Mid -Tex Division ("Atmos") rates, operations, and services as a gas utility within the municipality;
and,
WHEREAS, the City has participated in prior cases regarding Atmos as part of a coalition of
cities known as the Atmos Texas Municipalities ("ATM"), and,
WHEREAS, on or about April 1, 2010 Atmos filed for an increase in rates, pursuant to the
Rate Review Mechanism ("RRM"), of approximately $15.6 million; which represents approximately a
$9 million base rate increase and an approximate $6.6 million for the steel pipe replacement program;
and,
WHEREAS, after months of investigation by ATM's rate experts and weeks of negotiations by
ATM' S negotiation team a settlement was arrived at which provides: (1) the steel service line
replacement program for this last year be funded through a monthly increase of the residential
customer charge of twenty-nine cents and an increase in the commercial customer charge of a dollar
and twenty-two cents; (2) there will be no increase in base rates; and (3) Atmos and representatives of
ATM will begin meeting in mid-August to begin working on rate -related issues, especially those that
are difficult to resolve in the time period called for by the RRM process.
WHEREAS, the Executive Committee of ATM and its lawyers recommend that the Council
approve the attached tariffs which are consistent with the understandings between Atmos and the ATM
Executive Committee.
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NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
ROUND ROCK, TEXAS THAT:
Section 1. That the findings set out in the preamble to this resolution are hereby in all things
approved and adopted.
Section 2. The rates contained in the attached tariffs are just and reasonable and are hereby
approved subject to a prudence review of the steel pipe replacement expenditures in the next general
rate proceeding.
Section 3. That a copy of this Resolution shall be sent to Mr. David Park, Vice President for
Rates and Regulation, Mid -Tex Division, Atmos Energy Corporation, 5420 LBJ Freeway, Suite 1800,
Dallas, Texas 75204, and to Jim Boyle, Counsel for ATM, at Herrera & Boyle, PLLC, 816 Congress
Avenue, Suite 1250, Austin, TX 78701.
Section 4. That 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 5. That this resolution shall become effective immediately from and after its passage.
The City Council hereby finds and declares that written notice of the date, hour, place and
subject of the meeting at which this Resolution was adopted was posted and that such meeting was
open to the public as required by law at all times during which this Resolution and the subject matter
hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act,
Chapter 551, Texas Government Code, as amended.
RESOLVED this 1 lth day of August, 2011.
ATTEST:
SlAktiL,
SARA L. WHITE, City Secretary
2
ALAN MCGRAW, Mayor
City of Round Rock, Texas
ROUND ROCK, TEXAS
PURPOSE. PASSION. PROSPERITY.
City Council Agenda Summary Sheet
Agenda Item No. 8C2.
Agenda Caption:
Consider a resolution approving a settlement between Atmos Energy Corp's Mid -Tex
Division and Atmos Texas Municipalities resulting in no change in base rates and
approving tariffs which reflect costs related to the steel pipe replacement program.
Meeting Date: August 11, 2011
Department: Finance
Staff Person making presentation: Cheryl Delaney
Finance Director
Item Summary:
For the last four years ATM cities have worked to resolve rate cases brought by Atmos Energy Corp. ("Atmos") under
a regime known as the Rate Review Mechanism ("RRM"). During last year's RRM negotiations, the retroactive true -
up provision of RRM was eliminated. This lead to a much smaller base rate increase request by Atmos. Last year
Atmos requested an increase of $70 million in base rates and this year the requested increase in base rates,
excluding the steel pipe replacement program, was approximately $9 million.
Over the past few years there have been a number of explosions involving steel service lines. The worst of these
lines need to be replaced rapidly. Atmos did a risk assessment which attempted to target the lines most likely to
have problems. This is the second year of the steel pipe replacement program. As part of the settlement last year it
was expected that the residential customer charge would increase this year by 40 cents as a result of steel pipe
replacements. In fact, the increase in the residential customer charge turned out to be lower than expected. The
increase for the residential customer charge turned out to be 35 cents, of which 29 cents of that sum is for the steel
pipe replacement program. The additional 6 cents is offset by a reduction in consumption or volumetric charges. The
commercial customer charge will increased by $1.22. Even with these increases, the customer charge for Atmos
customers in the Mid -Tex region is among the lowest in Texas.
Counsel for ATM recommends that the settlement be adopted. It is the belief of Counsel that a litigated outcome is
unlikely to result in a better outcome for ratepayers. The settlement is effective on September 1, 2011. It is
important for ATM cities use their best efforts to adopt the resolution implementing the new tariffs by September 1,
2011. If a city should choose not to approve the settlement it is likely that the decision will be appealed to the
Railroad Commission by Atmos. A litigated appeal of this sort could cost well over $1 million, including the rate case
expenses of Atmos and the city. An appeal of this sort will be extremely difficult to pursue if most of the cities
located in the Mid -Tex Division have adopted the settlement.
Cost: N/A
Source of Funds: N/A
Date of Public Hearing (if required): N/A
Recommended Action: Approval