R-2025-017 - 1/9/2025 RESOLUTION NO. R-2025-017
RESOLUTION BY THE CITY OF ROUND ROCK, TEXAS
("CITY") DENYING THE INCREASE IN RATES PROPOSED BY
ATMOS ENERGY CORPORATION IN ITS MID-TEX DIVISION
FILED ON ABOUT DECEMBER 16, 2024; AUTHORIZING
INTERVENTION IN PROCEEDINGS RELATED TO ATMOS
ENERGY'S APPLICATION TO INCREASE RATES;
AUTHORIZING SPECIAL COUNSEL TO REPRESENT THE
CITY IN MATTERS RELATED TO ATMOS ENERGY'S
PROPOSED INCREASE IN RATES; DIRECTING ATMOS TO
REIMBURSE RATE CASE EXPENSES; FINDING THAT THE
MEETING COMPLIES WITH THE OPEN MEETINGS ACT;
MAKING OTHER FINDINGS AND PROVISIONS RELATED TO
THE SUBJECT; AND DECLARING AN EFFECTIVE DATE
WHEREAS, Atmos Energy Corporation ("Atmos" or "Company") filed a
Statement of Intent with the City on about December 16, 2024, to change its rate
schedules within the corporate limits of this municipality, specifically to increase its
annual revenue requirement by approximately $16.73 million, which represents an
increase in base rates of about 11.51%, excluding the cost of gas, and about 7.08%
including the cost of gas; and
WHEREAS, the City is a regulatory authority under the Gas Utility Regulatory
Act ("GURA") and under Chapter 103, §103.001 et seq. of GURA has exclusive original
jurisdiction over Atmos's rates, operations, and services within the municipality; and
WHEREAS, to maximize the efficient use of resources and expertise in
reviewing, analyzing and investigating Atmos's rate request and its changes in tariffs, the
City joins with other local regulatory authorities to form an alliance of cities known as
the Atmos Texas Municipalities ("ATM"); and
WHEREAS, Atmos's rate request consists of a voluminous amount of
information including Atmos's rate-filing package, exhibits, schedules, and workpapers;
and
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Atmos Energy—Mid-Tex—2024
Statement of Intent
WHEREAS, Atmos's rate application is the Company's first general rate case
since about 2018, and follows six consecutive annual increases in rates pursuant to the
Interim Rate Adjustment("IRA") mechanism, also known as "GRIP" filings; and
WHEREAS, Atmos proposed January 20, 2025, as the effective date for its
requested increase in rates; and
WHEREAS, the City will require the assistance of specialized legal counsel and
rate experts to review the merits of Atmos's application to increase rates; and
WHEREAS,Atmos's application fails to establish that its overall revenue request
resulted in no more than an amount that will permit Atmos a reasonable opportunity to
earn a reasonable return on the utility's invested capital used and useful in providing
service to the public in excess of its reasonable and necessary operating expenses; and
WHEREAS, Atmos's application fails to establish that its proposed rates are just
and reasonable; and
WHEREAS, Atmos may exercise its statutory right to appeal a City decision
regarding Atmos's request to increase rates to the Railroad Commission of Texas; and
WHEREAS, Atmos filed its Statement of Intent to increase its revenue and
change its rate with the City after it filed a substantially similar application with the
Railroad Commission of Texas, and the decision of the Railroad Commission of Texas
will have a direct impact on the City and its citizens who are customers of Atmos, and in
order for the City's participation to be meaningful, it is important that the City intervene
in any such proceedings at the Railroad Commission of Texas related to Atmos's
application to increase rates.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ROUND ROCK,TEXAS THAT:
Section 1. The findings set out in the preamble are in all things approved and
incorporated herein as if fully set forth.
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Atmos Energy—Mid-Tex—2024
Statement of Intent
Section 2. Atmos's application fails to show that its proposed rates are just and
reasonable.
Section 3. The City hereby DENIES Atmos's request to increase its revenue and
change its rates and in support of DENIAL finds that:
A. Atmos failed in its burden of proof to establish that its requested increase in
revenue or the changes set forth in its tariffs attached to Atmos's Statement of
Intent to change rates,results in just and reasonable rates;
B. Atmos failed in its burden of proof to establish that adoption of its proposed
rate base, expenses, investment, return on equity, and other rate issues as
presented in Atmos's Statement of Intent to increase rates, result in just and
reasonable rates.
Section 4. The City shall participate in a coalition of cities known as the Atmos
Texas Municipalities ("ATM"), and authorizes intervention in proceedings related to
Atmos's Statement of Intent before the Railroad Commission of Texas and related
proceedings in courts of law; and
Section 5. The City hereby orders Atmos to reimburse the City's rate case expenses
consistent with the Gas Utility Regulatory Act and that Atmos shall do so on a monthly
basis and within 30 days after submission of the City's invoices for the City's reasonable
costs associated with the City's activities related to this rate review or related to
proceedings involving Atmos before the City, the Railroad Commission of Texas, or any
court of law.
Section 6. Subject to the right to terminate employment at any time, the City retains
and authorizes the law firm of Herrera Law & Associates, PLLC to act as Special
Counsel with regard to rate proceedings involving Atmos before the City, the Railroad
Commission of Texas, or any court of law, and to retain such experts as may be
reasonably necessary for review of Atmos's rate application subject to approval by the
steering committee of the ATM.
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Atmos Energy—Mid-Tex—2024
Statement of intent
Section 7. The City, in coordination with the Atmos Steering Committee, shall
review the invoices of the lawyers and rate experts for reasonableness before submitting
the invoices to Atmos for reimbursement.
Section 8. A copy of this resolution shall be sent to Mr. Alfred R. Herrera, Herrera
Law & Associates, PLLC, P.O. Box 302799, Austin, Texas 78703, and a courtesy copy
to Atmos's local representative.
Section 9. 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 10. This resolution shall become effective from and after its passage.
PASSED AND APPROVED this 9th day of January, 2025.
- 4 M /.
CRAI MORG , Mayor
City of Round k,Texas
ATTEST:
41
ANN FRANKLIN,City Clerk
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Atmos Energy—Mid-Tex—2024
Statement of Intent
AGENDA INFORMATION SHEET
ITEM NO. R-2025-017
DENIAL OF ATMOS ENERGY CORPORATION'S APPLICATION
FILED ON ABOUT DECEMBER 16, 2024, PROPOSING TO INCREASE
IN-CITY RATES FOR ITS MID-TEX DIVISION; AUTHORIZING
PARTICIPATION IN THE ATMOS TEXAS MUNICIPALITIES (ATM)
COALITION OF CITIES; AUTHORIZING INTERVENTION IN
PROCEEDINGS RELATED TO ATMOS ENERGY'S STATEMENT OF
INTENT; REQUIRING THE REIMBURSEMENT OF MUNICIPAL
RATE CASE EXPENSES; AUTHORIZING REPRESENTATION OF
THE CITY BY SPECIAL COUNSEL
BACKGROUND
On about December 16, 2024, Atmos Energy Corporation (Atmos or Atmos Energy) filed
a Statement of Intent to increase its base rate revenues for its Mid-Tex Division within
certain cities, by approximately $16.73 million; this equates to an increase in annual
revenue of about 7.08% including gas costs, and 11.51% excluding gas costs. This is
Atmos's first request to increase its base rates since 2018. Following the conclusion of
its 2018 rate gas (Gas Utilities Docket No. 10742), Atmos has raised its rates by means of
six Interim Rates Adjustment ("IRA") filings, also known as "GRIP" filings.
Atmos proposes an effective date of January 20, 2025, for its change in rates. As is
explained below, the proposed Resolution related to Atmos's application to increase its
base rate revenues, if adopted, denies the proposed increase in rates.
Crucially, on November 18, 2024, Atmos filed with the Railroad Commission of Texas
(RRC or Commission) substantially the same proposal to increase rates. Because Atmos
filed its application to increase rates with the RRC several weeks before it filed the same
application with the city, and other similarly situated cities, the time line for the RRC to
issue a decision regarding Atmos's application with the RRC is such that by the time the
City's statutory deadline to make its decision regarding the application Atmos filed with
the City, the RRC proceedings will be close to, if not at, their end. Thus, it is highly
likely the RRC will make a decision on the merits of Atmos's application before the City
completes its review and makes its decision.
BILL IMPACT:
On average, Atmos' proposed increase if approved as filed would result in an increase of
about 14.05% in a residential customer's bill excluding the cost of gas, and about 9.41%
including the cost of gas. The effect of Atmos' proposed increase in rates for a
residential customer using average consumption of gas is shown in the table below:
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Atmos Energy—Mid-Tex—2024 Statement of Intent
ATMOS ENERGY CORP.,MID-TEX DIVISION
ATMOS TEXAS MUNICIPALITIES("ATM")STATEMENT OF INTENT
AVERAGE BILL COMPARISON BASE RATES
TEST YEAR ENDING JUNE 30,2024
Average Current Proposed Current Proposed Amount Percent
Line No. Description Volumes Rates Rates Average Bill Average Bill Change Change
(a) (h) (c) (d) (e) (g) (h)
1 Rate R at 32.6 Ccf
2 Base Rates
3 Customer Charge 5 4791 5 4791 $ 47.91 $ 47.91 $ -
4 Consumption Charge(Co 32 6 S 0 14846 $ 037584 4.84 12.25 7.41
5 Total Base Rates $ 52.75 $ 60.16 $ 7.41 1405%
6
7 Gas Cost.
8 Rider GCR Part A(Ccf) 32.6 $ 0.25792 $ 0.25792 $ 8.41 $ 8.41 $ -
9 Rider GCR Part 8(Ccf) 32.6 S 1153771 S Q53771 17.53 17.53
10 Total Gas Cost $ 25.94 $ 25.94 $ - 0 00%
11
12 Total Base with Gas Cost S 78.69 $ 86.10 $ 741
13 Rider FF and Rider TAX 0 06788 0 06788 5.34 5.84 0.50 9 36%
14
15 Total Residential Average Bill S 31.03 S 91.94 S 7.91 9.41%
Atmos proposes to leave rates for Commercial, Industrial, and Transportation customers
unchanged.
REVENUEIMPACT:
Because of the substantial increase in rates to the Residential class of customers the City
should closely scrutinize Atmos's proposed increase as well as its proposed allocation of
costs to the customer classes.
ACTION REQUIRED BY JANUARY 20,2025
The City must take action on Atmos's Statement of Intent by no later than January
20, 2025. Absent such action, Atmos's proposed rates are deemed approved by operation
of law.
ATMOS TEXAS MUNICIPALITIES
The coalition of cities known as the Atmos Texas Municipalities ("ATM") was organized
by a number of municipalities served by Atmos. Alfred R. Herrera, with the law firm of
Herrera Law & Associates, PLLC, has previously represented ATM in rate cases
involving Atmos.
CITY JURISDICTION TO SET ATMOS'S RATES
Unless a city ceded its original jurisdiction to the Railroad Commission of Texas, the Gas
Utility Regulatory Act § 103.001 grants a city exclusive original jurisdiction over a gas
utility's rates, services, and operations within the city limits. But even if a city has ceded
its jurisdiction to the Railroad Commission, the Gas Utility Regulatory Act § 103.023
("GURA"), grants a city the statutory right to participate in rate proceedings before the
Railroad Commission.
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Atmos Energy—Mid-Tex—2024 Statement of Intent
RATE CASE EXPENSES
Cities by statute are entitled to recover their reasonable rate case expenses from the
utility. See GURA § 103.022. Legal counsel and consultants approved by ATM will
submit monthly invoices to the coalition-designated city that will be forwarded to ATM
for reimbursement. No individual city's budget is negatively affected.
OPTIONS FOR CITY ACTION:
The City has three options with respect to the action it takes regarding Atmos's
application to increase rates:
1. The City could take no action, and under state law, Atmos's proposed increase
in revenue and change in rates would be deemed approved by operation of law
and go into effect on Atmos's proposed effective date, January 20, 2025;
2. The City may suspend Atmos's proposed effective date of January 20, 2025,
for its increase, for the statutorily allowed period of 90 days, which means the
suspension would expire on April 20, 2025. If the City suspends Atmos's
proposed effective date, the City will need to take final action on the merits of
Atmos's proposed increase in revenue and rates by no later than April 20,
2025;
3. The City may deny Atmos's proposed increase in revenue and rates; if the City
denies Atmos's proposed increase, Atmos will have the right to appeal the
City's action to the Railroad Commission of Texas, which it would do.
RECOMMENDATION
ATM's Special Counsel recommends that the City join or continue its participation in
ATM and retain the law firm of Herrera Law & Associates, PLLC to represent the City's
interest in matters related to Atmos's rate case and to advise the City with regard to
Atmos's application, and that, intervene in the proceedings before the Railroad
Commission of Texas related to Atmos's rates for its Mid-Tex Division, and related court
appeals, if any.
As noted above, because Atmos filed its application to increase rates with the RRC
several weeks before it filed the same application with the City, it is highly likely the
RRC will make a decision on the merits of Atmos's application pending before the RRC,
well ahead of the time the City completes its review and makes its final decision on
Atmos's application it filed with the City.
Thus, while the City could adopt a resolution suspending Atmos's proposed effective
date for the statutorily allowed period, and not make a final decision until close to the end
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Atmos Energy—Mid-Tex—2024 Statement of Intent
of the suspension period — April 20, 2025 — ATM's Special Counsel recommends the
City adopt a resolution denying Atmos's proposed increase in rates, and that the City do
so as expeditiously as possible.
Otherwise, if the City adopts a "suspension" resolution, it is highly likely the RRC would
have reached its decision on the merits of the application Atmos filed with the RRC,
before Atmos even files its appeal of the City's decision. This means that the City will
have had no opportunity to influence the RRC's decision and it is highly unlikely the
RRC would change its decisions on any appeal Atmos files from the City's actions on the
merits of Atmos's proposed increase in rates.
Crucially, though the City, as part of ATM, has filed a motion to intervene in Atmos's
pending rate case at the RRC, Atmos has informed ATM's Special Counsel that Atmos
will object to ATM's intervention and there is the risk that the RRC's administrative law
judge will sustain Atmos' objection keeping ATM out of the case Atmos filed with the
RRC. The ALJ is not expected to make a decision on ATM's motion to intervene until
sometime after December 16, 2024, at the earliest.
So, ATM's Special Counsel strongly advises the City to adopt a resolution denying
Atmos's proposed increase in rates, and that it do so as expeditiously as possible.
Doing so ensures that Atmos will appeal the City's decision to the RRC on a more
expedited time frame, thus assuring ATM's right to intervene in the proceedings at
the RRC.
If adopted, the accompanying resolution:
1. Denies Atmos's proposed increase in rates;
2. Authorizes Herrera Law & Associates,PLLC to represent the City through
ATM in proceedings related to Atmos's proposal to increase rates;
3. Directs Atmos to reimburse ATM's rate-case expenses.
The City must take action no later than January 20, 2025. If the City does not take
action by January 20, 2025, Atmos's proposed rates will be deemed approved by
operation of law. Though the City has until January 20, 2025, to take action, to
maximize ATM's participation in proceedings pending at the RRC, Special Counsel
advises the City to adopt the denial resolution as expeditiously as possible.
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Atmos Energy—Mid-Tex—2024 Statement of intent