CC MEETING: September 10, 2024
DATE: August 26, 2024
TO: City Council
FROM: Meredith A. Ladd, City Attorney
Title
Consider A Resolution Of The City Council Of The City Of Carrollton, Texas, Approving A Negotiated Settlement Between The Atmos Cities Steering Committee (“ACSC”) And Atmos Energy Corp., Mid-Tex Division (“Atmos”) Regarding Atmos’s 2024 Rate Review Mechanism Filing; Declaring Existing Rates To Be Unreasonable; Adopting Tariffs That Reflect Rate Adjustments Consistent With The Negotiated Settlement; Finding The Rates To Be Set By The Attached Settlement Tariffs To Be Just And Reasonable And In The Public Interest; Approving An Attachment Establishing A Benchmark For Pensions And Retiree Medical Benefits; Requiring Atmos To Reimburse ACSC’s Reasonable Ratemaking Expenses; Determining That This Resolution Was Passed In Accordance With The Requirements Of The Texas Open Meetings Act; Adopting A Savings Clause; Declaring An Effective Date; Requiring Delivery Of This Resolution To Atmos And ACSC’s Legal Counsel; And Providing An Effective Date.
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BACKGROUND:
The City, along with 181 other Mid-Texas cities served by Atmos Energy Corporation, Mid-Tex Division (“Atmos”), is a member of the Atmos Cities Steering Committee (“ACSC”). In 2007, ACSC and Atmos settled a rate application filed by Atmos pursuant to Texas Utilities Code Section 104.301 for an interim rate adjustment commonly referred to as a GRIP filing (arising out of the Gas Reliability Infrastructure Program legislation). That settlement created a substitute rate review process, referred to as Rate Review Mechanism (“RRM”), as a substitute for future filings under the GRIP statute.
Since 2007, there have been several modifications to the original RRM Tariff. The most recent iteration of an RRM Tariff was reflected in an ordinance adopted by ACSC members in 2018. On or about April 1, 2024, Atmos filed a rate request pursuant to the RRM Tariff adopted by ACSC members. Atmos claimed that its cost-of-service in a test year ending December 31, 2023, entitled it to additional system-wide revenues of $196.8 million.
Application of the standards set forth in ACSC’s RRM Tariff reduces Atmos’s request to $182.5 million, $132.6 million of which would be applicable to ACSC members. After reviewing the filing and conducting discovery, ACSC’s consultants concluded that the system-wide deficiency under the RRM regime should be $149.6 million instead of the claimed $182.5 million.
After several settlement meetings, the parties have agreed to settle the case for $164.7 million. This is a reduction of $32.1 million to Atmos’s initial request. This includes payment of ACSC’s expenses. The Effective Date for new rates is October 1, 2024.
FINANCIAL IMPLICATIONS:
The impact of the settlement on average residential rates is an increase of $5.52 on a monthly basis, or 6.84%. The increase for average commercial usage will be $13.39 or 3.44%.
STAFF RECOMMENDATION/ACTION DESIRED:
Staff recommends City Council adopt the Resolution approving the negotiated settlement in accordance with the terms set forth therein.