M&C Review


COUNCIL ACTION:  Approved on 5/16/2017 - Ordinance No. 22720-05-2017

DATE: 5/16/2017 REFERENCE NO.: **G-19008 LOG NAME: 21ADOPTION OF ATMOS 2017 RRM
CODE: G TYPE: CONSENT PUBLIC HEARING: NO
SUBJECT:  

Adopt Ordinance Approving Negotiated Settlement and Establishing Maximum Permitted Rates and Charges that Atmos Energy Corporation d/b/a Atmos Energy Corporation, Mid-Tex Division, May Assess Customers in the City of Fort Worth Effective June 1, 2017 (ALL COUNCIL DISTRICTS)


RECOMMENDATION:

It is recommended that the City Council adopt the attached ordinance establishing maximum permitted rates and charges that Atmos Energy Corporation, d/b/a Atmos Energy Corporation, Mid-Tex Division, may assess customers in the City of Fort Worth, effective June 1, 2017, pursuant to a negotiated settlement and resolution of Atmos' proposed rate increase under its 2017 Rate Review Mechanism filing.

 
DISCUSSION:

The purpose of this Mayor and Council Communication is to approve a settlement with Atmos Energy Corporation, d/b/a Atmos Energy Corporation, Mid-Tex Division (Atmos or Company), regarding the Company's 2017 filing under the Rate Review Mechanism (RRM).  This year's filing is the final one under the current RRM mechanism unless it is extended as discussed below.

The settlement was negotiated and is recommended by the Executive Committee of the Atmos Cities Steering Committee (ACSC), which is a coalition of more than 150 cities, including Fort Worth, that work cooperatively to provide members with more effective and efficient representation on gas-related issues.

The RRM Tariff was most recently re-adopted in 2013 (M&C G-17912) and serves as an alternative rate adjustment mechanism to the default process outlined in state law. Like the state-law adjustment mechanism, the RRM allows a company to adjust rates to recover capital improvement costs, but unlike state law, the RRM takes into account the company's overall financial situation, including operating costs and revenues and allows cities, as regulatory entities, to review filings and identify expenses or investments considered to be unreasonable or unnecessary that should be reduced or disallowed. Since it was originally adopted, the RRM process has generally resulted in rate increases that are less than Atmos would have been entitled to implement under the default state-law adjustment mechanism.

On March 1, 2017, Atmos filed its rate increase request under the RRM Tariff. That filing sought additional revenues in the amount of $57.4 million system-wide.  The City worked with and through ACSC to analyze the schedules and evidence offered by Atmos to support its request to increase rates.

The attached ordinance reflects the terms of a settlement negotiated between ACSC and the Company to resolve issues raised by ACSC during the review and evaluation of Atmos' filing. Under the ordinance the Company's revenues would increase by $48 million. This figure represents a reduction of approximately 9.4 million dollars from the amount Atmos requested in its RRM filing and is substantially less than the approximately $52.4 million increase the Company would have been entitled to implement under the default state-law adjustment mechanism.

On approval of the attached ordinance, the rates shown in Attachment A of the ordinance would be effective for bills rendered on or after June 1, 2017.  Key elements of the rate changes are as follows:

Residential @ 46.3 CcF

Present

Recommended

Customer Charge

$      19.10

$      19.60

Rider CEE Surcharge*

$        0.02

$        0.02

   Total Customer Charge

$      19.12

$      19.62

All Ccf

$   0.11378

$  0.14427

Commercial @ 371 CcF

Customer Charge

$     41.75

$      44.70

Rider CEE Surcharge*

$       0.02

$        0.08

Total Customer Charge

$     41.77

$      44.78

All Ccf

$   0.08494

$ 0.09279

Industrial @ 4364 MMBTU

Customer Charge

$  738.00

$   799.75

First 1,500 MMBtu

$  0.3096

$   0.3374

Next 3,500 MMBtu

$  0.2267

$   0.2470

All over percent,000 MMBtu

$  0.0486

$   0.0530

Transportation @ 4364 MMBTU

Customer Charge

$  738.00

$  799.75

First 1,500 MMBtu

$  0.3096

$  0.3374

Next 3,500 MMBtu

$  0.2267

$  0.2470

All over 5,000 MMBtu

$  0.0486

$  0.0530

*Surcharge imposed under the Conservation and Energy Efficiency Rider (Rider CEE) as approved by the RRC in Gas Utility Docket No. 10170.

The monthly bill impact for the average residential customer in the Atmos system consuming 46.8 Ccf will be an increase of $2.04, or about 3.87%. Within the City of Fort Worth, the average residential customer impact is projected to be $1.98, which also equates to 3.87%. The dollar amount is slightly lower than the system-wide average because the typical Fort Worth residential customer consumes slightly less (44.1 Ccf) than the system-wide average. The average Atmos system commercial customer will see an increase of $6.27, or 2.37%. Within the City of Fort Worth, the average commercial customer impact is projected to be $7.02, but a somewhat lower percentage increase of 2.21% compared to the typical customer. This dollar amount is higher than the average Atmos customer increase because the average consumption for a Fort Worth commercial customer is about 24% greater than the average Atmos consumption. The lower percentage increase is attributable to the impact of having fixed and variable components (customer charge and consumption charge) in the rate.

The attached ordinance also requires that rates be adjusted and reconciled if the Company's federal income rate is changed. In addition, the ordinance contemplates further negotiation of the RRM process to extend it beyond its current expiration. If those negotiations are successful, staff will bring back an M&C at a subsequent date to renew and extend the RRM mechanism for an additional period. If the negotiations are not successful, it is expected that a full rate case will be initiated.


The Executive Committee of ACSC as well as its consultants and legal advisors recommend that all ACSC members find the proposed rates to be just, reasonable, and in the public interest and adopt the ordinance and its attachments, thereby approving the negotiated rate settlement which resolves the 2017 RRM filing and implementing the rate change.

This M&C does not request approval of a contract with a business entity.

 
FISCAL INFORMATION/CERTIFICATION:

The Director of Finance certifies that this action will have no material effect on City Funds.

TO
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FROM
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Submitted for City Manager's Office by:
Jay Chapa (5804)
Originating Department Head:
Steve Cooke (5134)
Additional Information Contact:
Steve Cooke (5134)

 
 
ATTACHMENTS
  2017 Atmos RRM Rate Ordinance.docx
  Ordinance Attachment.pdf
  Summary of Impact Systemwide by Class.pdf