The City of Allen, along with approximately 171 other similarly situated cities served by Atmos Energy Corp., Mid-Tex Division ("Atmos Mid-Tex" or "Company"), is a member of the Atmos Cities Steering Committee ("ACSC"). The Rate Review Mechanism ("RRM") Tariff was originally adopted by ACSC member cities in 2007 as an alternative to the Gas Reliability Infrastructure Program ("GRIP"), the statutory provision adopted by the state legislature that allows Atmos to bypass the City's rate regulatory authority to increase its rates annually to recover capital investments. The RRM Tariff has been modified several times over the years and is again modified in the attached Ordinance.

The Ordinance passed on May 23, 2017 that resolved the Company's application under the last RRM Tariff also terminated the existing RRM Tariff and required a renegotiation of the terms of that tariff.  Negotiations have taken place over the past several months, and have resulted in a revised RRM Tariff that has been agreed to by the Company. The ACSC Executive Committee has recommended acceptance of the revised RRM Tariff, which is attached to this Ordinance.

The RRM Tariff on which the 2017 rates were based allowed a rate of return on equity of 10.50%.  The revised RRM Tariff reduces that to 9.8%.  The revised RRM Tariff also captures the reduction in federal income tax rates from 35% to 21%, and should result in a rate reduction effective by mid-March, 2018.  Prior RRM tariffs allowed Cities only three months to review the Company's filing.  The new revised Tariff expands that time period by two months.  New applications by the Company should be made on or about April 1 of each year, with new rates effective October 1.  A rate order from the Railroad Commission in an Atmos Texas Pipeline rate case adopted the position of Cities with regard to incentive compensation related to Atmos' Shared Services Unit that reduced allowed expenses, and that reduced level of expenses will be applicable under the new RRM Tariff.

The ACSC Executive Committee and its designated legal counsel and consultants recommend that all Cities adopt the Ordinance with its attachments approving the negotiated tariff authorizing a new annual Rate Review Mechanism. 

Staff recommends the City Council adopt an Ordinance approving this negotiated settlement between the Atmos Cities Steering Committee and Atmos Energy Corporation, Mid-Tex Division Regarding.

I make a motion to adopt Ordinance No. ______ approving a negotiated settlement between the Atmos Cities Steering Committee and Atmos Energy Corporation, Mid-Tex Division regarding the approval of a tariff authorizing an Annual Rate Review Mechanism (RRM).