The City of Allen, along with 171 other Mid-Texas cities served by
Atmos Energy Corporation, Mid-Tex Division ("Atmos Mid-Tex" or "Company"), is a
member of the Atmos Cities Steering Committee ("ACSC"). In 2007, ACSC and Atmos Mid-Tex settled a rate
application filed by the Company pursuant to Section 104.301 of the Texas
Utilities Code 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 (including the City of Allen) in March of this year. On or about
April 1, 2018, the Company filed a rate request pursuant to the RRM Tariff
adopted by ACSC members. The Company
claimed that its cost-of-service in a test year ending December 31, 2017,
entitled it to additional system-wide revenues of $42.0 million. Application of the standards set forth in ACSC's
RRM Tariff required Atmos to reduce its request to $27.4 million. After review of the consultants' report, the
Company offered to settle for a system-wide increase of $25.9 million. Following further negotiations, ACSC's
Executive Committee agreed to recommend a system-wide rate increase of $24.9
million. The Effective Date for new rates is October
1, 2018.
Atmos generated proof that the rate tariffs will generate $24.9 million in additional revenues on a system-wide
basis. ACSC
consultants have agreed that Atmos' Proof of Revenues is accurate.
Given the fact that ACSC demanded that Atmos reflect
reduced federal income taxes in its cost-of-service, as reflected in the RRM Tariff
adopted earlier this year, Atmos was required to reduce its rates in March. This rate reduction did not require City action and the reduced rates went into effect in April. The rate increase associated with this RRM is largely offset by the lowered federal income tax rates, such that
out-of-pocket expense to consumers should be roughly the same under new rates
as what was experienced by consumers last winter. The rate increase experienced by the average residential customer will be approximately $1.06 (or 1.94%) per month. This will return the average residential bill to roughly what it was prior to the rate reductions implemented in April, 2018.
The Legislature's GRIP process allowed gas utilities to
receive annual rate increases associated with capital investments with very limited oversight. The RRM process has proven to result in a
more efficient and less costly (both from a consumer rate impact perspective
and from a ratemaking perspective) than the GRIP process. Given Atmos Mid-Tex's claim that its historic
cost of service should entitle it to recover $42 million in additional
system-wide revenues, the RRM settlement at $24.9 million reflects savings of
$17.1 million. ACSC's consultants
produced a report indicating that Atmos had justified increased revenues of at
least $21.7 million. Settlement at $24.9
million is fair and reasonable. The ACSC
Executive Committee consisting of city employees of 18 ACSC members urges all
ACSC members to pass the Resolution before September 30, 2018. New rates will become effective October 1, 2018.