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 2018. On or about
April 1, 2019, the Company filed a rate request that did not comply with the RRM tariff adopted by ACSC members. The Company
claimed, based on traditional rate-making standards, that its cost-of-service in a test year ending December 31, 2018,
entitled it to additional system-wide revenues of $70 million. Soon after, the Company filed supplemental materials that complied with the RRM tariff agreed to in 2018, reducing its filing to $54 million, of which $39.3 million would be applicable to ASCS members. (ASCS members constitute roughly 72.8% of the entire system.) Consultants for ASCS concluded that the system-wide deficiency under the RRM regime should be $38.7 million instead of the claimed $54 million. The amount of the $38.7 million deficiency applicable to the ASCS members would be $28.2 million.
After review of the consultants' report, the ASCS Executive Committee and the
Company negotiated a settlement whereby the Company would receive an increase of $35.4 million from ASCS Cities. The Executive Committee recommends a settlement at this amount. The Effective Date for new rates is October
Atmos generated proof that the rate tariffs will generate $35.4 million in additional revenues from the ASCS Cities. ACSC
consultants have agreed that Atmos' Proof of Revenues is accurate.
The rate increase experienced by the average residential customer will be approximately $2.05 (or 3.7%) per month.
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 $38.7 million in additional system-wide revenues, the RRM settlement at $35.4 million reflects savings of
$3.3 million. ACSC's consultants
produced a report indicating that Atmos had justified increased revenues of at
least $32.7 million. Settlement at $35.4 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, 2019. New rates will become effective October 1, 2019.