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HomeMy WebLinkAboutResolution - 2011-R0201 - Engagement Letter - Utilitech Inc.- Review Of Atmos Rate Review Mechanism Filing - 05/10/2011Resolution No. 2011-RO201 May 10, 2011 Item No. 5.1 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the City Council of the City of Lubbock hereby authorizes and directs the Mayor of the City of Lubbock to execute an Engagement Letter by and between the City of Lubbock and Utilitech, Inc. for informal review of the Atmos Engergy Corporation 2011 Rate Review Mechanism Filing and annual rate adjustment, which agreement and any associated documents are attached hereto and made a part of this Resolution for all intents and purposes. Passed by the City Council on May 10, 2011 TOM MARTIN, MAYOR ATTEST: RebeAa Garza, City Secret APPROVED AS TO CONTENT: Andy Bu cham, Chief Financial Officer Sam Medina, City orney vw:cedocs/RES.Utilitech, Inc. -Engagement Ltr 4.27.11 UTILITECH, IMC. Resolution No. 2011-80201 Regulatory and Management Consultants P.O. Box 481934 • Kansas City, MO 64148-1934 •816-525-521 1 • Fax: 816-525-5258 April 27, 2011 Mr. Andy Burcham Chief Financial Officer City of Lubbock, TX 1625 13th Street, Room 201 Lubbock, TX 79409 RE: ENGAGEMENT LETTER FOR INFORMAL REVIEW OF ATMOS ENERGY CORPORATION 2011 RRM FILING, ANNUAL RATE ADJUSTMENT AND REVIEW FOR EXTENSION OR MODIFICATION OF RRM. Dear Mr. Burcham: This letter is to serve as our agreement for Utilitech to conduct an informal regulatory analysis on behalf of the City of Lubbock, in connection with the final year of the three year pilot Rate Review Mechanism ("Rider RRM"). Atmos' filing was submitted April 1, 2011 and represents the third and final year of the pilot. Atmos is seeking a rate adjustment of approximately $2.3 million to become effective on or before August 1, 2011. Based upon our prior work involving the Atmos Mid -Tex Division rate case, the recent Atmos Pipeline rate case, and multiple previous filings under the Mid - Tex, Lubbock and Amarillo Rider RRM procedures in the past several years, our proposal contemplates a focus upon verification of compliance with the RRM tariff and development of the revenue requirement accounting issues that may result from this filing, including analysis of the accounting adjustments that are made, or needed but not made, by Atmos. We agree to conduct the following work in connection with this engagement: A thorough review of prefiled RRM supporting schedules and workpapers to understand the basis for Atmos' asserted revenue change and the accounting records relied upon to develop such evidence. We will also review the Company's filing for compliance with RRM tariff terms and conditions and to identify potential adjustments required to properly quantify Lubbock earnings and rate adjustments. 2. Preparation and submission of targeted and exploratory discovery to Atmos for information beyond that contained within the filing, as needed for our analysis. On-site interviews and document review at Atmos' offices in Dallas and follow-up teleconferences with Company representatives, as necessary. 4. Analysis of Atmos' 2010 true -up and 2011 prospective earnings and rate base, as allocated to Lubbock, to assess whether reasonable amounts are reflected in the determination of RRM earnings and rate of return, quantifying any adjustments the City may wish to consider in order to correct deficiencies in the Company's filing. 5. Preparation of a report containing earnings and revenue requirement computations to either confirm the Atmos filing amounts, or to calculate alternative rate recommendations for consideration by Lubbock. 6. Review of Atmos proposals for extension and/or modification of Rider RRM beyond the existing pilot program that is expiring. We will prepare and present alternative proposals • Page 2 April 27, 2411 regarding alternative ratemaking mechanisms for consideration by City personnel, in addition to critiquing proposals advanced by Atmos. 7. Support and consultation to Lubbock personnel in negotiation with Atmos and/or presentation of recommendations before City authorities. We propose to commence this work in early May, as our focus on pre-existing project commitments begin to ease. Our proposed efforts assume a cooperative and informal working environment with Atmos and do not include any depositions or formal testimony sponsorship by Utilitech personnel. The proposed work is to be completed within the 90 day review period contemplated in Rider RRM, with such completion subject to Atmos providing the cooperative and informal working environment mentioned herein as well as timely responses to our requests for information. In the event the RRM filing cannot be resolved informally, Utilitech would negotiate in good faith with Lubbock for any further services that may required of us. In the event special studies or more than one trip to Lubbock is needed to support the negotiated extension of the pilot program of regulation for Atmos, additional work beyond that proposed herein will be required and the project budget stated below may require upward amendment. Fees for Utilitech services would be billed at our standard hourly rates for our current fiscal year for Messrs. Michael Brosch ($150 per hour) and Steven Carver ($130 per hour). We expect that our administrative personnel would assist in the processing of discovery, development of spreadsheet analyses and/or preparation of draft testimony and exhibits. As needed, these services will be billed at $45 per hour. Our work would be billed on an actual hours and expenses basis and we commit to not exceed a proposed overall project cost estimate of $30,000 without advanced notification to you and written agreement for such additional work. Utilitech shall serve as contractor, and not as employees of the City of Lubbock, and will maintain all required insurance in connection with such services. Qualifications and professional reference materials for Utilitech personnel will be provided to you separately, upon request. If any professional references or Utilitech specimen work products are desired, please let me know. I am available to discuss this proposal at your convenience. If you are in agreement with the services and terms set forth herein, please so indicate by signing below and returning an original copy. Thank you for this opportunity to serve the utility ratepayers of Lubbock. Sincerely, President, Utilitech, Inc. ATTEST: Rebeleca Garza, City Secretar City ofLubbock��"" — LIM TOM MARTIN Title: Ma Approved as to Content: By: Approved as to Form: By: r City Attorney