HomeMy WebLinkAboutOrdinance - 2014-O0033 - Atmos Rate Change - 03/27/2014City of Lubbock
ORDINANCE NO.
AN ORDINANCE OF THE CITY OF LUBBOCK APPROVING RATES
FOR ATMOS ENERGY -WEST TEXAS DIVISION ("COMPANY" OR
"ATMOS") RELATED TO THE COMPANY'S STATEMENT OF INTENT
TO CHANGE RATES SUBMITED ON OCTOBER 18,2013; APPROVING
A SETTLEMENT AGREEMENT RELATED TO SUCH STATEMENT OF
INTENT; DECLARING EXISTING RATES TO BE UNREASONABLE;
DENYING THE COMPANY'S PROPOSED RATES; ADOPTING
TARIFFS THAT REFLECT RATE ADJUSTMENTS CONSISTENT WITH
THE SETTLEMENT AGREEMENT; AND FINDING THE RATES TO BE
SET BY THE ATTACHED TARIFFS TO BE JUST AND REASONABLE;
FINDING THE CITY'S AND THE COMPANY'S RATE CASE EXPENSES
REASONABLE; DIRECTING ATMOS TO REIMBURSE THE CITY ITS
REASONABLE RATE CASE EXPENSES; DETERMINING THAT THIS
ORDINANCE WAS PASSED IN ACCORDANCE WITH THE
REQUIREMENTS OF THE TEXAS OPEN MEETING ACT; DECLARING
AN EFFECTIVE DATE; REPEALING ANY PRIOR ORDINANCES
INCONSISTENT WITH THIS ORDINANCE AND REQUIRING
DELIVERY OF THIS ORDINANCE TO THE COMPANY AND LEGAL
COUNSEL.
WHEREAS, the City of Lubbock, Texas ("City") has exclusive original
jurisdiction as a regulatory authority over Atmos Energy -West Texas Division's
("Atmos" or "Company") rates, operations, and services within the City; and
WHEREAS, Atmos filed a Statement of Intent with the City on October 18,
2013 to increase its annual revenue requirement in its West Texas Division by
approximately $12.4 million on a system -wide basis; and
WHEREAS, the City's rates historically have been established based on the
distinct and separate cost to provide service to the City as part of the Lubbock Rate
Jurisdiction; and
WHEREAS, the Gas Utility Regulatory Act, § 103.021 requires that a gas utility
submit information to the City as necessary to make a reasonable determination of rate
base, expenses, investment, and rate of return in the City; and
WHEREAS, the City took action to suspend the effective date and to coordinate
a response to Atmos' filing with the Cities of Amarillo, Channing, and Dalhart,
municipalities with interests similar to those of the City; and
PAGE 1 of 4
City of Lubbock
WHEREAS, it is the City's goal to minimize regulatory costs and potentially
protracted litigation that would result from a lengthy contested rate -case proceeding
before the Railroad Commission of Texas ("Commission") and through the appellate
process; and
WHEREAS, the City directed its consultants and Special Counsel to formulate
and review reasonable settlement positions to resolve Atmos' pending request to increase
rates; and
WHEREAS, the City's Staff, consultants, and Special Counsel met numerous
times with the Company to negotiate a Settlement Agreement resolving the issues raised
in the Company's Statement of Intent filing; and
WHEREAS, after extensive review and analysis, the City's consultants and
Special Counsel found that Atmos' proposed increase in revenue and its proposed rates
are unreasonable; and
WHEREAS, the City's consultants and Special Counsel have evaluated what a
likely outcome from a fully -litigated proceeding would be and are of the opinion that the
increase of $2.75 million identified in the negotiated Settlement Agreement compares
favorably with a likely outcome from a fully -litigated proceeding; and
WHEREAS, the City's consultants and Special Counsel recommend that the City
approve the negotiated Settlement Agreement and attached tariffs; and
WHEREAS, under the Gas Utility Regulatory Act, the City has a right to
reimbursement of its reasonable rate -case expenses and Atmos has an obligation to
reimburse the City's reasonable rate -case expenses; and
WHEREAS, the attached tariffs implementing new rates are consistent with the
Settlement Agreement and are just, reasonable, and in the public interest; and
WHEREAS, the Settlement Agreement as a whole is in the public interest;
NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE
CITY OF LUBBOCK, TEXAS THAT:
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City of Lubbock
Section 1. The findings set out in the preamble are in all things approved and
incorporated herein as if fully set forth.
Section 2. That Atmos' existing rates are hereby found to be unreasonable, and the
increase in revenue and resulting rates Atmos proposed in the Company's Statement of
Intent of October 18, 2013 are hereby denied.
Section 3. That the City Council finds that the Settlement Agreement, including the
exhibits appended to the Settlement Agreement, which is attached hereto and
incorporated herein as Attachment A, is in the public interest.
Section 4. That the revenue and resulting rates set forth in the Settlement Agreement
and schedule of rates and tariffs for gas -utility service provided by Atmos, which are
attached hereto and incorporated herein, are just and reasonable, and are hereby adopted.
Section 5. That neither this Ordinance, nor the Settlement Agreement, shall be of any
precedence with regard to any methodology employed for establishing the rates approved
by this Ordinance.
Section 6. That the City's, including the Cities of Amarillo, Channing, and Dalhart,
and the Company's, combined rate -expenses in the amount not to exceed $374,000.00 are
hereby found to be reasonable and that Atmos is hereby directed to reimburse the City's
rate case expenses within thirty days from adoption of this Ordinance; that Atmos is
hereby authorized to recover through the tariff "Rider SUR" approved by this Ordinance,
the amount of rate case expenses found reasonable, subject to adjustment to reflect the
actual expenses ultimately incurred; and that the Rider SUR tariff shall automatically end
with the recovery of the rate -case expenses approved in this Ordinance.
Section 7. That Atmos shall provide a report to the City within thirty days after the
end of sixth month in which the Rider SUR is in effect, and again thirty days after the end
of the twelfth month in which the Rider SUR is in effect, showing the amount of rate -
case expenses recovered through each six-month period.
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City of Lubbock
Section 8. That to the extent any resolution or ordinance previously adopted by the
Council is inconsistent with this Ordinance, it is hereby repealed.
Section 9. That the meeting at which this Ordinance was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government
Code, Chapter 551.
Section 10. That if any one or more sections or clauses of this Ordinance is adjudged
to be unconstitutional or invalid, such judgment shall not affect, impair or invalidate the
remaining provision of this Ordinance and the remaining provisions of the Ordinance
shall be interpreted as if the offending section or clause never existed.
Section 11. That this Ordinance shall become effective from and after its passage with
rates authorized by the attached tariffs to be effective for service delivered on or after
April
1,
2014.
Section 12. That a copy of this Ordinance shall be sent to the Company, care of Mr.
Jeffrey Foley, Vice President Rates and Regulatory Affairs, Atmos Energy Corporation,
5110 80th Street, Lubbock, Texas 79424, and to Mr. Alfred R. Herrera, Special Counsel,
Herrera & Boyle, PLLC, 816 Congress Ave., Suite 1250, Austin, Texas 78701.
PASSED AND APPROVED this day of
ATTEST:
cp'"
City Aecretary
APPROVED AS TO FORM:
Special 'Counsel -Alfred -R. Herrera
PAGE 4 of 4
SETTLEMENT AGREEMENT BETWEEN ATMOS ENERGY CORPORATION, WEST
TEXAS DIVISION AND THE CITIES OF AMARILLO, LUBBOC& DALHART AND
CHANNING
WHEREAS, this settlement agreement (the "Settlement Agreement") is entered into by
Atmos Energy Corporation's West Texas Division ("Atmos Energy" or the "Company") and the
Cities of Amarillo, Lubbock, Dalhart and Channing ("ALDC Cities") (collectively
"Signatories");
WHEREAS, Atmos Energy currently has pending before the ALDC Cities a Statement of
Intent to change rates within the incorporated areas of its West Texas Division;
WHEREAS, Atmos Energy's West Texas Division is comprised of the Amarillo Rate
Jurisdiction, which includes the Cities of Amarillo, Dalhart and Channing and surrounding
environs, the Lubbock Rate Jurisdiction, which includes the City of Lubbock and surrounding
environs, and the West Texas Cities Rate Jurisdiction, which includes 68 cities and surrounding
environs; and
WHEREAS, the ALDC Cities have hired experts and lawyers to analyze the rates
proposed by Atmos Energy in its Statement of Intent submitted to the ALDC Cities on October
18, 2013 ("2013 Rate Filing"); and
WHEREAS, the Signatories agree that resolution of this matter by settlement agreement
will significantly reduce litigation uncertainties and the amount of reimbursable rate case
expenses associated with this matter; and
WHEREAS, this Settlement Agreement resolves all issues between the Signatories
regarding the Company's 2013 Rate Filing, which is currently pending before the ALDC Cities,
in a manner that the Signatories believe is consistent with the public interest, and the Signatories
represent diverse interests; and
WHEREAS, the Signatories believe that the resolution of the issues raised in the 2013
Rate Filing can best be accomplished by each ALDC City approving this Settlement Agreement
and the rates, terms and conditions reflected in the tariffs attached to this Settlement Agreement
as Exhibit A;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
established herein, the Signatories, through their undersigned representatives, agree to the
following Settlement Terms as a means of fully resolving all issues between the Atmos Energy
and the ALDC Cities involving the 2013 Rate Filing:
Settlement Terms
1. The Signatories agree to the rates, terms and conditions reflected in the tariffs attached to
this Settlement Agreement as Exhibit A. These tariffs allow Atmos Energy's West Texas
Division an additional $2.85 million in annual revenues from customers located within
the incorporated areas of the Amarillo Rate Jurisdiction, and $2.75 million from
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customers located within the incorporated areas of the Lubbock Rate Jurisdiction. This
revenue increase is illustrated in the proof of revenues attached as part of Exhibit B to
this Settlement Agreement. The Signatories agree that the revenue increase is a "black
box" amount and is not tied to any specific expense or rate -base item in Atmos Energy's
West Texas Division's underlying cost of service nor any particular rate -setting
methodology. Signatories further agree that the rates, terms and conditions reflected in
Exhibit A to this Settlement Agreement comply with the rate -setting requirements of
Chapter 104 of the Gas Utility Regulatory Act ("GURA"). The gas rates, terms and
conditions established by this Settlement Agreement shall, subject to municipal approval,
be effective for bills rendered on and after April 1, 2014, and should a municipality not
approve this Settlement Agreement in time for Atmos Energy to implement rates on April
1, 2014, the Signatories agree that on April 1, 2014, Atmos Energy's existing rates will
be established as temporary rates for service and bills rendered on and after that date and
such temporary rates will be subject to reconciliation back to April 1, 2014, through a
surcharge to give effect to the rates agreed to in this Settlement Agreement; provided that
the surcharge period be no longer than a period of sixty days.
2. The Signatories agree that it is reasonable to merge and include State Institution
customers within the Public Authority customer class. The Signatories further agree to
the following customer charges and consumption charges for customers residing in the
ALDC Cities. These rates are reflected in the rate schedules attached as Exhibit A.
Amarillo Rate Jurisdiction (Incorporated Areas)
Customer Class
Customer Charge
Consumption Charge
per Ccf
Residential
$14.75
$0.09760
Commercial
$33.00
$0.11666
Industrial/Transportation
$300.00
$0.13075
Public Authority
$82.00
1 $0.12457
Lubbock Rate Jurisdiction (Incorporated Areas)
Customer Class
Customer Charge
Consumption Charge
per Ccf
Residential
$14.75
$0.12449
Commercial
$33.00
$0.11226
Industrial/Transportation
$300.00
$0.08895
Public Authority
$82.00
1 $0.14512
3. Signatories agree that the September 30, 2013 balance related to the Company's
regulatory asset under 16 TEx. ADMIN. CODE § 8.209 is $2,881,345 and that this amount
shall be included in the Company's plant in service. Given the black box nature of this
settlement, Signatories take no position regarding the deferral algorithms used to
calculate this amount and further agree that the ALDC Cities are not precluded from
reviewing and proposing adjustments to the deferral algorithms or the products of those
algorithms. Notwithstanding the preceding sentence, the Signatories agree that Atmos
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Energy is under no obligation to accept or agree with any proposed adjustment by the
ALDC Cities.
4. To give effect to Section 104.059 of GURA, Signatories agree that the base year level of
pension -related and other post -employment benefits expenses, as shown on the attached
Exhibit D and summarized below, shall be as follows:
Description
Total
Shared Services Unit - Pension Account Plan
("PAP")
$546,158
Shared Services Unit - Post -Retirement Medical
Plan ("FAS 106")
$388,281
West Texas Division — PAP
$1,843,850
West Texas Division — FAS 106
$2,732,959
West Texas Supplemental Executive Retirement
Plan "SERP"
$77,628
5. Signatories agree that the Rider Tax, Rider FF, Rider WNA and Rider GCA, which are
attached as Exhibit A, are reasonable and should be approved.
6. Signatories agree that the base load and heat sensitivity factors referenced in the WNA
tariff shall be updated to correspond to those identified in Exhibit E to this Settlement
Agreement.
7. The Signatories agree that, should Atmos Energy submit an application in 2014 that
affects the amounts customers pay for gas utility service, any such application that Atmos
Energy submits in 2014 seeking to increase rates in the Amarillo and/or Lubbock Rate
Jurisdictions shall be an application pursuant to Section 104.301 of GURA and that this
application shall be filed in lieu of a statement of intent filing submitted under Section
104.102 of GURA.
8. The Signatories agree that for purposes of interim rate adjustments filed pursuant to
Section 104.301 of GURA, Atmos Energy shall use the net plant amount of $402,687,486
as the beginning plant balance for the first interim rate adjustment ("IRA") filing made
pursuant to Section § 104.301. The Signatories agree that any filing made pursuant to
Section 104.301 of GURA shall be based on the changes in the investment in the West
Texas Division, which includes the Amarillo, Lubbock and West Texas Cities Rate
Jurisdictions. The Signatories further agree that Atmos Energy shall use the capital
structure and cost of debt and equity established in the Commission's final order in GUD
No. 10170 and the additional factors identified on the attached Exhibit C for future IRA
filings.
9. With regard to rate case expenses, Signatories agree that: (1) ALDC Cities' rate case
expenses shall be recovered from customers within the incorporated areas of the ALDC
Cities Rate Jurisdictions and; (2) Company expenses shall be recovered from customers
within the entire incorporated areas of the West Texas Division, which includes the West
Texas Cities, Amarillo and Lubbock Rate Jurisdictions. Signatories further agree that the
parties' reasonable rate case expenses should be recovered by surcharge over a twelve-
month period as shown in the Rider SUR, attached as Exhibit A.
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10. The Signatories agree to support and seek municipal approval of this Settlement
Agreement.
11. The Signatories agree that neither this Settlement Agreement nor any oral or written
statements made during the course of settlement negotiations may be used for any
purpose other than as necessary to support the entry by a City of an ordinance or
resolution approving this Settlement Agreement. Signatories further expressly agree that
this Settlement Agreement and any oral or written statements made during the course of
settlement negotiations are privileged, inadmissible, and not relevant to prove any issues
associated with Atmos Energy's 2013 Rate Filing, except to the extent that such
information is necessary to support rate case expense recovery.
12. The Signatories agree that the terms of the Settlement Agreement are interdependent and
indivisible, and that if a City enters an order that is inconsistent with this Settlement
Agreement, then any Signatory may withdraw without being deemed to have waived any
procedural right or to have taken any substantive position on any fact or issue by virtue of
that Signatory's entry into the Settlement Agreement or its subsequent withdrawal.
13. The Signatories agree that this Settlement Agreement is binding on each Signatory only
for the purpose of settling the issues set forth herein and for no other purposes, and
except to the extent the Settlement Agreement governs a Signatory's rights and
obligations for future periods, this Settlement Agreement shall not be binding or
precedential upon a Signatory outside this proceeding.
14. The Signatories agree that this Settlement Agreement may be executed in multiple
counterparts and may be filed with facsimile signatures.
Agreed to this day of March, 2014.
ATMOS ENERGY CORP, WEST TEXAS DIVISION
By:
avPark
ON BEHALF OF THE CITIES OF AMARILLO, LUBBOCK, DALHART AND CHANNING
By: _ a�
2 7L��_
Alfre R. Herrera
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