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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: PAGE 2 of 4 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. PAGE 3 of 4 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 1 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 2 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. 3 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 0