HomeMy WebLinkAbout05-07-12 TC Agenda PacketThe Regular Meeting of the Town of Westlake Town Council will begin immediately following the conclusion
of the Town Council Workshop but not prior to the posted start time.
Mission Statement
On behalf of the citizens, the mission of the Town of Westlake is to be a one-of-a-kind community
that blends our rural atmosphere with our vibrant culture and metropolitan location.
Westlake, Texas – A Premier Knowledge Based Community
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TOWN OF WESTLAKE, TEXAS
Vision Points
Sense of Place; Leadership; Caring Community; Exemplary Governance; and
Service Excellence
TOWN COUNCIL SPECIAL MEETING
AGENDA
May 7, 2012
WESTLAKE TOWN HALL
3 VILLAGE CIRCLE, 2ND FLOOR
WESTLAKE, TX 76262
COUNCIL CHAMBERS / MUNICIPAL COURT ROOM
Regular Session 6:30 p.m.
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Regular Session
1. CALL TO ORDER
2. CITIZEN PRESENTATIONS AND RECOGNITIONS: This is an opportunity for citizens
to address the Council on any matter whether or not it is posted on the agenda. The
Council cannot by law take action nor have any discussion or deliberations on any
presentation made to the Council at this time concerning an item not listed on the
agenda. The Council will receive the information, ask staff to review the matter, or an
item may be noticed on a future agenda for deliberation or action.
3. CONSIDER APPROVAL OF RESOLUTION 12-18 DENYING ATMOS ENERGY
CORP., MID-TEX DIVISION’S (“ATMOS MID-TEX”) REQUESTED RATE CHANGE.
4. ADJOURNMENT
ANY ITEM ON THIS POSTED AGENDA COULD BE DISCUSSED IN EXECUTIVE
SESSION AS LONG AS IT IS WITHIN ONE OF THE PERMITTED CATEGORIES UNDER
SECTIONS 551.071 THROUGH 551.076 AND SECTION 551.087 OF THE TEXAS
GOVERNMENT CODE.
CERTIFICATION
I certify that the above notice was posted at the Town Hall of the Town of Westlake, 3 Village Circle,
May 2, 2012, by 5:00 p.m. under the Open Meetings Act, Chapter 551 of the Texas Government Code.
_____________________________________
Kelly Edwards, TRMC, Town Secretary
If you plan to attend this public meeting and have a disability that requires special needs, please advise
the Town Secretary 48 hours in advance at 817-490-5710 and reasonable accommodations will be made
to assist you.
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estlake Town Council
TYPE OF ACTION
Regular Meeting - Action Item
Westlake Town Council Special Meeting
Monday, May 07, 2012
TOPIC: Consider Approval o f Resolution 12-18 Denying Atmos Energy Corp.,
Mid-Tex Division’s (“Atmos Mid-Tex”) Requested Rate Change.
STAFF CONTACT: Tom Brymer, Town Manager
DECISION POINTS
Start Date Completion Date
Timeframe: May 7, 2012 May 7, 2012
Pass the resolution by the end of May.
Funding: Amount- Status- N/A Source- N/A
Decision Alignment
VVM Perspective Desired Outcome
Exemplary Governance Customer Focus N/A
Strategic Issue Outcome Strategy Staff Action
N/A N/A N/A
Strategy Map or VVM Connection
Strategic Issue Connection
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EXECUTIVE SUMMARY
Most municipalities have retained original jurisdiction over gas utility rates and services within
their corporate limits. The Atmos Cities Steering Committee ("ACSC") is composed of
municipalities, including Westlake, in the service area of Atmos Energy Corporation, Mid-Tex
Division regardless of whether original jurisdiction has been retained. Atmos is a monopoly
public utility provider of natural gas. Because Atmos has no competitors, regulation of the rates
it charges its customers in the only way that cities can insure that natural gas rates are equitable
and competitive. Working as a coalition to review the rates charged by Atmos allows cities to
accomplish more collectively than each city could do acting alone. Cities have more than 100
years of experience in regulating natural gas rates in Texas.
The Town Council passed a resolution on February 27, 2012, suspending Atmos Energy
Corporation’s Mid-Tex Division Requested Rate Change to Permit the Town Time to Study the
Request and to Establish Reasonable Rates.
ORGANIZATIONAL HISTORY/RECOMMENDATION
Town Staff and the ACSC Executive Committee, as well as ACSC lawyers and rate consultants,
recommend adoption of this Resolution.
ATTACHMENTS
Memo to ACSC Member, Staff Report, Exhibit A and Resolution
2557/17/2056489
816 Congress Avenue, Suite 1900
Austin, Texas 78701
Telephone: (512) 322-5800
Facsimile: (512) 472-0532
www.lglawfirm.com
Mr. Gay’s Direct Line: (512) 322-5875
Email: ggay@lglawfirm.com
M E M O R A N D U M
TO: Atmos Cities Steering Committee Members
FROM: Geoffrey M. Gay
Georgia Crump
Eileen McPhee
DATE: April 30, 2012
RE: Denial Resolution For Atmos Mid-Tex’s Requested Rate Increase
Background on Atmos Mid-Tex Rate Case
On January 31, 2012, Atmos Energy Corporation, Mid-Tex Division (“Atmos Mid-Tex”
or “Company”) filed with Atmos Cities Steering Committee (“ACSC”) city members that
exercise original jurisdiction a request for a rate increase in excess of $49 million. ACSC
members passed resolutions suspending the effective date of the proposed increase to allow
ACSC attorneys and consultants to study the request. A summary of the consultants’ findings is
attached as Exhibit A. The ACSC Settlement Committee has met with Company officials to
negotiate a settlement. While ACSC has given the Company a settlement offer, Atmos Mid-Tex
does not want to provide a written offer before the expiration of city jurisdiction on June 11,
2012.
Timing of City Action
ACSC members with original jurisdiction suspended the proposed effective date of
March 6, 2012, extending city jurisdiction until June 4, 2012. On April 25, 2012, the Company
extended its effective date by a week, which similarly extended the June 4, 2012 deadline to June
11, 2012. It does not appear that settlement could be achieved within a time frame that would
allow the City to take action prior to June 11, 2012. Thus, ACSC members are encouraged to
pass a denial resolution. Atmos Mid-Tex has promised to support the action which does not
preclude a subsequent settlement. If settlement is achieved, ACSC will return to member cities
with a request for approval of the settlement.
April 30, 2012
Page 2
2056489.1
Recommendation and Explanation of Denial Resolution
The ACSC Settlement Committee recommends the ACSC cities pass resolutions denying
Atmos Mid-Tex’s proposed rate increase. The denial resolution will prevent the Company’s
proposed rate increase from automatically taking effect on June 11, 2012, and allow more time to
engage in settlement discussions. Atmos will appeal your denial to the Railroad Commission
which will trigger a 185-day time frame for action by the Commission. Settlement will
hopefully occur before a hearing takes place. Please contact Geoffrey Gay if you have any
questions or concerns.
2056490.1
MODEL STAFF REPORT SUPPORTING RESOLUTION DENYING ATMOS
MID-TEX’S PROPOSED RATE INCREASE
The City, along with over 150 other cities served by Atmos Energy Corp., Mid-Tex
Division (“Atmos Mid -Tex” or “Company”), is a member of the Atmos Cities Steering
Co mmittee (“ACSC” or “Steering Committee”). On or about January 31, 2012, Atmos Mid-Tex
filed with the City a Statement of Intent to increase rates within the City.
Background
In 2003, TXU Gas filed a statewide rate case which became known at the Railroad
Commission of Texas (“RRC”) as Gas Utilities Docket (“GUD”) No. 9400. That same year the
Texas Legislature passed legislation referred to as the Gas Reliability Infrastructure Program
(“GRIP”) which authorized annual piecemeal rate reviews that Texas courts have concluded
significantly restrict city jurisdiction, participation, and input. Shortly after GUD No. 9400 was
decided in 2004, Atmos Energy purchased TXU Gas and created what is known as Atmos
Energy Corp., Mid-Tex Division. The City is within the Atmos Mid-Tex Division.
Atmos Mid-Tex filed four GRIP cases before filing a traditional rate case in September,
2007. As part of ACSC’s Settlement Agreement with Atmos of the 2007 rate case, ACSC and
Atmos created a substitute process for annual piecemeal GRIP cases. That substitute process
was called a Rate Review Mechanism (“RRM”) and was intended as an expedited but
comprehensive rate review that included a number of fixed values and constraints. The RRM
was intended as a three-year experiment. Last year , it was extended for a fourth year with some
slight modifications to the original formulas. ACSC negotiated with Atmos in the final quarter
of last year to further extend the RRM process, but no agreement was reached. Atmos has
expressed a desire to reach a settlement of the January 31, 2012 filing that includes a revised
RRM process.
Discussion and Purpose
Atmos Mid-Tex filed a Statement of Intent on January 31, 2012, seeking to increase
system-wide base rates (which exclude the cost of gas) by approximately $49 million or 11.94%.
However, the Company is requesting an increase of 13.6%, excluding gas costs, for its
residential customers. Additionally, the application would change the way that rates are
collected, by increasing the residential fixed-monthly (or customer) charge from $7.50 to $18.00
and decreasing the consumption charge from $0.25 per 100 cubic feet (“ccf”) to $0.07 per ccf.
ACSC engaged attorneys and consultants to review Atmos Mid-Tex’s proposed rate
increase. Additionally, the ACSC cities passed suspension resolutions earlier this year,
extending the effective date of Atmos Mid-Tex’s proposed rate increase to June 4, 2012, in order
to permit the cities time to review Atmos Mid-Tex’s Statement of Intent. During their review,
ACSC’s consultants found justification that Mid-Tex’s rates should be decreased. On April 25,
2012, the Company extended the effective date of its proposed rate change, which similarly
extended cities’ jurisdictional deadline to June 11, 2012.
2056490.1
ACSC and the Co mpany have engaged in some settlement discussions but have not yet
reached agreement. ACSC is hoping to achieve settlement with the Company in order to
perpetuate the RRM process. The ACSC Settlement Committee therefore recommends denial of
the Company’s proposed rate increase rather than a rate decrease to facilitate further settlement
discussions . The resolution prevents the Company’s proposed rates from automatically going
into effect on June 11. The Company has expressed a desire for settlement while an appeal from
the cities’ denial of the rate increase is pending at the RRC. Should a settlement be reached, the
City may be required to pass an ordinance setting new rat es pursuant to the settlement.
The purpose of the resolution is to deny Atmos Mid -Tex’s proposed rate increase
pending further settlement discussions and to prevent Atmos’ proposed rate increase from
automatically taking effect on June 11, 2012.
Explanation of “Be It Resolved Paragraphs”
Section 1. The paragraph denies the Company’s proposed rate increase.
Section 2. This provision provides that the Company shall continue to charge its
existing rates to its customers within the City.
Section 3. By law, t he Company must reimburse the cities for their reasonable rate
case expenses. Legal counsel and consultants approved by ACSC will present their invoices to
the City of Arlington which will then seek reimbursement from Atmos Mid-Tex. The City will
not incur liability for payment of rate case expenses by adopting a denial resolution.
Section 4. This section merely recites that the resolution was passed at a meeting that
was open to the public and that the consideration of the resolution was properly noticed.
Section 5. This section provides that both Atmos Mid -Tex’s designated
representative and counsel for ACSC will be notified of the City’s action by sending a copy of
the approved and signed resolution to certain designated individuals.
Recommendation
The City Staff recommends adoption of the resolution denying Atmos Mid-Tex’s
proposed rate increase.
2070345.1
Exhibit A
ACSC Consultants’ Recommended Adjustments to Atmos Mid-Tex’s 2012 Statement of Intent
to Increase Rates 1
Following a review of the Company’s 2012 Statement of Intent, ACSC consultants found
justification for an approximately $77 million decrease to the Company’s requested revenue,
resulting in a $23 million decrease to the current rates charged by Atmos Mid-Tex. ACSC
consu ltants’ recommendation for a rate decrease is based upon the following major components:2
• Lowering the Company’s return on equity from 10.9% to 9.5%, resulting in a revenue
requirement decrease of over $30 million
• Removing the Company’s improper post -test year adjustment to add plant from January
to March 2012, resulting in a revenue requirement decrease of appro ximately $5 million
• Removing the Company’s proposal for an energy efficiency plan to be funded only by
ratepayers, resulting in a revenue requirement decrease of over $1 million
• Various adjustments to accumulated deferred income tax, resulting in a revenue
requirement decrease of approximately $10 million
• Recognizing new depreciation rates as filed by the Company (without adjustment by
ACSC consultants), resulting in a revenue requirement decrease of approximately $15
million
• Various adjustments to the Company’s requested level of operating and maintenance
(O&M) expense, resulting in a revenue requirement decrease of over $8 million
• Reducing rate base to account for ratepayer supplied funds relating to other post -
employment benefits (FAS B 106), resulting in a revenue requirement decrease of over
$8 million
• Cap residential customer charge at $9.00, instead of Atmos’ requested $18.00.
1 All figures are adjustments resulting in a revenue requirement impact to Atmos’ filed case system-wide. Factoring
out Dallas, the ACSC cities would see slight decreases in the numbers listed above. 2 Please note that the adjustments listed are on a stand-alone basis, and may have a different impact when combined
with the other adjustments.
Resolution 12-18
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RESOLUTION NO. 12-18
RESOLUTION OF THE TOWN OF WESTLAKE DENYING ATMOS ENERGY CORP.,
MID-TEX DIVISION’S (“ATMOS MID-TEX”) REQUESTED RATE CHANGE;
REQUIRING THE COMPANY TO REIMBURSE THE TOWN’S REASONABLE
RATEMAKING EXPENSES; FINDING THAT THE MEETING AT WHICH THIS
RESOLUTION IS PASSED IS OPEN TO THE PUBLIC AS REQUIRED BY LAW;
REQUIRING NOTICE OF THIS RESOLUTION TO THE COMPANY AND ACSC’S
LEGAL COUNSEL
WHEREAS, the Town of Westlake, Texas (“Town”) is a gas utility customer of Atmos
Energy Corp., Mid-Tex Division (“Atmos Mid -Tex” or “Company”), and is a regulatory
authority under the Gas Utility Regulatory Act (“GURA”) and under Chapter 104, §104.001 et
seq. of GURA, has exclusive original jurisdiction over Atmos Mid-Tex’s rates, operations, and
services within the City; and
WHEREAS, the Town is a member of the Atmos Cities Steering Committee (“ACSC”),
a coalition of over 150 similarly situated cities served by the Company that have joined together
to facilitate the review and response to natural gas issues affecting rates charged in the Atmos
Mid-Tex Division; and
WHEREAS, pursuant to the terms of the agreement settling the Company’s 2007
Statement of Intent to increase rates, ACSC and the Company worked collectively to develop a
Rate Review Mechanism (“RRM”) tariff that allows for an expedited rate review process
controlled in a three-year experiment by ACSC as a substitute to the current GRIP process
instituted by the Legislature; and
WHEREAS, ACSC and the Company agreed to extend the RRM process in reaching a
settlement in 2010 on the third RRM filing; and
WHEREAS, in 2011, ACSC and the Company engaged in good faith negotiations
regarding the continuation of the RRM process, but were unable to come to ultimate agreement;
and
WHEREAS, on or about Januar y 31, 2012, the Company filed a Statement of Intent with
the cities retaining original jurisdiction within its Mid-Tex service division to increase rates by
approximately $49 million; and
WHEREAS, Atmos Mid-Tex proposed March 6, 2012, as the effective date for its
requested increase in rates; and
WHEREAS, the Town suspended the effective date of Atmos Mid-Tex’s proposed rate
increase for the maximum period allowed by law and thus extended the Town’s jurisdiction until
June 4, 2012; and
Resolution 12-18
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WHEREAS, on April 25, 2012, the Company extended the effective date for its
proposed rates by one week, which similarly extended the Town’s jurisdiction until June 11,
2012; and
WHEREAS, the ACSC Executive Committee hired and directed legal counsel and
consultants to prepare a common response to the Company’s requested rate increase and to
negotiate with the Company and direct any necessary litigation; and
WHEREAS, ACSC’s consultants conducted a review of the Company’s requested rate
increase and found justification that the Company’s rates should be decreased; and
WHEREAS, ACSC and the Company have engaged in settlement discussions but will be
unable according to Company representations to reach settlement in sufficient time for cities to
act before June 11, 2012; and
WHEREAS, failure by ACSC members to take action before June 11, 2012 would allow
the Company the right to impose its full request on residents of said ACSC members; and
WHEREAS, the ACSC Settlement Committee recommends denial of the Company’s
proposed rate increase in order to continue settlement discussions pending the Company’s appeal
of cities’ denials to the Railroad Commission of Texas; and
WHEREAS, the GURA § 103.022 provides that costs incurred by cities in ratemaking
activities are to be reimbursed by the regulated utility.
NOW, THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE
TOWN OF WESTLAKE, TEXAS:
SECTION 1: That the rates proposed by Atmos Mid-Tex to be recovered through its gas rates
charged to customers located within the Town limits, are hereby found to be unreasonable and
shall be denied.
SECTION 2: That the Company shall continue to charge its existing rates to customers within
the City and that said existing rates are reasonable.
SECTION 3: That the Town’s reasonable rate case expenses shall be reimbursed by the
Company.
SECTION 4: That it is hereby officially found and determined that the meeting at which this
Resolution is passed is open to the public as required by law and the public notice of the time,
place, and purpose of said meeting was given as required.
Resolution 12-18
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SECTION 5: A copy of this Resolution shall be sent to Atmos Mid-Tex, care of David Park,
Vice President Rates & Regulatory Affairs, at Atmos Energy Corporation, Mid-Tex Division,
5420 LBJ Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay, General Counsel to
ACSC, at Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767-
1725.
PASSED AND APPROVED ON THIS 7th DAY OF MAY, 2012.
___________________________________
Laura Wheat, Mayor
ATTEST:
________________________________ ___________________________________
Kelly Edwards, Town Secretary Thomas E. Brymer, Town Manager
APPROVED AS TO FORM:
________________________________
L. Stanton Lowry, Town Attorney