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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 Page 1 of 2 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. Page 2 of 2 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. Page 1 of 2 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 Page 2 of 2 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 Page 1 of 2 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 Page 1 of 2 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 Page 1 of 2 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