2023-056 Oncor Rate Filing and Approval August 25,2023 Report No. 2023-056
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
2023 Atmos Rate Filing and Approval
EXECUTIVE SUMMARY:
Atmos Mid-Tex filed for a system-wide rate increase for the next year, beginning Oct. 1, 2023.
The City of Denton, through its membership in a coalition of cities, has evaluated the requested
increase and negotiated a reduction in Atmos' overall request. The City of Denton retains original
jurisdiction over gas utility rates and must approve any rate increases.
BACKGROUND:
The City of Denton ("City"), along with 181 other Texas cities served by Atmos Energy Corp.,
Mid-Tex Division ("Atmos Mid-Tex"), is a member of the Atmos Cities Steering Committee
(ACSC). In 2007, ACSC and Atmos Mid-Tex settled a rate application filed by Atmos for an
interim rate adjustment commonly referred to as a GRIP filing, arising out of the Gas Reliability
Infrastructure Program legislation. That settlement created a new rate review process, referred to
as Rate Review Mechanism ("RRM"), as a substitute for the GRIP statute in future rate filings.
This process has been in place with some modifications since that time.
DISCUSSION:
On or about March 31, 2023, Atmos Mid-Tex filed a rate request pursuant to the RRM Tariff
adopted by ACSC members. The Company claimed that its cost-of-service in a test year ending
December 31, 2022, entitled it to additional system-wide revenues of$165.9 million.
Application of the standards set forth in ACSC's RRM Tariff reduces the Company's request to
$156.1 million, $113.8 million of which would be applicable to ACSC members. After reviewing
the filing and conducting discovery, ACSC's consultants concluded that the system-wide
deficiency under the RRM regime should be $130.9 million instead of the claimed$156.1 million.
After several settlement meetings, the parties have agreed to settle the case for$142 million. This
is a reduction of$23.9 million to the Company's initial request. This includes payment of ACSC's
expenses. The settlement also includes an additional $19.5 million for the securitization of
regulatory asset expenses related to Winter Storm Uri. This was previously approved by the Texas
Legislature and Railroad Commission.
Summary:
$165.9M: Atmos Original Request (system-wide)
$156AM: Tariff-Related (System-wide)
$142M: Increase to after review/negotiation
$23.9M: Savings from original request
August 25,2023 Report No. 2023-056
Bill Impact
The impact of the settlement on average residential rates is an increase of$6.47 monthly,or 7.31%.
The increase in average commercial usage will be $24.72 or 5.19%. A bill impact comparison
containing these figures is attached.
RRM Savin_s Over GRIP
The GRIP process does not allow any review of the reasonableness of capital investment and does
not allow cities to participate in the Railroad Commission's review of annual GRIP filings or allow
recovery of Cities' rate case expenses. The Railroad Commission undertakes a mere
administrative review of GRIP filings (instead of a full hearing) and rate increases go into effect
without any material adjustments. In ACSC's view, the GRIP process unfairly raises customers'
rates without any regulatory oversight. In contrast, the RRM process has allowed for a more
comprehensive rate review and annual evaluation of expenses and revenues, as well as capital
investment.
While residents outside municipal limits must pay rates governed by GRIP, there are some cities
served by Atmos Mid-Tex that chose to remain under GRIP rather than adopt RRM. When new
rates become effective on October 1, 2023, ACSC residents will maintain an economic monthly
advantage over GRIP and DARR rates.
Comparison to Other Mid-Tex Rates (Residential)
AVERAGE BILL COMPARED TO RRM
CITIES
RRM CITIES $42.62 -
ATM CITIES $44.39 +$1.77
ENVIRONS $44.27 +$1.65
CONCLUSION:
The RRM process has proven to result in a more efficient and less costly (both from a consumer
rate impact perspective and from a rate-making perspective)than the GRIP process. Given Atmos
Mid-Tex's claim that its historic cost of service should entitle it to recover $165.9 million in
additional system-wide revenues,the RRM settlement at$142 million for ACSC members reflects
substantial savings to ACSC cities. Settlement at $142 million is fair and reasonable. Staff will
recommend the City Council approve an ordinance approving the proposed rates at the Sept. 19
Council meeting, with the new rates becoming effective on October 1, 2023.
ATTACHMENTS:
1. Average Bill Comparison
STAFF CONTACT:
Ryan Adams
August 25,2023 Report No. 2023-056
Chief of Staff
Ryan.Adams@cityofdenton.com
(940) 349-8565
REQUESTOR: Staff Initiated
STAFF TIME TO COMPLETE REPORT: 2 hours
PARTICIPATING DEPARTMENTS:
City Manager's Office
ATMOS ENERGY CORP., MID-TEX DIVISION
MID-TEX RATE REVIEW MECHANISM
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2022
Line Change
No. Description Current Proposed Amount Percent
(a) (b) (c) (d) (e)
1 Rate R(aD 43.6 Ccf
2 Customer charge $ 21.55
3 Consumption charge 43.6 CCF X $ 0.36223 = 15.79
4 Rider GCR Part A 43.6 CCF X $ 0.63625 = 27.74
5 Rider GCR Part B 43.6 CCF X $ 0.41732 = 18.20
6 Subtotal $ 83.28
7 Rider FF & Rider TAX $ 83.28 X 0.06237 = 5.19
8 Total $ 88.47
9
10 Customer charge $ 22.25
11 Consumption charge 43.6 CCF X $ 0.48567 = 21.18
12 Rider GCR Part A 43.6 CCF X $ 0.63625 = 27.74
13 Rider GCR Part B 43.6 CCF X $ 0.41732 = 18.20
14 Subtotal $ 89.37
15 Rider FF & Rider TAX $ 89.37 X 0.06237 = 5.57
16 Total $ 94.94 $ 6.47 7.31%
17
ATMOS ENERGY CORP., MID-TEX DIVISION
MID-TEX RATE REVIEW MECHANISM
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2022
Line Change
No. Description Current Proposed Amount Percent
(a) (b) (c) (d) (e)
18 Rate C (ED 356.6 Ccf
19 Customer charge $ 63.50
20 Consumption charge 356.6 CCF X $ 0.14137 = 50.41
21 Rider GCR Part A 356.6 CCF X $ 0.63625 = 226.86
22 Rider GCR Part B 356.6 CCF X $ 0.30202 = 107.69
23 Subtotal $ 448.46
24 Rider FF & Rider TAX $ 448.46 X 0.06237 = 27.97
25 Total $ 476.43
26
27 Customer charge $ 72.00
28 Consumption charge 356.6 CCF X $ 0.18280 = 65.18
29 Rider GCR Part A 356.6 CCF X $ 0.63625 = 226.86
30 Rider GCR Part B 356.6 CCF X $ 0.30202 = 107.69
31 Subtotal $ 471.73
32 Rider FF & Rider TAX $ 471.73 X 0.06237 = 29.42
33 Total $ 501.15 $ 24.72 5.19%
34
ATMOS ENERGY CORP., MID-TEX DIVISION
MID-TEX RATE REVIEW MECHANISM
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2022
Line Change
No. Description Current Proposed Amount Percent
(a) (b) (c) (d) (e)
35 Rate I (cD 1720 MMBTU
36 Customer charge $ 1,204.50
37 Consumption charge 1,500 MMBTU X $ 0.4939 = 740.85
38 Consumption charge 220 MMBTU X $ 0.3617 = 79.64
39 Consumption charge 0 MMBTU X $ 0.0776 = -
40 Rider GCR Part A 1,720 MMBTU X $ 6.2134 = 10,688.12
41 Rider GCR Part B 1,720 MMBTU X $ 0.6267 = 1,078.08
42 Subtotal $ 13,791.19
43 Rider FF & Rider TAX $13,791.19 X 0.06237 = 860.17
44 Total $ 14,651.36
45
46 Customer charge $ 1,382.00
47 Consumption charge 1,500 MMBTU X $ 0.7484 = 1,122.62
48 Consumption charge 220 MMBTU X $ 0.5963 = 131.30
49 Consumption charge 0 MMBTU X $ 0.2693 = -
50 Rider GCR Part A 1,720 MMBTU X $ 6.2134 = 10,688.12
51 Rider GCR Part B 1,720 MMBTU X $ 0.6267 = 1,078.08
52 Subtotal $ 14,402.12
53 Rider FF & Rider TAX $14,402.12 X 0.06237 = 898.28
54 Total $ 15,300.40 $ 649.04 4.43%
55
ATMOS ENERGY CORP., MID-TEX DIVISION
MID-TEX RATE REVIEW MECHANISM
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2022
Line Change
No. Description Current Proposed Amount Percent
(a) (b) (c) (d) (e)
56 Rate T(@ 4720 M M BTU
57 Customer charge $ 1,204.50
58 Consumption charge 1,500 MMBTU X $ 0.4939 = 740.85
59 Consumption charge 3,220 MMBTU X $ 0.3617 = 1,164.50
60 Consumption charge 0 MMBTU X $ 0.0776 = -
61 Rider GCR Part B 4,720 MMBTU X $ 0.6267 = 2,957.85
62 Subtotal $ 6,067.70
63 Rider FF & Rider TAX $ 6,067.70 X 0.06237 = 378.45
64 Total $ 6,446.15
65
66 Customer charge $ 1,382.00
67 Consumption charge 1,500 MMBTU X $ 0.5684 = 852.60
68 Consumption charge 3,220 MMBTU X $ 0.4163 = 1,340.29
69 Consumption charge 0 MMBTU X $ 0.0893 = -
70 Rider GCR Part B 4,720 MMBTU X $ 0.6267 = 2,957.85
71 Subtotal $ 6,532.74
72 Rider FF & Rider TAX $ 6,532.74 X 0.06237 = 407.45
73 Total $ 6,940.19 $ 494.04 7.66%