2024-033 Atmos Rate Filing and Approval Date: September 06, 2024 Report No. 2024-033
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
2024 Atmos Rate Filing and Approval
EXECUTIVE SUMMARY:
Atmos Mid-Tex filed for a system-wide rate increase for the next year,beginning Oct. 1, 2024.
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, called 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 April 1, 2024, 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, 2023, entitled it to additional system-wide revenues of$196.8 million.
Applying the standards set forth in ACSC's RRM Tariff reduces the Company's request to
$182.5 million, $132.6 million of which would apply 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 $149.6 million instead of the claimed$182.5 million.
After several settlement meetings, the parties have agreed to settle the case for $164.7 million.
This is a reduction of$32.1 million to the Company's initial request. This includes payment of
ACSC's expenses.
Summary:
$196.8M: Atmos Original Request(system-wide)
$182.5M: RRM Tariff Applied Standard(system-wide)
$149.6M: RRM Tariff Reviewed of Applied Standard(system-wide)
$164.7M: Agreed Upon Review/Negotiation
$32.1M: Savings from Atmos Original Request
Date: September 06, 2024 Report No. 2024-033
Bill Impact:
The settlement's impact on average residential rates is an increase of$5.52 monthly or 6.84
percent. The increase for average commercial usage will be $13.39, or 3.44 percent. A bill
impact comparison containing these figures is attached.
RRM Savings Over GRIP:
The GRIP process does not allow any review of the reasonableness of capital investment. It 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, some cities served
by Atmos Mid-Tex chose to remain under GRIP rather than adopt RRM. When new rates
become effective on October 1, 2024, ACSC customers will maintain a monthly cost advantage
over GRIP and DARR rates.
Comparison to Other Mid-Tex Rates (Residential)
Description Average Bill Compared to RRM Cities
RRM CITIES W.19
ATM CITIES $49.59 +$1.40
ENVIRONS $49.53 +$1.34
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$196.8 million
in additional system-wide revenues, the RRM settlement at $164.7 million for ACSC members
reflects substantial savings to ACSC cities. Settlement at $164.7 million is fair and reasonable.
Staff will recommend the City Council approve an ordinance approving the proposed rates at the
September 17, 2024 Council meeting, with the new rates becoming effective on October 1, 2024.
ATTACHMENTS:
Average Bill Comparison
STAFF CONTACT:
Jessica Williams, Chief Financial Officer
Jessica.JWilliamskcityofdenton.com
(940) 349-8244
Date: September 06, 2024 Report No. 2024-033
REQUESTOR:
Staff initiated.
PARTICIPATING DEPARTMENTS:
Finance Department
STAFF TIME TO COMPLETE REPORT:
2 hour
ATMOS ENERGY CORP., MID-TEX DIVISION
MID-TEX RATE REVIEW MECHANISM
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2023
Line Change
No. Description Current Proposed Amount Percent
(a) (b) (c) (d) (e)
1 Rate R Ca_42.8 Ccf
2 Customer charge $ 22.25
3 Consumption charge 42.8 CCF X $ 0.48567 = 20.79
4 Rider GCR Part A 42.8 CCF X $ 0.27958 = 11.97
5 Rider GCR Part B 42.8 CCF X $ 0.47494 = 20.33
6 Subtotal $ 75.34
7 Rider FF & Rider TAX $ 75.34 X 0.07196 = 5.42
8 Total $ 80.76
9
10 Customer charge $ 22.95
11 Consumption charge 42.8 CCF X $ 0.58974 = 25.24
12 Rider GCR Part A 42.8 CCF X $ 0.27958 = 11.97
13 Rider GCR Part B 42.8 CCF X $ 0.47494 = 20.33
14 Subtotal $ 80.49
15 Rider FF & Rider TAX $ 80.49 X 0.07196 = 5.79
16 Total $ 86.28 $ 5.52 6.84%
17
ATMOS ENERGY CORP., MID-TEX DIVISION
MID-TEX RATE REVIEW MECHANISM
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2023
Line Change
No. Description Current Proposed Amount Percent
(a) (b) (c) (d) (e)
18 Rate C Cc_363.6 Ccf
19 Customer charge $ 72.00
20 Consumption charge 363.6 CCF X $ 0.18280 = 66.47
21 Rider GCR Part A 363.6 CCF X $ 0.27958 = 101.67
22 Rider GCR Part B 363.6 CCF X $ 0.33806 = 122.93
23 Subtotal $ 363.07
24 Rider FF & Rider TAX $ 363.07 X 0.07196 = 26.13
25 Total $ 389.20
26
27 Customer charge $ 81.75
28 Consumption charge 363.6 CCF X $ 0.19033 = 69.21
29 Rider GCR Part A 363.6 CCF X $ 0.27958 = 101.67
30 Rider GCR Part B 363.6 CCF X $ 0.33806 = 122.93
31 Subtotal $ 375.56
32 Rider FF & Rider TAX $ 375.56 X 0.07196 = 27.03
33 Total $ 402.59 $ 13.39 3.44%
34
ATMOS ENERGY CORP., MID-TEX DIVISION
MID-TEX RATE REVIEW MECHANISM
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2023
Line Change
No. Description Current Proposed Amount Percent
(a) (b) (c) (d) (e)
35 Rate I (cr_ 1335 MMBTU
36 Customer charge $ 1,382.00
37 Consumption charge 1,335 MMBTU X $ 0.7484 = 998.94
38 Consumption charge 0 MMBTU X $ 0.5963 = -
39 Consumption charge 0 MMBTU X $ 0.2693 = -
40 Rider GCR Part A 1,335 MMBTU X $ 2.7303 = 3,644.33
41 Rider GCR Part B 1,335 MMBTU X $ 0.7337 = 979.37
42 Subtotal $ 7,004.64
43 Rider FF & Rider TAX $ 7,004.64 X 0.07196 = 504.08
44 Total $ 7,508.72
45
46 Customer charge $ 1,587.75
47 Consumption charge 1,335 MMBTU X $ 0.6553 = 874.67
48 Consumption charge 0 MMBTU X $ 0.4799 = -
49 Consumption charge 0 MMBTU X $ 0.1029 = -
50 Rider GCR Part A 1,335 MMBTU X $ 2.7303 = 3,644.33
51 Rider GCR Part B 1,335 MMBTU X $ 0.7337 = 979.37
52 Subtotal $ 7,086.12
53 Rider FF & Rider TAX $ 7,086.12 X 0.07196 = 509.94
54 Total $ 7,596.06 $ 87.34 1.16%
55
ATMOS ENERGY CORP., MID-TEX DIVISION
MID-TEX RATE REVIEW MECHANISM
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2023
Line Change
No. Description Current Proposed Amount Percent
(a) (b) (c) (d) (e)
56 Rate T(&4645 MMBTU
57 Customer charge $ 1,382.00
58 Consumption charge 1,500 MMBTU X $ 0.5684 = 852.60
59 Consumption charge 3,145 MMBTU X $ 0.4163 = 1,309.08
60 Consumption charge 0 MMBTU X $ 0.0893 = -
61 Rider GCR Part B 4,645 MMBTU X $ 0.7337 = 3,407.90
62 Subtotal $ 6,951.58
63 Rider FF & Rider TAX $ 6,951.58 X 0.07196 = 500.26
64 Total $ 7,451.84
65
66 Customer charge $ 1,587.75
67 Consumption charge 1,500 MMBTU X $ 0.6553 = 982.95
68 Consumption charge 3,145 MMBTU X $ 0.4799 = 1,509.08
69 Consumption charge 0 MMBTU X $ 0.1029 = -
70 Rider GCR Part B 4,645 MMBTU X $ 0.7337 = 3,407.90
71 Subtotal $ 7,487.68
72 Rider FF & Rider TAX $ 7,487.68 X 0.07196 = 538.84
73 Total $ 8,026.52 $ 574.68 7.71%