2022-047 2022 Atmost Energy Rate ReviewsAugust 12, 2022 Report No. 2022-047
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
2022 Atmos Energy Corporation, Mid-Tex Division, Rate Review
EXECUTIVE SUMMARY:
Atmos Energy Corporation filed a rate request for additional system-wide revenues of $141.3
million. As the City of Denton is a member in the Atmos Cities Steering Committee, the ACSC
Executive Committee recommends a system-wide settlement of $115 million. This rate increase
provides a minimal increase on residential and commercial Atmos accounts. Staff has scheduled
this settlement to be considered by the City Council on September 20, 2022 to ensure adoption
prior to October 1, 2022, the effective date for new Atmos rates.
BACKGROUND:
The City of Denton, along with 181 other Texas cities served by Atmos Energy Corporation, Mid-
Tex Division (“Atmos”) 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 April 1, 2022, Atmos filed a rate request pursuant to the RRM Tariff. Atmos claimed
that its cost-of-service in a “test year” ending December 31, 2021, entitled it to additional system-
wide revenues of $141.3 million. It is important to note that such an increase in revenue would be
spread across Atmos customers in the Mid-Tex service area, not solely to the City of Denton
customers.
Through the application of the standards set forth in the RRM Tariff, ACSC consultants and its
Executive Committee reviewed the request by Atmos. ACSC’s consultants concluded that the
system-wide deficiency under the RRM regime should be $95.8 million instead of the claimed
$141.3 million. ACSC and the Executive Committee negotiated a reduction in Atmos’ request to
$115 million, $83.26 million of which would be applicable to ACSC members.
Bill Impact
The impact of the settlement on average residential rates is an increase of $4.60 monthly or 6.7
percent. The increase for average commercial usage will be $14.34 or 4.3 percent. Atmos has
provided bill impact comparisons containing these figures (see attached).
RRM Savings over GRIP
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. Additionally,
the City of Dallas adopted a variation of RRM which is referred to as DARR. When new rates
August 12, 2022 Report No. 2022-047
become effective on October 1, 2022, ACSC residents will maintain an economic monthly
advantage over GRIP and DARR rates. The following is a comparison to other Mid-Tex rates for
residential accounts:
Average Bill Compared to RRM Cities
RRM Cities: $73.22 -
DARR: $71.96 ($1.26)
ATM Cities: $78.72 $5.50
Environs: $78.53 $5.31
Note: DARR uses a test year-end of September, rather than December, and the DARR rate above
is as filed on January 1, 2022.
The Executive Committee recommends a settlement of $115 million. The Effective Date for new
rates is October 1, 2022. ACSC members, including the City of Denton, are advised to take action
to approve an ordinance approving this settlement before September 30, 2022. Staff has scheduled
this item to be considered on September 20, 2022.
CONCLUSION:
The Legislature’s GRIP process allowed gas utilities to receive annual rate increases associated
with capital investments. The RRM process has proven more efficient and less costly, both from a
consumer rate impact perspective and from a ratemaking perspective, than the GRIP process.
Given Atmos Mid-Tex’s claim that its historic cost of service should entitle it to recover $141.3
million in additional system-wide revenues, the RRM settlement at $115 million for ACSC Cities
reflects substantial savings to ACSC Cities. ACSC finds the settlement at $115 million fair and
reasonable. The ACSC Executive Committee consisting of city employees of 18 ACSC members
urges all ACSC members to pass the Resolution/Ordinance before September 30, 2022, as new
rates for residential and commercial Atmos accounts become effective October 1, 2022. Staff has
scheduled this item to be considered on September 20, 2022.
Summary:
$141.3M Atmos Original Request (system-wide)
$115M Reduction to Atmos’s Request due to RRM (system-wide)/$83.26M –
Portion attributable to ACSC cities
$95.8M Recommended increase to ACSC members by consultants
$115M Increase to ACSC members after review/negotiation and settlement
agreement
In short, the settlement reduces the proposed increase from $141.3M to $115M for ACSC cities,
reducing the rate increase impact on residential and commercial Atmos accounts.
Customer Impact (avg. monthly bill):
Residential: $4.60 (6.7%) increase
Commercial: $14.34 (4.3%) increase
August 12, 2022 Report No. 2022-047
ATTACHMENTS:
1. Average Bill Comparison
STAFF CONTACT:
Jennifer Rainey
Assistant to the City Manager
Jennifer.Rainey@cityofdenton.com
940-349-8569
REQUESTOR:
Staff Initiated
PARTICIPATING DEPARTMENTS:
City Manager’s Office
City Attorney’s Office
Line
No.
1 Rate R @ 43.8 Ccf Current Proposed Change
2 Customer charge 20.85$
3 Consumption charge 43.8 CCF X 0.27979$ =12.25
4 Rider GCR Part A 43.8 CCF X 0.35744$ =15.66
5 Rider GCR Part B 43.8 CCF X 0.35918$ =15.73
6 Subtotal 64.49$
7 Rider FF & Rider TAX 64.49$ X 0.06408 =4.13
8 Total 68.62$
9
10 Customer charge 21.55$
11 Consumption charge 43.8 CCF X 0.36223$ =15.87
12 Rider GCR Part A 43.8 CCF X 0.35744$ =15.66
13 Rider GCR Part B 43.8 CCF X 0.35918$ =15.73
14 Subtotal 68.81$
15 Rider FF & Rider TAX 68.81$ X 0.06408 =4.41
16 Total 73.22$ 4.60$
17 6.71%
18
19 Rate C @ 345.7 Ccf Current Proposed Change
20 Customer charge 56.50$
21 Consumption charge 345.7 CCF X 0.12263$ =42.39
22 Rider GCR Part A 345.7 CCF X 0.35744$ =123.56
23 Rider GCR Part B 345.7 CCF X 0.26532$ =91.71
24 Subtotal 314.16$
25 Rider FF & Rider TAX 314.16$ X 0.06408 =20.13
26 Total 334.29$
27
28 Customer charge 63.50$
29 Consumption charge 345.7 CCF X 0.14137$ =48.87
30 Rider GCR Part A 345.7 CCF X 0.35744$ =123.56
31 Rider GCR Part B 345.7 CCF X 0.26532$ =91.71
32 Subtotal 327.64$
33 Rider FF & Rider TAX 327.64$ X 0.06408 =20.99
34 Total 348.63$ 14.34$
35 4.29%
ATMOS ENERGY CORP., MID-TEX DIVISION
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2021
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Line
No.
ATMOS ENERGY CORP., MID-TEX DIVISION
AVERAGE BILL COMPARISON - BASE RATES
TEST YEAR ENDING DECEMBER 31, 2021
36 Rate I @ 4278 MMBTU Current Proposed Change
37 Customer charge 1,054.75$
38 Consumption charge 1,500 MMBTU X 0.4330$ =649.50
39 Consumption charge 2,778 MMBTU X 0.3171$ =880.80
40 Consumption charge 0 MMBTU X 0.0680$ =-
41 Rider GCR Part A 4,278 MMBTU X 3.4906$ =14,931.86
42 Rider GCR Part B 4,278 MMBTU X 0.5485$ =2,346.33
43 Subtotal 19,863.24$
44 Rider FF & Rider TAX 19,863.24$ X 0.06408 =1,272.82
45 Total 21,136.06$
46
47 Customer charge 1,204.50$
48 Consumption charge 1,500 MMBTU X 0.4939$ =740.85
49 Consumption charge 2,778 MMBTU X 0.3617$ =1,004.69
50 Consumption charge 0 MMBTU X 0.0776$ =-
51 Rider GCR Part A 4,278 MMBTU X 3.4906$ =14,931.86
52 Rider GCR Part B 4,278 MMBTU X 0.5485$ =2,346.33
53 Subtotal 20,228.23$
54 Rider FF & Rider TAX 20,228.23$ X 0.06408 =1,296.21
55 Total 21,524.44$ 388.38$
56 1.84%
57 Rate T @ 4278 MMBTU Current Proposed Change
58 Customer charge 1,054.75$
59 Consumption charge 1,500 MMBTU X 0.4330$ =649.50
60 Consumption charge 2,778 MMBTU X 0.3171$ =880.80
61 Consumption charge 0 MMBTU X 0.0680$ =-
62 Rider GCR Part B 4,278 MMBTU X 0.5485$ =2,346.33
63 Subtotal 4,931.38$
64 Rider FF & Rider TAX 4,931.38$ X 0.06408 =316.00
65 Total 5,247.38$
66
67 Customer charge 1,204.50$
68 Consumption charge 1,500 MMBTU X 0.4939$ =740.85
69 Consumption charge 2,778 MMBTU X 0.3617$ =1,004.69
70 Consumption charge 0 MMBTU X 0.0776$ =-
71 Rider GCR Part B 4,278 MMBTU X 0.5485$ =2,346.33
72 Subtotal 5,296.37$
73 Rider FF & Rider TAX 5,296.37$ X 0.06408 =339.39
74 Total 5,635.76$ 388.38$
75 7.40%
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