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S:\Our Documents\Ordinances\06\A TM DENY RATE INCREASE. doc
ORDINANCE NO. c1tJo6 -;;53
AN ORDINANCE OF THE CITY OF DENTON, TEXAS, DENYING THE RATE INCREASE
PROPOSED BY THE ATMOS ENERGY CORPORATION, MID-TEX DIVISION;
REQUIRING THE REIMBURSEMENT OF MUNICIPAL RATE CASE EXPENSES;
FINDING THAT THE MEETING COMPLIES WITH THE OPEN MEETINGS ACT;
MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND
DECLARING AN EFFECTIVE DATE.
WHEREAS, Atmos Energy Corporation - Mid- Tex Division ("Atmos") filed a Statement
of Intent with the City of Denton, Texas ("City") on May 31, 2006 to increase its system-wide,
annual revenue requirement, by approximately $73 million; and
WHEREAS, the City is a regulatory authority under the Gas Utility Regulatory Act
("GURA") and under 9103.001 of GURA has exclusive original jurisdiction over Atmos' rates,
operations, and services of a gas utility within the municipality; and
WHEREAS, the original effective date for the Atmos rate increase request was July 5,
2006, the City has suspended the effective date for the City to take final action until at least
October 3, 2006; and
WHEREAS, the City, acting in concert with other cities known as the Atmos Texas
Municipalities ("ATM"), has employed rate experts to review the testimony, schedules,
workpapers and other documents provided by Atmos in its Statement of Intent and in response to
discovery requests; and
WHEREAS, the City's rate experts have reviewed thousands of pages of the books and
records of Atmos and the review is on-going; and
WHEREAS, before the City Council passed this Ordinance, it held a public hearing on
the 12th day of September 2006 at which representatives of Atmos and interested citizens were
given the opportunity to testify and present evidence; and
WHEREAS, based upon the review of the rate experts the request to increase rates should
be denied; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1. Findings
(A) On May 31, 2006, Atmos filcd a rate filing package with the City based on a test
year ending December 31, 2005, seeking to increase rates by $73 million with a proposed
effective date of July 5,2006 which was suspended to at least October 3,2006.
(B) Based on Company-provided information, Atmos' proposal would result in an
approximate average monthly increase per customer within the City as follows:
S:\Our Documents\Ordinunccs\06\^ TM DENY RATE INCREASE.doc
.
. Residential - $4.02 or approximately 5.36%
. Commcrcial - $ I 7.16 or approximately 5.25%
. Industrial - $7.10 or approximately .21 %
(C) Thc City has cxclusive original jurisdiction under the Gas Utilities Regulatory
Act, Texas Utilities Code 9103.001 to evaluate Atmos' proposed rate increase.
(D)
("ATM").
The City has joined a coalition of cities, known as Atmos Texas Municipalitics
(E) A TM has hired experts to cvaluate and make recommendations regarding the
proposed rate increasc.
(F) While ATM's experts will not conclude their investigation until September 15,
2006, based on current information, they recommend that Atmos is not entitled to an increase in
rates.
(G) These experts havc determined that the rate increase proposed by Atmos is not
just and reasonable based on the following:
the request seeks an excessive rate of retum of 11.5%;
the request artificially decreases debt and increases equity;
the request seeks excessive Icvels of infrastructure adj ustments for its Gas
Rcliability Infrastructure Program ("GRIP"); and
the request proposes a radical change in rate design for residential customers,
which promotes waste of natural gas and shifts costs to low use customers.
(H) The 11.5% rate of retum proposed by Atmos is 135 basis points more than the
10. I 2% rate of retum considered to be reasonable in Atmos' most recent rate case before the
Georgia Public Service Commission.
(I) Atmos' proposal treats somc of its debt (at a cost of 5% to 6%) as equity (at a cost
of9% to 10.5'%), artificially intlating the cost of equity and thercby increasing the overall return
on investments and making the rate increase request considerably larger than justified.
(J) Contrary to the plain language and intent of the Gas Utilities Regulatory Act,
Texas Utilities Code 9104.301, some of the GRIP adjustments proposed by Atmos have nothing
to do with capital invcstment for infrastructure improvcments related to safety and reliability.
Instead GRIP adjustments includc the purcha~e of new computcrs, office fumiture, signage for
trucks and other vehiclcs and telecommunications systems.
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S:\Our Documents\Ordinances\06\ATM DENY RATE INCREASE.doc
(K) Atmos has proposed a rate design that unjustly shifts costs of the proposed
increase to low use residential customers by increasing the residential customer charge and base
rate cost for the first 3 Mcf of usage. In turn, Atmos has proposed to dramatically decrease the
cost of gas above 3 Mcf thereby promoting consumption and waste of a finite natural resource as
demonstrated in the chart below.
RESIDENTIAL RATES
Charge Current Proposed % Increase
Customer Charge $9.00 $13.50
GRIP Adjustments 0.58 0
Total $9.58 $13.50 4]%
o - 1.5 Mcf $1.239/Mcf $3.546/Mcf
1.5 - 3 Mcf $1.239/Mcf $0.346/Mcf
Total $2.4 78 $3.892 57%
(L) The failure of Atmos to provide cost information related to assets of TXU Gas
Company prior to the acquisition by Atmos on October I, 2004, has made it difficult to analyze
the components and reasonableness of the requested costs and expenses.
(M) The meeting at which this ordinance was approved was in all things conducted in
strict compliance with the Texas Open Meetings Act, Texas Government Code, Chapter 551.
SECTION 2. Based upon the foregoing findings the rate increase proposed by Atmos
and filed with the City on May 31, 2006, is denied.
SECTION 3. Atmos is directed to reimburse all municipal rate case expenses incurred by
the City in relation to the filing.
SECTION 4. A copy of this ordinance shall be sent to Mr. Richard Reis, Atmos Energy
Corporation, 5420 LBJ Freeway, Suite ]800, Dallas, Texas 75240 and to Mr. Jim Finley, City
Attorney, City of Longview, Texas, at fax number 903-239-5539.
SECTION 5. This ordinance shall become effective from and after its passage.
PASSED AND APPROVED this the
. ilL ' .
/,l, - day of 0t/1im/2t1/
,2006.
~ &fJ1r1J
PE~ McNEILL, MAYOR
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ATTEST:
JENNIFER WALTERS, CITY SECRETARY
D AS LEGAL FORM:
. SNYDER, CITY ATTORNEY
'1d
BY:
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