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Home My WebLink AboutO-2951-9-10ORDINANCE NO. 2951-9-10 ' AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ALLEN, COLLIN COUNTY, TEXAS, ("CITY") APPROVING A NEGOTIATED RESOLUTION BETWEEN THE ATMOS CITIES STEERING COMMITTEE ("ACSC" OR "STEERING COMMITTEE") AND ATMOS ENERGY CORP., MID-TEX DIVISION ("ATMOS MID-TEX" OR "COMPANY") REGARDING THE COMPANY'S THIRD RATE REVIEW MECHANISM ("RRM') FILING IN ALL CITIES EXERCISING ORIGINAL JURISDICTION; DECLARING EXISTING RATES TO BE UNREASONABLE; REQUIRING THE COMPANY TO REIMBURSE CITIES' REASONABLE RATEMAKING EXPENSES; ADOPTING TARIFFS THAT REFLECT RATE ADJUSTMENTS CONSISTENT WITH THE NEGOTIATED SETTLEMENT AND FINDING THE RATES TO BE SET BY THE ATTACHED TARIFFS TO BE JUST AND REASONABLE; APPROVING ATMOS MHl-TEX'S PROOF OF REVENUES; EXTENDING THE RRM PROCESS FOR TWO CYCLES AND ADOPTING A NEW BRM TARIFF; RATIFYING THE SETTLEMENT AGREEMENT, INCLUDING COST RECOVERY FOR A STEEL SERVICE LINE REPLACEMENT PROGRAM; ADOPTING A SAVINGS CLAUSE; DETERMINING THAT THIS ORDINANCE WAS PASSED IN ACCORDANCE WITH THE REQUIREMENTS OF THE TEXAS OPEN MEETINGS ACT; REQUIRING DELIVERY OF THIS ORDINANCE TO THE COMPANY AND THE STEERING ' COMMITTEE'S LEGAL COUNSEL; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Allen, Collin County, Texas ("City") is a gas utility customer of Atmos Energy Corp., Mid -Tex Division ("Atmos Mid -Tex" or " Company"), and a regulatory authority with an interest in the rates and charges of Atmos Mid -Tex; and, WHEREAS, the City is a member of the Atmos Cities Steering Committee ("ACSC" or "Steering Committee"), a coalition of approximately 148 similarly situated cities served by Atmos Mid -Tex that have joined together to facilitate the review of and response to natural gas issues affecting rates charged in the Atmos Mid -Tex service area (such participating cities are referred to herein as "ACSC Cities"); and, WHEREAS, pursuant to the terms of the agreement settling the Company's 2007 Statement of Intent to increase rates, ACSC Cities and the Company worked collaboratively to develop a Rate Review Mechanism ("RRM") tariff that allows for an expedited rate review process controlled in a three year experiment by ACSC Cities as a substitute to the current GRIP process instituted by the Legislature; and, WHEREAS, the City took action in 2008 to approve a Settlement Agreement with Atmos Mid -Tex resolving the Company's 2007 rate case and authorizing the RRM Tariff; and, WHEREAS, the 2008 Settlement Agreement contemplates reimbursement of ACSC Cities' reasonable expenses associated with RRM applications; and, WHEREAS, on or about March 15, 2010, Atmos Mid -Tex filed with the City its third application pursuant to ' the RRM tariff to increase natural gas base rates by approximately $70.2 million, such increase to be effective in every municipality that has adopted the RRM tariff within its Mid -Tex Division; and, WHEREAS, ACSC Cities coordinated its review of Atmos Mid-Tex's REM filing by designating a Settlement Committee made up of ACSC representatives, assisted by ACSC attorneys and consultants, to resolve issues identified by ACSC in the Company's REM filing; and, WHEREAS, the Company has filed evidence that existing rates are unreasonable and should be changed; and, WHEREAS, independent analysis by ACSC's rate expert concluded that Atmos Mid -Tex is able to justify an increase over current rates of $21 million; and, WHEREAS, Atmos Mid -Tex has commenced a program to replace steel service lines based on a relative leak repair risk analysis; and, WHEREAS, the Steering Committee has entered a Settlement Agreement ("Exhibit C" to this Ordinance) with Atmos Mid -Tex to: (1) increase base rate revenues by $27 million; (2) extend the REM process, with modifications for an additional two cycles and to thereafter require the filing of a system -wide Statement of Intent rate case on or before June 1, 2013; and (3) in the interim to allow current recovery of incremental direct costs of the steel service line replacement program in rates set via this ordinance and in future RRMs; and, WHEREAS, the ACSC Executive Committee, as well as ACSC lawyers and consultants, recommend that ACSC members approve the attached rate tariffs ("Exhibit A" to this Ordinance), which will increase the Company's revenue requirement by $27 million; and, WHEREAS, the attached tariffs implementing new rates and Atmos Mid-Tex's Proof of Revenues ("Exhibit B" to this Ordinance) are consistent with the negotiated resolution reached by ACSC Cities and are just, ' reasonable, and in the public interest; and, WHEREAS, it is the intention of the parties that if the City determines any rates, revenues, terms and conditions, or benefits resulting from a Final Order or subsequent negotiated settlement approved in any proceeding addressing the issues raised in the Company's Third REM filing would be more beneficial to the City than the terms of the attached tariff, then the more favorable rates, revenues, terms and conditions, or benefits shall additionally accrue to the City; and, WHEREAS, the negotiated resolution of the Company's REM filing and the resulting rates are, as a whole, in the public interest. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF ALLEN, TEXAS, THAT: SECTION 1. The findings set Forth in this Ordinance are hereby in all things approved. SECTION 2. The City Council finds the existing rates for natural gas service provided by Atmos Mid -Tex are unreasonable and new tariffs and Atmos Mid-Tex's Proof of Revenues, which are attached hereto and incorporated herein as Exhibits A and B, arejust and reasonable and are hereby adopted. SECTION 3. Atmos Mid -Tex shall reimburse the reasonable ratemaking expenses of the ACSC Cities in processing the Company's rate application. ' SECTION 4. The Settlement Agreement, attached as Exhibit C, which includes in addition to resolution of the Third RRM: (1) extension of a modified REM process; (2) requirement that Atmos Mid -Tex file a system -wide Statement of Intent rate case on or before June 1, 2013; and (3) current recovery of incremental direct costs for a steel service line replacement program, is hereby ratified. Ordinance No. 2951-9-10, Page 2 SECTION 5. To the extent any resolution or ordinance previously adopted by the Council is inconsistent with this Ordinance, it is hereby repealed. ' SECTION 6. 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 7. If any one or more sections or clauses of this Ordinance is adjudged to be unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remaining provisions of this Ordinance and the remaining provisions of the Ordinance shall be interpreted as if the offending section or clause never existed. SECTION 8. If the City determines any rates, revenues, terms and conditions, or benefits resulting from a Final Order or subsequent negotiated settlement approved in any proceeding addressing the issues raised in the Company's Third RRM filing would be more beneficial to the City than the terms of the attached tariff, then the more favorable rates, revenues, terms and conditions, or benefits shall additionally accrue to the City. SECTION 9. A copy of this Ordinance shall be sent to Atmos Mid-Tex, care of David Park, Vice President Rates and Regulatory Affairs, at Atmos Energy Corporation, 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. SECTION 10. This Ordinance shall become effective from and after its passage with rates authorized by attached Tariffs to be effective for bills rendered on or after October 1, 2010. DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF ALLEN, COLLIN COUNTY, TEXAS, ON THIS THE 28ra DAY OF SEPTEMBER, 2010. APPROVED: 4QL StephelfTerrell, MAYOR 1 APPROVED AS TO FORM: ATTEST: Peter G. Smith, CITY ATTORNEY Shelley B. Georg , TRMC, CITY SEC41ETARY Ordinance No. 2951-9-10, Page 3 F ATMOS ENERGY CORPORATION MID-TEX DIVISION RATE SCHEDULE: R— RESIDENTIAL SALES APPLICABLE TO: All Cities except the City of Dallas and all unincorporated areas EFFECTIVE DATE: Bills Rendered on or after 1 010112 01 0 Application Applicable to Residential Customers for all natural gas provided at one Point of Delivery and measured through one meter. Type of Semi" Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customers monthly bill will be calculated by adding the following Customer and Md charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Bill $ 7.15 per month Commodity Charge — All Mcf $2.5246 per Mcl ' Gas Cost Recovery. Plus an amount for gas costs and upstream transportation costs calculated in accordance wnh Part (a) and Part (b), respectively, of Rider GCR Weather Normalization Adjustment: Plus or Minus an amount for weather normalization calculated in accordance with Rider W NA. 1 Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider FIRM. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment. Plus an amount for tax calculated in accordance with Rider TAX_ Surcharges: Plus an amount for surcharges calculated in accordance with the applicable nder(s). Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service_ EXHIBIT A Ordinance No. 2951-9-10, Page 4 I ATMOS ENERGY CORPORATION MID-TEX DIVISION RATE SCHEDULE: C—COMMERCIAL SALES APPLICABLE TO: All Cities except the City of Dallas and all unincorporated areas EFFECTIVE DATE: Bills Rendered on or after 10/0112010 Application Applicable to Commercial Customers for all natural gas provided at one Point of Delivery and measured through one meter and to industrial Customers with an average annual usage of less than 3,000 Mcf Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customees monthly bill will be calculated by adding the following Customer and Mcf charges to the amounts due under the nders listed below: Charge Amount Customer Charge per Bill $ 13.91 per month Commodity Charge - All Mcf $ 1.0796 per Mcf Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Weather Normalization Adjustment: Plus or Minus an amount for weather normalization calculated in accordance with Rider WNA. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Franchise Fee Adjustment: Plus an amount for franchise fees calculated in accordance with Rider FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable nder(s). Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. EXHIBIT A Ordinance No. 2951-9-10, Page 5 I ATMOS ENERGY CORPORATION MID-TEX DIVISION RATE SCHEDULE: I — INDUSTRIAL SALES APPLICABLE TO: All Cities except the City of Dallas and all unincorporated areas EFFECTIVE DATE: Bills Rendered on or after 1 0101 /201 0 Next 3,500 Mill Application Applicable to Industrial Customers with a maximum daily usage (MDU) of less than 3,500 MMBtu per day for all natural gas provided at one Point of Delivery and measured through one meter. Service for Industrial Customers with an MDU equal to or greater than 3,500 MMBtu per day will be provided at Company's sole option and will require special contract arrangements between Company and Customer. Type of Service Where service of the type desired by Customer is not already available at the Point of Delivery, additional charges and special contract arrangements between Company and Customer may be required prior to service being furnished. Monthly Rate Customer's monthly bill will be calculated by adding the following Customer and MMBtu charges to the amounts due under the riders listed below: Charge Amount Customer Charge per Meter $ 450.00 per month First 0 MMBtu to 1,500 MMBtu $ 0.2750 per MMBtu Next 3,500 Mill $ 0 2015 per MMBtu All Mill over 5,000 MMBtu $ 0.0433 per MMBtu Gas Cost Recovery: Plus an amount for gas costs and upstream transportation costs calculated in accordance with Part (a) and Part (b), respectively, of Rider GCR. Rate Review Mechanism: Plus or Minus an amount for rates as calculated in accordance with Rider RRM. Franchise Fee Adjustment Plus an amount for franchise fees calculated in accordance with Rider FF. Rider FF is only applicable to customers inside the corporate limits of any incorporated municipality. Tax Adjustment: Plus an amount for tax calculated in accordance with Rider TAX. Surcharges: Plus an amount for surcharges calculated in accordance with the applicable nder(s). Curtailment Overpull Fee Upon notification by Company of an event of curtailment or interruption of Customer's deliveries, Customer will, for each MMBtu delivered in excess of the stated level of curtailment or interruption, pay ' Company 200% of the midpoint price for the Katy point listed in Plaits Gas Daily published for the applicable Gas Day in the table entitled "Daily Price Survey.' EXHIBIT A Ordinance No. 2951-9-10, Page 6 I ATMOS ENERGY CORPORATION MID•TEX DIVISION RATE SCHEDULE: I—INDUSTRIAL SALES APPLICABLE TO: All Chios except the City of Dallas and all unincorporated areas EFFECTIVE DATE: Bills Rendered on or after 10101/2010 Replacement Index In the event the "midpoint' or "common' price for the Katy point listed in Platts Gas Daiy in the table entitled "Daily Price Survey' is no longer published, Company will calculate the applicable imbalance fees utilizing a daily price index recognized as authoritative by the natural gas industry and most closely approximating the applicable index. Agreement An Agreement for Gas Service may be required. Notice Service hereunder and the rates for services provided are subject to the orders of regulatory bodies having jurisdiction and to the Company's Tariff for Gas Service. Special Conditions ' In order to receive service under Rate I, Customer must have the type of meter required by Company. Customer must pay Company all costs associated with the acquisition and installation of the meter. 1 EXHIBIT A Ordinance No. 2951-9-10. Page 7 I ATMOS ENERGY CORP., MID-TE%DIVISION Line No. SUMMARY OF CURRENT AND PROPOSED RATE STRUCTURE TEST YEAR ENDING DECEMBER 31, 2009 (2010 RRM SETTLEMENT PROPOSAL) Proposed (Beginning Description Current Oct 1) (a) 16) (d) 1 Rate R 2 Customer Charge per month $7.00 $7.00 3 4 Consumption Charge per MCF $2.2647 $2.5246 5 2008 RRM True -up per MCF $0.0000 $0.0000 6 2009 RRM True -up per MCFO$ 0060w 0000 7 Total Consumption Charge per MCF $2.2707 $2.5246 6 Rate C 9 Customer Charge per month $13.50 $13.50 10 11 Consumption Charge per MCF $0.9825 $10796 12 2008 RRM True -up per MCF $0-0000 $0.0000 13 2009 RRM True -up per MCF $0.0052 SO.0IX70 14 Total Consumption Charge per MCF $0.9877 $1.0796 15 Rate 18 T 16 Customer Charge per month $425.00 $450.00 17 18 Consumption Charge per MMBTU: 19 First 1,500 MMBTU $0.2496 $0.2750 20 Next 3,500 MMBTU $0.1820 50.2015 21 Over 5,000 MMBTU $0.0390 $0.0433 22 2008 RRM True -up, per MMBTU: 23 First 1,500 MMBTU 50.0087 $0.0000 24 Next 3,500 MMBTU S00064 $0.0000 25 Over 5,000 MMBTU 50-0014 $0.0000 26 2009 RRM True -up per MMBTU: 27 First 1,500 MMBTU 50.0000 $0.00D0 28 Next 3,500 MMBTU 50.0000 $0.0000 29 Over 5,000 MMBTU $0.0000 $0 .0000 30 Total Consumption Charge per MMBTU 31 First 1,500 MMBTU 50.2583 $0.2750 32 Next 3,500 MMBTU $0.1884 $0.2015 33 Over 5,000 MMBTU 50.0404 50.0433 EXHIBIT B Ordinance No. 2951-9-10, Page 8 I F ATMOS ENERGY CORP.. MID-TEX DIAS40N CUSTOMER IMPACT OF PROPOSED RATES COMPARED TO CURRENT RATES TEST YEAR ENDING DECEMBER 31. 2009 (2010 FIRM SE EMENT PROP03ALI Line Pmsp.aw. No. Oa*cmpnon Raw bma.a Ia( (b) 1 Raw R 2 CorwOmp9M Grunge per MCF 3 Change TOM Cumem Raw 502539 4 alling UMIs Qon 5peaeie0 PencO 75.W%MD 5 Total Charge In Base Revenue 51%934,212 6 Asscclate6 ReYMUe Tames 51.490.4431 T TOQ1 R * IMP= 521A24,613 5 Numcer Y BIW ten SpeOI Penoo 1]267.740 9 N:"age Impact W Dil $1.24 10 Raw C 11 Conal p--Jw Change l'Rr MCF 12 Change TOM Current Raw 50.0919 43 &Iling Units Ta SpeaTeO Penm 49,==O 14 Total Change In Base RevenUe 54.547.0 O 15 PbKdaw6 Revemm T., SM%%6 16 TOUT Race Imp= 54,587,026 17 Number al Bl% Ita npeclT. dP MM J*i5A36 18 N arage Impact per all SJ.36 19 Rates MT - Customer Changs 20 Customer Change 21 Change imm Current Raw 525.00 M Blling Unhhs •a SpeotRO PenW 10.965 23 TOMI Change In Base Revenue 5274.E25 M ASSoclawa Re:Mue Thies25 0533 211 TOW Rase Imp= 52-'SAE761 M Raw* IBT- let black 2] COmmMpmh Change per MCF 26 Change TOM CUnem Rale 30.0167 29 1511ing Units Tx SFecMe01OuIW 10.597.655 30 Total Change In Bane Revenue 5177.01 31 AssocI Revenue T..$13236 32 Tow; Rase IMP= S190.256 M R.N. MIT -Ind black 34 Cou mpJon Charge per MCF 35 change Tom COMM Raw 50.0131 36 auing Untie Ta spetlT40 FeMW 10.791216 37 TOUT Change In Base Re.YOUe $141.297 38 OSSOO teC Re'lehue Tales1s GMA 39 TOM? Ra.e Impact $351.862 40 Rates 14T -&A block 41 Coasumppm Charge per MCF 42 Change Tom Cunem Raw SoM9 d3 B11mg JnllsT 0peobe0 PenoO 16.,285.623 44 Total Charge In Baa Revenue 33].655 45 Aaccl.teO Re:Mue Tait. 3131 46 Total Rase Impact. 551.218 47 Rates IST - Total M TOW R311e IMP= SE66.FA4 49 NUROer V Elie W SpiI FFlIW 1D.MS 59 A':erage ImpaOt pen all 562.68 51 52 Total Change In Ba*e Revenu. $25.121.880 53 Total Raw Impact (Inc, Rev. Tama) 1127.00.142 EXHIBIT B Ordinance No. 2951-9-10, Page 9 EXHIBIT B Ordinance No. 2951-9-10, Page 10 ATMOS ENERGY CORP.- MID -TU DIV131ON ' AVERAGE BILL COMPARISON -OCTOBER 1.2010 TEST YEAR ENDING DECEMBER 31, NO meemzio+D —ansa en cuwwr a..sa n.p a wr uzmr • awun Ma sarranr rw, N+v x Da+.n rmu¢r,e.y. +cr ussw I+r U AbGCnnNa .S NmA sma eral PIEW nr, xn„ n Mrceue+Nr wswr a ua.+..nme• mm w..arme.v. cr man am wllMa r� cr Nem . asr n m+we Me vz cr x mart - m a i s.1CYl )'pm m w.�+.Y sa+er n Dwm - s n n)mu'gne.p yr cr uvla . Mxa[n Mt Nmm . W.+xnlwee ux cr x aew . x ml�iRtl�pu cuww, nwaeev V N]fm a r..m,ae.p w+v mam . +D tl Cwigmtly wN m➢YY • Hm ImrreCRMt .t IWwa Me ],0.' wN F mMl M rW m r�� tivP WUWntl.4 I!a IDSM p,�.sa pip Ip] wN Wa+! ]W wN NOY 'AC6el lav wN F IDem +w )wzl� ulv m mrevx ewry cunan rewmrD auwe ura,., ep )mm m n..n..��.> wN mm • r�e.p IIDt wN ID+W ]IDs m v wN IDvm, vm mmea +.+n..a.�•.Y mma + ew.vr . sra.+. ev. sam w..Ne,a.p ID]na . fw'eW �.p +D _wN NA+E Ia9 n wN mD,a ]N wN F IDam N EXHIBIT B Ordinance No. 2951-9-10, Page 10 I 1 n ATMOS ENERGY CORP., MID-TEX DIVISION CUSTOMER IMPACT OF PROPOSED RATES COMPARED TO CURRENT RATES (STEEL S ERVICE REPLACEMENT PROGRAM) Line Prospective No. Description Rate Increase (a) (h) 1 Rate R 2 Monthly Customer Charge 3 Change from Current late 50.15 4 billing UnIG tow Specilled Period 17,287;740 5 Total Cr,3rye In Base Revenue 52,593,161 6 Associated Revenue Taxes 51931880 7 Total Rale Impact 52,787,041 8 Numoer of Bl1sfor Spedlvd Period 17287,740 9 kweinitpe Impact per all $0.15 10 Rate C 11 MontnlyCustomHCharge 12 Change from Current Rate $0.41 13 ailing Units for Sped -52d Period IA45A36 14 Total Change In Base Revenue $592,529 15 Associated Revenue Tabs $44,308 16 Total Rale impaa 5636,937 17 Number if Bits for Specified Period 1,445A36 18 Average Impact per Flit $0.44 19 2D Total Change In Bass Revenue $3,185,790 21 Total Rata Impact )Inc. Rev. Taxes) 53A23,979 22 EXHIBIT B Ordinance No. 2951-9-10, Page 11 SETTLEMENT AGREE\IENT BETWEENATMOS ENERGY CORP., 11111-TEX ' DIVISION AND ADIOS CITIES STEERING COMMITTEE WHEREAS, this settlement agreement is entered into by Atmos Energy Corp's Mid - Tex Division and Atmos Cities Steering Committee ('ACSC") whose members include the Cities of Abilene. Addison. Allen. Alvarado. Angus. Anna. Argyle. Arlington, Bedford, Belhuead.. Benbrook. Beverly Hills. Blossom, Blue Ridge. Bowie, Boyd, Bridgeport, Brownwood, Buffalo. Burkbrmett, Burleson. Caddo Mills, Carrollton, Cedar Hill. Celeste, Celina. Cisco, Cleburne, Clyde. College Station. Colleyville, Colorado City. Comanche, Coolidge, Coppell, Corinth. Corral City. Crandall. Crowley, Dalworthington Gardens, Denison, DeSoto, Duncanville. Eastland, Edgecliff Village. Emory. Eris, Euless, Everman. Fairview. Facers Branch. Fannersville, Fate. Flower Mound. Forest Hill, Fort Worth, Frisco, Frost. Gainesville, Garland, Garrett. Grand Prairie, Grapevine, Haltom City, Harker Heights. Haskell. Hewitt, Highland Park. Highland Village. Honey Grove, Hurst. Imva Park, Irving, Justin. Kaufirn, Keene. Keller, Kemp, Keredale. Kerrville, Killeen. Knr. Lakeside. Lake Worth. Lancaster, Lewisville, Lincoln Park. Little Elm. Loren, Malakoff, Mansfield, McKinney, Melissa Mesquite. Midlothian. Murphy, Nocona. North Richland Hills, Northlake. Oakleaf. Ovilla, Palestine, Pantego, Paris, Parker, Pecan Hill, Plano. Ponder, Pottsboro, Prosper. Quitman, Red Oak. Reno (Parker County), Richardson, Richland, Richland Hills, Roanoke. Robinson, Rockwall, Roscoe. Rowlett. Sachse. Saginaw, Seagoville, Shenrmn. Snyder. Southlake. Springtoum. Stamford. Stephenville, Sulphur Springs, Sweetwater, Temple, Terrell. The Colony, Tyler. University Park. Venus. Vernon, Waco.. Watauga. Waxahachie. Westlake. Whitesboro. White Settlement. Wichita Falls. Woodway, and Wylie. WHEREAS our March 15, 2010, Atmos Sled with the ACSC Cities an application. hereafter referred to as the 2010 RRM filing, to adjust rates pursuant to Rider RRM - Rate Review Mechanism: and ' WHEREAS. ACSC has hired experts mid lawyers to analyze the rates proposed by Antos Energy Corp.'s. Mid -Tex Division ("Atmos" or `Company') in its 2010 RRM filing: and [l WHEREAS, the Settlement Agreement resolves all issues between Amos and ACSC ("the Signatories') regarding the 2010 RRM filing, which is currentlypending before the .4CSC Cities, in a manner that the Signatories believe is consistent with the public interest, mrd the Signatories represent diverse interests. and WHEREAS, the Signatories believe that the resolution of the issues raised in the 2010 RRM filing can best be accomplished by each ACSC City approving this Settlement Agreement and the rates. temrs and conditions reflected in die tariffs attached to this Settlement Agreement as Exhibit A: NOW. THEREFORE, in consideration of the mutual agreements and covenants established herein, the Signatories. through their undersigned representatives, agree to the following Settlement Terms as a means of fully resolving all issues between the ACSC Cities and Atmos involving the 2010 RRM filing: EXHIBIT C Ordinance No. 2951-9-10, Page 12 Settlement Tetras ' 1. Upon the execution of this Settlement Agreement, Atmos and the counsel for the ACSC cities will recommend that an ordinance or resolution be adopted to approve this Settlement Agreement and implement the rates. terms and conditions reflected in the tariffs attached to this Settlement Agreement as Exhibit A. (Attachment A to the Ordinance ratifying this Agreement). Said tariffs should allow Atmos an additional. prospective $27 million in annual revenue by implementation of rates shown in the proof of revenues attached as Exhibit B. (Attachment B to the Ordinance ratifying this Agreement). The uniform implementation of gas rates, terms and conditions established by this Settlement Agreement shall be effective for bills rendered on or after October 1, 2010. In an effort to streamline the regulatory review process. Atmos and ACSC have agreed to renew the Rate Review Mechanism ("Rider RRM") for a period commencing with the Company's April 1. 2011 filing trader this mechanism for the calendar year 2010. effective August 15, 2011. and concluding upon the implementation of new. final rates established pursuant to the general rate case that Atmos will file on or before June 1. 2013. Rider RRM provides for an annual rate adjustment to reflect changes in billing determinants, operating and maintenance expense. depreciation expense, other taxes expense, and revenues as well as changes in capital investment and associated changes in gross revenue related taxes. The revised RRM tariff is included in Exhibit A. 3. Notwithstanding the RRM rate adjustments that will occur pursuant to paragraph 2 of ' this Settlement Agreement, Atmos and ACSC agree that on or before June 1. 2013, Atmos shall file a general. system -wide rate case for the Mid -Tex Division. Dining the pendency of the general rate case, Atmos and ACSC agree that rate adjustments associated with the RRM filing for calendar year 2011 shall be implemented on August 15, 2012, and shall remain in effect until the earlier of either the issuance of a foal order by the Railroad Commission of Texas in the general rate case to be filed on or before June 1, 2013, or the entry of an agreed upon order resolving all issues involved in the general rate case. The adjustments made or requested in the 5's year RRM shall not be considered precedent during the general rate case. Atmos and ACSC further agree that for the period commencing March 1. 2010 through September 30. 2012, Atmos will expand its existing steel service line replacement program to complete the replacement of 100.000 steel service lines within its Mid -Tex Division during this period. Atmos and ACSC agree that a risk-based approach should be adopted to allow replacement of the highest priority steel service lines within this time period. Atmos agrees to provide the ACSC cities with quarterly reports providing the number and location of the lines replaced during the quarter. Atmos agrees to coordinate with ACSC member cilia to minimize disruption to cities' tights of way without compromising the safety of residents of the cities. 5. Atmos and ACSC agree that costs incurred to replace steel service lilies prior to October 1, 2010 shall be included in the RRM rate adjustment calculation for the 2010 ' calendar year, and shall not be subject to or included in the rate cap limitations set forth in subsection IV (a) -(b) of the Rider RRM tariff. Ordinance No. 2951-9-10, Page 13 6. Atmos and ACSC agree that the projected incremental direct costs incurred to replace ' steel service lines on or after October 1. 2010 shall be separately identified and shall not be subject to or included in the rate cap limitations set forth in subsection N (a) - (b) of the Rider RRM tariff. Atmos and ACSC further agree that such projected direct incremental costs incurred to replace steel service lines after October 1, 2010, shall be separately calculated and recovered as a discrete component of customer charges in the Company's annual RRM filings as set forth below: Atmos and ACSC agree that Atmos shall be entitled to separately adjust rates for the Rate Effective Period as defused in the Rider RRM tariff to allow recovery of the projected annual revenue requirement associated with direct incremental costs to be incurred in connection with a steel service line replacement program, that are not otherwise included within the RRM cost of service, including a return on equity of 9.0% within the overall weighted cost of capital applied to net investment (net plant additions, less accumulated depreciation and accumulated deferred income taxes), depreciation expense and applicable taxes: b. Atmos and ACSC further agrec that the capital structure used to calculate the steel service line replacement rate adjustment will be the actual Evaluation Period (as defined in the Rider RRM tariff) ratio of long-term debt and equity. with an equity percentage not to exceed 50%; c. Rate recoveryassociated with a steel service line replacement program shall occur through an adjustment to the Residential and Commercial customer charges. ' Current year recovery factors as of October 1. 2010 shall be $0.15 for residential customers and $0.41 for commercial customers. The rates will be adjusted annually. however. Atmos and ACSC agree that in no case will the per customer monthly cost recovery factors attributable to a steel service line replacenment program exceed $0.44 for residential customers or $1.22 for commercial customers, either prior to or during the pendency of the general rate case Atmos will file on or before June 1. 2013. d. Atmos and ACSC further agree that any per customer amount attributable to cost recovery for a steel service line replacement program shall be subject to review by the regulatory authority in a subsequent Evaluation Period as defined in the Rider RRM tariff and all incremental costs associated with a steel service lux replacement program shall be subject to a prudence/reasonableness review in the general rate case to be filed by Atmos on or before June 1, 2013. 7. With respect to the Company's annual RRM filings. Atmos agrees to pay all reasonable and accessary expenses of each entity having original jurisdiction that are incurred to review the Company's annual RRM filings. Atmos farther agrees that in calculating the proposed rate for any Rate Effective Period. the Company shall not include: (1) any external legal. expert. or consultant costs to prepare and,'or provide supportive information related to its filing: or (2) reimbursements to original jurisdiction entities. ' 8. Notwithstanding paragraph 7 of this Settlement Agreement, Atmos and ACSC agree that in the event of an appeal of an original jurisdiction entity's decision regarding a proposed RRM adjustment recovery of rate case expenses shall be determined 3 CXHHH'IC Ordinance No. 2951-9-10, Page 14 according to Chapters 103 and 104, TEX. UID.. CODE ANN. Further, in the event of ' such appeal(s). Atmos shall recover any reimbursement made to the original jurisdiction entity through a surcharge to all customer rates that are subject to the Commission's jurisdiction in that proceeding or proceedings that might be joined therewith. regardless of whether such renubuusements are made during the initial review period or appeal period. 9. The ACSC Cities agree that they will not challenge the legal basis of the rates, terms. and conditions reflected in Exhibit A, or any annual RRM adjustment that is implemented pursuant to Rider RRM. 10. Atmos and the ACSC Cities further agree that the express terns of the Rider RRM me supplemental to the filing. notice, regulatory review, or appellate procedural process of the ratemaking provisions of Chapter 104 of the Texas Utilities Code. If the statute requires a mandatory action on behalf of the municipal regulatory authority or Atmos. the paries will follow the provisions of such statute. If the statute allows discretion on behalf of the municipal regulatory authority, the ACSC Cities agree that they shall exercise such discretion in such a way as to implement the provisions of the RRM tariff. If Atmos appeals an action or inaction of an ACSC City regarding an RRM Sling to the Railroad Commission. the ACSC Cities agree that they will not oppose the implementation of interim rates or advocate the imposition of a bond by Atmos consistent with the RRM tariff. Atmos agrees that it will make no Slings on behalf of its Mid -Tex division under the provisions of TEX. UTD.. CODE ANN. ss 104.301 while the Rider RRM is in place. hr the event that a regulatory authority fails to act or enters ' an adverse decision regardiug the proposed annual RRM adjustment, the Railroad Commission of Texas shall. pursuant to the provisions of the Texas Utilities Code. have exclusive appellate jurisdiction to review the action or inaction of the regulatory authority exercising exclusive original jurisdiction over the RRM request. In addition. the Signatories agree that this Settlement Agreement shall not be construed as a waiver of the ACSC Cities' right to initiate a show cause proceeding or the Company's right to file a Statement of Intent under the provisions of the Texas Utilities Code. 11. Atmos and ACSC further agree that the ordinance or resolution adopting this Settlement Agreement shall include a provision authorizing Atmos to establish regulatory asset account(s) for costs related to working gas in storage. Atmos and ACSC further agree that the language authorizing these regulatory asset account(s) shall be the same as that set forth in the 4m Ordering Paragraph (Page 10 of 11) of the Final Order Nunc Pro Tunc issued by Railroad Commission of Texas in GUD No. 9869 on February 23, 2010. This language states as follows: IT IS FURTHER ORDERED that Atmos shall be allowed to establish a regulatory asset for the ad valorem taxes related to working gas in storage. In addition, Atmos shall be allowed to establish a regulatory asset for (1) the costs associated with Accumulated Deferred Income Tax for UNICAP Section 263A. (2) the WACOG to FIFO change, and (3) an amount equal to the rate of rennin approved in this RRM Proceeding for the Accumulated Deferred Income Tax items related to working gas in ' storage. Atmos shall record these amounts in Other Regulatory Assets (Account 182.3). These deferred items shall be considered, along with the EXHIBIT C Ordinance No. 2951-9-10, Page 15 investment in working gas, for consideration and possible inclusion in rates for Atmos Pipelive-Texas in that entity's next filed rate case. If the Commission determines that such deferred items aro not properly included in the rates of Atmos Pipeline — Texas, the items shall be further deferred until the next Atmos Mid -Tex rate case filed after the final decision in the Atmos Pipeline Texas rate case for inclusion with the working gas investment in the Atmos Mid -Tex mates. 12. Antics and ACSC agree that each ACSC city should approve this Settlement Agreement and adopt an ordinance or resolution to implementfor the ACSC Cities the rates, terms, mid conditions reflected in the tariffs attached to this Settlement Agreement as Exhibit A. as well as the regulatory asset authorization language discussed in paragraph 12 of this Settlement Agreement. 13. The Signatories agree that the terms of the Settlement Agreement are interdependent and indivisible, and that if any ACSC city enters an order that is inconsistent with this Settlement Agreement, then any Signatory may withdraw without being dcevcd to have waived any procedural right or to have taken any substantive position on any fact or issue by virtue of that Signatory's entry into the Settlement Agreement or its subsequent withdrawal. If any ACSC city rejects this Settlement Agrcencm, then this Settlement Agreement shall be void ab initio and counsel for the ACSC Cities shall thereafter only take such actions as are in accordance with the Texas Disciplinary Rules of Professional Conduct. ' 14. The Signatories agree that all negotiations, discussions and conferences related to the Settlement Agreement are privileged, inadmissible, mid not relevant to prove any issues associated with Atmos' 2010 RRM filing. 15. The Signatories agree that neither this Settlement Agreement nor any oral or written statements made during the course of settlement negotiations may be used for any purpose other than as necessary to support the entry by the ACSC Cites of an ordinance or resolution implementing this Settlement Agreement. 16. The Signatories agree that this Settlement Agreement is binding on each Signatory only for the purpose of setting the issues set forth herein and for no other purposes. and. except to the extent the Settlement Agreement governs a Signatory's rights and obligations for future periods, this Settlement Agreement shall not be binding or precedential upon a Signatory outside this proceeding. 17. The Signatories agree that this Settlement Agreement may be executed in multiple commterparts and maybe filed with facsimile signatures. EXHIBIT C Ordinance No. 2951-9-10, Page 16 U 1 Agreed to this _ day of August, 2010. ATMOS ENERGY CORP., MID-TEX DIVISION By Jolm A. Paris President, Mid -Tex Division EXHIBIT C Ordinance No. 2951-9-10, Page 17 Agreed to this day of August 2010. ATTORNEY FOR ATMOS TEXAS MUNICIPALITIES, WHOSE MEMBERS INCLUDE THE CITIES OF ABILENE. ADDISON, ALLEN, ALVARADO. ANGUS. ANNA, ARGYLE, ARLINGTON.. BEDFORD. BELLMEAD, BE\BROOK, BEVERLY HILLS. BLOSSOM, BLUE RIDGE, BOWIE. BOYD. BRIDGEPORT, BROWNWOOD. BUFFALO. BURKBURNETT, BURLESON. CADDO MILLS. CARROLLTON, CEDAR HILL. CELESTE, CELINA. CISCO, CLEBURNE, CLYDE, COLLEGE STATION, COLLEYVE.LE. COLORADO CITY, COMANCHE. COOLIDGE, COPPELL, CORINTH. CORRAL CITY. CRANDALL. CROWLEY. DALWORTHINGTON GARDENS. DENISON. DESOTO, DUNCANVILLE, EASTLAND. EDGECLIFF VILLAGE, EMORY. ENNIS. EULESS, EVERMAN, FAIRVIEW, FARMERS BRANCH, FARMERSVILLE, FATE. FLOWER MOUND. FOREST HILL. FORT WORTH, FRISCO, FROST. GAINESVILLE, GARLAND. GARRETT. GRAND PRAIRIE. GRAPEVINE. HALTOM CITY. FARKER HEIGHTS, HASKELL. HEWITT. HIGHLAND PARK, HIGHLAND VILLAGE. HONEY GROVE, HURST, IOWA PARK. IRVING, JUSTIN. KAUFMAN. KEENE. KELLER KEMP. KENNEDALE, KERRVILLE. KILLEEN, KRUM. LAKESIDE, LAKE WORTH, LANCASTER LEWISVILLE, LINCOLN PARK. LITTLE ELM, LORENA, MALAKOFF. MANSFIELD, MCKINNEY, MELISSA. MESQUITE. MIDLOTHIAN, MURPHY, NOCONA. NORTH RICHLAND HILLS. NORTHLAKE, OAKLEAF. OVILLA, PALESTINE. PANTEGO, PARIS, PARKER PECAN HILL. PLANO, PONDER, POTTSBORO. PROSPER. QUITMAN, RED OAK. RENO (PARKER COUNTY), RICHARDSON, RICHLAND, RICHLAND HILLS, ROANOKE, ROBINSON, ROCKWALL, ROSCOE, ROWLETT. SACHSE. SAGINAW, SEAGOVILLE. SHERMAN. SNYDER, SOUTHLAKE. SPRINGTOWN, STAMFORD, STEPHENVILLE, SULPHUR SPRINGS, SWEETWATER- TEMPLE. TERRELL, THE COLONY, TYLER UNIVERSITY PARK. VENUS. VERNON, WACO. WATAUGA. WAXAHACHIE. WESTLAKE. WHITESBORO. WHITE SETTLEMENT, WICHITA FALLS, \VOODWAY, AND WYLIE By: Geoffrey Gay' " Subject to approval by ACSC City Councils EXHIBIT C Ordinance No. 2951-9-10, Page 18