BLOG: Saving Money through Gas Rate Case Involvement by Cities

Regulators ordered the utility to cut its proposed hike by more than half.


R.A. Dyer

Back in October, we reviewed a series of Atmos Energy rate increases associated with something called the “Gas Reliability Infrastructure Program,” or “GRIP.”  Under the program, gas utilities can hike rates on an annual basis, but without any meaningful contemporaneous review by regulators. GRIP rules likewise lack other important consumer safeguards. For instance, utilities can obtain GRIP hikes even when they otherwise are collecting windfall profits.

That earlier analysis found that through GRIP, Atmos added between $1.20 and $2.02 to monthly residential bills from 2013 through 2018 for customers in the utility’s Mid-Tex Division, which is located around the Dallas and Fort Worth area. By the end of that period, those approximately half million customers were paying approximately $123 more per year than they would have paid otherwise.  Atmos collected more than $22.3 million in additional revenue from its residential and business customers because of the GRIP increases.

City involvement in a 2017 Atmos Pipeline Case led to avoided-cost savings.

We now have gone back through the regulatory record, but this time with our eye on a more traditional rate proceeding: a 2017 pipeline case by Atmos. You can find details about this case on the Texas Railroad Commission website, under docket number 10580. Here’s the link.

Atmos filed paperwork in this 2017 case to hike rates on an annual basis, as measured on a system-wide basis, by $81 million. It proposed to implement these new rates largely through its gas cost recovery charge on customers living in its Mid-Tex Division.

Now, before we go any further, we should make an important distinction. This is not a GRIP case, but rather a more traditional case. As we noted above, state law bars any meaningful and contemporaneous rate regulation in GRIP cases. In GRIP cases, utilities typically receive every dime of their request.

But in traditional rate cases cities typically have the legal right to intervene to protect their citizens. As our analysis illustrates — this intervention can make a big difference.

Again — Atmos filed paper work here to hike rates by $81 million. However, after the Atmos Cities Steering Committee and other city groups and an industrial group became involved, regulators ordered the utility to cut its proposed hike by more than half, to $31 million. That amounts to avoided-cost savings of $50 million each year for its customers. The Texas Railroad Commission ordered this rate adjustment in August 2017.

One other point: under law, the utility passes into rates the cost of city regulatory participation. The cities’ combined legal and regulatory expenses in the Atmos Pipeline case highlighted here amounted to less than $900,000.  This means that in just one year, the avoided-cost savings accruing to ratepayers was more than 55 times greater than the cost of the cities’ expert representation to secure that savings. This is a good deal by any measure. Also, keep in mind that the city’s regulatory expenditures end as soon as such cases conclude, while the avoided-cost savings for ratepayers repeat year after year.