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Department: Policy & Government Relations
Director: Andrew Fortune, Director of Policy & Government Relations
Agenda Item: Negotiated Settlement between the Atmos Cities Steering Committee and Atmos Energy Corp., Mid-Tex Division regarding the 2026 Rate Review Mechanism Filing
Recommended Action: Adoption of Ordinances
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Item Summary
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To approve a negotiated settlement between the Atmos Cities Steering Committee (“ACSC”) and Atmos Energy Corp., Mid-Tex Division (“Atmos Mid-Tex” or “Company”) regarding the Company’s 2026 Rate Review Mechanism filing; declaring existing rates to be unreasonable; adopting tariffs that reflect rate adjustments consistent with the negotiated settlement; finding the rates to be set by the attached settlement tariffs to be just and reasonable and in the public interest; approving an attachment establishing a benchmark for pensions and retiree medical benefits; requiring the Company to reimburse ACSC’s reasonable ratemaking expenses; determining that this Ordinance was passed in accordance with the requirements of the Texas Open Meetings Act; adopting a savings clause; adopting a severability clause; declaring an effective date; and requiring delivery of this Ordinance to the Company and the ACSC’s legal counsel.
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Previous Action/Presentation
An Ordinance approving the negotiated settlement between Atmos Cities Steering Committee and Atmos Energy Corp., Mid-Tex Division regarding Atmos’ Rate Review Mechanism was passed at the August 25, 2025, City Council meeting.
Background
The City of Plano, along with 181 other cities served by Atmos Energy Corporation, Mid-Tex Division (Atmos Mid-Tex) is a member of the Atmos Cities Steering Committee (ACSC).
Starting in 2007, ACSC and Atmos Mid-Tex settled a rate application filed by Atmos Mid-Tex pursuant to Section 104.301 of the Texas Utilities Code for an interim rate adjustment commonly referred to as a GRIP filing (arising out of the Gas Reliability Infrastructure Program legislation). GRIP filings allowed gas companies to annually recover charges to invested capital without a review of whether increased revenues or declining expenses offset the invested capital costs. The GRIP filings also guaranteed a one-sided, rubber-stamp approval at the Railroad Commission of the utility’s rate request.
The settlement by the ACSC created the Rate Review Mechanism (RRM), as a substitute for future gas rate filings under the GRIP statue. Since 2007, there have been several modifications to the original RRM request. In an Ordinance adopted by ACSC members in 2018, the RRM implemented new procedures like longer rate review times by the ACSC from three to five months. Unlike GRIP, the RRM provided an annual review of all portions of Atmos Mid-Tex’s cost of service. More importantly, it allowed ACSC member cities to make a comprehensive evaluation of all aspects of the gas utility’s business including investment, operation and maintenance expenses, and revenues unlike GRIP that only allows consideration of changes to invested capital.
Around April 1, 2026, Atmos Mid-Tex filed a rate request pursuant to the RRM review standards adopted by ACSC members. Atmos Mid-Tex claimed that its cost of service in the test year ending December 31, 2025, entitled it to additional system-wide revenues of $291.1 million. In applying the standards set forth in ACSC’s RRM review, ACSC’s consultants and Atmos Mid-Tex have agreed to settle Atmos Mid Tex’s request to $260.5 million, which is a reduction of $30.6 million to Atmos Mid-Tex’s initial request. The impact of the settlement on monthly average rates is an increase of $13.37 for residents, and an increase of $44.82 for commercial accounts. Increases in gas utilities has become a state-wide concern, and gas bill affordability will be a priority of the ACSC during the next Texas Legislative Session.
The RRM process has proven to be more efficient and less costly than the GRIP process. The settlement of $260.5 million is fair and reasonable and will be effective on October 1, 2026. For Plano and other ACSC member cities to receive the RRM settlement rate, they should take action approving the Ordinance before September 30, 2026.
Financial Summary/Strategic Goals
This item has no financial impact.
Approval of this item supports the City’s Strategic Plano Critical Success Factors of Excellent, Innovative and Accountable City Government.
Attachments
Ordinance
Exhibits A & B