By: JAMES OSBORNE |
The natural gas utility Atmos Energy is facing stiff opposition from Texas cities over its plans for a $45 million rate increase.
More than 130 cities from Round Rock to Wichita Falls have decided to fight the Dallas-based company on what they say is an effort to enrich the company’s executives and shareholders at the expense of local customers.
“They’re asking for too much,” said Arlington City Attorney Jay Doegey. “The last six, seven years it’s been steady rate increases. Before, they’d go years between filing for rate increases.”
The rate hike is described by Atmos as necessary to cover repairs and renovations to its aging gas pipeline network. Over the last five years the company has spent about $1 billion in that effort and needs the rate increase to maintain it, said Chris Felan, Atmos vice president of rates and regulatory affairs for its Mid-Texdivision.
At the same time Atmos, whose rates are regulated by the Texas Railroad Commission, has been posting record profits. Atmos operates across eight states, but about half its profits were earned in Texas, Felan said.
Last year the company earned $243.2 million, a more than 30 percent increase since 2008.
“Centerpoint and utilities across the country are doing the same thing. It’s not just Atmos,” Felan said. “From my point of view, a healthy utility is good for the community. I would much rather have a utility that is healthy, that is providing safe service.”
The fight centers on whether Atmos is being allowed to earn a rate of return far beyond what it needs to upgrade its infrastructure.
The rate increase works out to less than $2 a month for the average residential customer, according to a regulatory filing. But it includes money for executive bonuses and increases in employee benefits, according to Geoffrey Gay, the attorney representing most of the cities.
“We hear them on safety, and that’s fine. Except [Atmos is] making a lot of money right now,” Doegey said. “This is not a blank check.”
As more cities sign on to the fight, Atmos is preparing to go to the railroad commission to appeal.
With the hydraulic fracturing boom, natural gas prices in the United States have dropped significantly since 2009. The railroad commission has taken the tack that now is the time to spend on infrastructure, trading customer savings for safety.
In an interview last year, Railroad Commission Chairman Barry Smitherman made the case that rate hikes were necessary to avoid accidents like a 2010 pipeline explosion outside San Francisco, in which eight people died.
But that line of reasoning is starting to find opposition.
Dallas City Council member Philip Kingston fought last month to reject an Atmos rate increase within Dallas, which negotiates separately from other cities in the region. But the council approved the settlement, with at least one member arguing the railroad commission was likely to give Atmos even more.
In an interview this week, Kingston said Atmos was making excessive profits and it was time for politicians to take a stand.
“I’d rather fight it, lose and let the railroad commission explain themselves,” he said. “It’s the railroad commission that’s screwing people. God knows I’m not providing political cover for them.”