Dallas Resident, RRC

8/8/2019 Dallas Resident, RRC

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12116/2010

To: Sunset CommissionRe: Review of Railroad Commission of Texas

Subject: SSC recommendation that natural gas rateregulation duties be transferred from RRC to PUC

1) Introduction:

RRC fails to balance consumer and gas utili ty interests in its rate casedecisions.

I'm a residential Atmos Energy customer living in Dallas. As natural gas prices

have trended downward in recent years, I've watched the "customer charge"

portion of my bill rise dramatically from $9.00/month in early 2005 to $16.78/

month today, an increase of over 86% in approximately five and a half years.

What's significant about the customer charge is that it is unrelated to

consumption levels and is imposed by Atmos to recover a liberal range· of what

Atmos describes. as "fixed" operational and administrative costs. I learned this

when I made a call to an Atmos billing specialist in the fall of 2008. I expect

Atmos to continue filing rate cases each year and to utilize its power under GRIP

provisions to continue increasing this charge to the extent possible. Local

regulators in Dallas have denied these increases each year since 2003 with the

opinion that Atmos has failed to show sufficient cause for increases. In fact,

local regulators had tried years ago to get this charge reduced when it was still in

the $9.00 range. In each case Atmos has appealed to RRC and gotten rate

increases, although not the full increases requested. An exception to this

pattern occurred in early 2009 when Atmos increased this charge under GRIP

provisions without regulatory authority after the city had denied the increase the

preceding year. RRC had refused to hear Atmos's appeal to that decision. Thisact is documented in the March 23, 2009 Atmos Energy Corporation

Municipal Gas Rate Case Audit - page 10, prepared by Atmos and submitted to

the City of Dallas. I'm still unsure how Atmos was able to bypass regulatory

authority in this instance.

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2) RRC Gas Utility Customer Communications and Service:

RRC is unresponsive to gas util ity customer inquiries.

In 2008 when I noticed my customer charge had suddenly increased 310/0 I called

Atmos billing service to ask what the charge represented and why it had risen so

dramatically to $14.00/month. I was told the charge covered billing, mailing,

meter reading, and other unspeci'fied costs that Atmos deemed to be ''fixed'' and

applicable to all accounts. I found this increase to be excessive based on my

understanding of printing, postage and administrative costs and told the rep so.

She explained that certain operational costs were also included in this charge

and that Atmos only charged what the Railroad Commission told them they

should charge. I wrote the RRC in October of that year requesting it explain its

logic in assigning the same customer charge to the owner of a 1,200 sq/ft duplexthat it assigned the owner of a 5,500 sq/ft mansion since the mansion would in

most instances put higher demands on Atmos equipment and resources than the

duplex.

Within ten days I received a letter from Sal Suarez, an Almos rate specialist,

(now retired) explaining to me that RRC had forwarded my letter to him for

response. I learned in a subsequent conversation that RRC "never responds to

utility customer requests" and always forwards such letters to Atmos. I explained

to Mr. Suarez that I'd already spoken with Atmos and requested any documents

he could provide detailing the costs Atmos expected to recover in its customer

charge. I received copies of rate design and revenue requirement documents

used by Atmos to support its rate cases in Dallas. Seeing items like "planf' and

"materials and supplies" included in these documents was not reassuring since

the size of a plant and its equipment, the lot it sits on, maintenance materials and

the frequency of its maintenance are all directly proportional to the volume ofproduct handled to meet consumption demand. To argue that these costs should

be divided evenly among all customers regardless of individual consumption

stretches the limits of logic and reason. In the past month I've contacted RRC

by phone (calls never returned), email and through their website a total of five

times and have received in response one letter offering no more information

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(what was provided was inaccurate and incomplete) or insight than my initial call

to Atmos billing services in 2008 provided. After two years I'm still at square one

with RRC.

By way of contrast, my inquiries this year to Dallas Manager of Regulatory Affairs

Nick Fehrenbach, Atmos Energy's David Park - the top rate executive in thecompany as I understand i t, OPUC, and SSC Project Manager Kelly Kennedy

have all resulted in prompt responses and a wealth of information, insight and

clarification. Each of these agencies or individuals has gone the extra mile to

provide details regarding Atmos billing charges, SSC hearings and status, and to

explain in great depth and detail the background and processes involved in

setting gas utili ty rates in the Dallas market.

3) Customer Charge premise:

The model Atmos Energy imposes on Dallas residential customers in fixing

its "customer charge" is based on flawed logic, yet supported by RRC ratecase decisions.

From the perspective of a natural gas consumer, the only value I derive from the

service dollars I spend is in the heat supplied to my water heater and other

appliances, and to my home in the winter. The Atmos model for imposing its

customer charge is based on the assumption that the bulk of customer value is

derived from being connected to Atmos gas lines and infrastructure even if no

gas is used during a given billing period. Thus Atmos divides nearly all its

operational and administrative costs except .the cost of the gas itself and its

transportation equally among all customers rather than on a per MCF

consumptive basis. To my mind that premise is as preposterous as one in which

. a store owner demands that a customer walking in to buy acarton of eggs pay a

share of the store's operational costs equalto that of the customer behind him

buying five cartloads of groceries. In other words, he'd have to pay simply to

have the resources and product contained in the store available to him,

regardless of how much he bought. Both Dallas City Manager of Regulatory

Affairs Nick Fehrenbach and I strongly disagree with this Atmos model. It

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effectively charges customers a monthly membership fee (now over $200/year)

along the lines of a membership store or a co-operative franchise. Atmos is

neither but rather a monopoly collecting every retail natural gas dollar in this

market. Therefore it is not equitable to pay a share of most operations costs that

is not directly proportional to my volume usage. The only costs I concede asbeing fairly divided equally among all customers would be cost of meters (but not

meter reading which is much more expensive in low density than in high density

neighborhoods), billing and postal costs, administrative, customer service and

emergency response costs. RRC testimony made clear that commissioners see

their primary allegiance to be to the oil and gas industry in Texas.

4) Sa.fety:

RR C with full rate regulatory authority has failed in its primary job of

insuring public safety through enforcement of safety regulations.Therefore its claim that industry safety standards will be compromised if it.loses this author,ity lacks merit.

There have been in North Texas in recent years several fatal and near fatal

explosions of homes due to failure of deteriorating gas lines and couplings in

residential neighborhoods. It was alleged that Atmos Energy had violated state

safety regulations in the neighborhoods where these explosions occurred. There

was a catastrophic fatal explosion and fire in June, 2010 outside Cleburne, TX

when a construction crew punctured a large improperly marked high-pressure

gas main. Land owner testimony at the Sunset Commission hearings indicated

very clearly that safety concerns, particularly in the development of the Barnett

Shale in and around Fort Worth, are not being adequately enforced or even

addressed by RRC. RRC has marginalized safety violations such as inaccurate

line mapping and lack of proper signage that puts workers and firefighters at risk.

RRC claims that safety will be compromised if rate regulation is shifted to PUC.

However, even with full rate regulatory powers, RRC has failed to enforce public

safety regulations within the natural gas industry in recent years. Therefore,

industry and RRC arguments that loss of rate regulatory control by RRC will

compromise public safety have no merit. Any regulatory agency with access to

industry experts can quickly and easily analyze documentable costs associated ,

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indicator that RRC is giving Texas energy industry interests exactly what they

want, often at the expense of landowners and gas utility customers. Public

perception that RRC serves only the interests of gas &oil industries is therefore

supported by RRC's own testimony and that of industry witnesses. The

. comments by a City of Arlington witness citing that RRC awarded rate increases to

Atmos that exceeded even what its own adviSOry panels recommended (withresidential customers carrying a disproportionate portion of these increases)

confirmed my belief that balancing consumer interests with those of utility companies

does not factor in to RRC rate case decisions.

6) Conclusions:

RRC should focus on public safety and environmental impact in the gas

and oi l industries and relinquish rate setting author ity to PUC.

No single rate formula will be 1000/0 fair to 1000/0 of both consumers and gas

utilities 100°A, of the time. However the current Atmos formula applies an inflated

customer charge and in so doing over-charges low volume residential customers

on small lots and under-charges high volume residential customers on large lots

in the Dallas market. It unfairly benefits Atmos by providing a cushion of more

stable revenues through periods of gas price fluctuation, unusually warm winters

or declining natural gas consumption. Its revenue requirements could be moreequitably met by re-assigning appropriate costs to the "consumptive charge"

portion of its monthly bill.

RRC should shift focus entirely to safety in areas of exploration, production and

delivery, and on environmental impact in the gas exploration industry. It has

failed in the job of balancing consumer and utility interests in its rate case

decisions and should relinquish this authority to PUC.

JoelFoy

Dallas, TX

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Dallas Resident, RRC

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