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<br />HOW ARE RATE CASE EXPENSES RECOVERED <br />FROM CUSTOMERS IN RATE PROCEEDINGS? <br /> <br />1. The Gas Utility Regulatory Act ("GURA") allows a utility to recover from customers both the <br />reasonable rate case expenses the utility directly incurs to put on its case, as well as any <br />reimbursement to the municipality for its costs. 1 <br /> <br />2. The regulatory authority (either the municipality having original jurisdiction over the utility's rates <br />or the Railroad Commission of Texas on appeal) only has the authority to order the recovery of rate <br />case expenses from customers whose rates will change as a result of the case pending before the <br />regulatory authority. <br /> <br />WHAT DOES THIS MEAN? <br />In Texas, a city gets the exclusive right to determine whether a rate request is reasonable for customers in that <br />city. It is only if the utility appeals a city's decision on rate relief to the Railroad Commission that the <br />Commission gains the authority to set rates for those city's customers. In contrast, if a city approves the <br />requested rates or lets them go into effect, the Railroad Commission has no authority to change the rates for that <br />city. This also means that on appeal, the Railroad Commission cannot order a surcharge on rates for recovery <br />of rate case expenses associated with the appeal for city customers whose rates are not at issue on appeal. <br /> <br />WHY? <br />Because the Railroad Commission does not have authority to change the rates of customers in those cities that <br />are not participating in the appeal case. <br /> <br />WHAT IS THE CONSEQUENCE OF THIS? <br />The consequence is that the Railroad Commission can only order the recovery of rate case expenses from those <br />customers who live in the cities that deny the rate change and end up in an appeal before the Railroad <br />Commission. <br /> <br />WHY HAVE ALL CUSTOMERS OF ATMOS MID-TEX PAID FOR RATE CASE EXPENSE IN THE <br />PAST? <br />Because in past cases (GUD No. 9400 and GUD No. 9670) every city served by Atmos Mid-Tex participated in <br />the appeal at the Railroad Commission. <br /> <br />HAS THE RAILROAD COMMISSION REJECTED SURCHARGING RATE CASE EXPENSES ON A <br />CITY NOT PARTICIPATING IN AN APPEAL? <br />Yes. In GUD No. 9465, the utility filed for a rate change in four cities. The utility settled with the City of Port <br />Arthur, Texas, agreeing to give that city most favored nation treatment from any resulting appeal. The other <br />three cities denied the proposed rates and litigated an appeal at the Railroad Commission. Over those three <br />cities' objections, the Railroad Commission surcharged rate case expenses only on the three cities involved in <br />the appeal and not on the settling city. Although the Commission approved a revenue increase of only $518,950 <br />for the three non-settling, rate case expenses for the utility and the three non-settling cities exceeded $1 million, <br />which worked out to about $70 per person in litigation costs. <br /> <br />IS THERE ANY GUARANTEE THAT THE RAILROAD COMMISSION WILL ALLOW THE CITY <br />TO RECOUP ITS RATE CASE EXPENSES? <br />No. A city's recovery of rate case expense is not guaranteed. The Railroad Commission has become tougher on <br />the recovery of rate case expenses by both cities and utilities. <br /> <br />I See Railroad Commission of Texas case GUD No. 9002-9135, citing GURA S 1 03.022 and S 104.051. <br /> <br />W:C:\Docurnents and Settings\00061286.CNP\Local Settings\Ternporary Internet Files\Content.Outlook\JZRNJG3W\CP Revised Rate Case Expense Handout.doc <br />