8-KOther Events

ATMOS ENERGY CORP 8-K Report, Corporate Update (Apr 20, 2011)

Filed April 20, 2011For Securities:ATO

Summary

This 8-K filing reports on an order issued by the Railroad Commission of Texas regarding Atmos Pipeline-Texas (APT), a division of Atmos Energy Corporation. The order, dated April 18, 2011, approves a net annual increase in operating income of approximately $20.4 million for APT. This is driven by a base rate increase of $26.1 million, partially offset by increased depreciation rates. The order also establishes an authorized return on equity of 11.8% and an overall rate of return of 9.361%, based on a capital structure of 49.5% debt and 50.5% equity. Key changes for investors include the approval of a Straight Fixed Variable rate design, which will impact how fixed costs are recovered. Additionally, a new annual adjustment mechanism for regulated rates, tied to non-regulated revenue, has been approved for a 3-year pilot period. The approved rate base has also significantly increased to $807.7 million from the prior case. These provisions are effective for bills rendered on or after May 1, 2011.

Key Highlights

  • 1Net annual operating income increase of approximately $20.4 million approved for Atmos Pipeline-Texas (APT).
  • 2Base rate increase of $26.1 million granted, offset by $5.7 million in increased depreciation.
  • 3Authorized return on equity set at 11.8% with an overall rate of return of 9.361%.
  • 4Approval of a Straight Fixed Variable (SFV) rate design for cost recovery.
  • 5Introduction of a 3-year pilot program for an annual adjustment mechanism based on non-regulated revenue.
  • 6Significant increase in approved rate base to $807.7 million compared to the previous rate case.
  • 7New rates and provisions become effective for bills issued on or after May 1, 2011.

Frequently Asked Questions

The primary impact is a net annual operating income increase of approximately $20.4 million for its division, Atmos Pipeline-Texas (APT). This is due to an approved increase in base rates, an authorized rate of return, and changes in rate design and adjustment mechanisms.

The approval of the Straight Fixed Variable (SFV) rate design means that fixed costs associated with transportation and storage will be recovered through monthly customer charges. This could lead to a more stable recovery of fixed costs.

The annual adjustment mechanism, approved for a 3-year pilot period, allows regulated rates to be adjusted up or down by 75% of the difference between APT's non-regulated annual revenue and a base credit of $84 million. This mechanism provides a potential for revenue adjustment based on the performance of APT's non-regulated operations.

The provisions of the order will be in effect for bills rendered on and after May 1, 2011.