filings.toolsItem 1. Business.
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Item 1. Business.
Overview and Strategy
Atmos Energy Corporation, headquartered in Dallas, Texas, and incorporated in Texas and Virginia, is the country’s largest natural-gas-only distributor based on number of customers. We safely deliver reliable, affordable, efficient and abundant natural gas through regulated sales and transportation arrangements to over three million residential, commercial, public authority and industrial customers in eight states located primarily in the South. We also operate one of the largest intrastate pipelines in Texas based on miles of pipe.
Atmos Energy's vision is to be the safest provider of natural gas services. We intend to achieve this vision by:
| • | operating our business exceptionally well |
| • | investing in our people and infrastructure |
| • | enhancing our culture. |
Since 2011, our operating strategy has focused on modernizing our distribution and transmission system to improve safety and reliability. This operating strategy also allows us to reduce methane emissions from our system. Since that time, our capital expenditures have increased approximately 14 percent annually. Additionally, during this period, we have added new or modified existing regulatory mechanisms to reduce regulatory lag.
Our core values include focusing on our employees and customers while conducting our business with honesty and integrity. We continue to strengthen our culture through ongoing communications with our employees and enhanced employee training.
Operating Segments
As of September 30, 2020, we manage and review our consolidated operations through the following reportable segments:
| • | The distribution segment is primarily comprised of our regulated natural gas distribution and related sales operations in eight states. |
| • | The pipeline and storage segment is comprised primarily of the pipeline and storage operations of our Atmos Pipeline-Texas division and our natural gas transmission operations in Louisiana. |
Distribution Segment Overview
The following table summarizes key information about our six regulated natural gas distribution divisions, presented in order of total rate base.
| Division | Service Areas | Communities Served | Customer Meters | |||
| Mid-Tex | Texas, including the Dallas/Fort Worth Metroplex | 550 | 1,751,898 | |||
| Kentucky/Mid-States | Kentucky | 230 | 182,639 | |||
| Tennessee | 156,820 | |||||
| Virginia | 24,493 | |||||
| Louisiana | Louisiana | 270 | 368,332 | |||
| West Texas | Amarillo, Lubbock, Midland | 80 | 320,085 | |||
| Mississippi | Mississippi | 110 | 267,482 | |||
| Colorado-Kansas | Colorado | 170 | 123,423 | |||
| Kansas | 138,009 |
We operate in our service areas under terms of non-exclusive franchise agreements granted by the various cities and towns that we serve. At September 30, 2020, we held 1,023 franchises having terms generally ranging from five to 35 years. A significant number of our franchises expire each year, which require renewal prior to the end of their terms. Historically, we have successfully renewed these franchises and believe that we will continue to be able to renew our franchises as they expire.
Revenues in this operating segment are established by regulatory authorities in the states in which we operate. These rates are intended to be sufficient to cover the costs of conducting business, including a reasonable return on invested capital. In addition, we transport natural gas for others through our distribution systems.
Rates established by regulatory authorities often include cost adjustment mechanisms for costs that (i) are subject to significant price fluctuations compared to our other costs, (ii) represent a large component of our cost of service and (iii) are generally outside our control.
Purchased gas cost adjustment mechanisms represent a common form of cost adjustment mechanism. Purchased gas cost adjustment mechanisms provide a method of recovering purchased gas costs on an ongoing basis without filing a rate case because they provide a dollar-for-dollar offset to increases or decreases in the cost of natural gas. Therefore, although substantially all of our distribution operating revenues fluctuate with the cost of gas that we purchase, distribution operating income is generally not affected by fluctuations in the cost of gas.
Additionally, some jurisdictions have performance-based ratemaking adjustments to provide incentives to minimize purchased gas costs through improved storage management and use of financial instruments to reduce volatility in gas costs. Under the performance-based ratemaking adjustments, purchased gas costs savings are shared between the Company and its customers.
Our supply of natural gas is provided by a variety of suppliers, including independent producers, marketers and pipeline companies, withdrawals of gas from proprietary and contracted storage assets and peaking and spot purchase agreements, as needed.
Supply arrangements consist of both base load and swing supply (peaking) quantities and are contracted from our suppliers on a firm basis with various terms at market prices. Base load quantities are those that flow at a constant level throughout the month and swing supply quantities provide the flexibility to change daily quantities to match increases or decreases in requirements related to weather conditions.
Except for local production purchases, we select our natural gas suppliers through a competitive bidding process by periodically requesting proposals from suppliers that have demonstrated that they can provide reliable service. We select these suppliers based on their ability to deliver gas supply to our designated firm pipeline receipt points at the lowest reasonable cost. Major suppliers during fiscal 2020 were Castleton Commodities Merchant Trading L.P., CenterPoint Energy Services, Inc., ConocoPhillips Company, Devon Gas Services, L.P., EnLink Gas Marketing LP, Hartree Partners, L.P., Symmetry Energy Solutions, LLC, Targa Gas Marketing LLC, Texla Energy Management, Inc. and Twin Eagle Resources Management, LLC.
The combination of base load, peaking and spot purchase agreements, coupled with the withdrawal of gas held in storage, allows us the flexibility to adjust to changes in weather, which minimizes our need to enter into long-term firm commitments. We estimate our peak-day availability of natural gas supply to be approximately 4.4 Bcf. The peak-day demand for our distribution operations in fiscal 2020 was on November 12, 2019, when sales to customers reached approximately 2.7 Bcf.
Currently, our distribution divisions utilize 37 pipeline transportation companies, both interstate and intrastate, to transport our natural gas. The pipeline transportation agreements are firm and many of them have “pipeline no-notice” storage service, which provides for daily balancing between system requirements and nominated flowing supplies. These agreements have been negotiated with the shortest term necessary while still maintaining our right of first refusal. The natural gas supply for our Mid-Tex Division is delivered primarily by our APT Division.
To maintain our deliveries to high priority customers, we have the ability, and have exercised our right, to curtail deliveries to certain customers under the terms of interruptible contracts or applicable state regulations or statutes. Our customers’ demand on our system is not necessarily indicative of our ability to meet current or anticipated market demands or immediate delivery requirements because of factors such as the physical limitations of gathering, storage and transmission systems, the duration and severity of cold weather, the availability of gas reserves from our suppliers, the ability to purchase additional supplies on a short-term basis and actions by federal and state regulatory authorities. Curtailment rights provide us the flexibility to meet the human-needs requirements of our customers on a firm basis. Priority allocations imposed by federal and state regulatory agencies, as well as other factors beyond our control, may affect our ability to meet the demands of our customers. We do not anticipate any problems with obtaining additional gas supply as needed for our customers.
Pipeline and Storage Segment Overview
Our pipeline and storage segment consists of the pipeline and storage operations of APT and our natural gas transmission operations in Louisiana. APT is one of the largest intrastate pipeline operations in Texas with a heavy concentration in the established natural gas-producing areas of central, northern and eastern Texas, extending into or near the major producing areas
of the Barnett Shale, the Texas Gulf Coast and the Permian Basin of West Texas. Through its system, APT provides transportation and storage services to our Mid-Tex Division, other third party local distribution companies, industrial and electric generation customers, marketers and producers. As part of its pipeline operations, APT owns and operates five underground storage reservoirs in Texas.
Revenues earned from transportation and storage services for APT are subject to traditional ratemaking governed by the RRC. Rates are updated through periodic filings made under Texas’ GRIP. GRIP allows us to include in our rate base annually approved capital costs incurred in the prior calendar year provided that we file a complete rate case at least once every five years; the most recent of which was completed in August 2017. APT’s existing regulatory mechanisms allow certain transportation and storage services to be provided under market-based rates.
Our natural gas transmission operations in Louisiana are comprised of a 21-mile pipeline located in the New Orleans, Louisiana area that is primarily used to aggregate gas supply for our distribution division in Louisiana under a long-term contract and, on a more limited basis, to third parties. The demand fee charged to our Louisiana distribution division for these services is subject to regulatory approval by the Louisiana Public Service Commission. We also manage two asset management plans in Louisiana that serve distribution affiliates of the Company, which have been approved by applicable state regulatory commissions. Generally, these asset management plans require us to share with our distribution customers a significant portion of the cost savings earned from these arrangements.
Ratemaking Activity
Overview
The method of determining regulated rates varies among the states in which our regulated businesses operate. The regulatory authorities have the responsibility of ensuring that utilities in their jurisdictions operate in the best interests of customers while providing utility companies the opportunity to earn a reasonable return on their investment. Generally, each regulatory authority reviews rate requests and establishes a rate structure intended to generate revenue sufficient to cover the costs of conducting business, including a reasonable return on invested capital.
Our rate strategy focuses on reducing or eliminating regulatory lag, obtaining adequate returns and providing stable, predictable margins, which benefit both our customers and the Company. As a result of our ratemaking efforts in recent years, Atmos Energy has:
| • | Formula rate mechanisms in place in four states that provide for an annual rate review and adjustment to rates. |
| • | Infrastructure programs in place in all of our states that provide for an annual adjustment to rates for qualifying capital expenditures. Through our annual formula rate mechanisms and infrastructure programs, we have the ability to recover approximately 90 percent of our capital expenditures within six months and substantially all of our capital expenditures within twelve months. |
| • | Authorization in tariffs, statute or commission rules that allows us to defer certain elements of our cost of service such as depreciation, ad valorem taxes and pension costs, until they are included in rates. |
| • | WNA mechanisms in seven states that serve to minimize the effects of weather on approximately 97 percent of our distribution residential and commercial revenues. |
| • | The ability to recover the gas cost portion of bad debts in five states. |
The following table provides a jurisdictional rate summary for our regulated operations as of September 30, 2020. This information is for regulatory purposes only and may not be representative of our actual financial position.
| Division | Jurisdiction | Effective Date of Last Rate/GRIP Action | Rate Base (thousands)****(1) | Authorized Rate of Return**(1)** | Authorized Debt/ Equity Ratio**(1)** | Authorized Return on Equity**(1)** | |||||
| Atmos Pipeline — Texas | Texas | 05/20/2020 | $2,698,343 | 8.87% | 47/53 | 11.50% | |||||
| Colorado-Kansas | Colorado | 05/03/2018 | 134,726 | 7.55% | 44/56 | 9.45% | |||||
| Colorado SSIR | 01/01/2020 | 56,507 | 7.55% | 44/56 | 9.45% | ||||||
| Kansas | 04/01/2020 | 242,314 | 7.03% | 44/56 | 9.10% | ||||||
| Kansas GSRS | 05/01/2019 | 26,322 | (4) | (4) | (4) | ||||||
| Kentucky/Mid-States | Kentucky | 05/08/2019 | 424,929 | 7.49% | 42/58 | 9.65% | |||||
| Kentucky-PRP | 10/01/2019 | 27,315 | 7.49% | 42/58 | 9.65% | ||||||
| Tennessee | 06/01/2019 | 389,061 | 7.79% | 42/58 | 9.80% | ||||||
| Virginia | 04/01/2019 | 47,827 | 7.43% | 42/58 | 9.20% | ||||||
| Virginia-SAVE | 10/01/2019 | 684 | 7.43% | 42/58 | 9.20% | ||||||
| Louisiana | Louisiana | 07/01/2020 | 747,021 | 7.57% | 42/58 | 9.80% | |||||
| Mid-Tex | Mid-Tex Cities(6) | 10/01/2019 | 3,052,562(5) | 7.83% | 42/58 | 9.80% | |||||
| Mid-Tex - ATM Cities | 06/01/2020 | 3,654,981(5) | 7.97% | 40/60 | 9.80% | ||||||
| Mid-Tex - Environs | 05/20/2020 | 3,654,985(5) | 7.97% | 40/60 | 9.80% | ||||||
| Dallas | 09/01/2020 | 3,510,508(5) | 7.83% | 40/60 | 9.80% | ||||||
| Mississippi | Mississippi(7) | 11/01/2019 | 448,533 | 7.81% | (4) | (4) | |||||
| Mississippi - SIR(7) | 11/01/2019 | 185,844 | 7.81% | (4) | (4) | ||||||
| West Texas | West Texas Cities(8) (10) | 10/01/2019 | 591,513(9) | 7.83% | 42/58 | 9.80% | |||||
| West Texas - ALDC | 04/28/2020 | 671,738(9) | 8.57% | 48/52 | 10.50% | ||||||
| West Texas - Environs | 06/16/2020 | 667,994(9) | 7.97% | 40/60 | 9.80% |
| Division | Jurisdiction | Bad Debt Rider**(2)** | Formula Rate | Infrastructure Mechanism | Performance Based Rate Program**(3)** | WNA Period | |||||
| Atmos Pipeline — Texas | Texas | No | Yes | Yes | N/A | N/A | |||||
| Colorado-Kansas | Colorado | No | No | Yes | No | N/A | |||||
| Kansas | Yes | No | Yes | Yes | October-May | ||||||
| Kentucky/Mid-States | Kentucky | Yes | No | Yes | Yes | November-April | |||||
| Tennessee | Yes | Yes | Yes | Yes | October-April | ||||||
| Virginia | Yes | No | Yes | No | January-December | ||||||
| Louisiana | Louisiana | No | Yes | Yes | No | December-March | |||||
| Mid-Tex Cities | Texas | Yes | Yes | Yes | No | November-April | |||||
| Mid-Tex — Dallas | Texas | Yes | Yes | Yes | No | November-April | |||||
| Mississippi | Mississippi | No | Yes | Yes | No | November-April | |||||
| West Texas | Texas | Yes | Yes | Yes | No | October-May |
| (1) | The rate base, authorized rate of return, authorized debt/equity ratio and authorized return on equity presented in this table are those from the most recent regulatory filing for each jurisdiction. These rate bases, rates of return, debt/equity ratios and returns on equity are not necessarily indicative of current or future rate bases, rates of return or returns on equity. |
| (2) | The bad debt rider allows us to recover from ratepayers the gas cost portion of bad debts. |
| (3) | The performance-based rate program provides incentives to distribution companies to minimize purchased gas costs by allowing the companies and their customers to share the purchased gas costs savings. |
| (4) | A rate base, rate of return, return on equity or debt/equity ratio was not included in the respective state commission’s final decision. |
| (5) | The Mid-Tex rate base represents a “system-wide,” or 100 percent, of the Mid-Tex Division’s rate base. |
| (6) | The Mid-Tex Cities approved the Formula Rate Mechanism filing with rates effective December 1, 2020, which included a rate base of $3,726.3 million, an authorized return of 7.53%, a debt/equity ratio of 42/58 and an authorized ROE of 9.80%. |
| (7) | The Mississippi Public Service Commission approved a settlement at its meeting on October 6, 2020, which included a rate base of $721.6 million and an authorized return of 7.81%. New rates were implemented November 1, 2020. |
| (8) | The West Texas Cities includes all West Texas Division cities except Amarillo, Channing, Dalhart and Lubbock (ALDC). |
| (9) | The West Texas rate base represents a "system-wide," or 100 percent, of the West Texas Division's rate base. |
| (10) | The West Texas Cities approved the Formula Rate Mechanism filing with rates effective December 1, 2020, which included a rate base of $660.9 million, an authorized return of 7.53%, a debt/equity ratio of 42/58 and an authorized ROE of 9.80%. |
Although substantial progress has been made in recent years to improve rate design and recovery of investment across our service areas, we are continuing to seek improvements in rate design to address cost variations and pursue tariffs that reduce regulatory lag associated with investments. Further, potential changes in federal energy policy, federal safety regulations and changing economic conditions will necessitate continued vigilance by the Company and our regulators in meeting the challenges presented by these external factors.
Recent Ratemaking Activity
The amounts described in the following sections represent the annual operating income that was requested or received in each rate filing, which may not necessarily reflect the stated amount referenced in the final order, as certain operating costs may have changed as a result of the commission's or other governmental authority's final ruling. The following table summarizes the annualized ratemaking outcomes we implemented in each of the last three fiscal years.
| Annual Increase (Decrease) to Operating Income For the Fiscal Year Ended September 30 | ||||||||||||
| Rate Action | 2020 | 2019 | 2018 | |||||||||
| (In thousands) | ||||||||||||
| Annual formula rate mechanisms | $ | 160,857 | $ | 114,810 | $ | 92,472 | ||||||
| Rate case filings | (1,057 | ) | 1,656 | (12,853 | ) | |||||||
| Other ratemaking activity | 353 | 214 | 457 | |||||||||
| $ | 160,153 | $ | 116,680 | $ | 80,076 |
Additionally, the following ratemaking efforts seeking $131.9 million in annual operating income were initiated during fiscal 2020 but had not been completed or implemented as of September 30, 2020:
| Division | Rate Action | Jurisdiction | Operating Income Requested | |||||
| (In thousands) | ||||||||
| Kentucky/Mid-States | Infrastructure Mechanism | Virginia (1) | $ | 410 | ||||
| Kentucky/Mid-States | Infrastructure Mechanism | Kentucky (2) | 3,049 | |||||
| Mid-Tex | Formula Rate Mechanism | Mid-Tex Cities (3) | 94,060 | |||||
| Mississippi | Infrastructure Mechanism | Mississippi (4) | 10,526 | |||||
| Mississippi | Formula Rate Mechanism | Mississippi (4) | 8,379 | |||||
| West Texas | Formula Rate Mechanism | West Texas Cities (5) | 7,057 | |||||
| West Texas | Rate Case | Amarillo, Lubbock, Dalhart and Channing | 8,406 | |||||
| $ | 131,887 |
| (1) | On August 21, 2020, the State Corporation Commission of Virginia approved a rate increase of $0.3 million effective October 1, 2020. |
| (2) | On September 30, 2020, the Kentucky Public Service Commission approved a rate increase of $1.6 million effective October 1, 2020. |
| (3) | The Mid-Tex Cities approved a rate increase of $82.6 million with new rates to be implemented on December 1, 2020. |
(4) The Mississippi Public Service Commission approved an increase in operating income of $10.6 million for the SIR filing and $5.9 million for the SRF filing. New rates were implemented November 1, 2020.
| (5) | The West Texas Cities approved a rate increase of $5.6 million with new rates to be implemented on December 1, 2020. |
Our recent ratemaking activity is discussed in greater detail below.
Annual Formula Rate Mechanisms
As an instrument to reduce regulatory lag, formula rate mechanisms allow us to refresh our rates on an annual basis without filing a formal rate case. However, these filings still involve discovery by the appropriate regulatory authorities prior to the final determination of rates under these mechanisms. The following table summarizes our annual formula rate mechanisms by state.
| Annual Formula Rate Mechanisms | ||||
| State | Infrastructure Programs | Formula Rate Mechanisms | ||
| Colorado | System Safety and Integrity Rider (SSIR) | — | ||
| Kansas | Gas System Reliability Surcharge (GSRS) | — | ||
| Kentucky | Pipeline Replacement Program (PRP) | — | ||
| Louisiana | (1) | Rate Stabilization Clause (RSC) | ||
| Mississippi | System Integrity Rider (SIR) | Stable Rate Filing (SRF) | ||
| Tennessee | (1) | Annual Rate Mechanism (ARM) | ||
| Texas | Gas Reliability Infrastructure Program (GRIP), (1) | Dallas Annual Rate Review (DARR), Rate Review Mechanism (RRM) | ||
| Virginia | Steps to Advance Virginia Energy (SAVE) | — |
| (1) | Infrastructure mechanisms in Texas, Louisiana and Tennessee allow for the deferral of all expenses associated with capital expenditures incurred pursuant to these rules, which primarily consists of interest, depreciation and other taxes (Texas only), until the next rate proceeding (rate case or annual rate filing), at which time investment and costs would be recoverable through base rates. |
The following table summarizes our annual formula rate mechanisms with effective dates during the fiscal years ended September 30, 2020, 2019 and 2018:
| Division | Jurisdiction | Test Year Ended | Increase (Decrease) in Annual Operating Income | Effective Date | ||||||
| (In thousands) | ||||||||||
| 2020 Filings: | ||||||||||
| Mid-Tex | DARR | 09/2019 | $ | 14,746 | 09/01/2020 | |||||
| Louisiana | Louisiana (1) | 12/2019 | 14,781 | 07/01/2020 | ||||||
| West Texas | Environs (2) | 12/2019 | 1,031 | 06/16/2020 | ||||||
| Kentucky/Mid-States | Tennessee ARM | 05/2019 | 714 | 06/15/2020 | ||||||
| Mid-Tex | ATM Cities (2) | 12/2019 | 11,148 | 06/12/2020 | ||||||
| Mid-Tex | Environs (2) | 12/2019 | 4,440 | 05/20/2020 | ||||||
| Atmos Pipeline - Texas | Texas | 12/2019 | 49,251 | 05/20/2020 | ||||||
| West Texas | Amarillo, Lubbock, Dalhart and Channing (2) | 12/2019 | 5,937 | 04/28/2020 | ||||||
| Colorado-Kansas | Colorado SSIR | 12/2020 | 2,082 | 01/01/2020 | ||||||
| Mississippi | Mississippi - SIR | 10/2020 | 7,586 | 11/01/2019 | ||||||
| Mississippi | Mississippi - SRF | 10/2020 | 6,886 | 11/01/2019 | ||||||
| Kentucky/Mid-States | Virginia - SAVE | 09/2020 | 84 | 10/01/2019 | ||||||
| Kentucky/Mid-States | Kentucky PRP | 09/2020 | 2,912 | 10/01/2019 | ||||||
| Mid-Tex | Mid-Tex RRM Cities | 12/2018 | 34,380 | 10/01/2019 | ||||||
| West Texas | West Texas Cities RRM | 12/2018 | 4,879 | 10/01/2019 | ||||||
| Total 2020 Filings | $ | 160,857 | ||||||||
| 2019 Filings: | ||||||||||
| Mid-Tex | ATM Cities | 12/2018 | $ | 6,591 | 09/26/2019 | |||||
| Louisiana | LGS | 12/2018 | 7,124 | 07/01/2019 |
| Mid-Tex | Environs | 12/2018 | 2,435 | 06/04/2019 | ||||||
| West Texas | Environs | 12/2018 | 1,005 | 06/04/2019 | ||||||
| Mid-Tex | DARR | 09/2018 | 9,452 | 06/01/2019 | ||||||
| Kentucky/Mid-States | Tennessee ARM | 05/2020 | 2,393 | 06/01/2019 | ||||||
| Atmos Pipeline - Texas | Texas | 12/2018 | 49,225 | 05/07/2019 | ||||||
| West Texas | Amarillo, Lubbock, Dalhart and Channing | 12/2018 | 5,692 | 05/01/2019 | ||||||
| Colorado-Kansas | Kansas GSRS | 12/2018 | 1,562 | 05/01/2019 | ||||||
| Louisiana | Trans La | 09/2018 | 4,719 | 04/01/2019 | ||||||
| Colorado-Kansas | Colorado GIS | 12/2019 | 87 | 04/01/2019 | ||||||
| Colorado-Kansas | Colorado SSIR | 12/2019 | 2,147 | 01/01/2019 | ||||||
| Mississippi | Mississippi - SIR | 10/2019 | 7,135 | 11/01/2018 | ||||||
| Mississippi | Mississippi - SRF | 10/2019 | (118 | ) | 11/01/2018 | |||||
| Kentucky/Mid-States | Tennessee ARM | 05/2019 | (5,032 | ) | 10/15/2018 | |||||
| Mid-Tex | Mid-Tex RRM Cities | 12/2017 | 17,633 | 10/01/2018 | ||||||
| West Texas | West Texas Cities RRM | 12/2017 | 2,760 | 10/01/2018 | ||||||
| Total 2019 Filings | $ | 114,810 | ||||||||
| 2018 Filings: | ||||||||||
| Louisiana | LGS | 12/2017 | $ | (1,521 | ) | 07/01/2018 | ||||
| West Texas | Amarillo, Lubbock, Dalhart and Channing | 12/2017 | 4,418 | 06/08/2018 | ||||||
| Mid-Tex | Environs | 12/2017 | 1,604 | 06/05/2018 | ||||||
| West Texas | Environs | 12/2017 | 826 | 06/05/2018 | ||||||
| Atmos Pipeline - Texas | Texas | 12/2017 | 42,173 | 05/22/2018 | ||||||
| Louisiana | Trans La | 09/2017 | (1,913 | ) | 05/01/2018 | |||||
| Colorado-Kansas | Kansas GSRS | 09/2018 | 820 | 02/27/2018 | ||||||
| Mississippi | Mississippi - SIR | 10/2018 | 7,658 | 01/01/2018 | ||||||
| Mississippi | Mississippi - SGR (3) | 10/2018 | 1,245 | 01/01/2018 | ||||||
| Mississippi | Mississippi - SRF (3) | 10/2018 | — | 01/01/2018 | ||||||
| Colorado-Kansas | Colorado SSIR | 12/2018 | 2,228 | 12/20/2017 | ||||||
| Atmos Pipeline - Texas | Texas | 12/2016 | 28,988 | 12/05/2017 | ||||||
| Kentucky/Mid-States | Kentucky - PRP | 09/2018 | 5,638 | 10/27/2017 | ||||||
| Kentucky/Mid-States | Virginia - SAVE | 09/2017 | 308 | 10/01/2017 | ||||||
| Total 2018 Filings | $ | 92,472 |
| (1) | Beginning in fiscal 2020, our Trans La and LGS filings were combined into one filing, per Commission order. These rates were implemented on July 1, 2020 subject to refund. |
| (2) | The rate increases for our Texas GRIP filings were approved based on the effective date herein; however, the new rates were implemented beginning September 1, 2020. |
| (3) | Beginning in fiscal 2019, our SGR rate base was combined with our SRF rate base, per Commission order. |
Rate Case Filings
A rate case is a formal request from Atmos Energy to a regulatory authority to increase rates that are charged to customers. Rate cases may also be initiated when the regulatory authorities request us to justify our rates. This process is referred to as a “show cause” action. Adequate rates are intended to provide for recovery of the Company’s costs as well as a reasonable rate of return to our shareholders and ensure that we continue to safely deliver reliable, reasonably priced natural gas service to our customers.
The following table summarizes our recent rate cases:
| Division | State | Increase (Decrease) in Annual Operating Income | Effective Date | |||||
| (In thousands) | ||||||||
| 2020 Rate Case Filings: | ||||||||
| West Texas (Triangle) | Texas | $ | (808 | ) | 04/21/2020 | |||
| Colorado-Kansas | Kansas | (249 | ) | 04/01/2020 | ||||
| Total 2020 Rate Case Filings | $ | (1,057 | ) | |||||
| 2019 Rate Case Filings: | ||||||||
| Mid-Tex (ATM Cities) | Texas | $ | 2,113 | 06/01/2019 | ||||
| Kentucky/Mid-States | Kentucky | 3,441 | 05/08/2019 | |||||
| Kentucky/Mid-States | Virginia | (400 | ) | 04/01/2019 | ||||
| Mid-Tex (Environs) | Texas | (2,674 | ) | 01/01/2019 | ||||
| West Texas (Environs) | Texas | (824 | ) | 01/01/2019 | ||||
| Total 2019 Rate Case Filings | $ | 1,656 | ||||||
| 2018 Rate Case Filings: | ||||||||
| Colorado-Kansas | Colorado | $ | (241 | ) | 05/03/2018 | |||
| Kentucky/Mid-States | Kentucky | (7,504 | ) | 05/03/2018 | ||||
| Mid-Tex - City of Dallas | Texas | (5,108 | ) | 02/14/2018 | ||||
| Total 2018 Rate Case Filings | $ | (12,853 | ) |
Other Ratemaking Activity
The following table summarizes other ratemaking activity during the fiscal years ended September 30, 2020, 2019 and 2018:
| Division | Jurisdiction | Rate Activity | Increase in Annual Operating Income | Effective Date | ||||||
| (In thousands) | ||||||||||
| 2020 Other Rate Activity: | ||||||||||
| Colorado-Kansas | Kansas | Ad Valorem (1) | $ | 353 | 02/01/2020 | |||||
| Total 2020 Other Rate Activity | $ | 353 | ||||||||
| 2019 Other Rate Activity: | ||||||||||
| Colorado-Kansas | Kansas | Ad Valorem(1) | $ | 214 | 02/01/2019 | |||||
| Total 2019 Other Rate Activity | $ | 214 | ||||||||
| 2018 Other Rate Activity: | ||||||||||
| Colorado-Kansas | Kansas | Ad-Valorem(1) | $ | 457 | 02/01/2018 | |||||
| Total 2018 Other Rate Activity | $ | 457 |
| (1) | The Ad Valorem filing relates to property taxes that are either over or undercollected compared to the amount included in our Kansas service area's base rates. |
Other Regulation
We are regulated by various state or local public utility authorities. We are also subject to regulation by the United States Department of Transportation with respect to safety requirements in the operation and maintenance of our transmission and distribution facilities. In addition, our operations are also subject to various state and federal laws regulating environmental matters. From time to time, we receive inquiries regarding various environmental matters. We believe that our properties and operations comply with, and are operated in conformity with, applicable safety and environmental statutes and regulations. There are no administrative or judicial proceedings arising under environmental quality statutes pending or known to be contemplated by governmental agencies which would have a material adverse effect on us or our operations. The Pipeline and Hazardous Materials Safety Administration (PHMSA), within the U.S. Department of Transportation, develops and enforces regulations for the safe, reliable and environmentally sound operation of the pipeline transportation system. The PHMSA
pipeline safety statutes provide for states to assume safety authority over intrastate natural transmission and distribution gas pipelines. State pipeline safety programs are responsible for adopting and enforcing the federal and state pipeline safety regulations for intrastate natural gas transmission and distribution pipelines.
The Federal Energy Regulatory Commission (FERC) allows, pursuant to Section 311 of the Natural Gas Policy Act (NGA), gas transportation services through our APT assets “on behalf of” interstate pipelines or local distribution companies served by interstate pipelines, without subjecting these assets to the jurisdiction of the FERC under the NGA. Additionally, the FERC has regulatory authority over the use and release of interstate pipeline and storage capacity. The FERC also has authority to detect and prevent market manipulation and to enforce compliance with FERC’s other rules, policies and orders by companies engaged in the sale, purchase, transportation or storage of natural gas in interstate commerce. We have taken what we believe are the necessary and appropriate steps to comply with these regulations.
The SEC and the Commodities Futures Trading Commission, pursuant to the Dodd–Frank Act, established numerous regulations relating to U.S. financial markets. We enacted procedures and modified existing business practices and contractual arrangements to comply with such regulations. There are, however, some rulemaking proceedings that have not yet been finalized, including those relating to capital and margin rules for (non–cleared) swaps. We do not expect these rules to directly impact our business practices or collateral requirements. However, depending on the substance of these final rules, in addition to certain international regulatory requirements still under development that are similar to Dodd–Frank, our swap counterparties could be subject to additional and potentially significant capitalization requirements. These regulations could motivate counterparties to increase our collateral requirements or cash postings.
Competition
Although our regulated distribution operations are not currently in significant direct competition with any other distributors of natural gas to residential and commercial customers within our service areas, we do compete with other natural gas suppliers and suppliers of alternative fuels for sales to industrial customers. We compete in all aspects of our business with alternative energy sources, including, in particular, electricity. Electric utilities offer electricity as a rival energy source and compete for the space heating, water heating and cooking markets. Promotional incentives, improved equipment efficiencies and promotional rates all contribute to the acceptability of electrical equipment. The principal means to compete against alternative fuels is lower prices, and natural gas historically has maintained its price advantage in the residential, commercial and industrial markets.
Our pipeline and storage operations have historically faced competition from other existing intrastate pipelines seeking to provide or arrange transportation, storage and other services for customers. In the last few years, several new pipelines have been completed, which has increased the level of competition in this segment of our business.
Employees
The Corporate Responsibility, Sustainability, and Safety Committee of the Board of Directors oversees matters relating to equality, diversity, and inclusion; human workplace rights; employee health and safety; and the Company’s vision, values, and culture. It also assists management in integrating responsibility and sustainability into strategic business activities to create long-term shareholder value.
Our culture respects and appreciates inclusion and diversity. Thus, we strive to have a workforce that reflects the unique 1,400 communities that we serve. At September 30, 2020, we had 4,694 employees, substantially unchanged from last year. We monitor our workforce data on a calendar year basis. As of December 31, 2019, 61 percent of our employees worked in field roles and 39 percent worked in support/shared services roles.
To recruit and hire individuals with a variety of skills, talents, backgrounds and experiences, we value and cultivate our strong relationships with hundreds of community and diversity outreach sources. We also target jobs fairs including those focused on minority, veteran and women candidates and partner with local colleges and universities to identify and recruit qualified applicants in each of the cities and towns we serve. Over the last five calendar years, we hired over 1,800 employees.
We perform succession planning annually to ensure that we develop and sustain a strong bench of talent capable of performing at the highest levels. Not only is talent identified, but potential paths of development are discussed to ensure that employees have an opportunity to build their skills and are well-prepared for future roles. The strength of our succession planning process is evident through our long history of promoting our leaders from within the organization.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports, and amendments to those reports, and other forms that we file with or furnish to the Securities and Exchange Commission (SEC) at their website, www.sec.gov, are also available free of charge at our website, www.atmosenergy.com, under “Publications and SEC Filings” under the “Investors” tab under "Our Company", as soon as reasonably practicable, after we electronically file these reports with, or furnish these reports to, the SEC. We will also provide copies of these reports free of charge upon request to Shareholder Relations at the address and telephone number appearing below:
Shareholder Relations
Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265-0205
972-855-3729
Corporate Governance
In accordance with and pursuant to relevant related rules and regulations of the SEC as well as corporate governance-related listing standards of the New York Stock Exchange (NYSE), the Board of Directors of the Company has established and periodically updated our Corporate Governance Guidelines and Code of Conduct, which is applicable to all directors, officers and employees of the Company. In addition, in accordance with and pursuant to such NYSE listing standards, our Chief Executive Officer during fiscal 2020, John K. Akers, certified to the New York Stock Exchange that he was not aware of any violations by the Company of NYSE corporate governance listing standards. The Board of Directors also annually reviews and updates, if necessary, the charters for each of its Audit, Human Resources, Nominating and Corporate Governance and Corporate Responsibility, Sustainability and Safety Committees. All of the foregoing documents are posted on our website, www.atmosenergy.com, under "Corporate Governance" under the "Corporate Responsibility" tab under "Our Company". We will also provide copies of all corporate governance documents free of charge upon request to Shareholder Relations at the address listed above.
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