Council Accepts Compromise Atmos Rate Increase Amid Fears of Larger Hike

Natural gas utility rates are going up again following a vote by the Dallas City Council on Wednesday approving a negotiated settlement with Atmos Energy.

The company filed its annual rate review earlier this year, requesting an additional $38.1 million in citywide revenues. After some wrangling with city staff and consultants, Atmos agreed to lower the figure to around $34 million. The new rate comes to a roughly $9.46 hike on the average residential customer’s monthly utility bill. Commercial customers will see an average monthly increase of $32.44.

Council members voted in favor of the settlement after hearing from staff about how Atmos would likely appeal to the Texas Railroad Commission as it had previously in the event of a rejection. The agency, which oversees utility regulation in the state, has historically been seen as more favorable to utility companies than cities or consumers because it generally allows them to recover infrastructure investment costs and earn a reasonable return as long as those improvements are justified.

Nick Fehrenbach, the city’s manager of regulatory affairs and utility franchising, said Atmos would be allowed to immediately implement its full requested rates while the appeal is pending, subject to potential refunds later if the Railroad Commission reduced the amount. He pointed to a previous dispute in 2017, when Dallas rejected a negotiated settlement and Atmos later secured a larger increase through the Railroad Commission than what had originally been offered in settlement talks.

“What I’m hearing, and help me if I’m wrong, but this is pretty much like a no-win for our residents,” said Council Member Maxie Johnson (District 4).

Johnson and the six other members of the Finance Committee unanimously voted to recommend a rejection of the negotiated settlement on Tuesday, citing the burden a rate hike would put on residents who are already struggling with rising household expenses.

The reality sunk in, though, and council members opted to approve the lower rate hike.

“Nobody wants an increase in their rate for Atmos, nobody,” said Council Member Cara Mendelsohn (District 12). “It would feel really good to vote against the settlement, right? Like I’m standing up for the people, this is just outrageous, we can’t have a bigger Atmos bill. But it’s really cutting off our noses to spite our face, because there is going to be an increase. The question is will we accept the settlement, which is a lower increase, or will we take our chances at the Railroad Commission, which is most assuredly going to go with Atmos.”

Atmos has argued it needs the rate hike to support ongoing infrastructure investments and pipeline replacement projects across Dallas. Over the last year, the company replaced 36 miles of pipe and 3,500 service lines in the city. New capital investment totaled $321 million.

The utility’s filing stated that the proposed rate changes would affect more than 208,000 residential customers, nearly 20,000 commercial customers, and a smaller number of industrial and transportation customers.

Some council members raised the prospect of shifting the increased cost burden to commercial customers, but staff explained there aren’t enough of them to absorb the hike in a meaningful way without the commercial rate becoming cost prohibitive and ultimately unviable.

The new rate will go into effect on June 1.

Last year, the negotiated settlement resulted in an average increase of $8.28 per month for residential customers and a $21.72 average increase for commercial customers.