Monday, February 18, 2008

Texas Railroad Commission approved millions of questionable expenditures for Atmos Energy - Costs passed through to consumers

By R.A. DYER - Fort Worth Star-Telegram Staff Writer - Mon, Feb. 18, 2008

AUSTIN -- Even as Atmos Energy was removing luxurious hotel stays and limousine rides from a natural gas rate case last year, its attorneys and consultants litigating the issue were running up more bills at fancy hotels and spending more than $100 for restaurant meals, according to documents obtained by the Star-Telegram.

North Texas customers of the gas utility will have to foot the bills -- plus about $1.7 million more in questionable expenditures -- because the three members of the Texas Railroad Commission gave them their approval last week.
Among the questionable charges are more than $16,400 in bills at expensive hotels, more than $3,000 for meals at pricey restaurants, and mileage reimbursements by at least one Atmos official that is almost double the federal standard.

"As it now stands ... the parties have not established the reasonableness of certain expenses included in the reimbursement requests," an agency hearings examiner says in a Feb. 5 report.

All the charges were accrued by attorneys and regulatory experts involved in a 2007 Atmos rate case. Most of the controversial costs were charged by the North Texas utility, although one of the cities opposing Atmos also failed to sufficiently document some expensive consultant charges, according to the report.

In the 2007 case, Atmos tried to charge its ratepayers for the cost of hotel stays of over $900 per night, expensive cases of wine, extravagant meals and limousine service. The utility removed those expenditures after they were reported by the Star-Telegram.

The cost of litigation

By state law, expenses associated with litigating rate cases -- whether those expenses are incurred by utility attorneys, or by attorneys representing ratepayer interests -- typically get passed onto customer bills. The controversial charges cited in the expert's report were included in a compromise settlement on legal costs from last year's case, and which was approved Tuesday by the three members of the Railroad Commission.

But commission Chairman Michael Williams stressed that the agency expert did not find that any of the legal bills were definitively out of bounds -- only that some could bear more scrutiny.
Williams also noted that the agency's expert recommended approval of the legal expenditures because further scrutiny would only drive up costs more.

"What the hearing examiner has to say is that, on first blush, these items could raise concern -- however, he's also recommending approval," Williams said. "This [settlement] is in the best interest of cities. There is an argument that we could have thrown it out, and forced them to [have a trial to prove their expenses] -- but that would not have served the ratepayers."

What are some of expenditures raising concern? According to the findings from the hearings examiner:

Atmos attorneys and consultants submitted $16,410.94 in hotel charges that could be considered excessive. Although the examiner's report did not break down the calculation, it said charges above $172.50 per night -- that is, $150 plus tax -- could be considered a luxury. "Other parties had no trouble staying at motels that were under $150 per night on most occasions," the examiner wrote, adding, "The State of Texas limits its motel travel expense to a maximum reimbursed rate of $85 per night, plus tax."

The Feb. 5 report identified $3,143.75 in questionable Atmos meal expenses. A "review of the invoices of Atmos Mid-Texas for meals from consultants' shows 88 occurrences of meals in excess of $100," the hearings examiner said.

The hearings examiner cited $3,888 in questionable mileage expenses by Atmos and noted that one of the utility's consultants billed for mileage reimbursement of 85 cents per mile. "There is nothing in the record to support the reasonableness of this amount," the examiner said, adding that the Internal Revenue Service considers 44.5 cents per mile a reasonable allowance for reimbursement.

More than $365,000 in charges associated with a technical billing issue raised may have been unwarranted because an expert witness for the utility was found to be unfamiliar with the company's billing practices.

Atmos attorneys have said the company can defend each expenditure. In a statement, the utility noted that all parties in the rate case agreed to the legal costs.

"This cooperative and collaborative approach to negotiation and compromise has allowed the parties in this proceeding to avoid a protracted legal battle that would have increased costs and expenses exponentially," the company said

The hearings examiner also identified $186,750 in consultant charges from Dallas that lacked sufficient backup documentation. Norman Gordon, an attorney representing Dallas in the rate case, said the municipality could have easily provided the documentation had it become necessary.

$9.7 million in legal bills

In total, attorneys for Atmos and various city groups and others opposing the company ran up about $9.7 million in legal bills in the rate case. Of those overall legal costs, Atmos attorneys and legal consultants will bill ratepayers for about $6.6 million, and various city groups and others opposing Atmos will bill for $3.1 million.

Atmos has sought to increase rates in that case by about $56.9 million annually. City attorneys had sought to lower rates by about $37 million. The Texas Railroad Commission ultimately awarded a $4.8 million increase and a one-time refund of $2.2 million to customers.
Read more in the Fort Worth Star-Telegram

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