CASE NO. 00007062 ATMOS ENERGY CORP., MID-TEX § DIVISION AND WEST TEXAS § BEFORE THE DIVISION, APPLICATION FOR § CUSTOMER RATE RELIEF AND § RAILROAD COMMISSION RELATED REGULATORY ASSET § DETERMINATION § OF TEXAS ATMOS ENERGY CORPORATION, MID-TEX DIVISION AND WEST TEXAS DIVISION, APPLICATION FOR CUSTOMER RATE RELIEF AND RELATED REGULATORY ASSET DETERMINATION Atmos Energy Corporation (“Atmos Energy” or the “Company”) on behalf of its Mid-Tex Division and West Texas Division (“WTX Division”) files this Application for a Regulatory Asset Determination (“Application”). Atmos Energy’s Mid-Tex and WTX Divisions operate in Texas as gas utilities under Texas Utilities Code §§ 101.003(7) and 104.362(12). The Company’s Application is timely filed pursuant to the customer rate relief provisions contained in H.B. 1520, Texas Utilities Code, Chapter 104, Subchapter I, and the Railroad Commission of Texas (“Commission”) Notice to Gas Utilities issued on June 17, 2021 (“June 17th Notice”). In support of the Application, the Company respectfully shows the following: FEBRUARY 2021 WINTER WEATHER EVENT Winter Storm Uri was historic in its severity, its breadth, and its duration. Within a day of its arrival on February 11, 2021, Governor Greg Abbott issued an emergency disaster declaration for all 254 counties in the State of Texas. On February 14, 2021, the President of the United States approved the disaster declaration and ordered federal assistance to supplement state and local recovery efforts. Across the state, temperatures dropped to some of the coldest recorded in decades. By Monday after the storm’s arrival, temperatures in Dallas had dropped to five degrees, the coldest temperature recorded in the city since the late 1980s. On Tuesday morning, the temperature at the 1 Dallas/Fort Worth International Airport dropped to negative two degrees, tying a record low 20th century temperature for this area. Austin and San Antonio also saw single-digit temperatures for the first time in more than thirty years. By the time the worst weather had passed on February 19th, almost half of the state’s population was still dealing with disruptions in water service. And nearly 190,000 Texas homes remained without electricity. Overall, the storm had catastrophic impacts on the entire state, causing power outages, burst water pipes, and limited travel. The storm also dramatically impacted natural gas availability. The record cold conditions led to wellhead freeze-offs across West Texas when water present in raw natural gas froze at the wellhead and inside gathering lines, causing blockages that severely restricted production. Due to widespread rolling blackouts, many natural gas facilities lost electricity, without which they could not deliver natural gas to the power plants. Because a significant number of natural gas facilities were not listed as critical infrastructure, electric power was curtailed to them, further decreasing the overall supply of gas. In response, the Commission quickly acted and issued an Emergency Order modifying curtailment priorities to require continued service to residential and other human needs customers.1 The Commission also acknowledged the natural gas supply and demand issues facing natural gas service and the resulting consequence that local distribution companies (“LDCs”) “may be required to pay extraordinarily high prices in the market for natural gas and may be subjected to other extraordinary expenses when responding to” Winter Storm Uri.2 The Commission’s prediction proved to be true. These weather conditions, lack of electricity, high customer demand for natural gas, unprecedented gas supply interruptions, and the diminished availability of gas supply caused 1 Emergency Order, Railroad Commission of Texas (Feb. 12, 2021). 2 Notice of Authorization for Regulatory Asset Accounting for Local Distribution Companies Affected by the February 2021 Winter Weather Event, Railroad Commission of Texas (Feb. 13, 2021). 2 natural gas prices to soar to unparalleled highs due to severely constrained supply during a time of unprecedented demand and left LDCs, like Atmos Energy, struggling to procure gas supply volumes needed to ensure that its human needs customers continued to receive reliable service. For example, Mid-Tex customer demand during Winter Storm Uri was over 2 Billion Cubic Feet (“Bcf”) for eight consecutive days. For comparison purposes, the average demand per day for the prior week was approximately 1 Bcf, or half of what the Company experienced daily during Winter Storm Uri. Likewise, price escalation for gas supply during Winter Storm Uri was dramatic and significant. The average price increase among the Houston Ship Channel, Katy and Waha Hub delivery locations was a staggering 9,230.4%. Yet, even at these price levels, demand far outstripped available supply, and as the cold weather persisted, the situation grew worse for any entity seeking natural gas. These circumstances, despite the extensive efforts Atmos Energy undertook to prepare for the winter peak, led to the need to procure natural gas supplies during unprecedented market conditions to continue to serve human needs, customer demand, and maintain system support. In passing H.B. 1520, the Texas Legislature recognized the unprecedented nature of Winter Storm Uri and its financial impacts—both to customers and gas utilities. The new rate relief measures in Subchapter I of Chapter 104 of the Texas Utilities Code benefit customers and support the financial strength and stability of gas utilities in Texas. Consistent with those purposes and the Commission’s June 17th Notice, Atmos Energy requests a regulatory asset determination to recover the extraordinary gas procurement costs its incurred to provide service to customers and maintain its system during Winter Storm Uri through securitization and the issuance of customer rate relief bonds. 3 JURISDICTION The Commission’s jurisdiction in this proceeding stems from the adoption of Subchapter I in Chapter 104 of the Texas Utilities Code, which was passed by the Texas Legislature to provide customers with rate relief related to natural gas costs incurred during Winter Storm Uri. Atmos Energy’s Mid-Tex Division and WTX Division are LDCs that operate as gas utilities under Texas Utilities Code §§ 101.003(7) and 104.362(12). The Commission has exclusive, original jurisdiction to prescribe the manner and form of the books, records, and accounts for gas utilities under Texas Utilities Code § 102.101(a), (b) and (d). In addition, Texas Utilities Code § 104.365 gives the Commission jurisdiction to determine the regulatory asset amount to be recovered by a utility related to its extraordinary costs incurred for Winter Storm Uri. Upon making a regulatory asset determination, the Commission has exclusive, original jurisdiction based on Texas Utilities Code § 104.364(c) to issue a financing order to authorize recovery of extraordinary costs through securitization by creating customer rate relief property. SUMMARY OF REQUESTED RELIEF In accordance with the Commission’s June 17th Notice, Atmos Energy requests a Commission determination that its extraordinary costs, which total $2,038,997,976 were prudently incurred and should be recovered through the securitization process authorized in Subchapter I in Chapter 104 of the Texas Utilities Code. The Company’s extraordinary costs have been recorded as a regulatory asset in the books and records of the Company in accordance with the Commission’s Notice of Authorization for Regulatory Asset Accounting for Local Distribution Companies Affected by the February 2021 Winter Weather Event issued on February 13, 2021, the Uniform System of Accounts (“USOA”) prescribed for natural gas companies subject to the provisions of the Natural Gas Act (15 U.S.C. 4 Section 717 et seq) by the Federal Energy Regulatory Commission (“FERC”), and generally accepted accounting principles. In addition to demonstrating the prudence of its extraordinary costs related to Winter Storm Uri, the Company’s Application, with its supporting testimony and evidence, also establishes that the issuance of customer rate relief bonds: (1) will be the most cost-effective method of funding the reimbursement of Atmos Energy’s extraordinary gas costs as compared to conventional methods of recovery; (2) will provide tangible and quantifiable benefits for customers greater than would be achieved absent the issuance of customer rate relief bonds; and (3) is in the public interest and consistent with the purposes of Subchapter I, Chapter 104 of the Texas Utilities Code. Concurrent with its processing of the Company’s Application, Atmos Energy requests that the Commission establish a concurrent proceeding to issue a financing order that will allow the Texas Public Finance Authority to issue securitization bonds relating to the utility regulatory assets resulting from Winter Storm Uri.3 The swift establishment of a separate proceeding will facilitate the selection of a governing board, selection of a lead underwriter and start of necessary financing initiatives, and save valuable time between a Commission order on the amount of utility regulatory assets to be securitized and the actual securitization of those costs. It could also save customers millions in carrying costs associated with the need for those utilities to carry the extraordinary costs on their balance sheets until such time as securitization can occur. Alternatively, if the Commission determines that securitization should not be used to recover the Company’s extraordinary