HomeMy WebLinkAboutPO 7379: SETTLEMENT OF TEXAS GAS SERVICE COMPANY, INCREASE GAS RATES P.O. No. 7379
11/17/25 gt
ORDINANCE NO.
AN ORDINANCE BY THE CITY OF PORT ARTHUR,
TEXAS, AUTHORIZING THE SETTLEMENT OF TEXAS
GAS SERVICE COMPANY, A DIVISION OF ONE GAS,
INC.'S STATEMENT OF INTENT TO INCREASE GAS
RATES, FILED ON JUNE 30, 2025; FINDING THAT THE
MEETING COMPLIES WITH THE OPEN MEETINGS ACT;
MAKING OTHER FINDINGS AND PROVISIONS RELATED
TO THE SUBJECT; AND DECLARING AN EFFECTIVE
DATE
WHEREAS, on or about June 30, 2025, Texas Gas Service Company, a Division
of ONE Gas, Inc. ("TGS" or "Company") filed a Statement of Intent with the City of
Port Arthur("City") and concurrently with the Railroad Commission of Texas ("Railroad
Commission") to increase gas rates within the Central-Gulf Service Area, West North
Service Area, and Rio Grande Valley Service Area; and
WHEREAS, in its Statement of Intent, TGS proposed to increase its revenue
requirement by $41.1 million per year and to consolidate its three service areas into one
statewide service area; and
WHEREAS, the City of Port Arthur joined the Steering Committee of Cities to
intervene and participate in the Railroad Commission proceedings; and
WHEREAS, the Company has moved or will move to consolidate municipal
proceedings with the concurrent Statement of Intent proceedings pending at the Railroad
Commission; and
WHEREAS, TGS, Railroad Commission Staff, and other intervening parties
including the Steering Committee of Cities participated in settlement discussions to resolve
all contested rate case issues without litigation, except the Company's request to
consolidate service areas; and
WHEREAS, TGS agreed to settle the rate request at an overall rate increase level
of$15 million per year for the Central-Gulf, West North, and Rio Grande Valley Service
Areas combined; and
WHEREAS, the Railroad Commission Staff, the Lawton Law Firm, and counsel
for other cities participating in this proceeding have recommended approval of the Partial
Settlement terms as a reasonable alternative to resolve all but one of the contested rate case
issues without the need for prolonged litigation.
NOW THEREFORE,BE IT ORDAINED BY THE CITY COUNCIL OF THE
CITY OF PORT ARTHUR,TEXAS:
1
Section 1. That the statement and findings set out in the preamble to this
Ordinance are hereby in all things approved and adopted.
Section 2. That the City of Port Arthur hereby authorizes the settlement of the
TGS rate case proceeding at an overall rate increase level of$15 million per year.
Section 3. That the meeting at which this Ordinance was approved was in all
things conducted in strict compliance with the Texas Open Meetings Act, Texas
Government Code, Chapter 551.
Section 4. That this ordinance shall become effective from and after its
passage.
READ, ADOPTED, AND APPROVED, this _day of December, 2025,
A.D., at a Regular Meeting of the City Council of the City of Port Arthur, Texas by
the following vote: AYES:
Mayor:
Councilmembers:
NOES:
Charlotte M. Moses, Mayor
ATTEST:
Sherri Bellard, City Secretary
APPROVED AS TO FORM:
Roxann Pais Cotroneo, City Attorney
APPROVED MINISTRATION:
Ron Burton, , ity Manager
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THE LAWTON LAW FIRM, P.C.
12600 Hill Country Blvd.,Suite R-275 • Austin,Texas 78738 • 512/322-0019
November 14, 2025
Via E-Mail
Ms. Sharae Reed Mr. Kenneth R. Williams
City Attorney—City of Beaumont City Manager—City of Beaumont
P.O. Box 3827 P.O. Box 3827
Beaumont, Texas 77704 Beaumont, Texas 77704
Mr. Brandon Monk Mr. Kevin Carruth
City Attorney—City of Groves City Manager—City of Groves
4875 Parker Drive 3947 Lincoln Avenue
Beaumont, TX 77705 Groves, Texas 77619-4604
Mr. Chris Leavins Ms. Cheryl Dowden
City Attorney—City of Nederland Interim City Manager—City of Nederland
P.O. Box 4915 P.O. Box 967
Beaumont, Texas 77704-4915 Nederland, Texas 77627
Ms. Roxann Cotroneo Mr. Ronald Burton
City Attorney—City of Port Arthur City Manager—City of Port Arthur
P.O. Box 1089 P.O. Box 1089
Port Arthur, Texas 77641 Port Arthur, Texas 77641
Mr. Lance Bradley Mr. Andre' Wimer
City Attorney—City of Port Neches City Manager—City of Port Neches
P.O. Box 1148 P.O. Box 758
Port Neches, Texas 77651 Port Neches, Texas 77651
Re: 2025 Statement of Intent of Texas Gas Service Company, a Division of ONE
Gas, Inc. ("TGS" or "Company") to Change Gas Utility Rates within the
Central-Gulf,West North, and Rio Grande Valley Service Areas
Dear Cities:
This letter is to update you on the status of TGS's statement of intent to increase rates in
its Central-Gulf, West North, and Rio Grande Valley Service Areas, which is still pending with
the Railroad Commission("Commission") and at the municipal level.
CONFIDENTIAL/ATTORNEY-CLIENT COMMUNICATION 1
The parties have reached a settlement in principle in the rate case before the Commission,
which we recommend that the Cities approve. As we will describe further below, we believe the
settlement represents a reasonable outcome given the potential expense and risk of litigating
contested issues. We are providing a proposed settlement approval ordinance for your
consideration. If your City takes no action, we will assume your City is unopposed to the
settlement.
Our Review and Analysis of the Statement of Intent
TGS requested a total rate increase of $41.1 million annually, representing a 9.83%
increase in non-gas revenues. TGS also requested to consolidate its three existing service areas
into one statewide service area.
The Company's proposed rate increase would have a widely disparate impact between
residential and non-residential customer classes as well as within the residential classes depending
on their current service area. The proposed increase would go entirely to residential customers,
whereas commercial, industrial, and other non-residential rate classes would receive rate
decreases. In addition, residential customers in the West North Service Area would see increases
of 24.5% to 27% over current rates, whereas residential customers in the Rio Grande Valley
Service Area would see decreases of 5.8%to 21.9%. The impact on customers in the Central-Gulf
Service Area, which includes all the cities in our coalition, is mixed. If approved, the average
increase for Central-Gulf small residential customers would be $3.98 for usage of 17 Ccf per
month, or an 8.9% increase over current rates. Large residential customers in the Central-Gulf
Service Area using 46 Ccf per month would see an average decrease of$2.89 per month, which is
a 3.7% decrease from current rates.
Railroad Commission rules require similarly situated cities to coordinate efforts;therefore,
we worked with the Cities Served by Texas Gas Service Company ("TGS Cities"), 1 the Alliance
of Texas Gas Service Municipalities ("ATGM"),2 and the City of El Paso in reviewing TGS's
request. The combined recommended adjustments of all the city groups would reduce the
Company's $41.1 million request by $52.2 million, resulting in a rate reduction of approximately
$11.1 million from current rates. Commission Staff recommended adjustments that would reduce
the Company's request by about $2.7 million.
Although we either support or do not oppose the adjustments of Commission Staff and the
other city groups, our focus in this case was on allocation and rate design issues such as those
The TGS Cities include the Cities of Alton,Austin,Bayou Vista,Bee Cave,Brownsville,Cedar Park,Cuero,
Donna,Dripping Springs,Edinburg,Elsa,Galveston,Georgetown,Gonzales,Harlingen,Hidalgo,Hutto,Kyle,
Lakeway,Lockhart,Los Fresnos,Luling,Marble Falls,McAllen,Mission,Palm Valley,Pflugerville,Pharr,Port
Isabel,Rancho Viejo,Raymondville,Rollingwood,San Benito,Shiner,Weslaco,West Lake Hills,and Yoakum.
2 The ATGM includes the Cities of Andrews,Anthony,Borger,Bryson,Clint,Horizon City,Graham,and San
Elizario.
CONFIDENTIAL/ATTORNEY-CLIENT COMMUNICATION 2
mentioned above. We also objected to a pilot program TGS proposed that would create a separate
residential rate class for low-income customers. These customers would receive a 25% discount
on their rates and the revenue shortfall of$3 million would then be collected from the rest of the
residential customers. While we do not have a problem with helping low-income customers, we
argued that it is unfair and contrary to basic ratemaking principles for one group of customers to
subsidize a program that solely benefits a different group of customers. The other city groups and
Commission Staff raised similar concerns with this program.
Settlement
The partial settlement in principle resolves all contested issues except the question of
consolidating service areas. The parties are still litigating the consolidation issue, which will be
decided by the Commission in January 2026.The Commission has a long-standing policy favoring
consolidation of service areas, so we expect the Company's consolidation request to be granted.
Key terms of the proposed settlement include:
• A revenue requirement increase of$15 million,which is approximately 64%lower
than the Company's requested revenue requirement increase of$41.1 million.
• Both small and large residential customers in the current Central-Gulf Service Area
are expected to have rate decreases if the Company's consolidation request is
approved.
• A 9.8% return on equity rather than the Company's requested 10.4% return on
equity.
• Revenue allocation such that no customer class will receive a rate decrease while
other classes receive a rate increase.
• The pilot program for low-income customers will be withdrawn. The Company's
existing Share the Warmth program will be expanded to provide more assistance
for low-income customers. The cost of this program will be shared between the
Company, residential customers, and commercial customers.
CONFIDENTIAL/ATTORNEY-CLIENT COMMUNICATION 3
•
The rates resulting from the proposed settlement are shown below:
Customer Class Customer Commodity
Charge Charge/Ccf
Residential—Small3 $19.50 $0.92290
Residential-Large4 $35.00 $0.35926
Commercial—Small $75.00 $0.49457
Commercial-Large $150.00 $0.19457
Industrial $1,250.00 $0.18947
Public Authority $200.00 $0.17511
Transportation $500.00 $0.09470
Electric Generation Transportation $1,000.00
Demand Charges $0.72542
Usage $0.02000
Compressed Natural Gas $380.00 $0.09470
Unmetered Gas Light-Residential $0.00 $0.92290
Unmetered Gas Light-Commercial $0.00 $0.49457
Unmetered Gas Light-Industrial $0.00 $0.18947
Unmetered Gas Light—Public Authority $0.00 $0.17511
Assuming the Company's consolidation request is approved,Central-Gulf customers in the
Small Residential Class with average usage of 15 Ccf per month will see a$1.82 decrease to their
monthly bills. Customers in the Large Residential Class with average usage of 43 Ccf per month
will see a $4.89 decrease to their monthly bills. Consolidation is expected to benefit residential
customers in the Central-Gulf Service Area, so if the Company's consolidation request is not
approved, they may experience increases rather than decreases. As stated earlier, however,we do
not expect the Commission to go against its long-standing policy supporting consolidation of
service areas.
Recommendation
We recommend that Cities approve the partial settlement. As we balanced the costs and
benefits of settlement versus continued litigation risk,we evaluated the strength of TGS's revenue
increase request compared to the litigation issues and proposed adjustments raised by the various
city groups.Based on precedent,we expected significant downward adjustments to the Company's
request. This downward assessment is supported by TGS's agreement to settle for $15 million
versus the requested $41.1 million request. However, given the uncertainty of successfully
3 Applies to residential customers with annual normalized volume less than 331 Ccf.
4 Applies to residential customers with annual normalized volume of 331 Ccf or greater.
CONFIDENTIAL/ATTORNEY-CLIENT COMMUNICATION 4
litigating each issue and litigation cost,a settlement of$15 million annual increase—that will result
in a rate decrease to Central-Gulf residential customers—is reasonable.
We are attaching for your consideration a proposed ordinance approving the
settlement. In terms of timeline,we are asking each City to make a final decision at its next
available meeting. The deadline for Cities to pass a Final Rate Ordinance is November 17, 2025,
but the proposed ordinance approving the settlement can be passed after this deadline. After
November 17, the Company will move to consolidate all municipal actions with the proceedings
at the Railroad Commission, including Cities who do not act before the November 17 deadline. If
your City does not take action regarding the proposed settlement, we will assume your City is
unopposed to the settlement. Please forward copies of passed ordinances to
danlawtonlawfirm(a,gmail.corn and molly(a,mayhallvandervoort.corn.
If you have any questions or concerns, please do not hesitate to call.
Sincerely,
/s/Daniel J. Lawton
CONFIDENTIAL/ATTORNEY-CLIENT COMMUNICATION 5