The Texas Supreme Court, in the case of Atmos Energy Corporation v. The Cities of Allen, et al. and the Railroad Commission of Texas, has concluded that cities have very little authority when it comes to Gas Reliability Infrastructure Program proceedings.

In 2003, the Texas Legislature passed the Gas Reliability Infrastructure Program (GRIP) statute. The GRIP statute permits a gas utility to file a new tariff adjusting its base rates to recover the costs of new “capital investment” made in the preceding calendar year, without the necessity of filing a rate case.

The statute is supposed to create an incentive for investment in Texas’ gas pipeline infrastructure “to meet continuing growth in the state and to enhance safety by replacing aging facilities.” However, some cities have expressed concern about the items included in gas utilities’ requests for rate increases. Those cities tried to intervene in a GRIP proceeding to be able to review the propriety of the increases.

The Texas Supreme Court ultimately concluded that the legislature “designed GRIP to incentivize gas utilities to expand infrastructure and empowered them to file interim rate adjustments in between rate cases.” Thus, the Court held that the Texas Railroad Commission has appellate jurisdiction over GRIP proceedings. The holding means that, if a city denies a GRIP increase, a gas utility can simply appeal that to the commission. More significantly, the Court held that cities have no right to participate in the commission’s GRIP decisions.

The decision means that cities are left with one option to dispute the commission’s approval of a GRIP-based rate increase: the city would have to institute a full-blown rate case. That is an extremely expensive and time-consuming process.

The issue of municipal involvement in rate cases, and how the League lobbies on that issue, will be considered during the League’s legislative policy process next year.

TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.

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