Atmos Energy 2000 Annual Report Download - page 8

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in Woodward, and we see a significant opportunity
to increase Woodward’s profitability by
acquiring the
remaining interest in the Company.
Upon completion of the acquisition, J. D.
Woodward, President of Woodward Marketing, will
join our senior management team as Senior Vice
President of Non-Utility Operations. J.D. and his
team have made Woodward Marketing a highly
successful company primarily due to the successful
relationships they have established with their
customers. We believe that Woodward Marketing’s
ability to prosper will be enhanced both as the
core of Atmos’ non-utility operations and through
the continued leadership of J. D. Woodward and
his
Woodward Marketing team.
Sale of Retail Products and Services.
In 2000, we launched the sale of non-traditional retail
products and services to a portion of our cus
tomer
base.This venture seeks to increase our non-
utility
revenue by capitalizing on our local brand
names
and strong customer relationships. Atmos has not
invested any capital in this venture but has instead
partnered with successful national retail distribution
companies. During 2000, we offered our customers
home protection products and discount buying club
memberships. Initial results are promising and indicate
that our customers are interested in purchasin
g non-
traditional products and services from us.
We will continue to look for ways to increase
the profitability of our non-utility operations. We
expect the earnings growth rate of our non-utility
operations to exceed the growth rate of our utility
operations, excluding acquisitions.
Taking Proactive Steps to
Mitigate the Effects of
Weather on Earnings
We were successful in improving our earnings
in 2000 through a diligent regulatory strategy of
making timely rate requests and redesigning our
rate structures to mitigate the effects of weather.
We completed three regulatory proceedings
during the fiscal year and settled two others just
after the close of the year that will result in more
than $16 million in additional annual revenues.
Rate proceedings are also pending in Virginia and
Colorado. In December, we placed $2 million in
new rates into effect under bond in Virginia while
awaiting a final January 2001 hearing in that case.
We anticipate the Colorado rate case will be
resolved during the 2001 fiscal year.
During the 2000 fiscal year, Atmos successfully
mitigated the effects of weather and established a
floor for its earnings by redesigning rates and pur-
chasing weather hedges. As a result of our success
in redesigning our rate structures, approximately 34
percent of Atmos’ customer base will have weather
normalized rates during the 2000 -2001 heating
season compared to only 17 percent in 1999-2000.
To further reduce the impact of weather on earn-
ings, Atmos purchased weather hedges for its Texas
and Louisiana operations for the 2000 -2001 heat-
ing season.These hedges provide protection against
weather that is at least seven percent warmer than
normal while preserving any upside if the weather
approaches normal, or even colder than normal,
Letter to Shareholders continued