PRESENTER: Presenter
Valeria M. Acevedo, City Attorney
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SUBJECT: Title
Discuss and consider the first reading of an ordinance granting to Universal Natural Gas, LLC d/b/a Universal Natural Gas, Inc., its successors and assigns for a period of 15 years, a non-exclusive franchise and right to enter public way to install, operate and maintain a natural gas distribution system within, along, across, over and under the public ways of the City of New Braunfels, Texas for the transportation, distribution and/or sale of natural gas to customers and the public in the City; providing for publication and an effective date.
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DEPARTMENT: City Attorney’s Office
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COUNCIL DISTRICTS IMPACTED: Citywide
BACKGROUND INFORMATION:
Universal Natural Gas (“UniGas”) started in 1993 as a family-owned gas distribution utility serving the Magnolia/Woodlands area north of Houston, Texas. Over time, UniGas has expanded into every major market throughout Texas and currently has over 30,000 residential and commercial natural gas customers. UniGas primarily serves growth markets and new master-planned communities outside of the core metropolitan centers where new infrastructure is most needed. UniGas is dedicated to delivering safe and reliable natural gas services while also meeting the growing needs of these emerging master-planned communities and developments in New Braunfels and the surrounding area. The three proposed developments that fall inside of the New Braunfels city limits and are proposed to be covered by this Franchise Agreement and the related ROW License Agreement include:
• Saengerhall Meadows (235 lots)
• Grace Meadows (550 lots)
• Wunderlich (284 lots)
The City Charter sets forth the City Council’s authority to grant franchises to public utilities which is the basis of this franchise agreement. Some key terms of this agreement include, but are not limited to, the following:
FRANCHISE FEE: The Franchise Fee associated with this agreement is 5% of gas sales and 5% for gas transportation from its customers located with redelivery points within the city limits. There will be a separate License Fee required pursuant to a License Agreement for Right-of-Way Access based on $/linear foot for UniGas property located in the City’s ROW that will serve customers outside the city limits through gas lines located in the city limits. The License Agreement will be approved at a later date upon final passage of this ordinance.
Since UniGas is building into new communities that have not yet initiated construction, or are at a very early phase of construction, the first year Franchise Fee noted below under Fiscal Impact section of this report is not a proper indicator on expected monetary outcome for the City. UniGas has estimated the average monthly customer bill. Please note this is variable due to the cost of gas and different utilization depending on the household. However, the average is normalized to provide a benchmark.
15 YEAR TERM: The term of the franchise agreement is 15 years. The City shall retain the right to audit records kept by UniGas pertaining to the natural gas business carried on by it.
RELOCATION COSTS BORNE BY UNIGAS: Grantee shall be responsible for costs associated with the relocation of mains, lateral, or other facilities to accommodate construction, widening, straightening, relocation, or improvement of a highway, street, alley, Public Way, or other public work by the Grantor without reimbursement or to otherwise accommodate Grantor under this Ordinance, Grantee shall have the right to seek a surcharge to recover reasonable and necessary relocation costs pursuant to Section 104.112 of the Texas Utilities Code or any other applicable law or regulations.
RESERVATION OF POWER OR RIGHT OF WAY: The City retains exclusive control over its streets, including (without enumerating all of its powers and without limiting its other powers) the power to lay out, establish, open, alter, widen, lower, elevate, extend, grade, abandon, discontinue, abolish, close, sell, pave, supervise, maintain and improve all of its streets and to construct, maintain and repair sewer pipes, water mains, drainage systems and other public works within its streets.
PROCEDURE: Such franchise agreements must be approved by ordinance with the first and second reading at least 30 days apart. The ordinance must be read at regular meetings of the City Council. It cannot take effect until 30 days from the date of final passage. Pending such time, the full text of the ordinance must be published once each week for four consecutive weeks in the local newspaper at the expense of UniGas.
ISSUE:
This franchise agreement must be approved by ordinance as required by the City Charter.
FISCAL IMPACT:
The estimated franchise fee the City can expect to receive over the term of this agreement is an approximate annual total of $47,555. Over the 15-year term, the City will be paid between $610,000 and $715,000.
Recommendation
RECOMMENDATION:
Staff recommends approval.