HomeMy WebLinkAboutItem 07 - TXU Electric Franchise FeesMEMO TO
FROM:
MEETING DATE:
SUBJECT:
RECOMMENDATION:
IMM "
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
ROGER NELSON, CITY MANAGER
NOVEMBER 20, 2001
TXU ELECTRIC FRANCHISE FEES
City Council consider approval of an ordinance which protects the collection of franchise
fees in the competitive market beginning January 1, 2002.
FUNDING SOURCE:
The City of Grapevine will continue to collect franchise fees from the Transmission and
Distribution Company in Grapevine, which is TXU Electric. However, the methodology
for calculating the fees has changed as result of SB 7, Electric Deregulation.
BACKGROUND:
In the 1999 Legislative Session, SB 7, Electric Deregulation, was passed into law. The
franchise fee payments were addressed in the legislation. Specifically, the law modified
the method for collecting payment from a "gross receipts" format to a "cents/kWH"
formula. The new formula is derived with a calculation: dividing the revenue received in
1998 by the amount kWhs delivered to the community.
In Grapevine, the total collections in 1998 divided by the number of kWhs delivered to
the City resulted in a factor of .002545. (See the attached letter from Rick Vaughn).
That factor will be applied to the number of kWh delivered in Grapevine in 2002 and
future years.
The City of Grapevine should continue to collect the same level of revenue based on the
new methodology. The City earned approximately $2.4 million in the last fiscal year.
The Utilities Committee, the City Attorney and the Staff recommend approval of the
ordinance.
November 14, 2001 (10:15AM)
doblectric
& Gas
1125 S. Ball, Suite 100 -
Grapevine,Texas 76099
October 17, 2001
Roger Nelson
City Manager
City of Grapevine
200 S. Main Street
Grapevine, Texas 76051
Re: Municipal Franchise Fees Calculation
Dear Roger:
As you are aware, 1999 electric utility restructuring in Texas necessitated a change in the
method of calculating municipal franchise fees. As such, pursuant to the Texas Electric
Choice Act, the basis for calculating municipal franchise fees will be changed from the
current gross receipts basis to a cents/kWh basis effective January 1, 2002. The new fee,
to be calculated on a city -by -city basis, will be equal to the total franchise fee revenue
due a municipality during calendar year 1998 divided by the number of kWhs delivered
for the same period.
Beginning January 1, 2002,.municipal franchise fees will be calculated by taking the new
cents,,'kWh rate and multiplying it by the total number of kWhs delivered within the
municipality. The calculation of your municipal franchise fee rate based on 1998 actual
figures, is as follows:
(a) (h) (c)
1998 Fees Due 1998 k-Whs Delivered Cents/ KWh
S 2,304,015.08 905,458,750 0.002545
a) 1998 actual fees paid based on 4% rate
b) 1998 actual kWhs delivered
c) New rate as determined [(column (a) divided by column (b)]
Municipal franchise fees will be paid by the energy delivery entity of TXU.
Should you have any questions, or would like to discuss this matter, please call me at
817-481-7365.
Sincerely,
Rick Vaughn
.-area ?Manager
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS RELATING TO ELECTRIC
FRANCHISE FEE PAYMENTS AS CALCULATED AND
PAID UNDER TEXAS UTILITY CODE § 38.008 FOR
EXISTING FRANCHISEES; CONTAINING FINDINGS AND
OTHER PROVISIONS RELATING TO THE FOREGOING
SUBJECT; PROVIDING AN EFFECTIVE DATE; AND
DECLARING AN EMERGENCY.
WHEREAS, the City of Grapevine, Texas ("City") on or about October 4,1960, by
Ordinance No. 60-12 entered in a franchise ("Franchise") with Texas Power and Light,
now assigned to TXU Electric, which granted them the right to use the public rights-of-
way to deliver electricity in the City; and
WHEREAS, Section 5 of the Franchise provides that the City may collect a
franchise fee from the electric utility for use of the public rights-of-way in the City and
the City has collected such a fee since the Franchise was entered into; and
WHEREAS, Texas Utility Code § 33.008(a) provides that, "a municipality may
impose on an electric utility, [or] transmission and distribution utility that provides
distribution service within the municipality a reasonable charge as specified in
Subsection (b) for the use of a municipal street, alley, or public way to deliver electricity
to a retail customer."; and
WHEREAS, Texas Utility Code § 33.008(b) provides in part that "[i]f a
municipality collected a charge or fee for a franchise to use a municipal street, alley, or
public way before [December 31, 2001], the municipality, after [December 31, 2001] is
entitled to collect from each electric utility, [or] transmission and distribution utility that
uses the municipality's streets, alleys, or public ways to provide distribution service a
charge based on each kilowatt hour of electricity delivered by the utility to each retail
customer whose consuming facility's point of delivery is located within the municipality's
boundaries."; and
WHEREAS, Texas Utility Code § 33.008(b) further provides that "[t]he charge
imposed shall be equal to the total electric franchise fee revenue due the municipality
from electric utilities for calendar year 1998 divided by the total kilowatt hours delivered
during 1998 by the electric utility to retail customers whose consuming facilities' points
of delivery were located within the municipality's boundaries," ("KWH Charge"); and
WHEREAS, § 33.008(b) further provides "[t]he compensation a municipality may
collect from each electric utility, [or] transmission and distribution utility providing
distribution service shall be equal to the charge per kilowatt hour determined for 1998
multiplied times the number of kilowatt hours delivered within the municipality's
boundaries."; and
WHEREAS, the City Council finds and determines that the City did collect a
franchise fee before December 31, 2001 and desires to impose and collect the charge
authorized of Texas Utility Code § 33.008 from the Electric Utility or Transmission and
Distribution Utility in the City.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS;
Section 1. That the findings contained in the preamble of this Ordinance are
determined to be true and correct and are hereby adopted.
Section 2. Pursuant to Texas Utility Code § 33.008(a) and § 33.008(b), the
City imposes on the Electric Utility and/or Transmission and Distribution Utility, that
provides distribution service within the municipalities' boundaries, a KWH charge as
authorized by Texas Utility Code § 33.008 Such charge shall be paid annually as is
provided for in the Franchise.
Section 3. Upon payment of the per kilowatt hour charge, as authorized by the
Texas Utility Code, § 33.008 the Electric Utility or Transmission and Distribution Utility
shall also file a report with the City evidencing the kilowatt hours delivered within the
City during the applicable period, and other reasonable information as requested in
writing by the City to verify the accuracy of that Report.
Section 4. It shall be a violation of this Ordinance for the Franchisee to
knowingly make a material misrepresentation of any information required to be reported
under this ordinance.
Section 5. If any section, subsection, sentence, clause, phrase, or portion of
this ordinance is for any reason held invalid or unconstitutional by any court or
administrative agency of competent jurisdiction, such portion shall be deemed a
separate, distinct, and independent provision and such holding shall not affect the
validity of the remaining portions thereof.
Section 6. This Ordinance shall take effect November 20, 2001, with the KWH
charge beginning to accrue as of 12:01 AM, January 1, 2002.
Section 7. The fact that the present ordinances and regulations of the City of
Grapevine, Texas are inadequate to properly safeguard the health, safety, morals,
peace and general welfare of the inhabitants of the City of Grapevine, Texas creates an
emergency for the immediate preservation of the public business, property, health,
safety and general welfare of the public which requires that this ordinance shall become
effective from and after the date of its passage, and it is accordingly so ordained.
ORD. NO. 2
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the 20th day of November, 2001.
F.-TUNWORNM
ATTEST:
0
ORD, NO. 3