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HomeMy WebLinkAboutORD 6079 ATLANTA GAS LIGHT Augusta Richmond GA DOCUMENT NAME: 0 rd inant.e u07Q DOCUMENT TYPE: D roh'v)ctnce YEAR: IOf q tJJ ,...- BOX NUMBER: 5 FILE NUMBER: J 1 ~ I i NUMBER OF PAGES: /0 , , r ~ ORDINANCE NO, bo 1 ~ AN ORDINANCE TO AMEND AN ORDINANCE DATED JULY 3, 1996, GRANTING ATLANTA GAS LIGHT COMPANY (HEREAFTER COMPANY) A FRANCIDSE FOR THE USE OF RIGHTS OF WAY AND OTHER PUBLIC PROPERTY FOR THE PURPOSE OF DISTRIBUTING GAS WITIDN AUGUSTA-RICHMOND COUNTY, GEORGIA, SO AS TO MODIFY THE FRANCIDSE FEE CALCULA nON PROVISIONS; TO REPEAL CONFLICTING LAWS; TO PROVIDE AN EFFECTIVE DATE; AND FOR OTHER PURPOSES, BE IT ORDAINED BY THE AUGUSTA-RICHM:OND COUNTY COMMISSION. SECTION 1. Ordinance No. 5903 dated July 3, 1996, granting Atlanta Gas Light Company a franchise for the use of rights of way and other public property for the purpose of distributing gas within Augusta- Richmond County (hereafter City), is hereby amended by inserting the following: "'Section I,Definitions: (a) "Base Year" means the fiscal year ending September 30, 1998. (b) "Base Year Franchise Fee Factor" means the total franchise fees paid during the Base Year divided by the Design Day Capacity as recorded by the Company on the last day of the Base Year. (c) "Design Day Capacity" means the sum of the individual capacity in dekatherms (Dt) attributable to all firm customers located within the city limits of the City, as of the last day of the previous fiscal year. <d) "Firm Customers" means all residential and business customers who purchase gas service that ordinarily is not subject to interruption or curtailment. -:e) "Fiscal Year" means the 12 months ending September 30, of each year. ~f) "Inflation Index" means the percentage change in the Consumer Price Index for all Urban Consumers as published by the Bureau of Labor Statistics, or any successor index, for the period of September 30, 1997, to the beginning of the then current fiscal year. The percentage shall be reduced by any productivity factor adjustment for the same time period determined by the Georgia Public Service Commission for the Company. ..- ~~ ~~W~ tJ . \ '7j~r R~~J-. vs, '1M. L.o ~ .:;ection 2. Franchise Fee. The total dollar amount of franchise fees paid by the Company to the City shall be calculated as follows: The current Fiscal Year total franchise fee shall equal the product of the Design Day Capacity ,md the current franchise fee factor, The current franchise fee factor shall be equal to the product of the Base Year Franchise Fee Factor and one plus the Inflation Index expressed as a decimal to three significant digits. The following formula quantifies this payment: F Fc = FFFt.yX(1 + (CPI-PFA)) x DDCc Where FFc = total franchise fees due the city for the current Fiscal Year FFFby= the Base Year Franchise Fee Factor CPI-PFA = the Inflation Index based on the cumulative change in the Consumer Price Index less the productivity factor adjustment determined by the Georgia Public Service Commission, DDCc = the Design Day Capacity as of the last day of the previous fiscal year. FFFby = FFby fDDCby where FFby= the total franchise fees paid in the Base Year and DDCby = the Design Day Capacity of the Base Year. ~)ection 3. Responsibility for Payment of Franchise Fee. The Company as the holder of the franchise privilege hereunder is responsible for the payment of all franchise fees payable 2 hereunder, and shall file such reports and returns as required by the franchise ordinance as modified by this Amendment. In addition, the Company shall report annually the names of all Gas marketers for which Company is transporting natural gas on the distribution system within the City. The franchise fee payments required hereunder shall be in lieu of any franchise fee, license fee, occupation tax or other payment for use of the rights of way by the Company for the provision of gas service, but shall not prohibit imposition of a license fee or an occupation tax on gas marketers. Section 4, Ouarterly Payments. Effective for the Fiscal Year 1999, and for each Fiscal Year thereafter during the term of the franchise ordinance, the Company shall remit to the City quarterly franchise fee installments. The installments shall equal to one-fourth (1/4) of the total annual franchise fee calculated in accordance with this ordinance. The quarterly payment is due and payable on or before the 30th day following the last day of each calendar quarter, Section 5, Annual Return, The Company shall file a return with its first quarterly installment in each Fiscal Year showing the details of the calculation of the annual franchise fee. Section 6, Delay of Inflation adiustment. Notwithstanding any other provision in this ordinance, any inflation adjustments shall be made to the franchise fee only when the Company changes its rates. Section 7. Conflicts, In the event of a conflict between this ordinance and the original franchise dated July 3, 1996, this ordinance shall control. All terms, conditions and stipulations contained in such franchise ordinance shall remain in full force and effect to the extent that they do not conflict with this ordinance." 3 and by renumbering the remaining sections accordingly, SECTION 2. All ordinances and parts of ordinances in conflict with this ordinance are repealed. SECTION 3. This ordinance shall become effective on the first day of the month following its approval by the Augusta-Richmond County Commission and its acceptance by Atlanta Gas Light Company, Approved by the Augusta-Richmond County Commission, on the L( day of August, 1998 and the / & _ day of August, 1998. (SEAL) Thla documtnllplllOYtd as ~r~r? ~;IiJI6wJ/ Accepted on behalf of Atlanta Gas Light Company, this ~ day of ~ u-J , 1921 Title Authorized Representative for Atlanta Gas Light Company '; v ' 4 ,~; ~. '/ .- ~.. GEORGIA MUNICIPAL r ASSOCIA TION 201 Pryor ~itreet, SW . Atlanta, Georgia 30303 · 404/688-0472 · Fax: 404/577-6663 · www.gmanet.com MEMORANDUM TO Mayors and Councilmembers of cities served by Atlanta Gas Light Company c/o City Clerks, City Managers and City Attorneys James A. Calvin, Executive Director ~ FROM DATE June 24, 1998 SUBJECT: GMA SUCCESSFULLY NEGOTIATES 'WITH ATLANTA GAS LIGHT COMPANY TO PRESERVE FRANCHISE FEES AFTER DEREGULATION Gas deregulation in Georgia is scheduled to be effective on November 1, 1998. Unless cities modify their existing franchise ordinances with Atlanta Gas Light Company, (AGL), prior to November 1, 1998, cities will see substantial reductions in future franchise fee receipts. GMA strongl)' recommends that you adopt the attached ordinanc:e to amend your gas franchise. GMA and Atlanta Gas Light Company Representatives have been working for the past 18 months to assure that the deregulation of the gas industry does not adversely affect municipal regulation of municipal rights of way and the amount of franchise fees paid as rental for use of such rights of way, Attached to this memo is a draft ordinance to amend your existing city/Atlanta Gas Light franchise ordinance to implement the joint recommendation ofGMA and AGL. A summary of the ordinance is also included. Why is modification of AGL's gas franchise ordinances necessary? Atlanta Gas Light will no longer be selling gas to the consumer. A separate unregulated AGL sub:;idiary, along with other companies (known as "Marketers"), will be actually selling gas to consumers. Consumers will have a choice of the company from whom they wish to buy their gas. This competition is expected to reduce user rates. Atlanta Gas Light Company will still own the pipes through which the marketers will be delivering gas to consumers. AGL will receive only a transportation fee for carrying the gas for the marketing companies. As a result, Atlanta Gas Light gross revenues \~ll be substantially reduced from t.~eir present revenues, Traditional municipal gas franchises provide for payment of franchise fees to a city based upon gross revenues for sales of gas to customers in the city. Since AGL will not be selling natural gas. franchise fees will be eliminated or significantly reduced unless franchise ordinances are modified. A d v () c a c y Service Innovat o n ?re~ldent - ....Villie DolVis. .\'.I\ll( ''',''"n...l ..J Fir'\t \tice President - Boh Sosehee. ':',L::H Ilrlh."nH)t.'r. ('I'"m....rc~ ..J Second Vice President ~ Evelvn Turner. .:..;nr I:or, l.IJillJIHJU'" ..J rhi,o Vice t're..idenl - ,\ndrcw H.urr... .1.J\Qr i'rq i"III, ,~','r'..:lt.;r ~ Immediate P.1)I Presiuent . j(~ilh Di~on. '\\,JVfH. :,If''!Slullll ...: !.Jmeli A. (.JJvin. c,...., t"I\'~ '~lrf" rflr " June 24, 1998 Page 2 Both AGL and GMA had the objective of protecting franchise payments at current levels while providing for receipts that closely mirror the existing process and further, to provide for adjustments for future growth. There are other benefits to the new process such as more stability and predictability in franchise fee receipts through elimination of fluctuations due to weather and changes in gas prices. The modified ordinance is our best effort to assure each city suffers no reduction in the franchise fees that they have been receiving. (Atlanta Gas Light presently pays about 13 million dollani annually in franchise fees to cities.) The new system is volume based, not based on gross sales. The new system is explained in more detail in the attachments. Will municipal franchise fees increase under the modified franchise fee ordinance? Yes. Growth in future franchise fee revenues was a key concern to GMA during the negotiations with AGL. Revenue received by cities will increase in two ways. As new cUstomers are added franchlse fees will increase. In addition, cumulative cost of living increases will be includl:d in the years when AGL goes to the Public Service Commission to modify its rates. If a city loses gas customers, of course, franchise fees will go down. COncllllsion We realize this is a very complex matter, but we believe we have arrived at a solution that is beneficial to all parties. Again, it is imperative that you adopt the attached ordinance in order to continue receiving franchise fees from Atlanta Gas Light Company after November 1, 1998. When adopted and signed by the dty's governing body, the odin:mte should be sent to: CatheJ:ine Land-Waters Atlanta Gas Light Company Post Office Box 4569 Atlanta, Georgia 30302-4569 If you :Jave any questions please feel free to call Don Schanding, Perry Hiott, Greg Fender, or Ed Sumner with Gr.-fA. (404-688-0472). A ttachnents DESCRIPTION OF ATLANTA GAS LIGHT FRAiVCHISE AMENDMENT INTRODUCTION The attached draft is in the form of an ordinance to amend a city's existing Atlanta Gas Light franchise ordinance. The ordinance is designed to insert seven new sections into the existing franchise. If your city's present franchise was adopted in the form of a resolution, the format will need to be changed The amendment does not address the length of the franchise nor the authority of the city to audit AGL to assure proper payment on the assumption that these matters are covered in the original franchise, SECTION BY SECTION ANALYSIS Section 1. This section contains the provisions that are to be inserted into your existing franchise, The following is a discussion of these inserted sections: Section 1. Definitions: The definitions established the framework for the new approachfor the imposition and collection of the franchise fees. The definitions are complex as they are technical terms that are common to the natural gas industry. The definitions establish October 1, 1997, through September 30, 1998. as the base year to be utilized in measuring the initial volume of gas sold in the city. The relationship between the base year, the inflation index and other definitions in establishing your city's future franchise fees are discussed in more detail below. Section 2, Franchise Fee: This is the key provision of the ordinance. The formula establishes the franchise fee attributable to each customer in the base year (October 1997 - September 1998) based on the volume of gas capacity assigned to that customer " under AGL 's Public Service Commission regulatory filing. A per decatherm of capacity franchise fee valuefor the base year will be establishedfor each city. Franchise fees for future years will increase to the extent that the amount of capacity used by gas customers in the city increases. Thus. if the franchise fee value for one decatherm of capacity for the base year is $10, the city will receive an additional $10 for each new decatherm of capacity added during 1999, 2000, 2001, etc. Each customer within the city is assigned capacity. If a new customer locates in the city, that customer will be assigned capacity to serve its load Thus, the total capacity within the city will increase. If a customer in the city stops using gas, the capacity within the city will decrease. Since each customer is assigned capacity, city growth typically will increase the franchise fee. Attached is a sample calculation demonstrating how the formula is actually applied (Remember, if the gas capacity in a city decreases, franchise fees will also decrease) Franchise fees will also be increased for inflation. Inflation increases will not occur, however, until the year in which AGL changes its rates. At that time, the franchise adjustment will be cumulative for all of the consumer price increases for the years between 1998 and whatever year AGL changes the rates. The inflation adjustment will be reduced by what is known as the productivity factor adjustment. This is an offset that the Public Service Commission will make to AGL's rate increases to account for improved efficiency in the delivery of gas. It is anticipated that the productivity factor adjustment will range from 1. 2 to 1. 8 percent per year. based upon (he AGL ra(efiling presently pending before (he Public Service Commission. Thus if the inflation rate increased by 4 percent and the PSC allowed a 1.2 percent P FA adjustment, the inflation factor increase in the franchise fee for that year would be 2.8 percent. Remember, however. that no actual inflation increase in the franchise fee will occur until the year or years in which AGL changes its rates. Inquiries on the actual implementation of the formulas contained in this section of the ordinance should be directed to Don Schanding or Perry Hiott at G/vfA. They can be reached Q[ ../.0../.-688-0472. fax: ../.04-5/i-6663 or email- dshanding.cygmanet. com or phiou@gmanet.com. Section 3. ResDonsibilitv for Pavment of Franchise Fee: AGL will continue to pay franchise fees to the city, A GL will also report the names of gas marketing companies that are transporting gas through the AGL pipes for final use by consumers. This will allow the city to assure that they are reflecting regulatory fees or occupation taxes that may be applicable to gas marketers. The payment of the franchise fee by AGL is in lieu of franchise fees, occupation taxes or other taxes that would otherwise be imposed upon AGL Section 4. Ouarterlv Pavments: Franchise fees will be remitted to the city on a last day of each calendar quarter. Payments will be made 4 times a year. Section 5. Annual Return: AGL has agreed to file a return with each city showing how the franchise fee is calculated for each city. Section 6. Delaved Inflation Ad;ustment: This is the provision discussed in the introduction which delays inflation adjustments until the year or years in which AGL changes its rates. Section 7. Conflicts: If a provision in this amending ordinance conflicts with the original franchise fee ordinance, the provision in this amendment will take precedence. Otherwise, all the other terms and condition of the original franchise fee ordinance remain inforce. For example. provisions on the length of the franchise. right of the city to audit and application of street cut/conslrUction standards to AGL contained in the original franchise fee ordinance will continue to apply. Section 2. This is a standard clause appearing in most ordinances, which repeals any ordinances or parts of ordinances that conflict with this ordinance. Example of Franchise Fee Calculations City A received $100,000 in franchise fees in 1998. The combined "Design Day Capacity" of customers in the city was 20,000 decatherms (Dt.s) in 1998. (This number will be provided for your city by Atlanta Gas Light.) The number of customers in City A is projected to grow by 1 % each year. Base Year Franchise Fee Factor = $100.000 = $5 I Dt. 20,000 Dt.s Therefore, the future franchise fees shall be based on a $5.00 franchise fee for each decatherm of Design Day Capacity, adjusted periodically for inflation. Franchise fees = Fr. Fee Factor x (1 +(inflation - productivity factor)) x DDC Franchise fees in 1999: $5 x (1 +(.04-.015)) x 20,200 = 103,525 Franchise fees in 2000: $5 x (1 +(.0816-.0302)) x 20,402 = 107,251 Franchise fees in 2019: $235,598 Assumptions: A year runs from the beginning of September to the end of August. The cpr changes by an average of 4% per year. TIle productivity factor adjustment is 1.5%. NI~w customers are the same percentage mix of residential and commercial customers as the existing customers. AGL adjusts its rate to account for inflation each year.