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HomeMy WebLinkAboutPO 5680: ENTERGY GULF STATESinteroffice MEMORANDUM To: Mayor, city Council, and City Manager From: Mark T. Sokolow, City Attorney Date: October 20, 2006 Subject: P. O. No. 5680; Council Meeting October 24, 2006 Attached is P. O. No. 5680 amending the Franchise Agreement granted Entergy Gulf States, Inc. MTS:ts Attachment cc: VIA FACSIMILE (512) 474-2507 Mr. Dan Lawton THE LAWTON LAW FIRM z .po5680 .memo P. O. No. 5680 10/20/06 ts ORDINANCE NUMBER AN ORDINANCE AMENDING THE FRANCHISE AGREEMENT GRANTED ENTERGY GULF STATES, INC. WHEREAS, by Ordinance Number 04-51 adopted on August 31, 2004 by the City of Port Arthur ("City"), wherein Entergy Gulf States, Inc. ("EGSI" or "Company") was granted a franchise ("Franchise"), subsequently accepted by EGSI on January 30, 2006 and made effective on February 1, 2006, to conduct within the City an electrical power business and to use the streets, alleys and public ways of the City for the purpose of conducting such business; and, WHEREAS, City and Company desire to amend the Franchise by changing the payments terms: NOW, TItEREFORE, BE IT ORDAINED BY THE CITY OF PORT ARTHUR: Section 1. That the facts and opinions in the preamble are true and correct. Section 2. That Section 9 of the Franchise is hereby amended to read as follows: "Section 9. The design and purpose of this franchise fee compensation clause is to establish an administratively simple uniform method of compensating the City for the use of the public right-of-way that: (1) is consistent with state law; (2) is consistent with the opening of the markets for competition; (3) is competitively neutral and nondiscriminatory; (4) is z.po5680 consistent with the burdens placed on the City created by Company's use of the right-of-way; (5) provides fair and reasonable compensation for the use of the public right-of-way; and (6) provides a mechanism by which Company will remain financially whole with respect to any increases in franchise payments resulting from the implementation of this franchise over and above the franchise fees calculated under the previous franchise agreement, as modified by Section 33.008 of the PURA, together with all associated costs and expenses, including gross receipts taxes. (Hereinafter, such incremental franchise fees and associated costs and expenses, including gross receipts taxes are referred to as "incremental amounts"). 9(a) That in consideration of the right granted by the City to Company to use and occupy the Public Ways in the City for the conduct of its business under this agreement, the Company agrees to pay to the City franchise fees in the amount and manner described herein. Subject to any reduction in payments as provided in this section, Company shall pay on September 1 of each year an amount equal to a $0.0016170 charge per kilowatt hour ("kWh") multiplied times the number of kilowatt hours delivered by Company to each retail customer whose consuming facility's point of delivery was located within the City's boundaries during the twelve month period fi.om July 1 to June 30 preceding the September payment. It is agreed that the payment to be paid on September 1, 2006 will be paid within twenty (20) days of this Agreement being accepted by Company. z.po5680 9(b) That in addition to the payments set out in Subsection 9(a), and subject to the provisions of Subsection 9(g), Company shall pay on or before the 15th day of May, August, November and February an amount equal to a $0.0013777 charge per kilowatt hour multiplied times the number of kilowatt hours delivered by Company during the preceding calendar quarter ending March, June, September, and December, to each retail customer whose consuming facility's point of delivery was located within the City's boundaries. The first quarterly payment due under this subsection will be due on November 15, 2006 for the preceding quarter ending September 30.~ 9(c) That an underlying premise of this franchise agreement and the ordinance implementing it is that the Company shall be kept financially whole with respect to any and all incremental amounts, as defined above in this Section 9. i. Company shall collect such incremental amounts through 1) a corresponding surcharge designed to collect the incremental increases in franchise fees calculated pursuant to the rate set forth in Subsection 9(b) including any increase due to the escalator provided for in Subsection 9(I), over and above the franchise fees calculated under the previous franchise agreement, as modified by Section 33.008 of the PURA, along with all applicable taxes, including gross receipts taxes ("corresponding surcharge"), which surcharge shall be approved by the Public Utility Commission of Texas ("PUCT" or "Commission"), and 2) a direct Prior to the passage of this Amendment, EGSI paid the incremental payments owed for February 2006 through June 2006. z.po5680 payment from the City to Company or a reduction in franchise payments to City, as set forth below. ii. This section is intentionally left blank in that at the time of this Amendment, the franchise and quarterly payments had already become effective. iii. In the event the Company does not collect in the corresponding surcharge all incremental amounts associated with the three-month periods corresponding with the quarterly due dates as set out in Subsection 9(b), the Company is authorized to collect such amounts not collected in the surcharge ("uncollected difference") through either direct payment by City or a reduction of franchise payments to City as provided in this Subsection. Prior to Company's reduction in franchise payments, Company shall provide the City 30 days for a one-time opportunity to make a direct payment to Company of any uncollected difference, such 30 days to mn from City's receipt of Company's written notice, which shall identify the uncollected difference, the time period over which the uncollected difference accrued and a detailed explanation of the calculations. Subsequent to said 30 day period, and in the absence of timely direct payment by the City of the entirety of the uncollected difference, Company is authorized to reduce any future franchise payment(s) in an amount equal to any unpaid uncollected difference not paid by the City. Company is authorized to implement the procedures set z.po5680 fo~h in this Subsection periodically as Company, in its sole discretion, determines is necessary to recover any ongoing uncollected difference. iv. With respect to the preparation for, or implementation of, retail open access in Entergy Gulf States, Inc.'s Texas service territory, City agrees to authorize and support the approval and implementation of a monthly surcharge for both Entergy's affiliate dis~bution company in Texas ("DISCO") and Entergy's affiliate retail electric provider in Texas ("REP") that provides for the collection and recovery of the same amounts as are recovered through the corresponding surcharge described in Subsection 9(c). The monthly surcharge described in this subsection shall be in addition to the base rates otherwise established for DISCO or the Price to Beat rates otherwise established for the REP. v. The corresponding surcharge described in this Subsection 9(c) shall appear as a line item on Company's retail electric bill and be identified as a "Municipal Franchise Fee." 9(d) In addition to the provisions of Subsection 9(c), Company is authorized to reduce the quarterly franchise payments by $150.00. Further, the City shall have until the latter of December 31, 2004 or 90 days after the effective date of this franchise agreement to pay to Company an amount of $24,400.00 for the cost of implementing the provisions of this franchise agreement ("implementation costs"). In the event payment in full is not timely made, the Company is authorized to reduce subsequent franchise payments in an amount necessary to recover the entirety of the implementation costs. z.po5680 9(e) That the City shall bear the costs and expenses of all claims, challenges, and lawsuits, of either the City or Company, regarding the validity of the new franchise agreement or the corresponding surcharge, regardless if such claim or challenge is brought before a regulatory authority or in a federal or state corox of law, including payment of attorneys fees and costs associated with the defense to Company or affiliates of Company for any legal or regulatory challenge to the new franchise agreement or corresponding surcharge, at the time such claim or challenge is made. The costs and expenses referred to in this Subsection include, but are not limited to: i. costs and expenses of the City, related to obtaining the corresponding sumharge; and/or ii. costs and expenses of or to Company, whether such costs and expenses are associated with Company's employees or consultants and/or attomeys retained by Company in the defense of such claims, challenges and lawsuits. 9(f) That such costs and expenses of or to Company, as are enumerated in Subsection 9(e) above, including carrying costs, shall be recovered from the City pursuant to direct payment or a reduction of franchise payments as provided in this Subsection. Prior to Company's reduction in franchise payments, Company shall provide the City 30 days for a one-time opporttmity to make a direct payment to Company of any such costs or expenses, such 30 days to mn from City's receipt of Company's written notice, which written notice shall identify any such costs and expenses. Subsequent to said 30 day period, and in the absence of timely z.po5680 direct payment by the City of the entirety of such costs and expenses, Company is authorized to reduce any future franchise payment(s) in an amount equal to any unpaid portion of such costs and expenses identified. At its sole discretion, Company may recover all costs or expenses identified in any notice in a one-time reduction to a future franchise payment. Company is authorized to pursue the procedure(s) set forth in this Subsection periodically as determined by Company, in its sole discretion, to be required for the recovery any ongoing expenditure of such costs and expenses. 9(g) Upon the occurrence of any of the following events, the franchise fee rate and quarterly payments provided for in Subsection 9(b) shall no longer be applicable or effective for the purpose of calculating the franchise payment: i. the recovery of the incremental amounts through a corresponding surcharge ceases, such as (but not exclusively) through the PUCT's determination that the incremental amounts shall be recovered through the Company's base rates rather than through the corresponding surcharge; ii. the PUCT or a court of competent jurisdiction 1) finds the corresponding surcharge unlawful or otherwise prohibits the surcharge recovery of the incremental amounts; 2) finds that the franchise fees calculated under this Section 9, or the amounts collected through the corresponding sumharge or through a reduction in franchise payments, as provided herein, may not be recovered by Company from its customers; or 3) in some manner prevents or prohibits Company from recovering said incremental amounts; and z.po5680 iii. with respect to the preparation for, or implementation of, retail open access in Entergy Gulf States, Inc.'s Texas service territory, Company or Entergy's affiliate distribution company in Texas ("DISCO") or Entergy's affiliate retail electric provider in Texas ("REP"), at any time, is not permitted to implement the monthly surcharge described in Subsection 9(c)(iv). Upon the occurrence of any of the events enumerated in Subsections 9(g) (i), (ii), or (iii), the franchise rate effective immediately prior to the effective date of this franchise agreement (which rate is reflected in Subsection 9(a)) shall be applicable and effective for the purpose of calculating the franchise payment under this franchise agreement. Further, in the event the PUCT or a court of competent jurisdiction finds a portion of the corresponding surcharge unlawful or otherwise prohibits a portion of the surcharge recovery of the incremental amounts, the franchise rate and quarterly payments provided for under Subsection 9(b) shall be amended and adjusted such that the franchise payment made by the Company to the City is no greater than the amounts the company is authorized to collect through its base rates and the corresponding surcharge. Nothing in the immediately preceding sentence permits the realignment of the recovery of any portion of the incremental amounts from the corresponding surcharge to the Company's base rates, prohibited by Subsection 9(g)i. 9(h) That if the PUCT or a court of competent jurisdiction orders Company to refund to customers any amounts for the franchise fees or any associated costs or expenses, including taxes, collected pursuant to this franchise agreement, such z.po5680 mounts refunded shall be recovered from the City pursuant to a direct payment or a reduction of franchise payments, under the procedure set forth in Subsection 9(c)iii above. 9(i) Entergy Gulf States, Inc. Franchise Fee Recovery Tariff (Corresponding Sumharge) i. City agrees that (a) it will adopt and approve the corresponding surcharge approved by the PUCT and accepted by Company as provided herein and, if required, amend, accordingly, the Municipal Franchise Sumharge attached to the implementing ordinance; (b) if City intervenes in any regulatory proceeding before a federal or state agency in which the recovery of Company's franchise fees is an issue, the City will take an affirmative position supporting 100% recovery of franchise fees by Company in the manner consistent with this agreement; (c) in the event of an appeal of any such regulatory proceeding in which the City has intervened, the City will take an affirmative position in any such appeals in support of the 100% recovery of such franchise fees by Company in the manner consistent with this agreement; and (d) subsequent to this agreement becoming effective, Company may take whatever action with, and seek whatever approval from, the PUCT, that it deems appropriate to continue to achieve full recovery of any incremental amounts under this agreement. z.po5680 ii. City agrees that it will take no action, nor cause any other person or entity to take any action, to prohibit the recovery of such incremental amounts by Company. iii. Neither the adoption of this franchise, the accompanying Ordinance, nor the corresponding tariff shall be used by either the City or the Company, in any proceeding before a regulatory authority or state or federal court of law, as precedent for a reduction in the Company's rates or as evidence of or support for the positions taken by the City or the Company in such matters, other than in requesting PUCT approval of the corresponding surcharge or in any direct court appeal of a PUCT order approving the corresponding surcharge. 90) That at the time of each payment, Company shall also submit to the City a sworn statement showing the following: (i) its kilowatt hour sales delivered to each retail customer whose consuming facility's point of delivery is located within the City's boundaries for the preceding calendar quarter upon which the franchise fee payment is calculated; (ii) a detailed listing of any claimed costs and expenses, including taxes, uncollected difference (not paid by City) and/or claimed refund items (all as referred to in this Section 9); and (iii) a detailed reconciliation of the quarterly franchise payment calculation. 9(k) That all payments made under this franchise shall be exclusive of and in addition to ad valorem taxes. Any and all such payments made by Company pursuant to this Section 9 shall be credited on any amount imposed, levied or assessed against Company by the City of Port Arthur, pursuant to ordinance or otherwise, at any z.po5680 time as a charge (whether designated as rental, tax or otherwise for the use by Company 0f City's streets, alleys and public ways. 9(1) Upon approval by the PUCT as provided herein, and beginmng on the first anniversary of the effective date of this agreement and annually thereafter, Company shall annually adjust the total unit per kWh franchise fee rate, set forth in Subsection 9(b), by an amount to be designated in writing by the City based on one-half the annual increase, if any, in the consumer price index as calculated in accordance with the Local Government Code §283.055(g). The adjustment provided for in this Subsection shall become effective only upon the PUCT's approval of an equivalent adjustment to the corresponding surcharge, which provides for the Company's collection through the corresponding surcharge of the increase in the franchise payment resulting from the adjustment provided in this Subsection. The approval of the PUCT referenced in the immediately preceding sentence may be obtained contemporaneously with, and contained in, a final order approving the corresponding surcharge, subject to acceptance by the Company, in its sole discretion, as provided in Section 11. Section 3. That all provisions of the Franchise, except for Section 9 as amended herein, shall remain in full force and effect and shall not be affected by the passage of this ordinance. Section 4. That this agreement shall become effective upon EGSI's acceptance, in writing (in the form provided below) of the ordinance. To the Honorable Mayor and City Council: z,po5680 EGSI acting by and through the undersigned authorized officer, hereby accepts in all respects, on this the day of ,2006, Ordinance No. amending Franchise Ordinance Number 04-51 granted to Entergy Gulf States, Inc. and the same shall constitute and be a binding contractual obligation of EGSI and the City. Entergy Gulf States, Inc. By: Title: READ, ADOPTED, AND APPROVED this the day of , A.D., 2006, at a Meeting of the City Council of the City of Port Arthur, Texas, by the following vote: AYES: Mayor Councilmembers NOES: Mayor ATTEST: CITY SECRETARY APPROVED AS TO FORM: CITY ATTORNEY APPROVED FOR ADMINISTRATION: CITY MANAGER z.po5680