Title
Consider and take action on ordinance amending Ordinance 2023-24 to expand the limited franchise with Universal Natural Gas, LLC (d/b/a Universal Natural Gas, Inc.) to operate and maintain a gas distribution system for the transportation, distribution and/or sale of gas to customers in League City through the use of public rights-of-way - First Reading (City Manager)
Background:
Approval of this agenda item will authorize the first of three required readings of an ordinance expanding the limited gas franchise to Universal Natural Gas, LLC which operates and maintains a gas distribution system for the transportation, distribution and/or sale of gas to customers in League City through the use of public rights-of-way. Specifically, this franchise expansion will allow service to the Legacy Development in League City. Per Article IX of the League City Charter, any ordinance granting or amending a public utility franchise must have 3 readings before the City Council.
Franchise fees are the rental costs paid by utilities that use the city’s rights-of-way or other city property to transmit their services. Rights of way, just like other land interests, are valuable to a city and cannot be given away to private companies free of charge as required under Article III, Section 52 of the Texas Constitution.
Universal Natural Gas, LLC., (UNIGAS) is a regulated natural gas distribution entity on file with the Texas Railroad Commission. UNIGAS has been around since 1993 and operates all over the State of Texas primarily in areas outside of Houston, DFW, San Antonio, and Austin. Their goal is to provide safe, reliable, and economical natural gas services to residential and commercial customers (unigas-tx.com).
UNIGAS proposes to pay League City a franchise fee of 5% of its gross receipts. The fee is based off of gross receipts or gross revenue generated from UNIGAS, which more accurately reflects the value of the use of the right of way to the utility occupying it. The gross receipts methodology was codified by federal law for cable television providers, and by state law for gas, electric, and water utilities. The term of this franchise expansion matches the original franchise (Ordinance 2023-24), which had a 10 year term with three automatic 5-year renewals. This franchise expansion will renew and/or terminate with the original franchise granted to UNIGAS.
As with the original franchise (Ordinance 2023-24), UNIGAS has committed to offering the lowest of three possible price rates: 1) UNIGAS's rate that has been approved by the Public Utility Commission (PUC), 2) a rate equal to the CenterPoint Energy rate in League City or 3) a rate equal to or less than the lowest UNIGAS rate in Texas. The lowest of the three possible rates is currently the CenterPoint Energy in League City.
If approved, this ordinance would expand the UNIGAS franchise to serve the Legacy Development, show in the attached Aerial Map.
Attachments:
1. Proposed Ordinance
2. Exhibit A - Legacy Development
3. Ordinance 2023-24 - Original Franchise
4. Aerial Map - Legacy Subdivision
FUNDING
{X} Revenue received will be posted in General Fund Natural Gas Franchise Fee revenue account 0100-40430
STRATEGIC PLANNING
{ } Addresses Strategic Planning Critical Success Factor # ______
{x} NOT APPLICABLE