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HomeMy WebLinkAboutO-2019-3746 Granting a Franchise to CenterPoint Energy Resources Corp. CITY OF LA PORTE, TEXAS - ORDINANCE NO. 2019-3746 AN ORDINANCE GRANTING TO CENTERPOINT ENERGY RESOURCES CORP., D/B/A CENTERPOINT ENERGY TEXAS GAS OPERATIONS, THE RIGHT, PRIVILEGE AND FRANCHISE TO CONSTRUCT, INSTALL, EXTEND, REMOVE, REPLACE, ABANDON, OPERATE AND MAINTAIN ITS FACILITIES WITHIN THE PUBLIC RIGHTS-OF-WAY OF THE CITY OF LA PORTE, TEXAS FOR THE TRANSPORTATION, DELIVERY, SALE AND DISTRIBUTION OF NATURAL GAS; CONTAINING OTHER PROVISIONS RELATING TO THE FOREGOING SUBJECT; PROVIDING FOR SEVERABILITY; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; CONTAINING A REPEALING CLAUSE; AND PROVIDING AN EFFECTIVE DATE. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE,TEXAS: Section 1. GRANT OF AUTHORITY. Subject to the terms, conditions and provisions of this ordinance, the right, privilege and franchise is hereby granted to CenterPoint Energy Resources Corp., D/B/A CenterPoint Energy Texas Gas Operations, hereinafter called "Company", to construct, install, extend, remove, replace, abandon, operate and maintain its facilities within the Public Rights-of-Way of the City of La Porte, Texas for the transportation, delivery, sale and distribution of natural gas within the corporate limits of the City of La Porte, Texas as the same are now and as the same may from time to time be extended. Section 2. DEFINITIONS. A. "City"shall mean the City of La Porte, Texas. B. "City Group" shall have the meaning set forth in Section 13 of this Franchise Ordinance. C. "Company" shall mean CenterPoint Energy Resources Corp., D/B/A CenterPoint Energy Texas Gas Operations, a Delaware Corporation, and shall not mean any of its affiliates and subsidiaries who shall have no right,privilege or franchise granted hereunder. D. "Facilities" shall mean pipes, pipelines, natural gas mains, laterals, feeders, regulators, meters, fixtures, connections and attachments and other instrumentalities and appurtenances, used in or incident to providing transportation, distribution, supply and sales of natural gas for heating, lighting,power and any other purposes for which natural gas may now or hereafter be used. E. "Public Rights-of-Way" shall mean the areas in, under, upon, over, across, and along any and all of the present and future Streets (as defined herein) or streams now or hereafter owned or controlled by City. F. "Street" shall mean the surface and the space above and below any public street, road, highway, alley, bridge, sidewalk, or other public place or way. G. "Transport Customer" shall have the meaning set forth in Section 8 of this Franchise Ordinance. Section 3. TERM OF FRANCHISE. This Franchise shall become effective on the Effective Date described in Section 21 of this Franchise Ordinance and shall be in full force and effect for a term of ten(10)years. Section 4. CONSTRUCTION AND MAINTENANCE OF NATURAL GAS DISTRIBUTION SYSTEM. All Facilities installed by Company shall be of sound material and good quality, and shall be laid so that they will not interfere with the artificial drainage of the City or its underground fixtures, or with navigation in or the natural drainage of any stream. All Facilities shall be installed in accordance with applicable Federal and State regulations and in the absence of such regulations in accordance with accepted industry practice. Within the Public Rights-of-Way, the location and route of the Facilities by the Company shall be subject to the reasonable and proper regulation, direction and control of the City or the City official to whom such duties have been delegated. Such regulation shall include, but not be limited to, the right to require in writing to the extent provided in Section 14 of this Franchise Ordinance, the relocation of Company's Facilities at Company's cost within the Public Rights-of-Way of the City whenever such relocation shall be reasonably necessary to accommodate the widening, change of grade, or relocation by City of Streets or Public Rights-of-Way, or construction or relocation by City of City utility lines or drainage facilities. Company shall keep current and up-to-date maps showing the physical location of Company's facilities and make such maps available for inspection by the City at no cost during normal working hours. Section 5. STREETS TO BE RESTORED TO GOOD CONDITION. Company and its contractors shall give City reasonable notice, via electronic mail, of the dates, location, and nature of all work to be performed on its Facilities within the Public Rights-of-Way. Following completion of work in the Public Rights-of-Way, Company shall repair the affected Public Rights-of-Way as soon as possible, but in all cases Company shall comply with all City ordinances (including but not limited to Chapter 62, Article IV "Management of Public Rights-of-Way of the City of La Porte Code of Ordinances) governing time periods and standards relating to excavating in the Public Rights-of-Way. No street, alley, highway or public place shall be encumbered for a longer period than shall be necessary to execute the work. Section 6. PERMITS. Company and its contractors shall obtain a permit prior to its commencement of any planned engineering work, including replacements, extensions and public relocations, within the Public Rights-of-Way, except as otherwise provided below. No permit shall be required for Routine Maintenance in the Public Rights-of-Way, but the Company must provide email notification to the City at least one day prior to the Company's commencement of such work. Company shall be exempt from any existing or future professional engineering stamp or certification requirement of the City. No permit shall be required to promptly initiate emergency repairs and repairs pursuant to the rules and regulations of the Railroad Commission of Texas. All work shall be preceded by an 811 call and be subject to the Texas One-Call Statute (Texas Utilities Code, Chapter 251, and any successor statutes). Company shall give the City telephone notice of the initiation of emergency repairs involving breaks in the paved surface of the Public Rights-of-Way, including sidewalks and curbs, as soon as practicable under the circumstances and shall submit a permit promptly following completion of the work. Company and contractors performing work for the Company shall not be required to obtain any permits for relocations of Facilities requested by the City, provided that the relocated facilities are placed in the location designated by the City and relocation is otherwise in accordance with the City's request to relocate. This Franchise shall constitute a permit to park vehicles in the Streets and other Public Rights-of-Way when necessary for the installation, replacement, abandonment, operation or maintenance of Company's Facilities. Company and contractors performing work for Company shall not be required to pay any fee in addition to the franchise fee in order to obtain a permit to perform work on Company's Facilities, or park within the Streets and other Public Rights-of-Way. City shall not be required to pay any fee in order to obtain a letter of consent from the Company regarding the City's abandonment of Public Rights-of-Way. However, any third party associated with the City's abandonment shall pay all costs related to the abandonment process. Section 7. QUALITY OF SERVICE. The service furnished hereunder to the City and its inhabitants shall be in accordance with the quality of service rules of the Railroad Commission of Texas (Texas Administrative Code, Title 16, Part 1, Chapter 7), state and federal regulations. Company shall furnish the grade of service to its customers as provided by its rate schedules and shall maintain its system in reasonable operating condition during the continuance of this Franchise. An exception to this requirement is automatically in effect, but only for so long as is necessary, when caused by a shortage in materials, supplies and equipment beyond the control of the Company as a result of fires, strikes, riots, storms, floods and other casualties, governmental regulations, limitations and restrictions as to the use and availability of materials, supplies and equipment and as to the use of the services, and unforeseeable and unusual demands for service. In any of such events the Company shall do all things reasonably within its power to restore normal service as quickly as practicable. Section 8. PAYMENT TO THE CITY. In consideration of the rights and privileges herein granted, the administration of the Franchise by the City, the temporary interference with the use of Public Rights-of-Way and cost and obligations undertaken by the City in relation thereto and in lieu of any license, charge, fee, street or alley rental or other character of charge for use and occupancy of the Streets, alleys, and public places of the City, and in lieu of any inspection fee, the Company agrees to pay to the City franchise fees in the amount and manner described herein as follows: Company agrees to pay to the City quarterly during the continuance of this Franchise a sum of money equal to three percent (3.00%) of the Company's gross receipts for the preceding calendar quarter received by the Company from the sale of gas within the corporate limits of the City plus seven cents (70) per Mcf for natural gas transported by Company for its Transport Customers during such quarter, without offset or exclusion of any amounts received by Company for receipts associated with Miscellaneous Service Charges, as defined and set forth in the Company's tariff. "Transport Customer" means any person or entity for whom Company transports gas through the distribution system of Company within the corporate limits of City for consumption within the corporate limits of City. The franchise fees hereunder shall be calculated for the calendar quarters ending March 31, June 30, September 30, and December 31 and shall be payable on or before the fifteenth day of May, August, November, and February following the quarter for which payment is made, beginning with the first such date following the Effective Date of this Franchise and each August 15th, November 15th, February 15th, and May 15th thereafter; provided, however, the first such payment shall be prorated as necessary to reflect only those gross receipts received and transportation volumes delivered by Company after the Effective Date of this Franchise. If the ten(10)year term of this Franchise provided for in Section 3 above ends on any day other than the last day of a calendar quarter, then the last payment shall be prorated as necessary. In no event shall the Company be required to remit to the City franchise fee amounts that for any reason whatsoever are not fully recoverable from its customers. Upon receipt of the above amount of money, the City Secretary shall deliver to the Company a receipt for such amount. If any payment due date required herein falls on a weekend or bank holiday,payment shall be made on or before the close of business of the first working day after the payment due date. Section 9. ANNEXATIONS BY CITY. This Franchise shall extend to and include any and all territory that is annexed by the City during the term of this Franchise. Within sixty (60) days from the receipt of notice from the City of any such annexation, the Company shall assure that any and all customers within such annexed territory are included and shown on its accounting system as being within the corporate limits of the City of La Porte, Texas. After such sixty (60) day period the payment provisions specified in Section 7 of this Franchise Ordinance shall apply to gross receipts and transport fees received by the Company from customers located within such annexed territory. Company shall true-up its map of City boundaries to the City's map on an annual basis. Section 10. NON-EXCLUSIVE FRANCHISE. Nothing contained in this Franchise shall ever be construed as conferring upon the Company any exclusive rights or privileges of any nature whatsoever. Section 11. COMPLIANCE AND REMEDIES. (a) In the event the Company by act or omission violates any material term, condition or provision of this Franchise, the City shall notify the Company in writing of such violation. Should the Company fail or refuse to correct any such violation within thirty (30) days from the date of City's notice, the City shall, upon written notification to the Company, have the right to terminate this agreement. Any such termination and cancellation shall be by ordinance adopted by City Council; provided, however, before any such ordinance is adopted, the Company must be given at least sixty (60) days' advance written notice. Such notice shall set forth the causes and reasons for the proposed termination and cancellation, shall advise the Company that it will be provided an opportunity to be heard by City Council regarding such proposed action before any such action is taken and shall set forth the time, date and place of the hearing. (b) Other than its failure, refusal or inability to pay its debts and obligations, including, specifically, the payments to the City required by this Franchise, the Company shall not be declared in default or be subject to any sanction under any provision of this Franchise in those cases in which performance of such provision is prevented by reasons beyond its control. (c) The rights and remedies of City and Company set forth herein shall be in addition to, and not in limitation of, any other rights and remedies provided at law or in equity and City's exercise of any particular remedy shall not constitute a waiver of its rights to exercise any other remedy. Section 12. RESERVE OF POWERS. Except as otherwise provided in this Franchise, the City by the granting of this Franchise does not surrender or to any extent lose, waive, impair or lessen the lawful powers, claims and rights, now or hereafter vested in the City under the Constitution and statutes of the State of Texas and under the Charter and Ordinances of the City of La Porte or other applicable law, to regulate public utilities within the City and to regulate the use of the Streets by the Company; and the Company by its acceptance of this Franchise agrees that, except as otherwise provided in this Franchise, all lawful powers and rights, whether regulatory or otherwise, as are or as may be from time to time vested in or reserved to the City, shall be in full force and effect and subject to the exercise thereof by the City at any time and from time to time. Section 13. INDEMNITY. THE COMPANY,ITS SUCCESSORS AND ASSIGNS,SHALL PROTECT AND HOLD THE CITY AND ITS OFFICERS, AGENTS, AND EMPLOYEES (COLLECTIVELY REFERRED TO IN THIS SECTION AS "CITY GROUP") HARMLESS AGAINST ANY AND ALL CLAIMS OR DEMANDS FOR DAMAGES TO ANY PERSON OR PROPERTY BY REASON OF THE CONSTRUCTION AND MAINTENANCE OF THE COMPANY'S NATURAL GAS DISTRIBUTION SYSTEM,OR IN ANY WAY GROWING OUT OF THE RIGHTS GRANTED BY THIS FRANCHISE, EITHER DIRECTLY OR INDIRECTLY,OR BY REASON OF ANY ACT,NEGLIGENCE OR NONFEASANCE OF THE COMPANY OR THE CONTRACTORS,AGENTS OR EMPLOYEES OF THE COMPANY OR ITS SUCCESSORS AND ASSIGNS, AND SHALL REFUND TO CITY GROUP ALL SUMS WHICH CITY GROUP MAY BE ADJUDGED TO PAY ON ANY SUCH CLAIM, OR WHICH MAY ARISE OR GROW OUT OF THE EXERCISE OF THE RIGHTS AND PRIVILEGES HEREBY GRANTED OR BY THE ABUSE THEREOF, AND THE COMPANY OR ITS SUCCESSORS AND ASSIGNS SHALL INDEMNIFY AND HOLD CITY GROUP HARMLESS FROM AND ON ACCOUNT OF ALL DAMAGES, COSTS, EXPENSES, ACTIONS, AND CAUSES OF ACTION THAT MAY ACCRUE TO OR BE BROUGHT BY, A PERSON, PERSONS,COMPANY OR COMPANIES AT ANY TIME HEREAFTER BY REASON OF THE EXERCISE OF THE RIGHTS AND PRIVILEGES HEREBY GRANTED,OR OF THE ABUSE THEREOF. Section 14. RELOCATION OF FACILITIES. The Company shall, upon written request of the City, relocate its Facilities within Public Rights-of-Way at Company's own expense, exclusive of Facilities installed for service directly to City, whenever such shall be reasonably necessary on account of the widening, change of grade, or relocation by City of Public Rights-of-Way, or construction or relocation by City of City utility lines or drainage facilities. City shall bear the costs of all relocations of Facilities installed for service directly to City and of any relocation of other Facilities requested by City for reasons other than the widening, change of grade, or relocation by City of Public Rights-of- Way, or construction or relocation by the City of City utility lines or drainage facilities. Section 15. GOVERNMENTAL FUNCTION. All of the regulations and activities required by this Franchise are hereby declared to be governmental functions and for the health, safety and welfare of the general public. Section 16. RECORDS AND REPORTS. (a) Books of Account. The Company shall keep complete and accurate books of accounts and records of its business and operations under and in connection with this Franchise. All such books of accounts and records shall be kept at the company's principal office in Houston, Texas. (b) Access by City. The City may conduct an audit or other inquiry or may pursue a cause of action in relation to the payment of the franchise fee only if such audit, inquiry, or pursuit of a cause of action concerns a payment made less than three (3) years before the commencement of such audit, inquiry, or pursuit of a cause of action. Each party shall bear its own costs of any such audit or inquiry. Upon receipt of a written request from the City, all books and records related to Company's operations under this Franchise shall be made available for inspection and copying no later than thirty (30) days from receipt of such request. (c) Interest on Underpayments and Overpayments. (1) Amounts due to City for late payments shall include interest, compounded daily equal to the return on equity plus three percent (3%) granted to the Company in its most recent proceeding fixing rates applicable to customers within the corporate limits of the City. (2) If the City identifies, as a result of a franchise fee compliance review, amounts owed by the Company from prior periods or prior underpayments, then the Company shall pay simple interest on such amounts equal to the return on equity granted to the Company in its most recent proceeding fixing rates applicable to customers within the corporate limits of the City. Said interest shall be payable on such sums from the date the initial payment was due until it is paid and shall not be billed to customers. (3) Amounts due Company for past overpayments shall include simple interest equal to the return on equity granted to the Company in its most recent proceeding fixing rates applicable to customers within the corporate limits of the City; provided, however, if there is a change in the approved return on equity during the time period subject to the City's audit or inquiry, then for each time period during which there was an overpayment, the approved return on equity in effect during such time period shall be used in calculating interest under this subparagraph (c). Interest payable on such sums shall be credited to customers. Section 17. EASEMENT. In consideration for the compensation set forth in Section 8 of this Franchise Ordinance, City agrees that if City sells, conveys, or surrenders possession of any portion of the Public Right-of-Way that is being used by Company pursuant to this Franchise, City, to the maximum extent of its right to do so, shall first grant Company an easement for such use and the sale, conveyance, or surrender of possession of the Public Right-of-Way shall be subject to the right and continued use of Company. Section 18. ACCEPTANCE. The Company shall, within thirty (30) days following the final passage and approval of this Franchise, file with the City Secretary of the City of La Porte either 1) a written statement signed in its name and behalf in the following form or 2) this document duly executed below by the Vice President of Regional Operations: "To the Honorable Mayor: and City Council of the City of La Porte, Texas: CenterPoint Energy Resources Corp., D/B/A CenterPoint Energy Texas Gas Operations, its successors and assigns, hereby accepts the attached Franchise Ordinance and agrees to be bound by all of its terms and provisions." CENTERPOINT ENERGY RESOURCES CORP., DBA CENTERPOINT ENERGY TEXAS GAS OPERATIONS Talmadge R. Centers Jr., Division Vice President, Regional Operations Dated this day of , 2019. Section 19. SEVERABILITY. If any provision, section, subsection, sentence, clause or phrase of this Franchise is for any reason held to be unconstitutional, void, or invalid or for any reason unenforceable, the validity of the remaining portions of this Franchise shall not be affected thereby, it being the intent the City of La Porte, Texas in adopting this Franchise that no portion hereof or provision hereof shall become inoperative or fail by reason of any unconstitutionality or invalidity of any other portion, provision or regulation and, to this end, all provisions of this ordinance are declared to be severable. Section 20. NOTICES. Every notice, order, petition, documents or other direction or communication to be served upon the City or the Company shall be deemed sufficiently given if sent by registered or certified mail, return receipt requested. Every such communication to the Company shall be sent to: CenterPoint Energy Resources Corp. Vice President Regulatory Relations PO Box 4567 Houston, TX 77210-4567 With a copy to: General Counsel, Gas Division PO Box 2628 Houston, TX 77252-2628 Every such communication to the City or the City Council shall be sent to the: Mayor, City of La Porte, Texas 604 W. Fairmont Pkwy. La Porte, Texas 77571 With a copy to: City Secretary 604 W. Fairmont Pkwy. La Porte, Texas 77571 Section 21. PUBLICATION, PASSAGE AND EFFECTIVE DATE. This Franchise, having been published in the official newspaper of the City of La Porte, Texas once each week for four consecutive weeks after its final passage, shall take effect sixty days after final passage ("Effective Date"). The Company shall pay the cost of those publications. Section 22 COMPLIANCE WITH TEXAS OPEN MEETINGS LAW. The City Council officially finds, determines, recites, and declares that a sufficient written notice of the date, hour, place, and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code; and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered, and formally acted upon. The City Council further ratifies, approves, and confirms such written notice and the contents and posting thereof. Section 23. REPEAL. All ordinances or parts of ordinances in conflict herewith are hereby repealed to the extent of the conflict only. Section 24. COMPLIANCE WITH CHARTER AND ORDINANCES. This Franchise, the rights granted hereby and the operations and activities performed by Company pursuant hereto shall be subject to applicable provisions of the Charter of the City of La Porte, Texas. Except to the extent otherwise expressly provided herein, the Franchise and rights granted hereby and the operations and activities performed by Company pursuant hereto, shall be subject to all valid ordinances and regulations of the City insofar as such ordinances and regulations (a) do not shorten the term hereof or terminate, abrogate, or materially and adversely affect the Franchise and right granted to Company hereby, (b) do not conflict with or are not inconsistent with the terms and provisions contained in this ordinance, (c) do not modify, preempt, or cause Company to violate the terms of a tariff approved by the Railroad Commission of Texas, Railroad Commission Rules, or the Gas Utility Regulatory Act, or (d)do not unreasonably regulate the Company's operations and activities in the City Right of Way. Section 25. APPROVAL. Read in full on its first reading at a regular meeting of the City Council of La Porte, Texas, on the 24th day of June, 2019, and read in full and passed and adopted on its second reading at a regular meeting of the City Council of La Porte, Texas, on the �(th day of nA5V" , 2019 and approved by the Mayor. CITY OFr ' S ' E, TEXAS alb 111 Lo W. Rigby,Ma ATTEST: APPROVED AS TO FORM: 1 0 11 t : ". ,,,,,,...1., ,,odward, w 5711.57- Clark T. Askins,Assistant City Attorney THE STATE OF TEXAS § COUNTY OF HARRIS § I, the duly appointed, qualified and acting City Secretary of City of La Porte, Texas, do hereby certify that the above and foregoing ordinance was read on first and second readings at regular meetings of the City Council of said City of La Porte, Texas, held on the 24th day of June, 2019 and on the A(0 day of Rk Au ! • ,2019;that written notice of the date,place and subject of said meetings were posted on a bulletin board located at a place convenient to the public in the City Hall, as well as on the City of La Porte, Texas' website, for at least 72 hours preceding the day of said meetings; that Mayor Louis Rigby and six (6) Councilpersons: 1. Steve Gillett 4. Thomas Garza 2. Brandon Lunsford 5. Bill Bentley 3. Jay Martin 6. Danny Earp were present at the meeting for the first reading of the above and foregoing ordinance and acted as the Council throughout;that the Mayor Louis Rigby, and C`ouncilpersons: 1. 11111 • • 5. l V�OrYNc � 2. CS.A I,, i� 6. N\ �' n 111*s 7. Iv as 4. atu30_,GA as. 8. were present at the meeting for the second reading of the above and foregoing ordinance and acted as the Council throughout; that the same has been signed and approved by the Mayor and is duly attested by the City Secretary; and that the same has been duly filed with the City Secretary and recorded by the City Secretary in full in the books for the purpose of recording the ordinances of the City of La Porte,Texas. EXECUT under my hand and the official seal of the City of La P. e,Texas at said City,this 1l9 day of ,2019. ,ip oodward, Ci - - - , • of La Porte, Texas [SEAL] Cit�5ecretary's Office May 20, 2005 {n - 4 J Honorable Mayor and City Officials City of La Porte 144? 2 4 206 City Hall crw c 3ECRE..cAst: 3 LaPorte, TX 77571 OFFICE RE: Filing of Residential and Commercial Rate Schedules for CENTERPOINT ENERGY HOUSTON GAS. Honorable Mayor and City Officials: For many years, CenterPoint Energy has supplied LaPorte with reliable and dependable natural gas service. We will continue to make a conscientious effort to meet our customers' needs under all operating conditions and will continue to provide the same high quality natural gas service that CenterPoint Energy has been known for throughout the years. This year, CenterPoint Energy is pleased to report that rates will decrease with all bills rendered on and after May 2, 2005. •In accordance with Section 102.151 of the Texas Utilities Code, CenterPoint Energy hereby files Rate Schedules R-870-land SC-870-1 that reflects a decrease of$0.25 per customer per month to be effective with all bills rendered on and after May 2,2005. This filing is made so that you will be informed of the rates in LaPorte. No action by the City is necessary. Please do not hesitate to contact us if you have any questions. As always,CenterPoint Energy will strive to do everything possible to merit your continued confidence in our Company. Sincerely, A Doug Ward Region Manager DW/rsm Attachments DELIVERED TO: / ,c NAME OFFICE(Mnpr,City Smeary.cit.) The City of LaPorte on thin day of 2005. SIONANRE CENTERPOINT ENERGY ENTEX RATE SHEET RESIDENTIAL SERVICE RATE SCHEDULE NO.R-870-1 APPLICATION OF SCHEDULE This schedule is applicable to consumers receiving gas for uses usual in a home through a single meter serving a single family dwelling and its related structures. Natural gas supplied hereunder is for the individual use of the customer at one point of delivery and shall not be resold or shared with others. NET MONTHLY RATE First 400 cubic feet or less $12.43+$.37662 per 100 cubic feet Next 2,600 cubic feet .49962 per 100 cubic feet Next 3,000 cubic feet .48662 per 100 cubic feet Next 10,000 cubic feet .46662 per 100 cubic feet Over 16,000 cubic feet .43162 per 100 cubic feet $.42562 per 100 cubic feet of gas over 6,000 cubic feet in each of the billing months of May through October,inclusive. MINIMUM MONTHLY BILL $12.43 PAYMENT The above net monthly rates will apply to all bills paid by date indicated on bill. For bills not paid by indicated date, • gross rates shall apply,which rates shall be the above net rates plus ten percent(10%),not to exceed$3.00. PURCHASED GAS ADJUSTMENT PROVISION The above net monthly rate per unit sold is predicated upon a price of gas purchased for resale hereunder of$3.8311 per McL To the extent that CENTERPOINT ENERGY ENTEX's(hereinafter referred to as"Company')price of gas to be purchased (adjusted to correct any prior variations from actual costs)for resale hereunder increases or decreases, said net monthly rate shall be adjusted up or down to reflect(i)changes in such cost of gas per unit sold and(ii)changes in gross receipts taxes resulting from such increases or decreases in the net monthly rate. For purposes of calculating said adjustment,it shall be proper for Company to determine its cost of gas from its several suppliers and the gross receipts taxes to be paid on the basis of a logical geographical area. If Company receives any refunds of any increased cost of purchased gas that have been passed on under this provision,a refund shall be made to consumers served by this rate schedule. COST OF SERVICE ADJUSTMENT PROVISION Annually, effective with all bills rendered after May 1, 1981, the above net monthly rate shall be adjusted upward or downward for increases or decreases in the cost of providing gas service(including depreciation but excluding cost of gas,gross receipts taxes,income taxes and return) for the previous year ended December 31 above or below such cost incurred in the second prior calendar year. These annual adjustments shall be cumulative. The operating expenses used in this computation shall be those reported to the Railroad Commission of Texas in the annual report of Company. A computation shall be made of the amount of such increase or decrease applicable to each customer in the Texas Coast Division, and the net monthly rate set forth above shall be adjusted upward or downward to reflect such change in the cost of providing gas service. CENTERPOINT ENERGY ENTEX RATE SHEET RESIDENTIAL SERVICE RATE SCHEDULE NO.R-870-1 COST OF SERVICE ADJUSTMENT PROVISION cont'd. All adjustments that become applicable pursuant to the terms of the foregoing paragraph shall become effective only after thirty days prior written notice to the Regulatory Authority of the approximate amount of the proposed adjustment and such proposed adjustment shall not become effective if disapproved by action of the Regulatory Authority during such 30 day period. • L Service under this schedule shall be furnished in accordance with the Company's General Rules and Regulations. CENTERPOINT ENERGY ENTEX RATE SHEET COMMERCIAL SERVICE RATE SCHEDULE NO.SC-870-1 APPLICATION OF SCHEDULE This schedule is applicable to consumers using gas for purposes other than residential whose consumption in any month is less than 150,000 cubic feet. When a customer uses in excess of 150,000 cubic feet in any month,the consumer shall be billed on the applicable large volume rate schedule. Natural gas supplied hereunder is for the individual use of the customer at one point of delivery and shall not be resold or shared with others. NET MONTHLY RATE First 400 cubic feet or less $12.93+ $.37662 per 100 cubic feet Next 8,600 cubic feet .50962 per 100 cubic feet Next 11,000 cubic feet .48662 per 100 cubic feet Next 10,000 cubic feet .45162 per 100 cubic feet Over 30,000 cubic feet .43662 per 100 cubic feet MINIMUM MONTHLY BILL $12.93 PAYMENT The above net monthly rates will apply to all bills paid by date indicated on bill. For bills not paid by indicated date, gross rates shall apply,which rates shall be the above net rates plus ten percent(10%),not to exceed$5.00. • PURCHASED GAS ADJUSTMENT PROVISION The above net monthly rate per unit sold is predicated upon a price of gas purchased for resale hereunder of$3.8311 per Mcf To the extent that CENTERPOINT ENERGY ENTEX's(hereinafter referred to as"Company'l price of gas to be purchased (adjusted to correct any prior variations from actual costs)for resale hereunder increases or decreases,said net monthly rate shall be adjusted up or down to reflect(i)changes in such cost of gas per unit sold and(ii)changes in gross receipts taxes resulting from such increases or decreases in the net monthly rate. For purposes of calculating said adjustment,it shall be proper for Company to determine its cost of gas from its several suppliers and the gross receipts taxes to be paid on the basis of a logical geographical area. If Company receives any refunds of any increased cost of purchased gas that have been passed on under this provision,a refund shall be made to consumers served by this rate schedule. COST OF SERVICE ADJUSTMENT PROVISION Annually, effective with all bills rendered after May 1, 1981, the above net monthly rate shall be adjusted upward or downward for increases or decreases in the cast of providing gas service(including depreciation but excluding cost of gas, gross receipts taxes,income taxes and return)for the previous year ended December 31 above or below such cost incurred in the second prior calendar year. These annual adjustments shall be cumulative. The operating expenses used in this computation shall be those reported to the Railroad Commission of Texas in the annual report of Company. A computation shall be made of the amount of such increase or decrease applicable to each customer in the Texas Coast Division, and the net monthly rate set forth above shall be adjusted upward or downward to reflect such change in the cost of providing gas service. 1 I . • • CENTERPOINT ENERGY ENTEX ® RATE SHEET COMMERCIAL SERVICE RATE SCHEDULE NO.SC-870-1 COST OF SERVICE ADJUSTMENT PROVISION confd. All adjustments that become applicable pursuant to the terms of the foregoing paragraph shall become effective only after thirty days prior written notice to the Regulatory Authority of the approximate amount of the proposed adjustment and such proposed adjustment shall not become effective if disapproved by action of the Regulatory Authority during such 30 day period. • L Service under this schedule shall be furnished in accordance with the Company's General Rules and Regulations. CenterPoint,. Energya ` MAy t62®% IT`1 gEGR6TAA(IS May 1,2006 OFFICE Honorable Mayor and City Officials City of La Porte City Hall La Porte, TX RE: Filing of Residential and Commercial Rate Schedules for CENTERPOINT ENERGY Honorable Mayor and City Officials: For many years, CenterPoint Energy has supplied La Porte with reliable and dependable natural gas service. We will continue to make a conscientious effort to meet our customers'needs under all operating conditions and will continue to provide the same high quality natural gas service that CenterPoint Energy has been known for throughout the years. This year, CenterPoint Energy is pleased to report that rates will decrease with all bills rendered on and after May 1,2006. In accordance with Section 102.151 of the Texas Utilities Code, CenterPoint Energy hereby files Rate Schedules R-870-1 and SC-870-1 that reflect a decrease of$0.45 per customer per month to be effective with all bills rendered on and after May 1,2006. This filing is made so that you will be informed of the rates in La Porte. No action by the City is necessary. Please do not hesitate to contact us if you have any questions. As always; CenterPoint Energy will strive to do everything possible to merit your continued confidence in our Company. Sincerely, / Doug W32 Region Manager Attachments DELIVERED TO: " //�1 ,,,,11 /I 1 �7,� _ / '. Shot.fal 1-h !iS .A J7, C1 A7V rre&q of NAME OFF, oaw..City sm .dc.) The City of La Porte on this k. day oft a,l�_ ,2006. �6� �IV�Jt2�-✓� SIGNATURE CENTERPOINT ENERGY ENTEX RATE SHEET RESIDENTIAL SERVICE RATE SCHEDULE NO.R-870-1 APPLICATION OF SCHEDULE This schedule is applicable to consumers receiving gas for uses usual in a home through a single meter serving a single family dwelling and its related structures. Natural gas supplied hereunder is for the individual use of the customer at one point of delivery and shall not be resold or shared with others. NET MONTHLY RATE First 400 cubic feet or less $11.98+$37662 per 100 cubic feet Next 2,600 cubic feet .49962 per 100 cubic feet Next 3,000 cubic feet .48662 per 100 cubic feet Next 10,000 cubic feet .46662 per 100 cubic feet Over 16,000 cubic feet .43162 per 100 cubic feet $.42562 per 100 cubic feet of gas over 6,000 cubic feet in each of the billing months of May through October, inclusive. MINIMUM MONTHLY BILL $11.98 PAYMENT The above net monthly rates will apply to all bills paid by date indicated on bill. For bills not paid by indicated date,gross rates shall apply,which rates shall be the above net rates plus ten percent(10%),not to exceed$3.00. PURCHASED GAS ADJUSTMENT PROVISION The above net monthly rate per unit sold is predicated upon a price of gas purchased for resale hereunder of $3.831 I per Mcf To the extent that CENTERPOINT ENERGY ENTEX's(hereinafter referred to as"Company")price of gas to be purchased(adjusted to correct any prior variations from actual costs)for resale hereunder increases or decreases, said net monthly rate shall be adjusted up or down to reflect(i)changes in such cost of gas per unit sold and(ii)changes in gross receipts taxes resulting from such increases or decreases in the net monthly rate. For purposes of calculating said adjustment, it shall be proper for Company to determine its cost of gas from its several suppliers and the gross receipts taxes to be paid on the basis of a logical geographical area. If Company receives any refunds of any increased cost of purchased gas that have been passed on under this provision,a refund shall be made to consumers served by this rate schedule. COST OF SERVICE ADJUSTMENT PROVISION Annually,effective with all bills rendered after May 1, 1981,the above net monthly rate shall be adjusted upward or downward for increases or decreases in the cost of providing gas service(including depreciation but excluding cost of gas, gross receipts taxes, income taxes and return) for the previous year ended December 31 above or below such cost incurred in the second prior calendar year. These annual adjustments shall be cumulative. The operating expenses used in this computation shall be those reported to the Railroad Commission of Texas in the annual report of Company. A computation shall be made of the amount of such increase or decrease applicable to each customer in the Texas Coast Division,and the net monthly rate set forth above shall be adjusted upward or downward to reflect such change in the cost 1 of providing gas service. CENTERPOINT ENERGY ENTEX RATE SHEET RESIDENTIAL SERVICE RATE SCHEDULE NO.R-870-1 COST OF SERVICE ADJUSTMENT PROVISION cont'd. All adjustments that become applicable pursuant to the terms of the foregoing paragraph shall become effective only after thirty days prior written notice to the Regulatory Authority of the approximate amount of the proposed adjustment and such proposed adjustment shall not become effective if disapproved by action of the Regulatory Authority during such 30 day period. Service under this schedule shall be furnished in accordance with the Company's General Rules and Regulations. CENTERPOINT ENERGY ENTEX RATE SHEET COMMERCIAL SERVICE RATE SCHEDULE NO.SC-870-1 APPLICATION OF SCHEDULE This schedule is applicable to consumers using gas for purposes other than residential whose consumption in any month is less than 150,000 cubic feet. When a customer uses in excess of 150,000 cubic feet in any month,the consumer shall be billed on the applicable large volume rate schedule. Natural gas supplied hereunder is for the individual use of the customer at one point of delivery and shall not be resold or shared with others. NET MONTHLY RATE First 400 cubic feet or less $12.48+ $37662 per 100 cubic feet Next 8,600 cubic feet .50962 per 100 cubic feet Next 11,000 cubic feet .48662 per 100 cubic feet Next 10,000 cubic feet .45162 per 100 cubic feet Over 30,000 cubic feet .43662 per 100 cubic feet MINIMUM MONTHLY BILL $12.48 PAYMENT The above net monthly rates will apply to all bills paid by date indicated on bill. For bills not paid by indicated date,gross rates shall apply,which rates shall be the above net rates plus ten percent(10%),not to exceed$5.00. PURCHASED GAS ADJUSTMENT PROVISION The above net monthly rate per unit sold is predicated upon a price of gas purchased for resale hereunder of $3.8311 per Mcf. To the extent that CENTERPOINT ENERGY ENTEX's(hereinafter referred to as"Company")price of gas to be purchased(adjusted to correct any prior variations from actual costs)for resale hereunder increases or decreases, said net monthly rate shall be adjusted up or down to reflect(i)changes in such cost of gas per unit sold and(ii)changes in gross receipts taxes resulting from such increases or decreases in the net monthly rate. For purposes of calculating said adjustment, it shall be proper for Company to determine its cost of gas from its several suppliers and the gross receipts taxes to be paid on the basis of a logical geographical area. If Company receives any refunds of any increased cost of purchased gas that have been passed on under this provision,a refund shall be made to consumers served by this rate schedule. COST OF SERVICE ADJUSTMENT PROVISION Annually,effective with all bills rendered after May 1, 1981,the above net monthly rate shall be adjusted upward or downward for increases or decreases in the cost of providing gas service (including depreciation but excluding cost of gas, gross receipts taxes, income taxes and return) for the previous year ended December 31 above or below such cost incurred in the second prior calendar year. These annual adjustments shall be cumulative. The operating expenses used in this computation shall be those reported to the Railroad Commission of Texas in the annual report of Company. A computation shall be made of the amount of such increase or decrease applicable to each customer in the Texas Coast Division,and the net monthly rate set forth above shall be adjusted upward or downward to reflect such change in the cost of providing gas service. CENTERPOINT ENERGY ENTEX RATE SHEET COMMERCIAL SERVICE RATE SCHEDULE NO.SC-870-1 COST OF SERVICE ADJUSTMENT PROVISION coned. All adjustments that become applicable pursuant to the terms of the foregoing paragraph shall become effective only after thirty days prior written notice to the Regulatory Authority of the approximate amount of the proposed adjustment and such proposed adjustment shall not become effective if disapproved by action of the Regulatory Authority during such 30 day period. Service under this schedule shall be furnished in accordance with the Company's General Rules and Regulations. February 21, 2008 Mr. Ron Bottoms City Manager City of La Porte Mr. John Joerns Assistant City Manager City of La Porte Mr. Steve Gillett Director of Public Works City of La Porte Re: Renewal of Centerpoint Energy Resources Corp. , dba Centerpoint Energy Texas Gas Operations, Franchise Agreement Gentlemen: I enclose herewith second draft dated February 21, 2008, of the above referenced gas franchise agreement. This draft incorporates the comments of Ron Bottoms in his email of February 11, 2008, except his comment "we need to beef up our verbiage on drainage as it relates to their construction activities. " I would like some further direction on this clause, at our meeting which is scheduled for Tuesday, February 26th, at 3 :00 p.m. I added the map filing requirement as a new subparagraph (i) , to Section 2 of the draft . Also, Ron Bottoms has furnished me with a copy of the City of Tyler gas franchise agreement, for your review prior to our meeting, so that we may discuss provisions of the Tyler ordinance that we may wish to include in the La Porte ordinance. Yours very truly, Knox W. Askins City Attorney City of La Porte KWA:sw Enclosures Page I of 1 Knox W. Askins From: Bottoms, Ron [BottomsR@ci.la-porte.tx.us] Sent: Monday, February 11, 2008 2:50 PM To: Knox W. Askins Cc: Gillett, Steve; Joems, John Subject: Centerpoint Energy Franchise Agreement Knox, I have reviewed the draft agreement and I have a number of questions/issues. In comparing the new agreement with the existing agreement there are a number of substantive changes that have been made-the most significant being the removal of the favored nations clause. Other changes: .fleleted $500/day charge for out of compliance IX moved from quarterly payments to annual -deleted the existing sections 16,17 and 18 /,deleted wording in section 13 f//deleted Centerpoints responsibility to pay for up to 100' line extensions deleted section 12 I also think we need to look at in reasin the franchise Dercentaae(currently.3?y).-.I.-noted-where3 f ter receives 4%. I think we need beef up our verbiage on drainage as it relates to their construction activitie I also think we should require them to a�nnuaf provide us a map aver o elr utility lines(type, saes and pressures)compatible with our GIS system. By the way Tyler duked it out with CenterPoint a couple of years ago and their franchise agreement(which I have a copy) is pretty extensive. I'll ask Dawn to set up a meeting for next week to discuss. Thanks, Ron 2/18/2008 ORDINANCE NO. 2008- AN ORDINANCE GRANTING CENTERPOINT ENERGY RESOURCES CORP. , DBA CENTERPOINT ENERGY TEXAS GAS OPERATIONS, ITS SUCCESSORS AND ASSIGNS, THE RIGHT, PRIVILEGE AND FRANCHISE FOR A PERIOD OF TWENTY (20) YEARS TO CONSTRUCT, LAY , MAINTAIN, OPERATE, EXTEND, REMOVE, REPLACE AND REPAIR A SYSTEM OF PIPELINES, GAS MAINS, LATERALS AND ATTACHMENTS AND ALL DESIRABLE INSTRUMENTALITIES IN, UNDER, OVER, ACROSS AND ALONG ANY AND ALL STREETS, AVENUES, PARKWAYS, SQUARES, ALLEYS AND ALL OTHER PUBLIC PLACES IN THE CITY OF LA PORTE, HARRIS COUNTY, TEXAS, FOR THE PURPOSE OF TRANSPORTING, DISTRIBUTING, SUPPLYING AND SELLING GAS (NATURAL AND/OR ARTIFICIAL AND/OR MIXED) FOR HEATING, LIGHTING, POWER, AND FOR ALL OTHER PURPOSES FOR WHICH GAS MAY BE USED, TO THE MUNICIPALITY OF SAID CITY OF LA PORTE, HARRIS COUNTY, TEXAS, AND ITS INHABITANTS AND OTHERS; PROVIDING CONDITIONS CONTROLLING THE USE OF PUBLIC THOROUGHFARES AND EXTENSIONS THEREIN? ESTABLISHING STANDARDS OF SERVICE/ PROVIDING FOR PAYMENT OF FOUR PERCENT (4%) OF THE GROSS RECEIPTS FROM THE SALE OF GAS WITHIN THE CITY OF LA PORTE, HARRIS COUNTY, TEXAS; PROVIDING FOR ACCEPTANCE/ PROVIDING A SEVERABILITY CLAUSE; MAKING MISCELLANEOUS PROVISIONS? REPEALING ALL ORDINANCES IN CONFLICT HEREWITH; FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE HEREOF. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. The City Council of the City of La Porte, Harris County, Texas, (herein called "Grantor" ) does hereby grant unto CenterPoint Energy Resources Corp. , DBA CenterPoint Energy Texas Gas Operations, its successors and assigns (herein called "Grantee") the right, privilege, and franchise to construct, lay, maintain, operate, use, extend, remove, replace and repair in, under, over, across and along any and all of the present and future streets, avenues, parkways, squares, alleys, thoroughfares, roads, highways, sidewalks, viaducts, bridges, streams, public grounds, public properties, and other public places in the City of La Porte, and in all tracts, territories, and areas hereafter annexed to or acquired by and places within the corporate boundaries of said municipality, a system of pipes, pipelines, gas mains, laterals, conduits, feeders, regulators, meters, fixtures, connections, and attachments and other desirable instrumentalities and appurtenances DRAFTS 02 .21.08 necessary or proper, for the purpose of transporting, distributing, supplying and selling gas (natural and/or artificial and/or mixed) for heating, lighting, power and for any other purpose for which gas may now or hereafter be used, in and to said municipality and its inhabitants or any other person or persons within or without the corporate boundaries of said municipality. Section 2 . Grantee' s property shall be so constructed and maintained as not to interfere unreasonably with traffic over the public thoroughfares of said municipality and the same shall be laid in accordance with the lines, grades, and conditions established by Grantor. The following standards also apply to the installation and maintenance of Grantee' s facilities : (a) In the future, where such facilities or any potion thereof crosses or is laid within, under or across any street, road or utility right-of-way, drainage way or public way, Grantee agrees to relocate such facilities (which shall include lowering or raising the facility, as well as casing it, if required) at the Grantee' s sole expense, when the City reasonably requires such action incidental to public construction or public improvement, including but not limited to, construction, maintenance and improvement of streets, water lines, sanitary sewer lines, storm sewers, ditches and public utilities . The City shall give the Grantee prior written notice of the need for repositioning location. (b) All pipelines shall be buried to specified depths, as follows : 1. Pipelines which run under any street or streets and/or any proposed street which has been designate on Master Plan for the City or the official City a ' of the City, shall be buried to a depth of at least six (6) feet measured between the top of the pipeline and the natural surface of the ground. 2 . Pipelines which run under any ditch and/or drainage area or structure shall be buried to a depth of at least five (5) feet measured between the top of the pipeline and the ultimate channel or structure depth. (c) All facilities shall cross public streets, public properties III and public rights-of-way as closely as possible to a right (90°) angle. 2 (d) All public streets, roads and ways in existence at the time of construction of a pipeline shall be bored under and shall not be cut for the purpose of constructing, relocating or repositioning a facility. (e) All facility-related excavations in any public right-of-way shall be backfilled in a manner satisfactory to the City; and if after once refilling such excavation the earth within the excavated area settles so as to leave a depression, the Grantee shall be required to make further necessary fills as ordered by the City. All areas shall be graded and maintained so as to provide drainage of the area. (f) Grantee shall be required to repair all portions of any street across or along and under which facilities are installed or maintained, and place the same in as good a state of repair and condition as they were at the time the construction, repair or removal was commenced, such repairs to be to the satisfaction of the City. (g) Except in an emergency, the Grantee shall notify the City forty-eight (48) hours before commencing at any time excavation in any portion of any said paved or unimproved street, and not wholly close any street, but shall at all times maintain a route of travel along and within such roadway area, to the extent such travel was allowed prior to the excavation. (h) In the event of an emergency, it being evident that immediate action is necessary for the protection of the public and to minimize property damage and loss of investment, Grantee may, at its own responsibility and risk, make necessary emergency repairs, notifying the City Police Dispatch of this action as soon as practical, but no later than one (1) hour after commencing repairs or maintenance. (i) Grantee shall furnish City annually, a map layer of Grantee' s gas utility lines (type, sizes, and pressures) compatible with City' s GIS system. Section 3 . Grantee at its own expense shall run or extend any gas mains or service lines comprising a part of its distribution system a distance'₹feeding one hundred (100) feet of pipe, not to f� exceed a diameter of two (2) inches, in order to bring gas service to the property line of each additional customer. Section 4 . The service furnished hereunder to said municipality and its inhabitants shall be first-class in allI, respects considering all circumstances and shall be subject to such 3 reasonable rules and regulations as Grantee may make from time to time. Grantee may require security for the payment of its bills not to exceed two months average estimated bills, or in accord with the rules of the Railroad Commission of Texas. Grantee shall refund said security deposit to each customer within 30 days after any twelve consecutive timely payments from the customer. Section 5. It shall be the Grantee's obligation as provided in Section 4 to furnish good quality natural gas service to the public at reasonable rates and to maintain its property in good repair and working order, except when prevented from so doing by forces and conditions not reasonably within the control of Grantee. Should Grantee fail or refuse to maintain its properties in good order and furnish efficient service at all times throughout the life of this grant, except only when prevented from so doing by forces and conditions not reasonably within the control of Grantee, or should the Grantee fail or refuse to furnish efficient service at reasonable rates, lawfully determined by the Grantor, throughout the life of this grant, excepting only during such periods as the Grantee shall in good faith and diligently contest the reasonableness of the rates in question, then it shall forfeit and pay to the Grantor the sum of Five Hundred Dollars ($500 . 00) for each day is shall so fail or refuse after reasonable notice thereof and hearing thereon by Grantor. Section 6. In consideration of the rights and privileges herein granted, Grantee agrees to pay to the Grantor on or before each May 1, August 1, November 1, and February 1, during the term of this franchise agreement, a sum of money equal to four percent (4%) of the gross receipts received by the Grantee from the sale of gas to its inhabitants within the corporate limits of the Grantor. 4 Payments hereunder shall be calculated on the basis of gross receipts from the sale of gas to its inhabitants within the corporate limits of grantor and shall be payable for the preceding three month period ending with the last day of the second month preceding each such date. Upon receipt of the above amount of money, the City Secretary shall deliver to Grantee a receipt for such amount. Upon request of the Grantor, Grantee shall present to it any and all records, accounts and books for inspection relative to the gross receipts of Grantee within the corporate limits of the Grantor. The consideration hereinabove set forth shall be paid and received in lieu of any license, charge, fee, street or alley rental or other character of charge for use and occupancy for the streets, alleys and public places within Grantor, and in lieu of any pipe tax or inspection fee or tax, but shall not in anywise increase or diminish Grantee' s obligation to pay the Grantor ad valorem taxes or anywise interfere with collection thereof. Any special taxes, rentals or other charges accruing after the effective date of this franchise, under the terms of any preexisting ordinance or imposed upon Grantee by subsequent action of the Grantor shall, when paid to the Grantor, be applied as a credit to the amount owed to the Grantor under the terms of this franchise agreement . Section 7. It is specifically agreed and understood that Grantor may, at its option, have inserted by amendment hereto any greater percent of the gross receipts or any other more favorable payment terms which Grantee agrees to pay to any other municipality within Harris County, Texas, and within the Division of Grantee in 5 which the Grantor is included and Grantee by its acceptance hereof agrees to such subsequent amendment . Section 8. If Grantee, in laying its pipes, shall come into conflict with the rights of any other person or corporation having a franchise from the City, the City Council or its delegate shall decide all questions concerning the conflicting rights of the respective parties, and shall determine the location of the structures of the said parties and what changes, if any, should be made and at whose cost, and shall reconcile their differences. Section 9. If the Legislature of the State of Texas amends the ceiling on utility gross receipts payments to municipalities established by Tex. Tax Code §182 . 025, then Grantor may prospectively change the percentage of Grantee' s gross receipts payable to Grantor under Section 6 of this franchise to the level established by such amendment; provided, however, that such change in the percentage of Grantee's gross receipts payable to Grantor shall not become effective unless and until Grantor shall have approved and authorized rate schedules acceptable to Grantee which will permit Grantee to fully recover through its rates effective within the corporate limits of Grantor any increase in amounts payable to Grantor resulting from such change. Section 10. Grantee, its successors and assigns, shall protect and hold City harmless against all claims for damages or demands for damages to any person or property by reason of the construction and maintenance of its e3�c }e transmission and distribution system, or in any way growing out of the granting of this franchise, either directly or indirectly, or by reason of any act, negligence, or nonfeasance of the contractors, agents or employees of Grantee, its successor or assigns, and shall refund to 6 City all sums which it may be adjudged to pay on any such claim, or which may arise or grow out of the exercise of the rights and privileges hereby granted, or by the abuse thereof, and Grantee, its successors an assigns, shall indemnify and hold City harmless from and on account of all damages, costs, expenses, actions, and causes of action, to the extent permitted by the Texas Tort Claims Act, that may accrue to or be brought by any person, persons, company or companies at any time hereafter by reason of the exercise of the rights and privileges hereby granted, or of the abuse thereof. Section 11. Nothing herein contained shall ever be held or considered as conferring upon Grantee and its successors and assigns any exclusive rights or privileges of any nature whatsoever. Section 12 . Within thirty (30) days following the final passage and approval of this ordinance, Grantee shall file with the City Secretary, accompanied by appropriate authorized corporate resolutions in a form acceptable to the City Attorney, a written statement in the following form signed in its name and behalf : "To the Honorable Mayor and the City Council of the City of La Porte, Texas : For itself, its successors and assigns, Grantee, CENTERPOINT ENERGY RESOURCES CORP. , DBA CENTERPOINT ENERGY TEXAS GAS OPERATIONS, hereby accepts the attached ordinance and agrees to be bound by all of its terms, conditions and provisions . CENTERPOINT ENERGY RESOURCES CORP. , DBA CENTERPOINT ENERGY TEXAS GAS OPERATIONS By: PrintedName: Title : Dated this the _ day of , 2008 . " 7 Section 13 . This franchise, having been published as required by Article VII, ^Franchises and Public Utilities" of the Home Rule Charter of the City of La Porte, Texas, shall take effect and be in force for a term of twenty (20) years from and after sixty (60) days following its final passage and approval, and after publication of the notice and caption of such ordinance once each week for four (4) consecutive weeks in The Bayshore Sun, the official newspaper of the City of La Porte, and receipt by the City of Grantee' s acceptance filed pursuant to Section 10 hereof . In compliance with the provisions of Article VII of the Home Rule Charter of the City of La Porte, the Grantee shall pay the cost of those publications and any costs associated with any elections held regarding this franchise required by such Home Rule Charter provisions. Section 14. Every notice, order, petition, document or other direction or communication to be served upon the City or the Grantee shall be deemed sufficiently given if sent by registered or certified mail, return receipt requested. Every such communication to the Grantee shall be sent to: CENTERPOINT ENERGY RESOURCES CORP. , DBA CENTERPOINT ENERGY TEXAS GAS OPERATIONS Vice President, Regulatory Relations Unless and until changed by written notice given in accordance with this section, every such communication to the City or the City Council shall be sent to the: City Manager City of La Porte li City Hall 604 West Fairmont Parkway La Porte, Texas 77571 8 and, as applicable, to the: City Secretary City of La Porte City Hall 604 West Fairmont Parkway La Porte, Texas 77571 The mailing of such notice, direction, or order shall be equivalent to direct personal notice and shall be deemed to have been given the earlier of receipt or two (2) business days after it was mailed. Section 15. If any provision, section, subsection, sentence, clause, or phrase of this ordinance is for any reason held to be unconstitutional, void, or invalid (or for any reason unenforceable) , the validity of the remaining portions of this ordinance shall not be affected thereby, it being the intent of the Grantor in adopting this ordinance that no portion hereof or provision or regulation contained herein shall become inoperative or fail by reason of any unconstitutionality or invalidity of any other portion, provision or regulation, and to this end, all provisions of this ordinance are declared to be severable. Section 16. Grantor may, at any time, declare a conditional forfeiture of this grant for a continuing violation by the Grantee of any of the substantial terms hereof. In such event, the Grantor shall give written notice, specifying all grounds on which forfeiture is claimed, by registered mail, addressed and delivered to the Grantee, to the attention of its President, in Houston, Texas . The Grantee shall have sixty days after receipt of such notice within which to discontinue said alleged violation, or to file suit in a court of competent jurisdiction for an adjudication 9 or declaration of the rights of the g parties with respect to forfeiture of the franchise. No forfeiture shall become effective until and unless (1) the Grantee shall have continued such violation or violations for more than sixty days after receipt of such written notice from the Grantor without filing such a suit; or (2) the Grantee shall have continued such violation or violations for more than sixty days (or such longer period as the Court in its discretion shall allow) after the entry or affirmance in a court of last resort of a final judgment finding and establishing the existence of such violation or violations, and that such violations are sufficiently substantial to warrant forfeiture and decreeing forfeiture as a consequence thereof . The Grantee shall not in any event be deemed to be in default of performance of any provisions of this grant, nor shall any forfeiture be invoked for violation or violations for failure to perform any provisions hereunder when due to shortages of material, supplies and equipment beyond the control of the Grantee, or to fires, strikes, riots, floods, war or other casualties, or to governmental regulations, limitations or restrictions as to the use or availability of materials, supplies or equipment or as to the use of the service, or to unforseen or unusual demands for service, or for any other cause not reasonably or practicably within the control of the Grantee. Section 17. No consolidation, sale, purchase, combination or agreement affecting the sale or distribution of gas within the City limits of the City of La Porte can be had or entered into by the Grantee with any other gas utility company within the City limits of the City of La Porte, unless the same be expressly authorized and approved by the City Council of the City of La Porte. 10 Section 18. The rights, privileges, and franchise herein granted to the Grantee shall extend to and include its successors and assigns, and the terms, conditions, provisions, requirements and agreements in this ordinance contained, and each of them, shall be binding upon the successors and the assigns of the Grantee. Section 19 . The rights and remedies provided herein are cumulative and not exclusive of any remedies provided by law, and nothing contained in this franchise shall impair any of the rights of the City of the Grantee under applicable law, subject in each case to the terms and conditions of this franchise. Section 20. In granting this franchise, it is understood that the lawful power vested by law in the Grantor to regulate certain public utilities within the City, and to regulate the local rates of said public utilities within the City within the limits of the constitution and laws, and to require all persons or corporations to discharge the duties and undertakings, for the performance of which this franchise was made, is reserved; and this grant is made subject to all lawful rights, powers and authorities, either of regulation or otherwise, reserved to the Grantor by its Home Rule Charter or by the general laws of this State. Section 21. All ordinances and parts of ordinances in conflict herewith are hereby repealed; provided, however, that such repeal shall be only to the extent of such inconsistency and in all other respects this ordinance shall be cumulative of other ordinances regulating and governing the subject matter covered by this ordinance. 11 Section 22. The City Council officially finds, determines, recites, and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the City Hall of the City for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code; and that this meeting has been open to the public as required by law at all times during which this ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 23 . Passed on first reading, the _ day of 2008 . Passed and approved on second and final reading, the day of , 2008 . CITY OF LA PORTE By: Alton E. Porter, Mayor ATTEST: Martha A. Gillett City Secretary APPROVED: Knox W. Askins City Attorney 12 1111 CITY OF TYLER CITY COUNCIL COMMUNICATION Agenda Number: O-1 Date: June 14,2006 Subject: Request that the City Council consider approving a proposed gas franchise ordinance with Centerpoint-Reliant-Entex on the third and final reading. Page: _ I of 1 Item Reference: Tyler City Charter requires a utility wanting to use public Right-of- Way to obtain permission through a franchise. Tyler City Charter requires three separate votes or readings of a franchise ordinance. Franchise negotiations with the gas company (Reliant, Entex, Centerpoint) have been underway for many years. During that time the first of three required readings was approved on April 23, 2003.There is a minimum time limit of 30 days between the first and third readings. The second of three readings occurred on May 24,2006.This will be the final reading of the Ordinance . Negotiations on this franchise were postponed over the past few years in order to complete the review of the company's cost of gas and cost of service. The proposed franchise document simply brings forward the same wording from the most recent franchise for a five year tens with only those changes needed to make the document accurate and current and to comply with the provisions of the settlement agreement. RECOMMENDATION: It is recommended that the City Council conduct a public hearing to receive any input and then approve a proposed gas franchise ordinance with Centerpoint-Reliant-Entex on the third and final reading. yyy , , Drafted/Recommended By: C. o 4 Department Leader Gary t.Landers,City Attorney Edited/Submitted By: City Manager I ORDINANCE NO.0-2006-55 AN ORDINANCE AMENDING CHAPTER 15, "FRANCHISES," AND GRANTING TO CENTERPOINT ENERGY RESOURCES CORP., THE RIGHT AND FRANCHISE TO USE THE STREETS, ALLEYS, AND PUBLIC WAYS OF THE CITY OF TYLER TO CONSTRUCT, OPERATE AND MAINTAIN A GAS UTILITY DISTRIBUTION SYSTEM, WITH RELATED PROVISIONS. WHEREAS, CenterPoint Energy Resources Corp. ("CenterPoint"), has provided gas utility service in the City of Tyler for many years;and WHEREAS,the franchise granted to CenterPoint in 1990 has expired; and WHEREAS, negotiations between CenterPoint and the City of Tyler have continued in an effort to reach an agreement for continued service;and WHEREAS, the City of Tyler desires to renew/or enter into a new franchise with CenterPoint; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF TYLER,TEXAS: PART 1: That Chapter 15, "Franchises," of the Code of Ordinances, City of Tyler, Texas,is hereby amended in its entirety to read as set out below. PART 2: That if any provision or any section of this ordinance shall be held to be void or unconstitutional, such holding shall in no way affect the validity of the remaining provisions or sections of this ordinance,which shall remain in full force and effect. ARTICLE.IV. GAS FRANCHISE DIVISION 1. IN GENERAL Sec. 15-130. Purpose. The City Council has determined it is in the best interest of and consistent with the convenience and necessity of the City to grant franchises to companies desiring to provide cable communications,electric service, gas service,telephone service, and underground or aerial cable services within the confines of the City and on the terms and conditions hereinafter set forth,and as may be further described in each franchise agreement. These regulations include both rights and obligations of a franchisee. It shall be unlawful and it is hereby prohibited for anyone or company to provide any of the services described herein or use any public street or area unless a franchise has been obtained and is still in effect, or is in negotiation. (Ord. No. 0-2006-55, 6/14/06) Sec. 15-131. Definitions. I For the purpose of this ordinance, the following terms, phrases, words and their derivations shall have the meaning given herein. When not inconsistent with the context, words used in the present tense include the future, words in the plural number include the singular number, and the words in the singular number include the plural number, and the use of any gender shall be applicable to all genders whenever the sense requires. The words "shall" and "will" are mandatory and the word "may" is permissive. Words not defined shall be given their common and ordinary meaning. City is the City of Tyler, Texas, in its present incorporated form or as it may be changed by annexation. Council shall mean the governing body of the City of Tyler. Force Majeure shall mean, without limitation, acts of God, strikes, lockouts, or other industrial disturbances, acts of public enemies, orders of any government of the United States or the State of Texas, or any of their departments, commissions, agencies, or officials, failure of vendors to supply equipment on a timely basis, weather and any other cause or event not reasonably within the control of Grantee. Franchisee, Grantee, or Company is the party or parties to which a franchise under this ordinance is granted by the Council,and its or their lawful successors and assigns(a gas utility as defined in Section 1.03 of the Gas Utility Regulatory Act,Article 1446e,V.A.C.S.) including all parts of such system proper for its operation and the transportation, distribution, delivery, and sale of gas hereunder. Gas shall mean combustible hydrocarbon natural or synthetic natural gas or a mixture thereof. Gross revenues shall mean all cash, credits, property of any kind or nature, or other consideration received directly or indirectly by a Grantee, or from any source whatsoever, arising from or attributable to the sale or transportation of gas to customers within the City or in any way derived from the operation of its system. These gross revenues shall not be reduced for any purposes other than provided herein,and shall be the basis for computing the franchise fee. GURA is the Gas Utility Regulatory Act, currently Tex. Utility Code §§ 101.001 et seq., or its successor as same may from time to time be amended. (See also Art. 6050.) RRC is the Railroad Commission of Texas or its successors. Regulations are Grantee's "General Rules and Regulations Applicable to Natural Gas Service in Texas," as amended from time to time and on file with the City. Rules are the Substantive Rules of the RRC. Settlement Agreement is the agreement reached between the City and Grantee on April 21, 2006 resolving certain appeals from actions of the Railroad Commission of Texas and approving base rates for the provision of gas utility service in the City effective June 1, 2006. (Ord.No.0-2006-55,6/14/06) Sec. 15-132. Franchise/Grant of Authority. 2 a. CenterPoint Energy Resources Corp., is hereby granted a renewed franchise to operate a gas utility distribution system pursuant to the Tyler City Charter, the Tyler Code (Chapter 15 Franchises), and this individual franchise ordinance. This franchise shall become effective upon acceptance and signature by Grantee. b. The area covered by this franchise is all areas within the City limits of City, both current and any future areas annexed. Within forty-five(45)days from the receipt of notice from City of any such annexation, Grantee shall assure that any and all customers located within such annexed territory are included and shown on its accounting system as being within the City of Tyler. After such forty-five (45) day period, all gross receipts received from customers located within such annexed territory shall be subject to the payment provisions specified in Section 15- 142 of this ordinance. c. The franchise granted under this ordinance will be for the non-exclusive right and privilege to acquire, construct, erect, operate and maintain, in, upon, along, across, above, over and under the streets, highways, alleys, and public ways now laid out or dedicated and all extensions thereof, and additions thereto, all fixtures necessary for the maintenance and operation in the City of Grantee's system of pipes, pipelines, gas mains, laterals, conduits, feeders, regulators, meters, fixtures, connections, attachments and other desirable instrumentalities and appurtenances necessary or proper for the purpose of transporting, distributing, supplying and selling gas (natural and/or artificial and/or mixed) for heating, lighting, and power, or for any other purpose for which gas may now or hereafter be used. The rights set forth herein shall not be exclusive and City reserves the right to grant a similar right of use to any person or corporation at any time. d. City hereby retains all of its power and control for regulation of its streets, highways, alleys,bridges, and public ways granted or which may hereafter be granted to it under the Constitution of the State of Texas,the Home Rule Statutes, and its Charter. e. The permission granted herein is likewise subject to laws, ordinances and regulations now in force or which may hereafter be enacted or promulgated by any governmental body or agency having jurisdiction. f. City assumes no responsibility for securing any franchises, rights-of-way, permits or easements which City does not already own. City shall in no way be responsible for the construction, operation, maintenance,performance,or any other activity of Grantee or its system or any part thereof g. Grantee agrees not to oppose intervention by City in any suit or proceeding to which Grantee is a party that is related to this franchise. h. Grantee agrees to abide by all lawful provisions of this franchise and further agrees that it will not at any future time set up as against City or the City Council the claim that the provisions of this franchise were unreasonable or arbitrary at the time of the acceptance hereof by Grantee. (Ord.No. 0-2006-55,6/14/06) Sec. 15-133. Term of Franchise. a. The duration of the rights, privileges, and authorizations granted in this franchise agreement shall be five(5)years from the effective date of this franchise. 3 b. Notwithstanding the term of this franchise defined by sub-section (A) above, in the event that the City or Grantee fails to materially comply with the provisions of the Settlement Agreement as defined herein,this franchise shall terminate upon 90 days written notice by either City or Grantee. (Ord.No.0-2006-55,6/14/06) DIVISION 2. APPLICATION,GRANT,TRANSFER,TERMINATION Sec. 15-134. Reserved. Sec. 15-135. Reserved. Sec. 15-136. Reserved. Sec. 15-137. Forfeiture and Termination. a. in addition to all other rights and powers retained by City under this ordinance or otherwise,City reserves the right to forfeit and terminate a franchise and all rights and privileges of Grantee in the event of a material breach of its terms and conditions. A material breach by Grantee shall include,but shall not be limited to the following: 1. Willful violation of any material provision of the franchise or any material rule, order, regulation or determination of City made pursuant to the franchise, including but not limited to the events listed in Section 15-153; 2. Willful attempt to evade any material provision of the franchise or the practice of any fraud or deceit upon the City or its subscribers or customers; 3. Material misrepresentation of fact in the application for or renegotiation of the franchise; or 4. Attempt to dispose of any of the facilities or property of its system to prevent the City from purchasing it,as provided for herein. b. None of the foregoing shall constitute a material breach if the violation occurs but ' is without fault of Grantee or occurs as a result of circumstances beyond its control, including, without limitation,Force Majeure. Grantee shall not be excused by mere economic hardship. c. Grantee shall not be excused from complying with any of the terms and conditions of a franchise agreement or this ordinance by any failure of the City upon any one or more occasions to insist upon or to seek compliance with any such terms or conditions, unless City amends this ordinance or agrees in writing that such noncompliance was excused. d Prior to any forfeiture or termination, City shall make a written demand that Grantee comply with any such provision, rule, order, or determination under or pursuant to this ordinance and franchise agreement. If the violation by Grantee continues for a period of thirty (30) days following such written demand without written proof that the corrective action has been taken or is being actively and expeditiously pursued, City may place the issue of termination of a franchise before City Council. City shall cause to be served upon Grantee, at least twenty(20)days prior to the date of such City Council meeting, a written notice of intent to request such termination and the time and place of the meeting. Public notice shall be given of the meeting and issue which City Council is to consider. 4 e. City Council shall hear and consider the issue and shall hear any person interested therein, including Grantee, and shall determine from the evidence and facts and in its discretion, whether or not any violation by Grantee has occurred. f. If City Council shall determine the material violation by a Grantee was the fault of Grantee and within its control, City Council may, by resolution, declare that the franchise of Grantee shall be forfeited and terminated unless there is compliance within such period as City Council may fix, provided no opportunity for compliance need be granted for fraud or misrepresentation. g. The issue of forfeiture and termination shall automatically be placed upon City Council agenda at the expiration of the time set by it for compliance. City Council then may terminate a franchise forthwith upon a finding that Grantee has still failed to achieve compliance or may further extend the period for compliance, in its discretion. h. In the event Grantee's facilities and equipment are abandoned by Grantee and their location is needed for other public facilities, Grantee shall remove them immediately forthwith,at its own expense,but as a reasonable and necessary operating expense, and under the supervision of City and restore such locations to their original condition (a condition similar to adjacent areas). If Grantee fails, within a reasonable time period to accomplish the same. City may either perform the removal at Grantee's expenses as well as retain the salvaged equipment, or leave the system or parts of the system in service. i. Grantee shall have the right to appeal any finding of violation or failure to comply that results in a forfeiture of the franchise to, or seek a restraining order and/or injunction enjoining such forfeiture from, the proper government agency or any court of competent jurisdiction sitting in Smith County,Texas. (Ord.No.0-2006-55,6/14/06) Sec. 15138. Foreclosure,Judicial Sale or Receivership. a. Upon the foreclosure or other judicial sale of all or a substantial part of the system, or upon the termination of any lease covering all or a substantial part of the system. 1. Grantee shall notify City of such fact, and such notification shall be treated as a notification that a change in control of Grantee has taken place, and the provisions of this ordinance governing the consent of City to such change in control of Grantee shall apply; or 2. In such an instance. City may serve notice of termination upon Grantee and if applicable, the successful bidder at such sale. In such event, the franchise shall cease and terminate thirty(30)days after service of such notice unless: (a) City shall have approved the transfer of a franchise and a prospective Grantee, as and in the manner of this ordinance provided;and (b) The successful bidder shall have covenanted and agreed with City to assume and be bound by all the terms and conditions of the franchise. b. City shall have the right to revoke a franchise one hundred twenty(120)days after the appointment of a receiver, or trustee, to take over and conduct the business of Grantee, whether in receivership, reorganization, bankruptcy, or other action or proceeding, unless such 5 receivership or trusteeship shall have been vacated prior to the expiration of said one hundred twenty(120)days, or unless: 1. Within one hundred twenty (120) days after the election or appointment, such receiver or trustee shall have fully complied with all the provisions of this ordinance and remedied all defaults thereunder;and 2. Such receiver or trustee, within said one hundred twenty (120) days, shall have executed an agreement, duly approved by the Court having jurisdiction in the premises, whereby such receiver or trustee assumes and agrees to be bound by each and every provision of the ordinance and franchise agreement and of the franchise granted to Grantee. (Ord. No. 0- 2006-55,6/14/06) See. 15-139. Continuity of service mandatory. a. It shall be the right of all customers to continue receiving service insofar as their financial and other obligations to a Grantee are honored. In the event that Grantee elects to reconstruct, modify or sell the system, or City gives notice of intent to terminate or fails to renew a franchise, Grantee shall act so as to ensure, as far as practicable, that all customers receive continuous, uninterrupted service under the circumstances; however, Grantee does not guarantee uninterrupted service. b. the event of a change of Grantee, or in the event a new operator acquires the system, Grantee shall cooperate with City, new Grantee or operator in maintaining continuity of service to all customers. During such period, Grantee shall be entitled to the net revenues for any period during which it operates the system. (Ord.No. 0-2006-55, 6/14/06) Sec. 15-140. Purchase of system by City. a. Rights to Purchase. In the event that Grantee forfeits, the City terminates this agreement in accordance with its terms, or upon normal expiration of a franchise pursuant to the provisions of this franchise or at any time after five (5) years from effective date of Grantee's franchise ordinance, but before the expiration thereof, City shall have the option to purchase the system at fair market value. If City desires, it may assume the customer deposits by requiring Grantee to pay in cash to City the amount of these deposits. b. Date of Valuation. The date of valuation shall be the date of forfeiture, termination, notice of purchase,or expiration of the franchise,as the case may be. c. Grantor must present Grantee with written notice of Grantor's intent to exercise its option to purchase the franchised property. Within thirty(30) days of receipt of notice, Grantee shall make a written offer (the "Offer") stating the cash price for the purchase and sale of said distribution system. Within twenty (20) days of Grantor's receipt of the Offer, Grantor will submit written notice rejecting or accepting the Offer. d. Nothing in this franchise shall be construed as limiting or otherwise affecting Grantor's authority, if any, to acquire the franchised property under Grantor's powers of eminent domain. (Ord.No. 0-2006-55,6/14/06) 6 Sec. 15-141. Transfers and Assignments. a. A franchise shall not be assigned or transferred, either in whole or in part, or lease, sublet, nor shall title thereto, either legal or equitable or any right, interest or property therein, pass to or vest in any person other than an affiliate without the prior written consent of City. The proposed assignee must show technical ability, financial capability, legal qualifications and general character qualifications as reasonably determined by City and must agree to comply with all provisions of the franchise which shall be binding on all successors and assigns. b. Grantee shall promptly notify City of any actual or proposed change in, or transfer of,or acquisition by any other party of, control of Grantee. The word "control"as used herein is not limited to major stockholders but includes actual working control in whatever manner exercised. Every change, transfer, or acquisition of control of Grantee shall make the franchise subject to cancellation unless and until City shall have consented thereto,which consent will not be withheld without good cause shown. City shall be deemed to have consented to any such change, transfer or acquisition if City has not responded to Grantee's request within 90 days of receipt of such request. For the purpose of determining whether it shall consent to such change, transfer or acquisition of control, City may inquire into the qualifications of the prospective controlling party and Grantee shall assist City in any such inquiry. (Ord.No. 0-2006-55, 6/14/06) DIVISION 3. GRANTEE REQUIREMENTS Sec. 15-142. Payment of Franchise Fee. a. For the reason that the right-of-way to be used by Grantee in the operation of its - system within the boundaries of City are valuable public properties acquired and maintained by City at great expense to its taxpayers, and that the grant to Grantee to the said right-of-way is a valuable property right without which Grantee would be required to invest substantial capital in the right-of-way costs and acquisitions, and because City will incur costs in regulating and administering the franchise, Grantee shall pay to City four percent (4%) of Grantee's gross annual revenue from all sources attributable to the operations of Grantee within the confines of City as defined herein. This amount may be increased during the term hereof by mutual written agreement. City reserves the right to increase the franchise fee upon thirty days written notice at such times as the state law maximum amount for street rental payment is increased above the fee provided herein. In addition, Grantee shall reimburse City for reasonable expenses incurred in employing rate consultants to analyze rate increase cases filed by Grantee to the fullest extent allowed by state law. If such fee requires any waiver or other approval by the FERC or Texas Railroad Commission or other agency, Grantee agrees to support the waiver and acknowledges its support by its voluntary act of applying for and accepting a franchise. b. The franchise fee shall be payable quarterly to the City accounting department. Pursuant to Section 5.07 of the GURA, City herewith finds that Grantee is entitled to recover through its rates within the corporate limits of City amounts payable to City hereunder. To ensure that Grantee's rates are just and reasonable;Grantee is herewith directed to revise its rate schedules as necessary to fully recover from its 7 customers within the corporate limits of City amount payble to City as set forth in this Section. The Grantee shall file a complete and accurate verified statement of all collected gross revenues within the City during the period for which said payment is made, and said payment shall be made to the City not later than sixty(60)days after the expiration of the period for which payment is due. Specifically, quarterly payments will be on or before February 28, May 30, August 30, and November 30 for the preceding three months ending December 31,March 31,June 30, and September 30,respectively. If Grantee shall accept (other than by succession or assignment of an existing franchise through the acquisition by merger or otherwise of another utility), renew or extend a franchise ordinance agreement adopted by any municipality on or after the effective date of this ordinance, [other than a short-term (not to exceed three(3)years in the aggregate to be extended by the City in the event that the City determines that the Grantee and such other municipality are negotiating in good faith) extension of a pre-existing franchise agreement pending negotiation of a new franchise agreement], and that franchise agreement provides for payment to the municipality for the use of said municipality's public rights-of-way on a monthly basis, then Grantee's payments under this section shall become monthly. Monthly payments to City will begin within three(3) months following the date Grantee accepts the franchise agreement of such other municipality and shall continue until expiration of the term of this franchise, or until the expiration of the franchisee agreement of such other municipality, whichever is earlier. Payments shall be due on or before the last day of the next month. C. City shall have the right to inspect Grantee's income records and the right to audit and to recompute any amounts determined to be payable under this ordinance; provided, however, that such audit shall take place within thirty-six (36) months following the close of each of Grantee's fiscal years. Such audit or reviews.shall be by a firm chosen by City. Any additional amount due to City as a result of the audit shall be paid,along with interest due,within thirty(30) days following written notice to Grantee by City which notice shall include a copy of the audit report. d. In the event that any franchise payment or recomputed amount is not made on or before the applicable dates heretofore specified, interest shall be charged daily from such date at an interest rate being charged by Bank of America NA, Houston, (or its successor), prime rate plus 1%. A 15-day grace period for payment may be granted by the City Manager upon presentation of reasonable justification by the Grantee. e. In order that the City Manager and the City Council at all times shall keep fully informed as to all matters in connection with or affecting the construction, reconstruction, maintenance, operation, and repair of the properties of Grantee, its accounting methods and procedures, the conduct of Grantee's business in the City; and of service being rendered by Grantee, the City expressly retains all rights and powers available to municipal regulatory authorities under state law. f. The consideration hereinabove set forth shall be paid and received in lieu of any license, charge, fee, street, or alley rental or other character of charge for use and occupancy for the streets, alleys and public places within Grantor, and in lieu of any pipe tax or inspection fee or tax, but shall not in anywise increase or diminish Grantee's obligation to pay the Grantor ad valorem taxes or anywise interfere with collection thereof. (Ord.No. 0-2006-55, 6/14/06) 8 I � Sec. 15-143. Use of Streets,Construction Activity. a. Construction Codes and Permits. Grantee shall obtain any required permission from City before commencing construction involving the opening or disturbance of any street or public property. City shall cooperate with Grantee and use its best efforts in granting any permission required. All transmission and distribution lines constructed by Grantee within the City shall be so located as to cause minimum interference with the rights and reasonable convenience of property owners who adjoin any of the said streets and the public use of such streets. b. Grantee shall conduct its maintenance, repair, construction, placement of facilities, excavations, and similar activity in the streets, alleys and public rights of way in such manner as will cause the least interference practicable with the use by the general public of streets, sidewalks,and other public ways or with the use of private property within the City. c. Except in case of an emergency, Grantee shall notify City in writing as soon as practicable before the disturbance of any right-of-way where disruption of traffic may occur. In case of such disturbance by Grantee, Grantee shall, at its own cost and expense, repair it to its condition prior to the disturbance. d. The location and route of all facilities to be placed or constructed by Grantee in City shall conform to the local codes and standards and be subject to review by City Engineer. Grantee shall submit engineering plans of projects involving significant construction or reconstruction activity in a public right of way to the City Engineer for review and approval as soon as practicable prior to the commencement of construction. Grantee shall not commence construction until opportunity for such review and comment by City. If Grantee has received no notice of conflict from the City Engineer within a reasonable period of time (which shall in no event be greater than thirty days)after plan submission, Grantee may proceed with construction. If there are conflicts, construction may be delayed upon written request of the City Manager until such conflicts are resolved. e. Except in an emergency, Grantee shall comply with applicable City ordinances and rules pertaining to notification,permitting or prior approval when excavating pavement in or upon an alley, street, or unpaved right of way. In this connection Grantee shall notify City as soon as practicable regarding work performed under emergency conditions. f. City may, at its option, require Grantee, by prior written notice,to repair,remove, or abate any structure, equipment, or installation that because of Grantee's failure to properly maintain same, is unnecessarily dangerous to life or property and, in the event Grantee fails to take such action within a reasonable time as determined by the City Manager or his designee, City may repair, remove, or abate such structure, equipment, or installation at the expense of Grantee and without compensation or liability to Grantee for damages. g. City expressly reserves the right to change grades, install, widen, or relocate streets and other public ways and public grounds. Whenever by reason of the installation, relocation, widening, or changing of grade of a street or other public way or public ground, including sidewalks and curbs, or in the location or manner of constructing a water pipe, gas pipe, sewer, or other underground or above-ground structure for a governmental purpose, it is deemed necessary by City to remove, alter,change,adapt,or conform the underground or above- ground facilities of Grantee, Grantee shall make the alterations or changes as soon as practicable when ordered in writing by City, without claim for reimbursement or damages against City. If 9 these requirements impose a financial hardship upon Grantee, Grantee shall have the right to present alternative proposals for City's consideration. City shall not require Grantee to remove its facilities entirely from a street, alley, highway, or public place unless suitable alternatives are available for relocation at reasonable cost in City's opinion. Upon prior written notice of at least thirty(30) days, City may require Grantee to relocate facilities in order to accommodate facilities of other utilities. Grantee and the Tyler City Engineer shall coordinate the timing and performance of such work to ensure that neither City nor Grantee shall incur unreasonable delay or expense. In the case of City street or water and sewer projects, in the event Grantee has not relocated its affected mains,meters,or other facilities within a reasonable time(as determined by City) prior to City's commencement date for construction, City may relocate or cause to be relocated the affected utilities and Grantee shall reimburse. City for all relocation costs within sixty(60)days of relocation completion. h. City reserves the right to lay, and permit to be laid, sewer, water, and other pipelines, cables, and conduits, and to do and permit to be done any underground or above- ground work that may be necessary or proper in, across, along, over, or under a street, alley, highway, or public place occupied by the Grantee. City also reserves the right to-change any curb,sidewalk, or grade of a street. In permitting this work to be done,City shall not be liable to Grantee for any resulting damage, but nothing herein shall relieve any other person or corporation from responsibility for damages to the facilities of Grantee. i. Grantee in laying or erecting its mains, pipe and/or service lines shall not interfere with any water lines, sewer lines, traffic signal and related underground conduit, or other conduit, pipe lines or supply lines or with any public or private drain in any street, alley, or public way except with the consent and direction of the City Manager or his designee and if Grantee, in laying its mains,pipes, and supply lines shall come in conflict with the rights of any other person or corporation having a franchise from City, the Council shall decide all questions concerning the conflicting rights of the respective parties and shall determine the location of the facilities and structures of said parties and what charges if any should be made and at whose expense and to reconcile the difference between the respective franchise holders. j. If the Council closes or abandons a street, alley, highway, or public place which contains existing facilities of Grantee, any conveyance of land within the closed or abandoned street, alley, highway, or public place shall be subject to the rights of Grantee. Grantee, however, may be ordered to vacate any land so conveyed if an alternate route is practicable and if Grantee is reimbursed by the person to whom the property is conveyed for the reasonable costs of removal and relocation of facilities. k. If City requires Grantee to adapt or conform its facilities, or to alter, relocate, or change its property to enable any other corporation or person, except City, to use, or use with greater convenience, the street, alley, highway, or public place, Grantee shall not be bound to make any of the changes until the other corporation or person has undertaken, with good and sufficient bond,to reimburse Grantee for any cost, loss, or expense that will be caused by or arise out of the change, alteration, or relocation of Grantee's property. 1. City anticipates a need for greater cooperation and coordination in the future between all utilities. In this regard, City expects and would require as a condition of use of its 10 I 1 right-of-way that Grantee cooperate with and participate in such activities. (Ord.No. 0-2006-55, 6/14/06) Sec. 15-144. Gas Purchase Contracts. a. An industrial or other similar large-volume consumer of natural gas and natural gas service may accept by contract an offer of Grantee to provide natural gas and natural gas service at different schedule of rates than that so fixed by City Council or the Railroad Commission so long as such contract rate schedules and the contracts under which such rates are so fixed conform with the requirements for establishing such rates under the GURA and such rate schedules shall be filed with the City. b. After the effective date of this franchise, Grantee shall never enter into any contract for the purchase of gas to be used in furnishing gas service under this franchise that shall be binding on City in the event the City takes over and acquires the property of the company constituting the distribution system serving City. (Ord.No. 0-2006-55,6/14/06) Sec. 15-145. Gas Quality. Grantee shall at all times furnish a merchantable natural gas commercially free of dust, gums, gum-forming constituents, gasoline,water, other liquid or solid matter, containing, before odorization, not more than two (2) grains of hydrogen sulfide per hundred (100) cubic feet of gas, and said gas shall have a gross heating value of not less than nine hundred (900) British thermal units per cubic foot. A cubic foot of gas shall be taken to be the amount of gas which occupies a volume of one cubic foot at a temperature of sixty(60) degrees Fahrenheit and under an absolute pressure of fourteen and sixty-five hundredths (14.65) pounds per square inch. For all purposes of gas measurement it shall be assumed that the atmospheric pressure in the City is at all times fourteen and forty hundredths (14.40) pounds per square inch even though it is known that such pressure does vary. Further more, it shall be assumed that the conditions prevailing in the customer's gas meter shall be considered to be the equivalent of conditions defining a cubic foot of gas (sixty (60) degrees Fahrenheit and fourteen and sixty-five hundredths (14.65) pounds absolute pressure) even though it is known that the average temperature may exceed sixty (60) degrees Fahrenheit and the average pressure exceed fourteen and sixty-five hundredths (14.65) pounds absolute. (Ord.No. 0-2006-55,6/14/06) Sec. 15-146. Transportation of Gas. Grantee is encouraged to make its lines and mains available for transportation of gas from other sources to franchise area end users; however, Grantee shall not be required to provide stand-by or back-up gas service to end-users receiving gas transported by Grantee. (Ord. No. 0- 2006-55, 6/14/06) Sec. 15-147. Service Standards. a. Grantee shall at all times furnish reasonable and prudent service which is modem, safe, and sufficient to meet demands without undue interruption or fluctuations to any person, firm, or corporation that requires service within the City, upon the terms specified and required by ordinance or rules adopted by City subject to state law. 11 The service furnished hereunder to said municipality and its inhabitants shall be first- class in all respects considering all circumstances and shall be subject to such reasonable rules and regulations as Grantee may make from time to time consistent with the Quality of Service regulations established from time to time by the Railroad Commission of Texas. Grantee may require reasonable security for the payment of its bills. b. Whenever it is necessary to shut off or interrupt service for the purpose of making repairs or installations, Grantee shall do so at such time as will cause the least amount of inconvenience to its customers and unless such repairs are unforeseen and immediately necessary to prevent injury to persons or property,it shall give reasonable notice thereof to its customer. c. Grantee shall install upon the premises of each customer a meter of standard type which shall be kept adjusted so as to measure accurately the amount of gas sold and no more than three percent fast or slow or such other percentage as the customer and Grantee may agree. Meters shall be installed so as not to create a danger to the health, safety, and welfare of the citizens of City. Charges for installation or relocation of facilities to serve consumers shall be in accordance with Company's Schedule of Miscellaneous Service Charges as filed with City. The use of more than one meter in the same building or on the same premises may be regulated by City in connection with the regulation of rates. If Grantee shall for its own convenience and not for the safety or convenience of the customer, change the point of delivery or the location of its equipment on private property, Grantee shall bear the expense as a reasonable and necessary operating expense. d. Grantee, through its authorized agents, shall have the right to enter upon the premises of any consumers of gas to examine gas pipes and appurtenances to prevent waste or theft of gas and to read its meters. No person, company or corporation shall be permitted to make any connection with Grantee's gas mains or service pipes unless duly authorized by Grantee, and Grantee may adopt subject to City approval such reasonable rules and regulations as may be necessary to protect Grantee from loss or damage by imposition or fraud and to prevent the waste of gas. Grantee shall also have the right to refuse gas service or to discontinue such service should the house piping, service lines from curb to meter, or appliance connections be found in faulty condition or in non-conformance with adopted rules. e. Each meter shall be read or estimated in accordance with General Rules and Regulations Applicable to Natural Gas Service in Texas as filed with City. With respect to service termination, Grantee shall follow either the rules existing at the execution of this franchise or rules filed with and approved by the City in accordance with this ordinance. (Ord.No. 0-2006-55,6/14/06) Sec. 15-148. Installations and Maintenance. a. Grantee shall make all necessary connections with and extensions from gas mains to the customer's property line(hereinafter referred to as the "gas service lines')to the inlet riser valve of the meter location (point of delivery), hereinafter referred to as the "customer's yard line", which shall likewise be installed by Grantee in accordance with the regulations and requirements set forth herein. Following any such installation, Grantee shall have the sole responsibility for continuing maintenance of the customer's yard line. 12 i 1 Grantee shall not be required to run or extend any pipe a distance exceeding one hundred (100) feet, not to exceed a diameter of two (2) inches, in order to bring gas service to the property line of each additional customer. b. Grantee shall be entitled to make a charge to the property owner for installation of the customer's yard line in accordance with Grantee's Schedule of Miscellaneous Service Charges filed with the City. c. Replacement of customer installed lines from curb to meter may be charged for in accordance with Schedule of Miscellaneous Service. Charges as filed with City. d. Grantee shall have the authority to stipulate the proper pipe size from the gas main to the meter location and the material used for gas service lines and customer's yard lines. e. The meter installation shall be located on the site preferred by the customer, provided it is readily accessible and located in such a place to prevent damage to the meter installation and minimize potential hazards. f. Grantee shall not be required to secure a permit or to pay permit fees to install meters or to install, extend, relocate,remove,or repair gas service lines or customer's yard lines. g. Grantee does agree, upon reasonable notice given by the City, to shut off, suspend,or in the alternative, reroute or reduce gas services when the same is necessary, in order that reasonable repairs may be made to City streets. Nothing herein shall preclude Grantee from electing to reroute such service as opposed to shut-off or suspension, when Grantee and the City shall determine this to be a reasonable alternative. h. All gas mains shall be laid at a safe depth, but not less than fifteen (15) inches under the surface of the streets and alleys, and the company shall use every reasonable care to avoid interference with water or sewer pipes. (Ord.No. 0-2006-55,6/14/06) Sec. 15-149. Extensions of Service;Extension Policy. a. The goal of this franchise is for Grantee to provide universal service to all City residents, industrial and commercial end users who desire such service, however, Grantee shall not be required to extend any of its existing mains or pipes a distance exceeding one hundred (100) feet in order to bring gas service to the property line of each additional customer unless the customer agrees to pay for the extension over 100 feet. Such extensions do not need to exceed a maximum diameter of two (2) inches. Grantee reserves the right to refuse any extension over one hundred(100)feet to any one customer where not economically justified. b. Grantee shall file with the City Clerk any written extension policy which shall be subject to Council approval and it shall be uniform and consistent in application and non- discriminatory. c. No contribution in aid of construction may be required of any customer except as provided for in the extension policy as adopted and approved by the Council. (Ord. No. 0-2006- 55, 6/14/06) Sec. 15-150. Customer Relations. 13 a. With respect to customer service requirements, billing, handling of complaints, discontinuance of service, and related matters, Grantee shall observe and abide by the current rules of the Texas Railroad Commission or its successor and City Council. b. Service Interruptions. With respect to service interruptions, Grantee shall follow either the rules existing at the execution of this franchise or the current rules of the Texas Railroad Commission or its successor,whichever rules are more favorable to the customer. c. Customer Security Deposits. Grantee consistent with applicable State and federal law and Grantee's Regulations,may require a reasonable security deposit in an amount calculated pursuant to rules filed with City. Said deposit shall be retained and refunded in accordance with such rules and shall bear interest, as provided by state law. Grantee shall be entitled to apply said deposit, with accrued interest, to any indebtedness owed Grantee by the consumer making the deposit. d. Customer Billing;Procedure for Disputed Bills. With respect to customer billing and disputed bills,Grantee shall follow either the rules existing at the execution of this franchise or the current rules of the Texas Railroad. Commission or its successor, whichever rules are more favorable to the customer. Grantee shall maintain the ability for customers to pay bills in person during regular business hours. (Ord.No. 0-2006-55,6/14/06) Sec. 15-151. Meter Requirements. With respect to meter requirements, Grantee shall follow either the roles existing at the execution of this franchise or the current rules of the Texas Railroad Commission or its successor,whichever rules are more favorable to the customer. (Ord.No.0-2006-55,6/14/06) Sec. 15-152. Reserved. Sec. 15-153. Franchise Review. The City Council reserves the right to review Grantee's performance under this franchise at any time. (Ord.No. 0-2006-55,6/14/06) Sec. 15-154. Complaint Procedures. a. The City Manager or City Manager's designee is specified by City as having primary responsibility for the continuing administration of this franchise and implementation of complaint procedures,consistent with law,Rules, and Grantee's Regulations. b. Grantee shall maintain an office in Tyler, and have a publicly listed telephone with adequate line capability so that complaints and request for repairs or service adjustments may be received twenty-four(24)hours a day and seven (7)days a week. Sufficient responsibility must be delegated to permit Grantees local management to make timely decisions. c. Grantee shall establish procedures for receiving, acting upon, and resolving customer complaints as provided by law, Rules, and Grantee's Regulations. A copy of current procedures shall always be filed with the City. 14 d. City understands that Grantee keeps various maintenance service, customer complaint, and service outage records which are available for review by City. (Ord.No. 0-2006- 55, 6/14/06) Sec. 15-155. Reserved. Sec. 15-156. Reserved. Sec. 15-157. Indemnification. a. Grantee shall at all times take reasonable precautions for preventing failures, explosions and accidents which are likely to cause damage or injury to the public,to employees of Grantee, and to public or private property. It is expressly understood and agreed by and between City and any Grantee hereunder that Grantee shall save City and its agents and employees harmless and indemnify it from and against all claims, damages, losses,judgments, and expenses, including attorney's fees sustained by City on account of any suit, judgment, execution, claim or demand whatsoever, arising out of the selection, construction, installation, operation, or maintenance of Grantee's system authorized herein, whether or not any act or omission complained of is authorized, allowed or prohibited by this ordinance and any franchise granted hereunder and shall refund to City all sums which City may be adjudged to pay on any such claim, or which may arise or grow out of the exercise of the rights and privileges hereby granted, or by the abuse thereof. Grantee shall have no liability to City under any provision of this paragraph with respect to any claim or action brought against City which is based solely on the actions of City, its agents or employees. It is understood that it is not the intention of the parties to create liability for the benefit of third parties, but that this agreement shall be solely for the benefit of the parties. b. Grantee shall be promptly notified in writing by City of any notice of claims, and Grantee shall have control of the defense of any action on such claims and all negotiations for its settlement or compromise, with the exception that for any claim which will require City to pay any money, the written consent of City shall be required prior to any such settlement or compromise. c. Should any actions or inaction of Grantee become, or in Grantee's opinion be likely to become,the subject of any such claim or action, City shall permit Grantee, at its option and expense,to take such reasonable action as may be necessary in order to avoid or mitigate any such claim; and, so long as Grantee reasonably demonstrates capacity to perform its obligations under this section, Grantee may select one law firm to represent both Grantee and City, in any action under this section, unless a conflict of interest requires multiple representation, in which even City agrees to monitor and control the work of its attorneys to the extent feasible to the end that the fees of its attorneys shall be reasonable. d. Upon the failure of Grantee to comply with this "defense-of-suit"provision of the franchise,after reasonable notice to it by City,City shall have the right to defend the same and in addition to being reimbursed for any such judgment that may be rendered against such City, together with all court costs incurred therein, Grantee shall reimburse said City for attorney's fees if any attorney is employed to assist the City Attorney in such case or cases, as well as all expenses incurred by City by reason of undertaking the defense of such suit or suits, whether such suit or suits are successfully defended, settled, compromised or fully adjudicated against City. 15 In the event City is compelled to undertake the defense of any such suit by reason of Grantee's failure to perform as hereinabove provided, City shall have the full right and authority to make or enter into any settlement or compromise of such adjudication as the Council shall deem in the best interests of City, this without the prior approval or consent of Grantee with respect to the terms of such compromise and settlement, unless at such time Grantee is also a party to the proceeding, in which event,Grantee's consent to such settlement shall be obtained. e. Grantee shall not prosecute or maintain any claims against City or its employees for any damage or injury to Grantee's pipelines or facilities resulting from City's performance of work or repairs upon city streets; provided, however, that the provisions hereof shall in no way limit Grantee's right to prosecute or maintain any such claim against any person, association, or corporation other than City or its employees. (Ord.No. 0-2006-55,6/14/06) Sec. 15-158. Insurance. City expects that Grantee will provide sufficient resources, either self-insurance or other insurance, to adequately support this franchise and the indemnity provisions of Section 15-157. (Ord.No.0-2006.55,6/14/06) Sec. 15-159. Rights of Individuals. a. Grantee shall not deny service, deny access, or otherwise discriminate against customers or general citizens on the basis of race, color, religion, national origin, sex, age or handicap. Grantee shall comply at all times with all other applicable federal, state and local laws and regulations, and all executive and administrative orders relating to nondiscrimination which are hereby incorporated and made part of this ordinance by reference. b. Grantee shall strictly adhere to the equal employment opportunity requirements of federal,state and local regulations, and as amended from time to time. (Ord. No. 0-2006-55, 6/14/06) Sec. 15-160. Preference/Discrimination Prohibited. a. Grantee shall not, as to rates, charges, service, services, facilities, rules, regulations or in any other respect make or grant any undue preference or advantage to any person, class of customers, nor subject any person to any prejudice or disadvantage. Grantee may offer different rates to classes of customers in accordance with filed and approved tariffs. b. Subject to subsection A., Grantee may not, directly or indirectly, by any device whatsoever or in any manner, change demand, collect or receive from any person a greater or lesser compensation for any service rendered or to be rendered by Grantee than that prescribed in the schedule of rates applicable when filed in the manner provided in this ordinance, nor any person knowingly receive or accept any service from Grantee for a compensation greater or less than that prescribed in the schedules. c. Subject to subsection A., the service furnished by Grantee shall be furnished to every person within the City of Tyler within reasonable time after demand for such service has been made,upon terms as authorized by Grantee's rates. (Ord.No. 0-2006-55, 6/14/06) Sec. 15-161. Rulemaking by City; Review and Approval of Grantee Rules and Policies. 16 a In order to insure uniform and reasonable application of conditions for service and to insure availability of service to all without discrimination,the Council reserves the right to review and approve, consistent with the terms of this code,Grantee's rulesç regulations,practices, terms,conditions,or standards governing the conduct of its business,to the full extent authorized by state and federal law. b. In the foregoing connection, Grantee shall promptly file with the City Clerk any such proposed Grantee rules,regulations,practices, terms, conditions,or standards governing the conduct of its business. c. In the further exercise of its police powers granted to it as a home rule city, City Council may, from time to time, after reasonable notice and hearing,establish such rules and regulations by ordinance as may be in the public interest regarding rates, the furnishing of service, administration of customer accounts, construction of Grantee's facilities on City property, or other matters pertaining to the administration of this franchise, provided such rules and regulations are not inconsistent with the rights of Grantee hereunder or any federal;state, or local law,rules or regulations of the Texas Railroad Commission,or its successor, and subject to Grantee's rights of appeal under GURA. (Ord.No.0-2006-55,6/14/06) Sec.15-162. Service Rates. City reserves the right to review and regulate the rates of Grantee as allowed bylaw. The rates which shall be charged by Grantee for its services within City shall be determined, fixed, and regulated by City Council which expressly retains and reserves its rate modification authority under this franchise. (Ord.No.0-2006-55, 6/14/06) Sec. 15-163 Regulation. Nothing in this franchise shall be construed to limit the authority of the City to regulate the business of the Grantee as provided by law. (Ord. No. 0-2006-55,6/14/06) Sec. 15-164. Books,Records,Maps,Inspections. a. Grantee shall, consistent with applicable law, fully cooperate in making available at reasonable times, and City Manager or designee shall have the right to inspect the books, records, maps, plans, and other like materials of Grantee applicable to Grantee's system, at any time during normal business hours;provided when volume and convenience necessitate, Grantee may require inspection to take place on Grantee's premises. b. Grantee shall keep its records in accordance with the system of accounts prescribed by state or federal law(currently 16 TAC §7.43) or as it may be amended. c. Grantee shall always keep and maintain complete books, records, accounts, documents,maps,plats, and papers,pertaining to its franchise operation and showing all existing and proposed installations. Certain historical financial records which are kept at Grantee's corporate office shall be made available as provided in subsection A. Maps,plats, records, inventories, and books of the Grantee pertaining to the franchise system, insofar as they show values of existing property, shall be preserved for use, if necessary in connection with future valuation of the property of Grantee and for such other purposes as necessary. 17 ( ( d. Grantee shall file annually with the office of City Clerk, no later than six (6) months after the end of Grantee's fiscal year, a copy of its annual report to its stockholders, including an income statement applicable to its operations during said fiscal year and a balance sheet. These reports shall be certified as correct by an authorized officer of Grantee and there shall be submitted along with them such other reasonable information as City Council shall request. e. City shall have the right at reasonable times to inspect the plant, equipment, and other property of Grantee and its affiliates according to state law, and to examine, audit, and obtain copies of the papers, books, accounts, documents, and other business records of Grantee and its affiliates consistent with state law. f. City retains all of the valid and enforceable investigative powers and other rights provided to City by the charter and state law. Notwithstanding anything to the contrary in this franchise, Grantee does not admit, by accepting this franchise or agreeing to any provision hereof, to the validity or enforceability of any provisions of the City Charter as same currently exists or to any amendments to the City Charter that may be made during the term of this franchise. (Ord.No. 0-2006-55,6/14/06) Sec. 15-165. Quarterly Reports/Quality of Service Evalutation. City reserves the right at any time to request information or to hold review sessions concerning Grantee's performance. (Ord.No. 0-2006-55,6/14/06) Sec. 15-166. Filings and Communications. a. Grantee shall file with the City all rate schedules, gas supply contracts, gas purchase contracts, and reports required by the Railroad Commission of Texas relating to Grantee's gas utility operations within the City. - - b. Upon request, Grantee shall furnish to City Attorney's Office a copy of any other report normally filed by Grantee with its other municipal regulatory authorities or any other document in respect to any matters affecting Grantee's operations authorized pursuant to this franchise. (Ord.No.0-2006-55, 6/14/06) DIVISION 4. OTHER Sec. 15-167. Notices. Whenever any notice or payment is required, such notice or payment shall be enclosed in an envelope with sufficient postage attached to ensure delivery and deposited in the United States mail, addressed to: Notice to: Payment to: City Manager Accounting Department City of Tyler City of Tyler P.O.Box 2039 P.O.Box 2039 Tyler,TX 75710 Tyler,TX 75710 (214) 531-1250 (214) 531-1137 and notices, etc.to Grantee addressed to: 18 CenterPoint Energy District Manager-Tyler Longview District SGO Texas Division 1701 East Harrison Road Longview,Texas 75604 903-238-7667 or to such other addresses as the parties may designate to each other in writing. (Ord. No. 0- 2006-55,6/14/06) Sec. 15-168. Amendment/Interpretation. City shall have the right to amend this ordinance and any amendment made pursuant to this right shall be fully incorporated into any franchise agreement granted under this ordinance only upon Grantee's approval and written acceptance of such amendment. City and Grantee hereby acknowledge that all of the provisions hereof are the result of negotiations between City and Grantee. The provisions of this ordinance shall be construed fairly and reasonably and not more strictly against the party drafting such provisions than against the nondrafting party. (Ord. No. 0-2006-55, 6/14/06) Sec. 15-169. Texas Law and Venue. Any franchise granted hereunder shall be construed under Texas laws and venue for any actions involving such franchise, other than where an appeal is pursuant to GURA, shall be in Smith County, Texas. (Ord.No. 0-2006-55, 6/14/06) Sec.15-170. Savings Clause. If any section, sentence, clause or phrase of this ordinance is held unconstitutional or otherwise invalid, such infirmity shall not affect the validity of the remaining portions of this ordinance, and any portions in conflict are hereby repealed, provided, however,that in the event that the state or federal government laws or regulations renders any section invalid, then such section or sections may be renegotiated by City and Grantee. (Ord.No. 0-2006-55, 6/14/06) Sec. 15-171. Reservation of Rights/Police Power. City hereby reserves to itself all rights, privileges, and interests which it has or may hereafter acquire, and nothing in this ordinance shall be construed otherwise unless it is specifically set forth in this ordinance. City specifically reserves the right to adopt such additional regulations as it shall fmd necessary in the exercise of its police power, and which are not in conflict with any federal, state,or local law. (Ord.No.0-2006-55,6/14/06) City hereby expressly reserves the right, power, and authority to fully regulate the rates, operations and services of Grantee to the extent authorized by and in a manner not inconsistent with the Constitution, the laws of the State, and the Rules, and subject to Grantee's right of appeal under the GURA. (Ord.No.0-2006-55, 6/14/06) Sec. 15-172. Acceptance and Effective Date of Franchise. 19 1 ( a. This franchise agreement shall not become effective until Grantee accepts it as described below. In the event Grantee does not agree to this document, the franchise will become null and void. b. Within thirty(30) days after the third and final vote of this ordinance awarding a franchise, Grantee shall file with City Clerk its written acceptance, shown by signing this document, together with the insurance proofs. By signing and returning this document, Grantee states its agreement to be bound by and to comply with and to do all things required of Grantee by the provisions of this ordinance and the franchise agreement. c. By execution of this franchise agreement, CenterPoint and the City agree that all franchise or other payments for the use and occupancy of City streets and public ways made by CenterPoint prior to the date of this franchise agreement are correct and sufficient, and each party releases the other from any and all claims relating to fees paid or unpaid for the use and occupancy of City streets and public ways by CenterPoint. (Ord.No. 0-2006-55, 6/14/06) Sec. 15-173. Adoption. PASSED,on the first reading the 23rd day of April, A.D.2003. PASSED,on the second reading the 24th day of May,A.D.,2006. PASSED, on third and final reading and approved this 14th day of June, A. D., 2006. 15-174—15-229. Reserved. JOSEPH O. SEEBER,MAYOR OF THE CITY OF TYLER,TEXAS ATTEST: APPROVED: CASSANDRA BRAGER,CITY CLERK CITY ATTORNEY 20 i i 4 t # # t F f 4 # • i ACCEPTANCE Grantee, by and through its undersigned authorized officer hereby accepts this Ordinance, No. 0-2006-55 granting it a franchise this day of 2006, and hereby tenders payment of all costs required herein. ATTEST: CENTERPOINT ENERGY RESOURCES CORP., dba CENTERPOINT ENERGY TEXAS GAS OPERATIONS BY: SECRETARY Richard A.Zapalac,Vice President,Texas Southern Gas Operations • + r < ♦ + + r • r r s + CERTIFICATION THE STATE OF TEXAS § COUNTY OF SMITH § 1, the duly appointed City Clerk of the City of Tyler, Texas, do hereby certify that the above and foregoing franchise ordinance was approved by majority vote of the Council on three separate readings, with the last being not less than 30 days from the first, and that notice of the franchise was published in a newspaper of general circulation in Smith County. City Clerk (SEAL) THE STATE OF TEXAS § COUNTY OF SMITH § I, the duly appointed, qualified and acting City Clerk of the City of Tyler, Texas, do hereby certify that the above and foregoing acceptance was received and filed in the office of the City Secretary of the City of Tyler on City Clerk 21 CenterPoint Energy Texas Coast Division • CenterPoint Energy plans to file a statement of intent to change its rates, terms and conditions of natural gas service in the city and in its Texas Coast Division. o Note: The statement of intent has nothing to do with electric service provided by CenterPoint Energy. • The total cost of service and rate base for Texas Coast Division is based on a test year ending September 30, 2007,adjusted for known and measurable changes to reflect a proforma period through December 31, 2008. • The Company's revenues in the Texas Coast Division are not keeping pace with increasing operating costs and capital investment, which are required to maintain safe,adequate, and reliable service. o We have worked hard to contain and reduce our operating costs and to continue to provide safe, adequate,and reliable service at reasonable rates. o Unfortunately, our cost for labor, materials and supplies, and other operating expenses continue to rise. o And, we also continue to make substantial investments to expand and improve our natural gas distribution system. • Historically, we have been able to rely upon customer growth and a cost of service tracker program that is in effect in some cities to help defer the need to file a general rate case. o In fact,the Texas Coast Division has not had a general rate case in over 30 years. o. However, the traditional cost of service tracker reflects only O&M expenses, and certain expenses that are not covered by the tracker have risen. o At the same time, the Company has experienced a reduction in use per customer due to energy conservation and other factors, which negatively impacts our revenues. o As a result, our current rates for service to customers in the Texas Coast Division do not provide us with a reasonable opportunity to recover our operating expenses and the cost of financing our investment in our natural gas distribution system. • The Company plans to file Statements of Intent on March 6, 2008 with the Texas Railroad Commission and the 47 cities in our Texas Coast Division. o The Railroad Commission will review our filing over a six-month period. It has original jurisdiction over rates established in the environs and appellate jurisdiction over rates set for the cities. o The proposed rate schedules will reflect uniform, division-wide rates, charges and terms and conditions of service for the cities and environs of the Texas Coast Division. • 0 CenterPoint Energy Texas Coast Division • The principal objectives of the rate case are to— I. establish uniform rates and services within our Texas Coast Division, as we have done in our Beaumont/East Texas, Houston, and South Texas Divisions; 2. establish a revenue requirement that will allow us to recover our operating costs and earn a fair return on our investment; 3. establish tariffs to recover gas costs and franchise fees and gross receipts taxes through separate rates,as we have done elsewhere in Texas; 4. eliminate the forfeited discount payment provision 5. reduce the frequency of future rate cases; and 6. continue to provide adequate, safe and reliable service. • The filing does not affect the cost of gas billed to our customers, which makes up about 70 percent of the bill. o The Company does not mark up the cost of gas; instead, it passes the cost through to customers at the same price the Company paid. o Through the rate design structure, the Company proposes to completely. . . segregate gas and non-gas costs to make gas costs more transparent. through a separate rider. o We will continue to manage our gas supply portfolio in a manner which appropriately balances adequacy, reliability, cost, and price stability. • The rate case filing proposes to change the base rate portion of a customer's natural gas bill, which makes up about 30 percent of the total bill, and covers the cost of distributing natural gas. o Distribution costs include operating and maintaining the Company's natural gas distribution system, taxes and fees paid to government entities, depreciation, income, and interest. o To lessen the need for future rate cases,the Company will be proposing modifications to our cost of service tracker. • We will be proposing a Tax Adjustment tariff that will give us more flexibility in working with your city and other cities on franchise agreements in the future. . o This same tariff has been implemented in our Houston, South Texas and Beaumont/East Texas divisions. o It will allow us to "flow through" changes in franchise fees and gross receipts taxes to our customers as those changes occur. o Once the Tax Adjustment tariff is approved, we will be able to offer to your city a standard franchise agreement that was recently approved by the City of West University Place and which we are proposing to other cities. • The effects of proposed statement of intent on the Company's revenues and the impact to a residential customer as it relates to your city are located on the next page. • Avg.Res. Total Total Monthly Residential Sm.Comm. Lrg.Volume Total Additional Percent Bill City Customers Customers Customers Customers Revenues Increase Increase La Porte 7,752 415 16 I 8,183 $359,103 5.46% $3.56 HOW ARE RATE CASE EXPENSES RECOVERED FROM CUSTOMERS IN RATE PROCEEDINGS? 1. The Gas Utility Regulatory Act("GURA") allows a utility to recover from customers both the reasonable rate case expenses the utility directly incurs to put on its case, as well as any reimbursement to the municipality for its costs.1 2. The regulatory authority (either the municipality having original jurisdiction over the utility's rates or the Railroad Commission of Texas on appeal) only has the authority to order the recovery of rate case expenses from customers whose rates will change as a result of the case pending before the regulatory authority. WHAT DOES THIS MEAN? In Texas, a city gets the exclusive right to determine whether a rate request is reasonable for customers in that city. It is only if the utility appeals a city's decision on rate relief to the Railroad Commission that the Commission gains the authority to set rates for those city's customers. In contrast, if a city approves the requested rates or lets them go into effect, the Railroad Commission has no authority to change the rates for that city. This also means that on appeal, the Railroad Commission cannot order a surcharge on rates for recovery of rate case expenses associated with the appeal for city customers whose rates are not at issue on appeal. WHY? Because the Railroad Commission does not have authority to change the rates of customers in those cities that are not participating in the appeal case. WHAT IS THE CONSEQUENCE OF THIS? The consequence is that the Railroad Commission can only order the recovery of rate case expenses from those customers who live in the cities that deny the rate change and end up in an appeal before the Railroad Commission. WHY HAVE ALL CUSTOMERS OF ATMOS MID-TEX PAID FOR RATE CASE EXPENSE IN THE PAST? Because in past cases (GUD No. 9400 and GUD No. 9670)every city served by Atmos Mid-Tex participated in the appeal at the Railroad Commission. HAS THE RAILROAD COMMISSION REJECTED SURCHARGING RATE CASE EXPENSES ON A CITY NOT PARTICIPATING IN AN APPEAL? Yes. In GUD No. 9465, the utility settled with the City of Port Arthur, Texas, agreeing to give that city most favored nation treatment from any resulting appeal. Three other cities denied the proposed rates and litigated an appeal at the Railroad Commission. Over those three cities' 'See Railroad Commission of Texas case GUD No.9002-9135,citing GURA§103.022 and §104.051. W:C\Documents and Senings\0006380TWcal Settings\Tcmpmary Intend FIIes\Contenl.Onllonk\YQZI4N\ CP Rate Case Expense Handourdoe objections, the Railroad Commission surcharged rate case expenses only on the three cities involved in the appeal and not on the settling city. IS THERE ANY GUARANTEE THAT THE RAILROAD COMMISSION WILL ALLOW THE CITY TO RECOUP ITS RATE CASE EXPENSES? No. A city's recovery of rate case expense is not guaranteed. The Railroad Commission has become tougher on the recovery of rate case expenses by both cities and utilities. W:C:\Documents and Setings\0006380TLocal Settings\Temporary Internet Files\ContentOuaook\7YQTJ4NW\CP Rate Case Expense Hanndoutdoc Procedure for Processing Franchise Revision Ordinance City of La Porte,Texas 2009 1. The ordinance should be passed at two separate regular meetings of the City Council. (a) READINGS. (1) The City Council should have a written notice of the date,how,place, and subject of the meetings(at which the franchise ordinance is to be passed on first reading)posted for at least 72 hours preceding the scheduled times of the meetings on a bulletin board located in a place in the City Hall that is convenient and readily accessible to the general public at all times. (2) A certified copy of the resolution passed by the City Council,establishing the time and place of its regular meetings should be obtained. 2. The City Council is composed of a Mayor and eight (8)Council members. At least five (5)members of the Council should be present throughout the meeting at which the ordinance is passed,and a majority of those present must vote in favor of the ordinance. 3. The Mayor should approve the ordinance by signing the copy that is introduced,read,and passed. 4. The City Secretary should complete the certificate attached to the ordinance. This certifies that the ordi- nance was adopted,and that notice was posted 72 hours before the meeting was held. 5. After the first and reading,the ordinance shall be published once a week for four(4)consecutive weeks in the official newspaper of the City,with the expense of such publication to be borne by our company.The Publisher should certify before a Notary Public that the ordinance was properly published. Said certificate shall be filed with the City within thirty(30)days after the passage of this ordinance. 6. After the ordinance has been passed, the following instruments should be forwarded to the Division Office for completion and distribution as indicated: (a) One certified copy of the resolution establishing the time and place of the regular meetings of the City Council as described in item 1(b)(to be placed in the general files of the company). (b) Three copies of the ordinance, executed by the Mayor,each with Secretary's certificates attached should be returned to the Division Office. These will be accepted by the company and returned to the local office. The City Secretary should certify in the place provided on the last page that acceptance by the company was received and filed. 1. One copy may be retained by the City 2. One copy should be returned to the Division Office for placement in the files. 3. One copy should be returned to the Legal Department in Houston. 4. Forward a copy to Angela Williams at CNP-T 3604A in Houston. 5. If there is a change in the percentage of gross receipts to be paid, please forward a copy of the signed franchise to Keith Wall in the Rate Department at CNP-T 2158 in Houston. CITY OF LA PORTE ORDINANCE NO.2009- AN ORDINANCE GRANTING TO CENTERPOINT ENERGY RESOURCES CORP., DBA CENTERPOINT ENERGY TEXAS GAS OPERATIONS, THE RIGHT, PRIVILEGE AND FRANCHISE TO CONSTRUCT, INSTALL, EXTEND, REMOVE, REPLACE, ABANDON, OPERATE AND MAINTAIN ITS FACILITIES WITHIN THE PUBLIC RIGHTS-OF-WAY OF THE CITY OF LA PORTE,TEXAS FOR THE TRANSPORTATION, DELIVERY, SALE AND DISTRIBUTION OF NATURAL GAS; CONTAINING OTHER PROVISIONS RELATING TO TIRE FOREGOING SUBJECT; PROVIDING FOR SEVERABILITY AND PROVIDING AN EFFECTIVE DATE. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE: Section 1. GRANT OF AUTHORITY. Subject to the terms, conditions and provisions of this ordinance, the right, privilege and franchise is hereby granted to CenterPoint Energy Resources Corp., DBA CenterPoint Energy Texas Gas Operations, hereinafter called "Company", to construct, install, extend, remove, replace, abandon, operate and maintain its facilities within the Public Rights-of-Way of the City of La Porte,Texas for the transportation, delivery, sale and distribution of natural gas within the corporate limits of the City of La Porte, as the same are now and as the same may from time to time be extended. Section 2.DEFINITIONS. A. "City" shall mean the City of La Porte,Texas. B. "Company" shall mean CenterPoint Energy Resources Corp., DBA CenterPoint Energy Texas Gas Operations, a Delaware Corporation, and shall not mean any of its affiliates and subsidiaries who shall have no right,privilege or franchise granted hereunder. C. "Facilities" shall mean pipes, pipelines, natural gas mains, laterals, feeders, regulators, meters, fixtures, connections and attachments and other instrumentalities and appurtenances, used in or incident to providing transportation, distribution, supply and sales of natural gas for heating, lighting, power and any other purposes for which natural gas may now or hereafter be used. D. "Public Rights-of-Way" shall mean the areas in, under, upon, over, across, and along any and all of the present and future Streets or streams now or hereafter owned or controlled by City. E. "Street" shall mean the surface and the space above and below any public street, road, highway, alley,bridge, sidewalk,or other public place or way. Section 3. TERM OF FRANCHISE. This Franchise shall become effective on the Effective Date described in Section 20 and shall be in full force and effect for a term of 30 years. Section 4. CONSTRUCTION AND MAINTENANCE OF NATURAL GAS DISTRIBUTION SYSTEM. All Facilities installed by Company shall be of sound material and good quality, and shall be laid so that they will not interfere with the artificial drainage of the City or its underground fixtures, or with navigation in or the natural drainage of any stream. All Facilities shall be installed in accordance with applicable Federal, State and City regulations and in the absence of such regulations in accordance with accepted industry practice. Within the Public Rights-of-Way, the location and route of the Facilities by the Company shall be subject to the reasonable and proper regulation, direction and control of the City or the City official to whom such duties have been delegated. Such regulation shall include, but not be limited to, the right to require in writing to the extent provided in Section 13 the relocation of Company's Facilities at Company's cost within the Public Rights-of-Way of the City whenever such relocation shall be reasonably necessary to accommodate the widening, change of grade, or relocation by City of Streets or Public Rights-of-Way, or construction or relocation by City of City utility lines or drainage facilities. The Company and the City shall work together to develop a procedure under which Company shall make available to the City maps showing the location of Company's Facilities within the corporate limits of the City. Section 5. STREETS TO RESTORED TO GOOD CONDITION. Company and its contractors shall give City re nab notice, of the dates, location and nature of all work to be performed on its Facilities within a Public Rights-of-Way. This Franchise shall constittap. mit to perform all work on Compan acilities within the Public Rights-of-Way and to vehicles the treets and other zblicjtsot Way when necessary for the installation, replacement, abandonment, 2aauion or maintenance of Company's Facilities. Company and contractors performing work for Company shall not be required to obtain any permits in addition to the Franchise or to pay any fee in addition to the franchise fee in order to perform work on Company's Facilities,or park within the Streets an4e rPubJic Rights-of-Way. Following completion of work in the Public Rights-of-Way, Company ,ftalhe affected Public Rights-of-Way as soon as_possible,.but in.alLcasea Cn any shall ty ord nances governing time peri ds aA -gaudatLlSSg]AtinB to er cav tin in the Public Rightsof- y. street, alley, highway or public place shall be encumbered for a longer period than shall be necessary to execute the work. Section 6. QUALITY OF SERVICE. The service furnished hereunder to the City and its inhabitants shall be in accordance with the quality of service rules of the Railroad Commission of Texas and all other applicable local, state and federal regulations. Company shall furnish the grade of service to its customers as provided by its rate schedules and shall maintain its system in reasonable operating condition during the continuance of this Franchise. An exception to this requirement is automatically in effect, but only for so long as is necessary, when caused by a shortage in materials, supplies and equipment beyond the control of the Company as a result of fires, strikes, riots, storms, floods and other casualties, governmental regulations, limitations and restrictions as to the use and availability of materials, supplies and equipment and as to the use of the services, and unforeseeable and unusual demands for service. In any of such events the Company shall do all things reasonably within its power to restore normal service as quickly as practicable. Section 7. PAYMENT TO THE CITY. In consideration of the rights and privileges herein granted, the administration of the Franchise by the City, the temporary interference with the use of Public Rights-of-Way and cost and obligations undertaken by the city in relation thereto and in lieu of any license, charge, fee, street or alley rental or other character of charge for use and occupancy of the Streets, alleys, and public places of the City, and in lieu of any inspection fee, the Company agrees to pay to the City franchise fees in the amount and manner described herein. Company agrees to pay to the City quarterly during the continuance of this Franchise a sum of money equal to four percent (4%) of the Company's gross receipts for the preceding calendar quarter received-by the om y4'rem-the s�ale�of gas within the corporate limits of the City plus seven cents (7¢) per Mcf for natural gas transponea by Company for its Transport Customers during such quarter. "Transport Customer"_.means any person or entity for whom Company transports gas through the distribution system of Company within the corporate limits of City for consumption within the co limits of City.::The franchise fees hereunder shall be calculated for the calendar quarters ending March 31,June 30, September 30, and December 31 and shall be payable on or before the fifteenth day of May, August,November, and February following the quarter for which payment is made, beginning with the first such date following the Effective Date of this Franchise and each August 15th, November 15th, February 15th, and May 15th thereafter; provided, however, the first such payment shall be prorated as necessary to reflect only those gross receipts received and transportation volumes delivered by Company after the Effective Date of this Franchise. In no event shall the Company be required to remit to the City franchise fee amounts that for any reason whatsoever are not fully recoverable from its-customers. Upon receipt of the above amount of m ey,the City Secretary shall deliver to the Company a receipt for such amount. If any payment due date required herein falls on a weekend or bank holiday,payment shall be made on or before the close of business of the first working day after the payment due date. Section 8. ANNEXATIONS BY CITY. This Franchise shall extend to and include any and all territory that is annexed by the City during the term of this Franchise. Within sixty (60) days from the receipt of notice from the City of any such annexation, the Company shall assure that any and all customers within such annexed territory are included and shown on its accounting system as being within the corporate limits of the City of La Porte. After such sixty (60) day period the payment provisions specified in Section 7 of this Franchise shall apply to gross receipts received by the Company from customers located within such annexed territory. Company shall true-up its map of City boundaries to the City's map on an annual basis. Section 9.NON-EXCLUSIVE FRANCHISE.Nothing contained in this Franchise shall ever be construed as conferring upon the Company any exclusive rights or privileges of any nature whatsoever. Section 10. COMPLIANCE AND REMEDIES. (a) In the event the Company by act or omission violates any material term, condition or provision of this Franchise, the City shall notify the Company in writing of such violation. Should the Company fail or refuse to correct any such violation within thirty (30) days from the date of City's notice, the City shall, upon written notification to the Company,have the right to terminate this agreement. Any such termination and cancellation shall be by ordinance adopted by City Council; provided, however, before any such ordinance is adopted, the Company must be given at least sixty (60) days' advance written notice. Such notice shall set forth the causes and reasons for the proposed termination and cancellation, shall advise the Company that it will be provided an opportunity to be heard by City Council regarding such proposed action before any such action is taken and shall set forth the time,date and place of the hearing. (b) Other than its failure, refusal or inability to pay its debts and obligations, including, specifically, the payments to the City required by this Franchise, the Company shall not be declared in default or be subject to any sanction under any provision of this Franchise in those cases in which performance of such provision is prevented by reasons beyond its control. (c)The rights and remedies of City and Company set forth herein shall be in addition to, and not in limitation of, any other rights and remedies provided at law or in equity and City's exercise of any particular remedy shall not constitute a waiver of its rights to exercise any other remedy. Section 11. RESERVE OF POWERS. Except as otherwise provided in this Franchise, the City by the granting of this Franchise does not surrender or to any extent lose, waive, impair or lessen the lawful powers, claims and rights, now or hereafter vested in the City under the Constitution and statutes of the State of Texas and under the Charter and Ordinances of the City of La Porte or other applicable law, to regulate public utilities within the City and to regulate the use of the Streets by the Company; and the Company by its acceptance of this Franchise agrees that, except as otherwise provided in this Franchise, all lawful powers and rights, whether regulatory or otherwise, as are or as may be from time to time vested in or reserved to the City, shall be in full force and effect and subject to the exercise thereof by the City at any time and from time to time. SECTION 12. INDEMNITY. THE COMPANY, ITS SUCCESSORS AND ASSIGNS, SHALL PROTECT AND HOLD THE CITY AND ITS OFFICERS, AGENTS, AND EMPLOYEES (COLLECTIVELY REFERRED TO IN THIS SECTION AS "THE CITY") HARMLESS AGAINST ANY AND ALL CLAIMS OR DEMANDS FOR DAMAGES TO ANY PERSON OR PROPERTY BY REASON OF THE CONSTRUCTION AND MAINTENANCE OF THE COMPANY'S NATURAL GAS DISTRIBUTION SYSTEM, OR IN ANY WAY GROWING OUT OF THE RIGHTS GRANTED BY THIS FRANCHISE, EITHER DIRECTLY OR INDIRECTLY, OR BY REASON OF ANY ACT, NEGLIGENCE OR NONFEASANCE OF THE COMPANY OR THE CONTRACTORS, AGENTS OR EMPLOYEES OF THE COMPANY OR ITS SUCCESSORS AND ASSIGNS, AND SHALL REFUND TO THE CITY ALL SUMS WHICH THE CITY MAY BE ADJUDGED TO PAY ON ANY SUCH CLAIM, OR WHICH MAY ARISE OR GROW OUT OF THE EXERCISE OF THE RIGHTS AND PRIVILEGES HEREBY GRANTED OR BY THE ABUSE THEREOF, AND THE COMPANY OR ITS SUCCESSORS AND ASSIGNS SHALL INDEMNIFY AND HOLD THE CITY HARMLESS FROM AND ON ACCOUNT OF ALL DAMAGES, COSTS, EXPENSES, ACTIONS, AND CAUSES OF ACTION THAT MAY ACCRUE TO OR BE BROUGHT BY, A PERSON, PERSONS, COMPANY OR COMPANIES AT ANY TIME HEREAFTER BY REASON OF THE EXERCISE OF THE RIGHTS AND PRIVILEGES HEREBY GRANTED, OR OF THE ABUSE THEREOF. Section 13.RELOCATION OF FACILITIES. The Company shall,upon written request of the City, relocate its Facilities within Public Rights-of-Way at Company's own expense, exclusive of Facilities installed for service directly to City, whenever such shall be reasonably necessary on account of the widening, change of grade, or relocation by City of Streets or Public Rights-of-Way, or construction or relocation by City of City utility lines or drainage facilities. City shall bear the costs of all relocations of Facilities installed for service directly to City and of any relocation of other Facilities requested by City for reasons other than the widening, change of grade, or relocation by City of Streets or Public Rights-of-Way, or construction or relocation by the City of City utility lines or drainage facilities. Section 14. GOVERNMENTAL FUNCTION. All of the regulations and activities required by this Franchise are hereby declared to be governmental and for the health, safety and welfare of the general public. Section 15. RECORDS AND REPORTS. (a) Books of Account. The Company shall keep complete and accurate books of accounts and records of its business and operations under and in connection with this Franchise. All such books of accounts and records shall be kept at the company's principal office in Houston,Texas. (b) Access by City. The City may conduct an audit or other inquiry or may pursue a cause of action in relation to the payment of the franchise fee only if such audit, inquiry, or pursuit of a cause of action concerns a payment made less than three (3) years before the commencement of such audit, inquiry, or pursuit of a cause of action. Each party shall bear its own costs of any such audit or inquiry. Upon receipt of a written request from the City, all books and records related to Company's operations under this Franchise shall be made available for inspection and copying no later than thirty (30) days from receipt of such request. (c) Interest on Underoavments and Overpayments. (1) Amounts due to City for late payments shall include interest,compounded daily equal to the return on equity plus three percent(3%) granted to the Company in its most recent proceeding fixing rates applicable to customers within the corporate limits of the City. (2) If the City identifies, as a result of a franchise fee compliance review, amounts owed by the Company from prior periods or prior underpayments, then the Company shall pay simple interest on such amounts equal to the return on equity granted to the Company in its most recent proceeding fixing rates applicable to customers within the corporate limits of the City. Said interest shall be payable on such sums from the date the initial payment was due until it is paid and shall not be billed to customers. (3) Amounts due Company for past overpayments shall include simple interest equal to the return on equity granted to the Company in its most recent proceeding fixing rates applicable to customers within the corporate limits of the City;provided,however, if there is a change in the approved return on equity during the time period subject to the City's audit or inquiry, then for each time period during which there was an overpayment,the approved return on equity in effect during such time period shall be used in calculating interest under uris subparpgraph�(c� Interest payable on such sums shall be credited to customers. Pt / G / oTi Section 16. EASEMENT. In consideration for the compensation set forth in Section 7, City agrees that if City sells, conveys, or surrenders possession of any portion of the Public Right-of-Way �l'yR that is being used by Company pursuant to this Franchise, City,to the maximum extent of its right to do so, shall first grant Company an easement for such use and the sale, conveyance, or surrender of possession of the Public Right-of-Way shall be subject to the right and continued use of Company. Section 17. ACCEPTANCE. The Company shall, within thirty (30) days following the final passage and approval of this Franchise, file with the City Secretary of the City of La Porte a written statement signed in its name and behalf in the following form: "To the Honorable Mayor: and City Council of the City of La Porte: Energy Texas Gas Operations, its CenterPoint Energy Resources Corp., DBA CenterPoint p successors and assigns, hereby accepts the attached Franchise Ordinance and agrees to be bound by all of its terms and provisions." CENTERPOINT ENERGY RESOURCES CORP., DBA CENTERPOINT ENERGY TEXAS GAS OPERATIONS By: Richard A.Zapalac,Vice President-Texas Gas Operations Dated this day of 2009. Section 18. SEVERABILITY. If any provision, section, subsection, sentence, clause or phrase of this Franchise is for any reason held to be unconstitutional, void, or invalid or for any reason unenforceable, the validity of the remaining portions of this Franchise shall not be affected thereby, it being the intent the City of La Porte in adopting this Franchise that no portion hereof or provision hereof shall become inoperative or fail by reason of any unconstitutionality or invalidity of any other portion, provision or regulation and,to this end, all provisions of this ordinance are declared to be severable. Section 19. NOTICES. Every notice, order, petition, documents or other direction or communication to be served upon the City or the Company shall be deemed sufficiently given if sent by registered or certified mail, return receipt requested. Every such communication to the Company shall be sent to: CenterPoint Energy Resources Corp. Vice President Regulatory Relations PO Box 4567 Houston,TX 77210.4567 With a copy to: General Counsel, Gas Division PO Box 2628 Houston, TX 77252-2628 Every such communication to the City or the City Council shall be sent to the: Mayor, City of La Porte La Porte,Texas With a Copy to: City Manager La Porte,Texas Section 20. PUBLICATION, PASSAGE AND EFFECTIVE DATE. This Franchise, having been published, shall take effect and be in force from and after the first day of the month following thirty days after receipt by the City of Company's acceptance filed pursuant to Section 18 (`Effective Date"). The Company shall pay the cost of those publications regarding this Franchise. Read in full and passed and adopted on first reading at a regular meeting of the City Council of La Porte,Texas,on the_day of ,2009,and approved by the Mayor. Read in full and passed and finally adopted on second reading at a regular meeting of the City Council of La Porte,Texas, on the_day of , 2009, and approved by the Mayor. APPROVED: MtYOR OF THE CITY OF LA PORTE, TEXAS ATTEST: CITY SECRETARY OF LA PORTE,TEXAS THE STATE OF TEXAS § COUNTY OF HARRIS § I, the duly appointed, qualified and acting City Secretary of La Porte, Texas, do hereby certify that the above and foregoing ordinance was passed and adopted on first reading at a regular meeting of the City Council of said La Porte, Texas, held on the_day of , 2009;that written notice of the date, place and subject of said meeting was posted on a bulletin board located at a place convenient to the public in the City Hall for at least 72 hours preceding the day of said meeting; that the Mayor and eight(8)Council members: 1. 5. 2. 6. 3. 7. 4. 8. were present at said meeting and acted as the Council throughout, that written notice of the date, place and subject of said meeting was posted on a bulletin board located at a place convenient to the public in the City Hall for at least 72 hours preceding the day of said meeting; that the Mayor and Council members: 1. 5. 2. 6. 3. 7. 4. 8. were present at said meeting and acted as the Council throughout; that the above and was finally passed and adopted on second reading at a regular meeting of the City Council of said La Porte, Texas, held on the day of , 2009;that the text of the ordinance was published on the day of 20_, in the which is the official newspaper of the City of La Porte once each week for four consecutive weeks;that the same has been signed and approved by the Mayor and is duly attested by the City Secretary; and that the same has been duly filed with the City Secretary and recorded by the City Secretary in full in the books kept for the purpose of recording the ordinances of the City of La Porte. EXECUTED under my hand and the official seal of the seal of the City of La Porte,Texas at said City,this the day of , 2009. City Secretary City of La Porte,Texas [SEAL] Fax Server 2/22/2010 3:2O:46 PM PAGE 2/005 Fax Server Lloyd 816 Cars Avae.5uh 1900 A,u0n T JaFll Gosselink rwepwna(512)322-5800 Faaimic (s I2)♦R-05]2 At TURNtYG nT I \ w w WW out Mr.Cnnipt Wen Lint. (312)322-5832 Email: tmnq@Igltwfinn_oom February 22, 2010 VIA FACSIMILE Mr. Knox Askins City Attorney City of La Porte 702 W. Fairmont Parkway P.O. Box 1218 La Porte,Texas 77572-1218 Re: City of La Porte-- Gas Franchise Renewal Dear Mr. Askins: The City of La Porte is considering a renewal or renegotiation of its gas franchise agreement with CenterPoint Energy ("CPE"). CPE has offered to increase the franchise fee payment to the City to five r3ercent (5%) of gross receipts in exchange for the City's relinquishment of its origin... _.. %_ctiun over the rates, operations, and services of CPE. You have asked for my opinion regarding the advisability of surrendering original jurisdiction, as proposed by CPE. Jurisdiction The legislature has found that gas utilities, by definition, are monopolies in the areas they serve, therefore it is necessary for public agencies to regulate these utilities as a substitute for competition.' The Gas Utility Regulatory Act("GURA") (Chapters 101, et seq., Texas Utilities Code) sets forth the respective jurisdictions of municipalities and the Railroad Commission of Texas ("Commission") over the rates, services, and operations of gas utilities in the State of Texas. The governing bodies of municipalities are included in the definition of "regulatory authority," along with the Commission. The jurisdiction of the regulatory authorities over gas utilities is generally divided between original jurisdiction and appellate jurisdiction. In order to provide fair,just, and reasonable rates and adequate and efficient services,the governing body of a municipality has exclusive original jurisdiction over the rates, operations, and services of a gas utility within the municipality.' This exclusive jurisdiction means that before the gas utility can make any changes to its rates, operations, or services provided within the city, it must obtain the approval of the governing body of the city. If the utility is not satisfied with the city's action, it is able to appeal the city's action to the Commission,which will GURA § 101.002(b). ' GURA 4103.001. Lloyd GosseJink Rochelle & Townsend, PC. Fax Server 2/22/2010 3:20 : 48 PM PAGE 3/005 Fax Server Mr. Knox Askins February 22, 2010 Page 2 then exercise its appellate jurisdiction over the utility's rates.3 If such an appeal is taken, the city has standing at the Commission in such appeal, enabling the city to participate as a party in the appeal of its action at the Commission. The Commission has exclusive original jurisdiction over the rates and services of gas utilities in areas outside of municipalities and in areas inside municipalities that have surrendered their jurisdiction to the Commission.' In addition, the Commission has exclusive appellate jurisdiction to review orders or ordinances of municipalities exercising their exclusive original jurisdiction over the utility.6 If the utility or the municipality wishes to appeal any order resulting from the Commission's appellate jurisdiction, such appeal is made to the Travis County District Court.' Section 103.003 provides that a municipality may elect to have the Commission exercise exclusive original jurisdiction over gas utility rates, operations, and services in the municipality. This action may be taken by the adoption of an ordinance,or by submitting the question to a vote within the city, If a petition is filed with the governing body, signed by the lesser of 20,000 or 10% of the voters voting in the last election, the governing body must hold an election on the question of ceding jurisdiction. If a municipality surrenders its jurisdiction to the Commission, it may reinstate its jurisdiction by the same process.` Advantages of Retaining Mumcioal Jurisdiction Texas is one of the few states wherein municipalities have the jurisdiction to regulate the rates and services of gas and electric utilities. This authority is available to general law, as well as home role, cities. The activities of a municipality undertaken pursuant to its original jurisdiction are varied, and include the setting and regulation of rates and the regulation of the gas utility's services and operations within the city. The Gas Utility Regulatory Act authorizes the municipality to engage rate conaultants, accountants, auditors, attorneys, and engineers to conduct investigations and assist the city with litigation or ratemaking proceedings before the regulatory authority or a court. The gas utility is required to reimburse the municipality for the reasonable costs of the services of these consultants.' Thus, the city is well-positioned to exercise its authority to ensure that rates are just and reasonable for its citizens. In fact, it has been our experience that municipalities are in the bat position to detemrine the appropriate level and structure of utility rates for their citizens. In many cases, the municipalities arc the one'regulatory authorities to fully examine requests for rate increases and GIJRA 1 103.051. ' GURA 4103023. GURA J 102.0.^.1(,) r GURA 4102.001(b). GUM 1 105.001. ' GI1RA 4103.003. s GURA 4 103.022. Fax Server 2/22/2010 3:20:48 PM PAGE 4/005 Fax Server Mr. Knox Askins February 22, 2010 Page 3 to require the gas utilities to fully justify their investments and expenditures. The ability of municipalities to take the first took at a rate filing presents a valuable opportunity for the municipality to negotiate with the utility on the amount of the rates, the structure of the rates,and the structure and language of the utility's tariff, thereby impacting the amounts paid by the citizens for utility service without the necessity of undertaking expensive litigation. This is perhaps the sheerest advantage of retaining municipal jurisdiction: the vast majority of rate cases that have historically been filed in Texas with municipalities that retained their original jurisdiction were settled at the city level,without involvement of the Commission. The current trend of both gas and electric utilities is to insert riders in their tariffs that allow the utility to automatically recover certain costs without the necessity of waiting until a rate case is flied. The procedure known as "GRIP," or Gas Reliability Improvement Program, created by the adoption of § 104.301, GURA, is but one mechanism whereby a utility may receive"piecemeal"rate relief without the benefit of any regulatory authority looking at its entire financial situation.10 However, cities that have retained their original jurisdiction over the utility's ,.ter have been able ft negotiate alternative mechanisms to enable the cities to have greater review and influence over to erica rate adjustments. If rate cases arc not settled at the city level, when the utility appeals a municipal rate order to the Commission the hearing on these rates is undertaken before a Hearings Examiner from the Commission staff, who hears the evidence and prepares a recommendation to the Commissioners. The Commission Staff will be a party to the rate cast, but the Staff very seldom investigates the filing or the facts to the same extent that the cities do. The Staff depends very heavily on the work performed by the cities' representatives to analyze the filing and present alternative rates and/or rate structures for the consideration by the Hearings Examiners and the Commission. It is also common for industrial interests to intervene in rate cases at the Commission level, and they have been aggressively seeking to influence the design of the utility's rates to reduce the impact on industrial customers. Without the active involvement of municipalities who are vested with the authority to review and set rates, it is unlikely that the utility's filings will be challenged or critically reviewed as appropriate. The Commission is currently not favorably disposed towards the interests of residential and small commercial consumers. Additionally, as with all litigation, the outcome of the rate cases tried at the Commission and finally determined by the Commission is uncertain. The costs of litigating these rate cases at the Commission is increasingly expensive; the cities' costs and the utility's costs are usually surcharged back to the customers on a system-wide basis over a period of time. These costs and uncertainty have been a major consideration in the past in cities' efforts to reach negotiated --nts with the utilities at the city level, efforts which have largely been successful. If a municipality cedes itsjurisdiction to the Commission, the utility will no longer file its rate increase applications with the city, and the city will have no opportunity to review the filing 10 Cities effom to influence the saes resulting from these ORIP filings by intervening at the Railroad Communion end the courts have been unsuccessful, due to the Imguage of the statute that makes these piecemeal rate increeses largely unreviewable by any regulatory authority. I Fax Server 2/22/2010 3: 20:46 PM PAGE 5/005 Fax Server Mr.Knox Askins February 22, 2010 Page 4 itself or to join in a coalition of similarly-affected municipalities to review the filing. Instead, the utility will file directly with the Commission and the Commission Staff will be primarily responsible for reviewing the filing and offering alternatives to the utility's request. The Staff does not represent residential or small commercial ratepayers, and will not advocate for their interests in the same manner as the cities. Another concern is the fact that cities that surrender their jurisdiction become a "kg. tide"problem,discouraging cities that have retained jurisdiction from participating in rate cases. The utilities argue, and the Commission may agree, that rate case expenses incurred at the Commission should be paid only by residents of cities that have participated in opposing the utility's rate increase request. Over time, discrimination and jealousy between cities can develop,resulting in no opposition to the utility. Franchirc Fee vs. Original JurisFction CPE's offer of an increase in franchise fees in exchange for the city's surrender of its original jurisdiction is suspect The city should initially determine the amount of monetary benefit to be obtained by increasing the fee, and then evaluate whether the increase in annual fees is material. Franchise fees are collected by the utility from the ratepayers,and do not impact the utility's profits or losses. Thus, the utility is not offering more then it can recover from its ratepayers; its shareholders will not contribute to these increased payments. Because the franchise Ice is spread among all the ratepayer in the city, its impact on individual ratepayers is fairly insignificant. However, the ultimate impact on the ratepayers if the utility is able to bypass the initial ratemaking authority of the city and go directly to the Commission for relief, could be substantial. The insertion of a"most favored nations" clause in the franchise agreement could possibly reduce that rate impact, but the city would then have to rely on other cities and hope they are succcssful in negotiating or litigating favorable rates for residential and small commercial customers. Also, this does not avoid the "free rider" problem discussed above. The ability of the city government to have local input into the utility's rates and services and to influence the utility's rate structure and tariff language are very valuable characteristics of local government in Texas. For these reasons, I do not recommend that the City agree to surrender its original jurisdiction over the rates, services, and operations to CPE to the Railroad Commission. I hope the above discussion is helpful to you. Please let me know if you need additional information or have any questions. Sincerely, Ocorgia N. Crump GNGjme 97310]. I.docv askins & askins r.c. ATTORNEYS and COUNSELORS Knox W.Asldns Clark T.Asians February 22, 2010 via email Ron Bottoms, City Manager John Joerns, Assistant City Manager Steve Gillett, Director of Public Works Clark T. Askins, Assistant City Attorney Shelley Wolney, Budget Investment officer Re: Centerpoint Gas Franchise Renewal Dear Folks: I enclose copy of letter which I received today from Georgia M. Crump, a utility attorney with the Lloyd Gosselink law firm in Austin, who represents municipalities on gas franchise, regulatory, and rate cases. When you have had an opportunity to review, I would suggest that our City staff committee have a meeting to discuss our latest draft of the franchise agreement, and Ms. Crump's letter, prior to an executive session with City Council to receive its input on the negotiations. Youra truly, Knox W. Askins City Attorney City of La Porte KWA:sw Enclosure 702W.Fairmont Parkway,P.O.Box 1218,La Porte,TX 77572-1218 281.471.1887 phone • 281.471.2047 fax • knmasklns@comcast.net • ctasklns@swbell.net Fax Server 2/22/2010 3:20:48 PM PAGE 2/005 Fax Server Lloyd B15 Corte5s m Site 190D �`se ' l{[- Pusbn Tens 79701 GosseU 11` F. nU^e(512)472.5532 Facwnla (512)1R-0SI2 A I T C R N E Y S AT' : 1 W ws wldwhm[om Ms.Cr mpsPu t Line: (Sn)322dr32 Email' tcvna@tr)awarm.can February 22, 2010 VIA FACSIMILE Mr.Knox Askins City Attorney City of Le Porte 702 W. Fairmont Parkway P.O.Box 1218 La Porte,Texas 77572-1219 Re: City of La Porte--Gas Franchise Renewal Dear Mr. Askins: The City of La Porte is considering a renewal or renegotiation of its gas franchise agreement with CenterPoint Energy ("CPE"). CPE has offered to increase the franchise fee payment to the City to five nercent (5%) of gross receipts in exchange for the City's relinquishment of its origin.:j-.....:_ction over the rates, operations, and services of CPE. You have asked for my opinion regarding the advisability of surrendering original jurisdiction, as proposed by CPE. Jurisdiction The legislature has found that gas utilities, by definition, are monopolies in the areas they serve, therefore it is necessary for public agencies to regulate these utilities as a substitute for competition.' The Gas Utility Regulatory Act ("GURA")(Chapters 101, et seq., Texas Utilities Code) sets forth the respective jurisdictions of municipalities and the Railroad Commission of Texas ("Commission") over the rates, services, and operations of gas utilities in the State of Texas. The governing bodies of municipalities arc included in the definition of "regulatory authority," along with the Commission. The jurisdiction of the regulatory authorities over gas utilities is generally divided between original jurisdiction and appellate jurisdiction. In order to provide fair,just, and reasonable rates and adequate and efficient services,the governing body of a municipality has exclusive original jurisdiction over the rates, operations, and services of a gas utility within the municipality.' This exclusive jurisdiction means that before the gas utility can make any changes to its rates, operations, or services provided within the city, it must obtain the approval of the governing body of the city. If the utility is not satisfied with the city's action,it is able to appeal the city's action to the Commission,which will GURA 4 101.002(b). GIJRA 4103.001. Lloyd Gosselink Rochelle & Townsend, P.C. Fax Server 2/22/2010 3:20 : 48 PM PAGE 3/005 Fax Server Mr. Knox Askins February 22_,2010 Page 2 then exercise its appellate jurisdiction over the utility's rates? If such an appeal is taken,the city has standing at the Commission in such appeal, enabling the city to participate as a party in the appeal of its action at the Commission. 4 The Commission has exclusive original jurisdiction over the rates and services of gas utilities in areas outside of municipalities and in areas inside municipalities that have surrendered their jurisdiction to the Commission.` In addition, the Commission has exclusive appellate jurisdiction to review orders or ordinances of municipalities exercising their exclusive original jurisdiction over the utility.' If the utility or the municipality wishes to appeal any order resulting from the Commissions appellate jurisdiction,such appeal is made to the Travis County District Court.' Section 103.003 provides that a municipality may elect to have the Commission exercise exclusive original jurisdiction over gas utility rates, operations, and services in the municipality. This action may be taken by the adoption of an ordinance, or by submitting the question to a vote within the city. If a petition is filed with the governing body, signed by the lesser of 20,000 or 10% of the voters voting in the last election, the governing body must hold an election on the question of ceding jurisdiction. If a municipality surrenders its jurisdiction to the Commission,it may reinstate its jurisdiction by the same process.' Advantages of Bets_Municinal Jurisdiction Texas is one of the few states wherein municipalities have the jurisdiction to regulate the rates and services of gas and electric utilities. This authority is available to general law, as well as home rule, cities- The activities of a municipality undertaken pursuant to its original jurisdiction are varied, and include the setting and regulation of rates and the regulation of the gas utility's services and operations within the city- The Gas Utility Regulatory Act authorizes the municipality to engage rate consultants, accountants, auditors, attorneys, and engineers to conduct investigations and assist the city with litigation or ratemaking proceedings before the regulatory authority or a court. The gas utility is required to reimburse the municipality for the reasonable costs of the services of these consultants.° Thus, the city is well-positioned to exercise its authority to ensure that rates are just and reasonable for its citizens. In fact,it has been our experience that municipalities are in the bear position to determine the appropriate level and structure of utility rates for their citizens. In many cases, the municipalities are the only regulatory authorities to fully examine requests for rate increases and G11RA§ 103.051. GURA §103.023. GURA 1102.0,t(?) • GURA §102.001(b). r GURA § 105.001. GURA § 103.003. GURA§ 103.022. Fax Server 2/22/2010 3 : 20: 46 PM PAGE 4/005 Fax Server Mr.Knox Askins February 22, 2010 Page 3 to require the gas utilities to fully justify their investments and expenditures. The ability of municipalities to take the first look at a rate filing presents a valuable opportunity for the municipality to negotiate with the utility on the amount of the rates, the structure of the rates,and the structure and language of the utility's tariff, thereby impacting the amounts paid by the citizens for utility service without the necessity of undertaking expensive litigation. This is perhaps the greatest advantage of retaining municipal jurisdiction: the vast majority of rate cases that have historically been filed in Texas with municipalities that retained their original jurisdiction were settled at the city level,without involvement of the Commission. The current trend of both gas and electric utilities is to insert riders in their tariff's that allow the utility to automatically recover certain costs without the necessity of waiting until a rate case is filed. The procedure known as "GRIP," or Gas Reliability Improvement Program, created by the adoption of § 104.301, GURA, is but one mechanism whereby a utility may receive"piecemeal"rate relief without the benefit of any regulatory authority looking at its entire financial situation.10 However, cities that have retained their original jurisdiction over the utility's ."te have been able tr. negotiate alternative mechanisms to enable the cities to have greater review and influence over micrim rate adjustments. If rate cases are not settled at the city level, when the utility appeals a municipal rate order to the Commission the hearing on these rates is undertaken before a Hearings Examiner from the Commission staff, who hears the evidence and prepares a recommendation to the Commissioners. The Commission Staff will be a party to the rate casc,but the Staff very seldom investigates the filing or the facts to the same extent that the cities do. The Staff depends very heavily on the work performed by the cities' representatives to analyze the filing and present alternative rates and/or rate structures for the consideration by the Hearings Examiners and the Commission. It is also common for industrial interests to intervene in rate cases at the Commission level, and they have been aggressively seeking to influence the design of the utility's rates to reduce the impact on industrial customers. Without the active involvement of municipalities who are vested with the authority to review and set rates, it is unlikely that the utility's filings will be challenged or critically reviewed as appropriate. The Commission is currently not favorably disposed towards the interests of residential and small commercial consumers. Additionally, as with all litigation, the outcome of the rate cases tried at the Commission and finally determined by the Commission is uncertain. The costs of litigating these rate cases at the Commission is increasingly expensive; the cities' costs and the utility's costs are usually surcharged back to the customers on a system-wide basis over a period of time. These costs and uncertainty have been a major consideration in the past in cities' efforts to reach negotiated mow '.r' nts with the utilities at the city level, efforts which have largely been successful. If a municipality cedes its jurisdiction to the Commission,the utility will no longer file its rate increase applications with the city, and the city will have no opportunity to review the filing 10 Cities' effort,to influence the rates resulting from these GRIP filings by intervening at the Railroad Commission and the court have been unsuccessful. due to the language of the statute that makes these piecemeal rate increases largely unreviewable by any regulatory authority. Fax Server 2/22/2010 3:20:413 PM PAGE 5/005 Fax Server Mr.Knox Askins February 22,2010 Page 4 itself or to join in a coalition of similarly-affected municipalities to review the filing. Instead,the utility will file directly with the Commission and the Commission Staff will be primarily responsible for reviewing the filing and offering alternatives to the utility's request. The Staff does not represent residential or small commercial ratepayers, and will not advocate for their interests in the same manner as the cities. Another concern is the fact that cities that surrender their jurisdiction become a "free rider"problem,discouraging cities that have retained jurisdiction from participating in rate cases. The utilities argue, and the Commission may agree, that rate case expenses incurred at the Commission should be paid only by residents of cities that have participated in opposing the utility's rate increase request. Over time, discrimination and jealousy between cities can develop,resulting in no opposition to the utility. Franchise Fee vs Original JurisO;ction CPE's offer of an increase in franchise fees in exchange for the city's surrender of its original jurisdiction is suspect. The city should initially determine the amount of monetary benefit to be obtained by increasing the fee, and then evaluate whether the increase in annual fees is material. Franchise fees are collected by the utility from the ratepayers,and do not impact the utility's profits or losses. Thus, the utility is not offering more than it can recover from its ratepayers; its shareholders will not contribute to these increased payments. Because the franchise fee is spread among all the ratepayers in the city, its impact on individual ratepayers is fairly insignificant. However, the ultimate impact on the ratepayers if the utility is able to bypass the initial ratemaking authority of the city and go directly to the Commission for relief,could be substantial. The insertion of a"most favored nations" clause in the franchise agreement could possibly reduce that rate impact, but the city would then have to rely on other cities and hope they are successful in negotiating or litigating favorable rates for residential and small commercial customers. Also, this does not avoid the "free rider" problem discussed above. The ability of the city government to have local input into the utility's rates and services and to influence the utility's rate structure and tariff language are very valuable characteristics of local government in Texas. For these reasons, I do not recommend that the City agree to surrender its original jurisdiction over the rates, services, and operations to CPE to the Railroad Commission. I hope the above discussion is helpful to you. Please let me know if you need additional information or have any questions. Sincerely, Georgia N. Crump GNermr 9llraf_r don Page I of 2 Knox W. Askins , - -? "---{J-- -- CG �ID Q..i I'" From: May Jr,Alexander(Zan)M lAlexander.May©centerpointenergy.coml V0 p.& / ply r.f ,Jpc[) Sent: Monday, March 0120108:55 AM /� r t 'C / To: knoxaskins@comcast.net /` "r �e,c.µ{t�L Subject: CenterPoint Natural Gas detail Knox- It was very nice speaking with you and look forward to more discussions as g` j�, y we attempt to finalize our franchise agreement. The below language is what the "�' r City of Sugar Land and CenterPoint agreed to establish an operational "letter of ' '°' r agreement" which defines in more granularity items which we felt don't fit in a franchise. ta� yc r This letter sets forth certain agreements between the City of La Porte ("City") and CenterPoint Energy Resources Corp. d/b/a CenterPoint Energy Texas Gas Operations ("CenterPoint" or "Company") regarding procedures and practices for relocation, restoration, and other services related to the Company's operations in City's rights-of-way. 1. This agreement supplements the Franchise approved as City of La Porte Ordinance No. xxxx and extends during the 30-year term of the Franchise. 2. CenterPoint will continue its customary practice to provide emergency line locating services to City at no additional cost and to provide such services within two hours when reasonable and practical. 3. The Gas Franchise allows the Company to perform all work on Company's Facilities within the Public Rights-of-Way and to park vehicles in the Streets and other Public Rights-of-Way when necessary for the installation, replacement, abandonment, operation or maintenance of Company's Facilities. The Gas Franchise further provides that Company and contractors performing work for Company shall not be required to pay any fee in addition to the franchise fee in order to perform work on Company's Facilities, or park within the Streets and other Public Rights-of-Way. CenterPoint agrees to follow the City's permitting processes for the purpose of keeping the City informed of CenterPoint's work pursuant to the rights granted CenterPoint and its contractors under the Gas Franchise. 4. Section 5 of the Franchise requires that CenterPoint restore disturbed surfaces within the City's rights-of-way to as good a condition as before the disturbance. Restoration will be completed within the time frame of the permit. 5. CenterPoint operational staff and City Staff will meet quarterly at mutually agreeable times and dates to discuss operational practices and procedures, to communicate regarding upcoming projects, and to attempt to resolve any outstanding disputes or concerns. Accidents are overcome when Safety becomes#1 3/1/2010 Page 2 of 2 Zan May CenterPoint Energy- Gas Operations Director,Texas Coast District (O)281.342.2947 (C)281.684.6093 (F)281.239.8202 3/1/2010 L-tD l P R April 30, 2010 Honorable Mayor and City Officials RECEIVED APR 2 8 2010 City of La Porte p,ay 1 9 2010 La Porte,Texas CITY MANAGER'S Re: Rate Schedule No. COSA-2 OFFICE Ladies and Gentlemen: For many years, CenterPoint Energy (`the Company") has supplied the City of La Porte with dependable natural gas service. The Company continually strives to anticipate and meet our customers'needs under all operating conditions. As required by the Cost of Service Adjustment(COSA)Tariff effective within your City, the Company is submitting this report of its operating results for calendar year 2009. Subject to the limitations prescribed in the COSA tariff, CenterPoint is required to adjust its rates based on these operating results and the formula contained in the tariff. The adjustment will become effective August 1,2010. No action is required by the City with respect to this report. The calculation of the Cost of Service Adjustment is formulaic and is based upon the Company's audited financial data as reflected in its Annual Report to the Railroad Commission of Texas. The attached schedules and attestation provide the information used by the Company in computing this year's adjustment and includes the results of an updated "lead lag" study. In addition, we are supplying a compact disc containing the workpapers used to compute the adjustment. Based on the 2009 operating results, the COSA formula produces an increase of$1.50 per residential customer per month. However, because the COSA tariff limits the amount of the annual adjustment for each class of customers,the increase is only$0.68 per residential customer bill. Similarly, the per bill increase for large and small general service customers is capped at $0.68 per customer bill. In addition, pursuant to the COSA tariff, certain expenses incurred in reviewing and establishing the currently effective rates have been paid by the Company and are recoverable in this year's COSA adjustment. These review costs are not subject to the limitations imposed on recovery of other operating expenses. Last year's COSA review expenses requested for recovery are $130,849. Recovery of the combined COSA review expenses results in an adjustment of $0.04 per bill for residential customers, $0.07 per bill for small general service customers, and $0.87 per bill for large general service customers. These COSA review expenses are significantly less than the litigation costs that would have been incurred by a full rate case. City of La Porte April 30,2010 Page 2 Small Residential Commercial Lane Volume Existing Customer Charge $ 13.65 $ 13.65 $ 13.65 Increasel(Decrease)to Customer Charge relating to 2009 COSA $ 0.68 $ 0.68 $ 0.68 Expenses relating to 2008 COSA Review $ 0.04 $ 0.07 $ 0.87 Total Customer Charge $ 14.37 $ 14.40 $ 1520 Please do not hesitate to contact us with any questions you may have regarding this report or CenterPoint Energy's natural gas service in your city. Sincerely, Scott E. Doyle 6O Regional Vice President Gas Operations Attachments DELIVERED TO: �J ?ob, i Qtr c4' C/t ry of NAME(Printe OFFICE(Mayor,City Sectétary,etc.) The City of La Porte on this o?v day of rt 2010 SIGNATURE 7 TX Coast 2009 COSA-2 Schedule I CenterPolnt Energy Texas Coast Division Cost of Service Adjustment For the Period Ended December 31,2009 (A) (B) (C) Line No. Description COSA 2 Amount COSA expenses 1 Operating Expenses (1] $ 42,303.565 2 Return On Investment-Revenue Requirement 121 $ 12,648,243 3 Texas Margin Tax (3) $ 1,088,339 4 Subtotal $ 56,038,147 5 Less: Actual Non-Gas Revenue (11 $ 51,248,499 6 Excluded Costs(COSA Expenses) (61 $ 129.541 $ 129,541 7 Subtotal $ 4,660,107 $ 129,541 8 Texas Margin Tax Adjustment Factor 0.99 0.99 9 Cost of Service Adjustment(line Thine 8) $ 4,707,179 $ 130,849 10 All t -f I led from te d i ) 11 Residential 88.8677% 88.8677% 12 Small Commercial 6.9721% 6.9721% 13 Large Volume 4.1602% 4.1602% 14 Allocated Cost of Service AdAdustn,ent 15 Residential (line 9 x line 11) $ 4,183,162 $ 116,283 16 Small Commercial (line 9 x line 12) $ 328,190 $ 9.123 17 Large Volume (line 9x line 13) $ 195,827 $ 5,444 18 Number of Division Customers-AVU 19 Residential (41 232,683 232.683 20 Small Commercial (4] 11,421 11,421 21 Large Volume (41 524 524 Allocated Cost of Service Adjustment per 22 Customer per year 23 Residential (line 15/line 19) $ 17.98 $ 0.50 24 Small Commercial (line 16/line 20) $ 28.74 $ 0.80 25 LargeVolume (line lT8ine21) $ 373.72 $ 10.39 Allocated Cost of Service Adlustment par 26 Customer oar month 27 Residential (line 23)12) $ 1.50 $ 0.04 28 Small Commercial (line 24/12) $ 2.40 $ 0.07 29 Large Volume (line 25/12) $ 31.14 $ 0.87 Allocated Cost of Service Adjustment oar Ctomer r month-CAP it 5%of Customer Cust 30 Charge cmaroe 5%Cag 31 Residential Bill [5] 13.65 $ 0.68 32 Small Commercial(655 rate)= L 13.65 $ 0.68 33 Large Volume(GSLV rate)_ 4' 13.65 $ 0.68 (1] From Schedule 3 121 From Scheduls 2 13] From Schedule4 (4) From Workpaper TX Coast Income Statement 2009', worksheet TX Coast RR Report (5] Source:GUD No.9872 (61 From Workpaper'COSA Expenses' Schedule 1 TX Coast 2009 COSA-2 CenterPoint Energy Schedule 2 Texas Coast Division Cost of Service Adjustment Return on Investment-Revenue Requirement For the Period Ended December 31,2009 (A) (B) Line No. Description COSA 2 Amount 1 Total Net Plant 11] $ 115,206,355 2 Add Working Capital: 3 Cash Working Capital 12] $ (711,061) 4 Materials and Supplies (3J $ 89,236 5 Storage Gas (4) $ 9,218,569 6 Prepayments (5) $ 117,774 7 Total $ 123920,873 8 Less: 9 Customer Deposits and Advances (6) $ (3,377,451) 10 Accumulated Deferred Income Taxes (7] $ (13,371,873) 11 Total Rate Base $ 107,171,549 12 Pre-Tax Rate of Return 18) 11.80% 13 Return on Investment-Revenue Requirement (9) $ 12,646,243 (1) From Workpaper-PIS&Accum Res (2) From Workpaper-Working Capital COSA 2 (3) From Workpaper-Mat&Sup (4) From Workpaper-Gas Storage (5) From Workpaper-Prepayments (6) From Workpaper-Cust Advance& Deposits (71 From Workpaper-ADIT (6] Per Section C.2 Return on Investment of the COSA tariff (9] To Schedule 1 Schedule 2 TX Coast 2009 COSA-2 CenterPoint Energy Schedule 3 Texas Coast Division Cost of Service Adjustment Adjusted Operating Income Statement For the Period Ended December 31, 2009 (A) (B) Line No. Description Amount 1 Utility Operating Revenues 2 Gas Sales (1] $ 46,679,393 3 Other Revenues (1) $ 4,569,106 4 Total Non-Gas Operating Revenues (1J,(2) $ 51,248,499 5 Utility Operating Revenue Deductions 6 Gas Purchases $ - 7 Operations& Maintenance Expenses (1) $ 12,992,419 8 Customer Accounting Expense (1] $ 9,333,485 9 Administrative&General Expense (1) $ 10,182,198 10 Total Operating Expenses $ 32,508,102 11 Depreciation Expense [11 $ 7,567,152 12 Taxes Other than Income (1) $ 2,228,311 13 Total Operating Revenue Deductions (1],(2] $ 42,303,565 14 Net Utility Operating Income Before FIT (1] $ 8,944,934 (1) From Workpaper TX Coast Income Statement 2009' (2] To Schedule 1 Schedule 3 TX Coast 2009 COSA-2 CenterPoint Energy Schedule 4 Texas Coast Division Cost of Service Adjustment Gross Margin Tax For the Period Ended December 31,2009 Source: SAP-ZF16 FERC Trial Balance (ZFAT) Company:BB82 CenterPoint Energy Entax Profit Center Group: RRTXCOAST Name: Texas Coast Reporting Area Fiscal Year:2B09 Period: 12 Year Ended Account/Description December 31,2009 717010 Current Income Taxes Exp-Federal (6,770,187) 717020 Current Inc Taxes Exp-State&Local 903,720 ' 4091 Inc Taxes-Oper Inc $ (5,866.467) 717020 Current Inc Taxes Exp-State&Local 903,720 Less: Other Local Taxes (184,619) 12J Gross Margin Tax $ 1,088,339 Ill ]1J To Schedule 1 121 Source: Tax Department Schedule 4 Certification of Responsible Official I certify that I am the responsible official of CenterPoint Energy Resources Corp. d/b/a/ P CenterPoint Energy Entex and CenterPoint Energy Texas Gas—Texas Coast Division. I have examined the prepared Cost of Service Adjustment("COSA")schedules of said company. To the best of my knowledge,information, and belief, all COSA schedules are in compliance with the provisions of the applicable COSA Rate schedules and are true and correct. A a ril26 2010 pa Dte Walter Fitzgerald Responsible Official Sr.Vice President and Chief Accounting Officer Title