Title
Consider/Discuss/Act on an Ordinance Granting to Denton County Electric Cooperative, Inc., D/B/A CoServ Electric, a Non-Exclusive Franchise to Use and Occupy Public Rights-of-Way Within the City of McKinney for the Constructing and Operating of an Electric Transmission and Distribution System
Summary
MEETING DATE: December 6, 2011
DEPARTMENT: City Manager’s Office
CONTACT: Aretha Harvey, Assistant to the City Manager
Mark Houser, City Attorney
RECOMMENDED CITY COUNCIL ACTION:
• Conduct public hearing and approve the ordinance.
ITEM SUMMARY:
• This ordinance grants Denton County Electric Cooperative, Inc., D/B/A CoServ Electric (Cooperatiave) a non-exclusive permission to construct, re-construct, extend, repair, remove, operate and maintain the electric transmission and distribution system within the public rights-of way of the City.
• This ordinance represents the terms and conditions of the franchise agreement.
• The negotiated franchise as set forth in the ordinance includes compensation that is equivalent to 5% of gross revenues, and will be paid to the City on the basis of a per kilowatt hour assessment calculated to be $0.005764 per kWh.
• This ordinance shall become effective upon cooperative’s written acceptance and the said written acceptance to be filed by Cooperative with the City within sixty (60) days after City provides written notice to the Cooperative of the final passage and approval (if passed, effective date will be March 1, 2012).
• The Franchise agreement shall terminate on December 31, 2021, unless written notice of non-renewal is given by either party hereto to the other not less than six (6) months before the expiration of the Franchise granted. The agreement shall be automatically renewed for an additional period of one (1) year from such expiration date and shall be automatically renewed thereafter for like periods until cancelled by written notice given not less than six (6) months before the expiration of any such renewal period.
BACKGROUND INFORMATION:
• The original agreement was dated September 1989, and was expired in September 2009. The City of McKinney and CoServ continued working under an extension of the original agreement while re-negotiations have been underway.
• In August 2009, an ad hoc coalition (CoServ Electric Franchise Coalition) was formed in order to share in costs of negotiations and develop a standard franchise for CoServ’s member cities. Member cities include Denton, Highland Village, Lewisville, McKinney, The Colony and the town of Little Elm.
• The Coalition engaged Lloyd Gosselink Rochelle & Townsend, P.C. to represent the coalition in negotiating a franchise agreement with the Cooperative.
• After a year and a half of negotiations between the Coalition of Cities and CoServ, the City of McKinney and other cities determined that independent negotiations, sans the Coalition, would be more beneficial to progress.
• In August 2011, staff began direct negotiations with CoServ and reached an agreement, as set depicted in the ordinance before Council.
SPECIAL CONSIDERATIONS:
• This ordinance requires three public readings and they are scheduled on October 18th, November 1st, and December 6th.
FINANCIAL SUMMARY:
• Franchise revenue from CoServ Electric is estimated to be $1.6 million for FY2011 with franchise fee rate at 4%. Revenue for FY2012 will increase by 27% (by $440,589 from $1.6 million to $2.07 million) if the franchise agreement is approved and the franchise fee rate is increased from 4% to 5%.
BOARD OR COMMISSION RECOMMENDATION: None