Appendix B · Franchises

Ordinance No. 1957

AN ORDINANCE OF THE CITY OF AUGUSTA, KANSAS, PERTAINING TO THE TRANSPORTATION, DISTRIBUTION, AND SALE OF NATURAL GAS OR OTHER ENERGY THROUGH PIPELINES OR DISTRIBUTION SYSTEMS IN THE CITY.

BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF AUGUSTA, KANSAS:

Section 1. Definitions.

City - Shall mean the City of Augusta, Kansas.

Consumer or User - Shall mean, without limitation, any individual person, business, corporation, company, partnership, firm, limited liability corporation, limited liability partnership, unincorporated association, joint venture, trust, municipality, or public corporation served by a Franchised Entity or Provider through a Distribution System.

Distribution System or Distribution Facilities - Shall mean a pipeline or system or pipelines including without limitation, mains, pipes, boxes, reducing and regulating stations, laterals, conduits, and services extensions, together with all necessary appurtenances thereto, or any part thereof, for the purpose of supplying natural gas or Other Energy for light, heat, power, and all other purposes.

Franchised Entity - Shall mean any entity that has a franchise granted by the City for supplying of natural gas or Other Energy.

Gross Receipts –

(1)Shall mean any and all compensation and other consideration derived directly or indirectly by the Provider from:

(A)Any transportation, distribution, or sale of natural gas or Other Energy to a Consumer for any use, including, domestic, commercial, and industrial purposes, and including without limitation interruptible, single and firm sales; and shall also include all fees or rental received by the Provider for the lease or use of pipeline capacity within the corporate limits of the City.

(2)Except the Gross receipts shall not include:

(A)Connection and disconnection fees, reconnection fees, returned check charges, temporary services charges, and delayed or late payment charges.

(B)Compensation from the sale of natural gas when:

(i)The Customer purchases the natural gas as a separate and identifiable commodity that is not subject to a regulated tariff rate, and

(ii)On which the Volumetric Rate is applied; or

(C)Compensation from the sale of natural gas or Other Energy when a franchise fee has been paid by another Franchised Entity on the same transaction.

MCF -Shall mean a measurement of natural gas equal to one thousand (1,000) cubic feet.

It is assumed for purposes of this Ordinance that one MCF equals one million (1,000,000) British Thermal Units (BT Us).

Other Energy -Shall mean energy provided in a gaseous, liquid, or slurry mixture from or through pipelines for light, heat, power, and all other purposes as an alternative or replacement for natural gas, but specifically, it shall not include electrical energy.

Provider - Shall mean any business, including any individual person, business corporation, company, partnership, firm, limited liability corporation, limited liability partnership, unincorporated association, joint venture, trust, municipality, or public corporation providing the transportation, distribution, or sale of natural gas or Other Energy to a Consumer, whether through its own Distribution System, the Distribution System of a Franchises Entity, or through the Distribution System of another, and shall also include a Consumer transporting natural gas or Other Energy for its own use through a distribution system.

Public Right-of-Way - Shall mean present and future streets, avenue, alleys, bridges, parks, parking areas, public easements, and public places of the City.

Settlement Prices - Shall mean the settlement prices for natural gas futures contracts traded on the New York Mercantile Exchange (NYMEX) n the fifteenth (1sth) day of each month as published daily in the Wall Street Journal (WSJ) on the following business day (or the next day in which the Settlement Price is published).

Volumetric Rate - Shall mean $0.4097 per MCF, or such amount as may be hereafter calculated and filed with the City Clerk according to the provisions of this Ordinance.

Section 2. Application of Ordinance.

From and after the effective date of the ordinance, no natural gas or Other Energy shall be transported, distributed, or sold by the Provider to any Consumer for use within the corporate limits of the City through a Distribution System located in whole or in part in the Public Right-of-Way of the City except in accordance with the provisions of this Ordinance. This Ordinance applies to any distribution to a Consumer within the City whether or not the portion of the Distribution System serving the Consumer is in the Public Right-of-Way so long as any portion of the Distribution System of the Provider is in the Public Right-of-Way.

Section 3. Franchise Required.

(1)Every Provider subject to this Ordinance shall obtain a franchise from the City under the provisions of K.S.A. 12-2001 et seq., for the use of Distribution Systems located in the Public Right-of-Way. Any Provider that only uses the Distribution System of a Franchised Entity and that reports and pays a pipeline transportation company that are located within the City shall obtain a franchise and shall report and pay a sum equal to the compensation calculated by Section 4(1) of this Ordinance and sum equal to five percent (5%) of the amount paid for the transportation of such natural gas or Other Energy.

(2)The franchise required under this Ordinance shall substantively contain the following elements:

(A)In consideration of and as compensation for the franchise, the Provider shall agree to pay to the City a sum equivalent to fees calculated in accordance with Section 4.

(B)The Provider shall agree that the City shall have access and the right to examine and audit all records reasonably necessary to verify the payment of the franchise fees. If any such payment is found to be incorrect, then payment shall be made upon a corrected statement. The Provider shall agree that for each and every month, or any part thereof, that the franchise compensation remains unpaid after the same becomes due and payable by the Provider, there shall be added as a late charge a sum equivalent to the statutory rate for interest on the unpaid amount.

(C)Provider shall agree to hold the City harmless from any and all damages arising from the exercise of any right or privilege granted under this Ordinance and the franchise, and from any and all damages accruing from the neglect or mismanagement of its employees, agents, or servants in the exercise of any right or privilege granted under this Ordinance and the franchise.

(D)Subject to the approval of the regulatory body having jurisdiction and control over rules and regulations of the Provider at the time in question, the Provider shall agree that the City has the right to make such reasonable rules and regulations for the protection of its property and for the distribution and sale of natural gas or Other Energy, and the appropriate conduct of business as the City may from time to time deem necessary.

(E)The franchise shall be non-exclusive.

(F)The franchise shall be for a term expiring no later than the earliest date of expiration of the franchise of any Franchised Entity and subject to reopening and renegotiation upon events materially affecting the rights or obligations of the City or Provider.

(G)In the event the Provider owns or maintains all or any portion of a Distribution System, it shall agree to provisions on the use of the Public Right-of-Way and the construction, location and relocation of facilities, and the quality of standards of service, all substantively equivalent to those of the Franchised Entities.

(H)The Provider shall agree to file its acceptance in writing of the provisions, terms and conditions of the franchise with the City Clerk within thirty (30) days after final passage and approval of the franchise ordinance.

Section 4. Calculation of fees.

(1)Natural Gas Fees by a Provider Required to have a Franchise.

In consideration of and as compensation for the franchise granted to the Provider by the City, the Provider shall make an accounting on a monthly basis to the City of all sales, distribution, or transportation to any Consumer, or User for use within the City by the Provider or by others through the sum equal to the compensation calculated by the separate Ordinance of the Franchised Entity for transportation services and by Section 4 (2) of this Ordinance to the City through such Franchised Entity shall be exempt from the requirement of a separate franchise. Any interstate pipeline transportation company that is otherwise a Provider under this Ordinance shall not be required to obtain a separate franchise under this section, provided that all Users of such interstate Distribution Facilities of the Provider. The Provider shall pay the City a franchise fee calculated as follows:

(A)A sum equal to five (5%) of the Gross Receipts.

(B)A sum equal to the Volumetric Rate multiplied by the number of MCF of natural gas transported or distributed by the Provider.

(2)Natural Gas Fees by a Provider through a Franchised Entity.

In Consideration of and as compensation for the use of the Public Right-of Way, any Provider using the Distribution System of a Franchised Entity (other than Provider) shall pay the City through the Franchised Entity a fee calculated by the separate Ordinance of the Franchised Entity for Transportation Services and pursuant to the formula contained in Section 4(1)(b). Such payments shall be made monthly under procedures established by the Franchised Entity.

(3)Other Energy Fees.

In consideration of and as compensation for the franchise granted to the Provider by the City, the Provider shall made an accounting and provide compensation to the City for the transportation, distribution, and sale of Other Energy to any Consumer, or User for use within the City by the Provider or by others through the Distribution Facilities of the Provider. The Provider shall pay the City a franchise fee that is calculated in a manner provided in each franchise that is substantially equivalent to the fees paid by Providers of natural gas, taking into account the alternative form of energy, its value per unit and the amount of energy necessary for light, heat, power or other purposes.

Section 5. Adjustment of Volumetric Rate.

The Volumetric Rate shall be recalculated annually by the City beginning January 1, 2006, based upon the Settlement Prices. The Volumetric Rate calculation form is attached hereto as Exhibit A and incorporated herein by reference shall be used for the recalculation of the Volumetric Rate. The recalculation shall be effective each January 1 and shall be based on Settlement Prices for the twelve (12) month period beginning in July of the second (2nd) preceding year and ending in June of the preceding year. For the fifteenth (15th) day of each month during said twelve (12) month period, the Settlement Prices for the next twelve (12) months will be summed and divided by twelve (12) to determine an average Settlement Price. The average Settlement Prices for each of the twelve (12) months shall then be summed and divided by twelve (12) and multiplied by five percent (5%) to obtain the Volumetric Rate to be effective January of the next succeeding year. The Volumetric Rate shall be calculated in July annually by the City and shall be effective upon filing of the completed Volumetric Rate Calculation From with the City Clerk without requirement of amendment to the Ordinance.

Section 6. Reporting and Collection Provisions.

(1) All Providers using the Public Right-of-Way for the transportation, distribution or sale of natural gas or Other Energy, whether through their own Distribution Facilities, through the Distribution Facilities of a Franchised Entity, or through the Distribution Facilities of another, shall report or register such use with the City Manager on such forms as are established and furnished by the City and subject to such administrative fees necessary to cover the costs of the effective administration of the ordinance as established by the City. Such registration shall include the name, address and agent for the Provider and shall include such information on the method and means of transportation, distribution or sale to Consumers as may be reasonably required by the City for enforcement of this Ordinance. The City shall have access to and the right to examine and audit such records necessary to verify the payment of compensation.

(3) Franchised Entities may serve as the agent for Providers using the Distribution System of the Franchised Entity for the purposes of reporting and collection under this Ordinance.

Section 7. Times. All Providers using the Public Right-of-Way prior to the effective date of this Ordinance shall make application within thirty (30) days of the effective date of this Ordinance to receive a franchise from the City, unless the Provider is exempt from the requirement of a separate franchise under the provisions of Section 3(1). It is the intent of this Ordinance that a franchise ordinance consistent with the requirement of Section 3 will be submitted to the governing body for consideration according to statutory procedures immediately upon such application. If a Provider not utilizing the Public Right-of-Way on the effective date of this Ordinance seeks to utilize such Right-of-Way after the effective date of this Ordinance, such Provider shall make an application for a franchise sixty (60) days prior to the date it shall begin use of the Public Right-of-Way.

All Providers exempted from the requirement of a separate franchise under Section 3 (1) shall be responsible for the fees required by this Ordinance as of the first cycle of the monthly billing cycle of the Franchised Entity which begins no later than sixty (60) days after final passage and approval by the City.

Any Provider hereafter becoming subject to this Ordinance shall immediately comply with the provisions of the Ordinance prior to use of Public Right-of-Way for the transportation, distribution, sale of natural gas, or Other Energy.

The fees calculated under Section 4 of this Ordinance shall be assessed and shall be effective as of the first cycle of the monthly billing cycle which begins no later than sixty (60) days after final passage and approval by the City.

Section 8. Violations. It shall be unlawful for a Provider to transport, distribute, or sell natural gas or Other Energy to a Consumer in violation of this Ordinance.

Section 9. Savings Clause. If any clause, sentence, or section of the Ordinance be held to be invalid, it shall not affect the remaining provisions of this Ordinance.

Section 10. This ordinance shall take effect and be in force from and after its publication in the official city Newspaper.

(01-21-2008)