To: Honorable Mayor and Members of Town Council
Thru: David L. Corliss, Town Manager
From: Kristin Read, Assistant Town Manager
Title
Update: Franchise Agreement With Black Hills Energy
Body
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Executive Summary
The Town and other municipal entities require franchise agreements for utility and cable companies to use public rights of way to provide services to their customers. These agreements outline requirements for using rights of way, which are property interests the Town holds to maintain roads, trails, drainageways and other public infrastructure. The agreements also provide for a franchise fee, which the Town charges for overall use of its rights of way in lieu of charging for each use of a Town right of way or easement.
Franchise agreements benefit utility companies and their customers, as the entities would otherwise have to purchase the property necessary to provide their services themselves, driving up their costs and their charges for services. Co-locating utility infrastructure in Town rights of way also helps limit disruptions to the public when the infrastructure needs to be repaired, replaced or moved.
The Town has a franchise agreement with Black Hills Energy, which was renewed in 2011 for a 10-year term that expires near the end of this year. Staff has been working with the Black Hills team to come to a mutually satisfactory renewal agreement, which it will present to Council later in the year. The authority to grant franchises is provided in the Town Charter, which places a 10-year limit on the duration of any franchise.
As part of its preparation on this item, staff has reviewed information from Black Hills regarding the gas and electric franchise fees in place with all utility providers throughout Black Hills’ service territory, to see how those fees compare to the Town’s current franchise fee of 3%. Fees range from ½% to 5%, with the average among the 277 fees assessed on a percentage basis being 3%. Some communities charge volumetric rates, which are not directly comparable to the Town’s percentage basis.
Within Douglas County, only Castle Pines and Larkspur are served by Black Hills. Their franchise fees are 3% and ½%, respectively. Xcel Energy provides natural gas service to Lone Tree and Parker, whose franchise fees with that provider are 3%.
The Town’s fee for Black Hills’ franchise is expected to generate about $535,000 in Town revenue this year. In addition to Black Hills, the Town currently has franchise agreements with Intermountain Rural Electric Association and Comcast, which this year are projected to generate $1.3 million and $692,000, respectively. The franchise fee for IREA is also 3%, while the fee for Comcast is 5%.
Staff is not seeking substantial changes to its franchise agreement with Black Hills, including with regard to the current franchise fee. If Council wishes staff to make any additional considerations as the draft agreement is wrapped up, staff requests Council please provide that information in the coming weeks.