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July 22, 2019, Meeting – Item 3 EUGENE CITY COUNCIL AGENDA ITEM SUMMARY Action: An Ordinance Extending the Term of Ordinance No. 20170 Granting to Northwest Natural Gas Company, a Corporation, a Twenty-Year Non-Exclusive Right and Franchise to Lay, Maintain and Operate Facilities in the Public Way Within the City of Eugene, Oregon; and Providing For the Payment of Compensation to the City Meeting Date: July 22, 2019 Agenda Item Number: 3 Department: Central Services Staff Contact: Mike Streepey www.eugene-or.gov Contact Telephone Number: 541-682-6820 ISSUE STATEMENT The City Council is scheduled to take action on an ordinance extending the Northwest Natural Gas Right of Way Franchise Agreement until November 11, 2020. Without the extension, the franchise agreement will expire on November 11, 2019. This ordinance would only extend the term of the franchise; all other current franchise terms and conditions would remain the same. A Public Hearing on the proposed ordinance was held on July 15, 2019. BACKGROUND Franchise agreements between local governments and utilities govern the use of the public right-of-way to ensure safety, coordinated access, and the stability of public infrastructure. Typical franchise agreements outline the terms and fees under which utility companies can utilize the public right-of-way for their business. Fees are typically calculated on a percentage of the revenues derived from sales of the utility company to customers within the service area. In October 1999, the City Council approved Ordinance 20170 (Attachment A) that: • Increased the compensation rate from four percent to five percent of gross revenues; • Granted a franchise term of 20 years with possible renegotiation every five years; • Provided updated audit language and facility relocation and abandonment provisions; • Added “favored cities” language, which requires NWNG to notify the City should they agree to pay any other city in Oregon a franchise fee that exceeds five percent of gross revenues. Currently, the City receives $1.4 million in General Fund revenues from this franchise annually. Revenue from NWNG franchise fees have been trending at this level over the past few years based on flat/declining NWNG rates in the area. Natural Gas Greenhouse Gas Emissions and the State Legislature As City staff continue to work on the franchise renewal process, two bills before the State Legislature this year (Senate Bill 98 and House Bill 2020) could have implications for franchise negotiations and the delivery of natural gas in Oregon. After analyzing the bills, it was determined