Background
In 1937, California enacted "The Franchise Act of 1937" (the Franchise Act) which, among other subjects, established a formula whereby a utility would pay a fee to a municipality for use of city streets and right-of-way. The amount paid counties under franchise agreements is based on the Broughton Act formula (Pub. Util. Code §§ 6001-6017). The amount paid general law cities is based on the greater of two computations; one determined under the Broughton Act formula, and the other determined under the Franchise Act. (Pub. Util. Code §§ 6231-6235). But the amount paid charter cities can differ. Charter cities are permitted to negotiate franchise fees or taxes in excess of the above statutory formulas.1
The Franchise Act sets out that for gas franchises, municipalities2 will be compensated through a formula whereby they will receive two percent (2%) of annual receipts derived from the use, operation or possession of the franchise, or a minimum of one percent (1%) of gross annual receipts from the sale, transmission, or distribution of gas within the limits of the municipality (the 2%/1% formula).3 SoCalGas states that of the 234 cities and counties with which it has franchise agreements, 172 are currently paid under the 2%/1% formula.
During the 50-year term of the previous franchise agreement, SoCalGas payments to Ventura followed the Broughton Act formula. However, at the conclusion of this franchise agreement, Ventura officials proposed that as a charter city Ventura should get an increase to a 2%/2% formula. This 1% increase in the franchise fee would be effective for the 25-year term of the proposed franchise agreement.
Rather than spreading the additional franchise fee among all SoCalGas ratepayers, SoCalGas and Ventura agreed that as part of the new franchise agreement, SoCalGas will surcharge its Ventura ratepayers living within Ventura's city limits.4 SoCalGas states that the additional surcharge of 1% will be applied to monthly billings for all Ventura customers. Furthermore, SoCalGas proposes to indicate the surcharge as a separate line item on bills rendered to Ventura customers, and to notify customers prior to the first bill being rendered.5 SoCalGas estimates that the additional franchise surcharge will total in approximately $246,000 annually, and that customer bills will increase by an average of $0.58 per month across all customer classes.6
SoCalGas states that the additional surcharge amounts will go into Ventura's general fund, and that Ventura has represented it will use the additional funds on projects such as paving and street repair. This would better protect SoCalGas' pipeline and other infrastructure. The proposed franchise agreement was unanimously adopted by the Ventura City Council.
On April 27, 2007, SoCalGas filed Application (A.) 07-04-027 (Application) requesting Commission approval for SoCalGas' acceptance to the terms of the franchise ordinance that would apply a surcharge to the bills of SoCalGas customers in Ventura.7 Accompanying the application is the Testimony of Emma Hernandez8 and the Testimony of Eugene "Mitch" Mitchell.9
SoCalGas states it has provided notice of its Application to those persons listed in Attachment E, cities and counties affected by this filing, notice in newspapers of general circulation to those areas, and notices to customers affected by the proposed surcharge as required by Rule 1.9.10
No responses to the Application have been received by the Commission.
1 See, Decision (D.) 89-05-063 (I.84-05-002), 32 CPUC 2d , 60, 64.
2 Municipalities are general law cities or counties.
3 Exhibit C, p. EM-2.
4 Exhibit A, Section 9 (A)(2)(b).
5 Exhibit B, p. EH-2.
6 Id., Exhibit B, p. EH-2.
7 Attached to the Application is Ordinance No. 2007-005 adopted by the Council of Ventura on March 13, 2007. Ordinance No. 2007-005 is identified and received as Exhibit A.
8 The Testimony of Emma Hernandez is identified and received as Exhibit B.
9 The Testimony of Eugene "Mitch" Mitchell is identified and received as Exhibit C.
10 All references to Rules are to the Commission's Rules of Practice and Procedure.
