Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, August 23, 1993 TAG: 9308230103
SECTION: VIRGINIA PAGE: A1 EDITION: STATE
SOURCE: DWAYNE YANCEY STAFF WRITER
DATELINE: LENGTH: Medium
\ Until 10 days ago, the only things we needed to know about natural gas were how to turn on the stove and where to send the check.
Since then, folks in the Roanoke Valley have gotten a cram course on the politics of gas. Franchise agreements. Takeover clauses. The statutory authority of the State Corporation Commission.
Sunday night, the firestorm ignited on that fateful Friday the 13th - when Roanoke Gas Co. revealed that the city wanted to take over the company's lines within the city - finally subsided.
For citizens trying to follow all the ins and outs of the gas war, here's a guide to the arcane details involved:
\ How the law works
The basis for this dispute lies in the Virginia Constitution and the way it distinguishes between cities, counties and towns.
In cities and towns, utilities can't cross streets unless they have the local government's approval.
But utilities don't need the local government's permission to run their lines through counties.
In cities and towns, that permission is called a "franchise," and utilities and municipalities sign "franchise agreements." It's the franchise agreement between Roanoke Gas and Roanoke that's the crux of the matter.
Under the 1973 franchise agreement, which expires Aug. 30, Roanoke Gas pays Roanoke $29,154.25 per year for the right to cross city streets. (Based on the same complicated formula, Roanoke Gas pays Salem $6,006.25 per year and Vinton $2,204.10 per year.)
Included in that franchise agreement was a takeover clause that gave Roanoke the right to buy the company's assets within the city limits "at a fair and reasonable price" if the contract is not renewed or extended.
The company contended that's an "obscure and archaic" provision left over from the early 1900s, when gas companies were fledgling enterprises and skittish cities wanted to protect themselves in case the utilities went belly-up.
But the city said it's not an obscure provision at all. Kit Kiser, the city's utility director, pointed out that the takeover language in the 1973 contract is different from that in the previous agreement from the 1950s. The language was changed "intentionally and deliberately," he says.
That's true, Roanoke Gas President Frank Farmer conceded, but it's still archaic. In the 1973 negotiations, the city insisted the clause - with additional wording - stay in.
The company wanted the clause taken out but eventually gave in, Farmer said. "We decided not to worry about it because there's no logical way," he said, for the city to take over just part of a gas system that spider-webs its way from Elliston to Bonsack without taking jurisdictional lines into account.
When Roanoke Gas renegotiated its franchise agreements with Salem and Vinton the following year, the takeover clauses were dropped.
\ Each side's view
Part of what precipated the gas war were the vastly different views both the city and the company took into the dispute:
From the city's point of view: The city is under increasing financial stress. It has little developable land left; it can't annex Roanoke County to get more. Meanwhile, the city's population is becoming smaller, older and poorer.
The result: a citizenry that both demands more services but is loathe to raise taxes. So the city eyes the expiring franchise agreement with Roanoke Gas. Cox Cable pays the city big bucks for its franchise, about $500,000 per year. Shouldn't Roanoke Gas pay more than a measly $29,154.25?
Maybe, the city administration figured, Roanoke should simply exercise the takeover clause. That way, the city could buy the gas wholesale and resell it to gas users for a profit. After all, city-owned gas companies are big money-makers in Charlottesville, Danville and Richmond.
From the company's point of view: The franchise fee paid to cities was never meant to be a way for cities to make money, the company contended. If cities want to make money off gas, they just tax it - as Roanoke already does, to the tune of $1.5 million a year.
Furthermore, Roanoke Gas already pays the highest franchise fee of any gas company in the state. In fact, the company says, there are at least seven cities in Virginia where gas companies don't pay any franchise fees at all: Alexandria, Fairfax, Falls Church, Petersburg, Portsmouth, Virginia Beach and Winchester.
Even by Roanoke standards, the gas company's franchise fee isn't out of line. Cox Cable may pay $500,000, but Appalachian Power Co. doesn't pay anything. Maybe Roanoke Gas should pay more than $29,154.25, the company contends, but the city shouldn't view it as a cash cow, either.
About half of the Roanoke Gas customers are in Roanoke. Faced with the loss of those customers, the company sees the city's possible takeover of its lines within the city as a mortal threat - and struck back.
by CNB