Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 24, 1994 TAG: 9402240257
SECTION: VIRGINIA PAGE: B-1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Long
The lack of a franchise should not affect the gas company's service or rates and should not raise concerns for its shareholders, company officers said.
Roanoke Gas has been operating in the city under a six-month extension of its 20-year franchise, which originally had been set to expire last August. The franchise was extended after City Council, under public pressure, gave up plans to acquire the portion of the gas company's operations that lie within the city limits.
When Roanoke Gas, in a pre-emptive move, revealed that the city was considering taking its assets, City Council ran into a buzzsaw of public opposition.
A successful public relations campaign turned public opinion to the company's side. And, on top of that, Del. Richard Cranwell, D-Roanoke County, threatened to introduce legislation to prevent a takeover.
That controversy subsided when both sides agreed to taking an additional 180 days to negotiate a new contract. Both the company and city said they have not been able to reach terms.
Company officers said they had no plans to make a public statement about the franchise expiration. But in answer to an inquiry from the Roanoke Times & World-News, John Williamson III, vice president for rates and finance, summarized negotiations over the past few months:
Late in August, the company proposed a 40-year franchise with a $40,000 annual payment to the city, a 38 percent increase over the $29,000 annual fee now, he said.
The company also proposed a formula for increasing the annual payment based on growth of either its gas sales in the city, the size of the company's transmission system, or the number of gas customers in Roanoke.
City negotiators countered, offering a five-year franchise with a $60,000 annual payment, a 107 percent increase. The city also said the annual increase should be based on the Consumer Price Index, the federal government's gauge of inflation, Williamson said.
Kit Kiser, Roanoke's director of utilities and operations, on Wednesday characterized Williamson's comments as a partially accurate description of the city's bargaining position. "It's mostly right, but not quite," he said.
Kiser, however, declined to discuss specifics of the city's talks with Roanoke Gas.
Kiser said expiration of the franchise should not affect the city's relationship with the company. The city, for example, will not interfere with the company's needs to excavate and cross city streets for its transmission pipes, he said.
Roanoke Mayor David Bowers said he had missed a briefing of City Council on the franchise talks Tuesday. He declined to comment on expiration of the long-standing agreements with the utility.
It was Bowers who, in an unusual Sunday night news conference Aug. 22, announced that the city had abandoned its plans to acquire the company's assets.
Under its 20-year franchise, Roanoke Gas has been paying the city $29,000 annually with increases based on expansion of its transmission system.
That fee is the highest paid by any gas company in the state, Roanoke Gas spokesman John Lambert said. Company officers also noted that Appalachian Power Co., the gas company's major competitor in the city's home-heating market, pays no franchise fee.
Williamson said that Roanoke Gas had indicated to the city early in the talks that any franchise shorter that 20 years would not be acceptable, because the company plans to invest $20 million in improving its transmission lines within the city during the next 20 years. The company would not feel comfortable doing that with a five-year franchise, said Robb Glenn, vice president for strategic planning.
But in an interview, Glenn said Roanoke Gas will proceed with its capital improvements, despite the lack of an operating franchise.
Roanoke Gas officials said the company plans to continue operating while negotiating a long-term agreement with the city. They remarked that Commonwealth Gas, which serves Lynchburg, has been operating for three years without a franchise.
Kiser said the city's talks with the company could resume around the end of March. "We're not far apart, but we're not together," he said.
The gas company believes it is on sound legal ground in operating without a franchise, Williamson said.
The company has no interest in another extension of the existing franchise, he said. "We just finished up a six-month extension and didn't get a whole lot accomplished.
"From our perspective, the most reasonable thing to do is let it expire."
Not involved in the franchise talks are agreements the gas company has with Salem and Vinton. The company operates in Roanoke County without a franchise.
The company and its Bluefield Gas Co. subsidiary also serve parts of Bedford, Botetourt and Montgomery counties; Bluefield, Va.; Bluefield, W.Va.; and Mercer and Tazewell counties in West Virginia.
The franchise with Roanoke gives the company a nonexclusive right to cross city streets and property. It does not provide the company a monopoly on gas service, however. The company's monopoly status is more firmly assured by the State Corporation Commission, which regulates the utility and has issued it a certificate of public need.
Except for refusing the company permission to work in city streets, the city appears to have little recourse over watching the franchise agreement die.
When the city gave up on the idea of acquiring the gas company and negotiated the franchise extension, it agreed to delete a clause from the old agreement that would have allowed the city to take over the city portion of the company. The company said about half of its total business comes from customers in the city.
Since August, Roanoke Gas has further cemented its relationship with the community through a plan to sell its common stock directly to its customers.
About 57 percent of the company's stock is owned by its customers, Glenn said.
As part of its negotiations with the city, Roanoke Gas also has proposed signing a 10-year option with the city for a site in the Carvins Cove basin for a new liquified natural gas facility. The option could lead to a 99-year lease for which the company would annually pay the city 5 percent of the plant's profit, the company said.
by CNB