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Board of County Commissioners March 26, 2013 Page Two One utility which uses the County's rights-of-way, but is not currently required to have a franchise or pay a franchise fee is natural gas. While natural gas has been available on some level in Indian River County for 17 years, it is still an emerging utility in the County with limited service areas. However, it is not unusual for natural gas utilities to pay a utility tax (up to 10%) or a franchise fee (usually 6%) in other parts of the state. Also, it is the County Attorney's understanding that the City of Vero Beach charges a utility tax of 10% on natural gas services within the City, and the City of Fellsmere is considering the adoption of a utility tax or franchise fee for such services within Fellsmere. Against this background, the Board voted to consider a natural gas franchise ordinance at its meeting on December 11, 2012. Specifically, the Board instructed staff to prepare a proposed natural gas franchise ordinance, and bring it back for initial Board consideration— which is the purpose of this agenda item. If the Board approves the ordinance in concept, a public hearing will be set to consider final adoption of the ordinance. The proposed ordinance requires that any natural gas company which uses the public rights-of-way to distribute natural gas to domestic, commercial and industrial users in the unincorporated County must obtain a franchise and pay a franchise fee of 6% of gross revenues. The franchise fee would be shown as a separate line item on customers' bills. Generally, the proposed ordinance follows the model of other County ordinances requiring a franchise from other utility service providers. It should be noted that the proposed ordinance does not apply to large transmission lines which deliver natural gas to regions across the state, where it is then sold wholesale to distributers who sell it to end users. Based on the research of County staff, franchise agreements and fees are typically not required with respect to the transmission activity. It is only the local distribution which is subject to the proposed ordinance. It should lastly be noted that County staff has been in ongoing contact about the proposed ordinance with Pivotal Utility Holdings, Inc., a New Jersey corporation which does business in Florida under the trade name Florida City Gas ("FCG"). FCG has been assigned the territory of Indian River County by the Florida Public Service Commission, and FCG is the only natural gas utility operating in the County. It is the County Attorney's understanding that generally FCG does not oppose the proposed franchise ordinance, although it has expressed concern for its customers and the financial impact that the new franchise fee might have on some customers. FINANCIAL IMPACT. Under the County's right-of-way ordinances, FCG presently pays permit fees for construction within the rights-of-way, and a right-of-way user fee of$500 per pipe per mile—which generates revenue of slightly over$14,000 per year. If a franchise ordinance is adopted, the permit and user fees will be eliminated and replaced with the 6% franchise fee. FCG has roughly estimated that total franchise fees will equal about �.. $15,000 to $30,000 per year. F:W rorneyDnda1GENERAL0 CCWgendadiemasWamra(Gas Franchise Udoc 250