Recommendation No. 20260429-004 Texas Gas Service Franchise — original pdf

Recommendation

BOARD/COMMISSION RECOMMENDATION Resource Management Commission Recommendation No. 20260429-004 Recommendation on Texas Gas Service Franchise WHEREAS, The City is in the process of renewing its franchise agreement with Texas Gas Service; and WHEREAS, the Resource Management Commission on January 20, 2026 made several recommendations pertaining to the renewal of the franchise agreement in Recommendation 20260120-002; and WHEREAS, many of those recommendations have been incorporated into the draft ordinance but several important terms are inadequate or absent; and WHEREAS, Texas Gas Service does not collect full payment for new infrastructure (known as Contribution in Aid of Construction or Capital Recovery Fees) required for new customers, thus subsidizing new customers while increasing gas bills of existing customers; and WHEREAS, the draft ordinance does not require Texas Gas to fund or operate any energy conservation programs or emergency bill assistance programs; and WHEREAS, the Sustainable Buildings section of the Austin Climate Equity Plan includes a goal of reducing natural gas-related emissions by 30% by 2030; and WHEREAS, the draft ordinance does not specify any minimum scope or standard on leak detection; and WHEREAS, the Houston Ship Channel index does not include storage and demand reservation fees, and therefore some large transport gas customers may not be paying their adequate share of franchise fees, NOW THEREFORE, BE IT RESOLVED that the Resource Management Commission recommends that the City require as part of its franchise agreement with Texas Gas Service that: The Company shall implement an emergency bill assistance program for income- ● qualified customers to be funded at an initial level of at least $500,000, to be indexed for inflation during the term of the agreement, with 50% of the funding coming from Texas Gas Service shareholders. This would be a separate program from the monthly bill assistance program for income-qualified Customers currently found in the draft ordinance. (Section 4.7) The Company shall include all expected capital expenditures relevant to ratemaking ● (including those to occur outside of the Austin metropolitan area that will ultimately affect rates for Austin customers) in its annual report to Austin Financial Services (Section 4.9) Beginning in December 2026, the Company shall annually file with the City a report ● detailing the Company’s expected capital investments for the upcoming year and actual capital investments for the prior year. Every two years, the City will hire a consultant to review multiple years of the Company’s actual and projected capital investments and evaluate the quality and prudence of the Company’s capital expenditure planning, management and execution. This report will be shared with the public, other TGS cities and the Railroad Commission. Funding for this consultant’s work would come from a dedicated tariff or slight increase in the TGS franchise fee. Beginning with implementation of rates determined by the next full rate case, the ● Company shall immediately collect full Contributions in Aid of Construction for its new hookups and developments that occur in the Austin city limits (and ideally in all other TGS Texas jurisdictions as well). Within City limits, the entirety of the capital costs for new hookup and development should be collected from developers requesting line extensions or new hookup. None of the collected capital costs in aid of construction should be refunded or returned in any way to the developer, but should be used to reduce the Company’s effective ratebase and its level of return on ratebase investment. The Company will not reduce the collected amount based on expected future revenues from new Customers. Austin Customers should not be billed for uncollected development expenses within or outside of City limits. A new full rate case should begin no later than January 1, 2028. Beginning in January 2027, the company should collect a new tariff to be adopted by the ● City to plan and implement an energy conservation program operated by the City to serve Company customers. As an alternative, an increase to the franchise fee of as much as 1%, which should be applied differently to different rate classes, should be collected by the City to fund an energy conservation program for Company customers to be operated by the City. All previously collected but unspent conservation funds and previously purchased equipment for implementation of Texas Gas Service’ conservation program should be transferred to the City for continued operation of the programs, which may include low-income home weatherization. The City may use these funds in conjunction with its own energy efficiency program funds to offer conservation services to Texas Gas Service customers that reduce both gas and electricity use. Leak Detection: The Company shall conduct annual emissions surveys using technology ● that: ○ Is capable of measuring a flow rate ○ Can accurately identify sources, and ○ Has a minimum detection threshold of 0.1 ppm or equivalent flow rate. Texas Gas Service should provide an annual report to the City summarizing its emissions findings, comparing those to national average methane emissions levels, and identifying the number, frequency, locations and any infrastructure patterns relevant to natural gas emissions that could pose public or local health and safety issues. Section 1.18 should be amended to require that transport gas customers who do not ● provide fuel costs be charged 125% of the Houston Ship Channel gas cost index. Date of Approval: April 29, 2026 Vote: 7-0 Motioned By: Vice Chair Robbins Seconded By: Commissioner Silverstein For: Against: Abstentions: Off Dais: Absences: Vacancies: Attest: Commissioner Charlotte Davis, Chair; Commissioner Paul Robbins, Vice Chair; Commissioner Kamil Cook; Commissioner Harry Kennard; Commissioner Martin Luecke; Commissioner Raphael Schwartz; Commissioner Alison Silverstein None None Commissioner Trey Farmer; Commissioner GeNell Gary None Mayor; District 6 Natasha Goodwin, Staff Liaison APPENDIX Suggested Franchise Language 1.18 (e) the value of Transport Gas transported by the Company for Transport Customers, through the System of the Company located in the City’s Public Rights-of-Way (“Third Party Sales”) (excluding the value of any gas transported to another gas utility in the City for resale to its customers within the City), with the value of such gas to be established by utilizing either the purchase price ($/MMbtu) of the Transport Gas as reported to the Company by its Transport customers or a price equal to 125% of the Houston Ship Channel Index of prices ($/MMbtu) for large packages of gas published each month in Inside FERC’s Gas Market (or a successor publication or another publication agreed upon by the City and Company) as reasonably near the time that the transportation service is performed; and Add to section 4.7 By December 1, 2026, the Company agrees to implement, based on a new tariff to be adopted by the City, an emergency bill assistance program for income-qualified Customers and include a monthly charge on Customer bills dedicated to funding such a program. The program will be funded at a level of $500,000 in 2026 dollars, which will be allowed to adjust annually with the Consumer Price Index. The Company will provide matching funds to this program ($250,000 in 2026 dollars to this $500,000 total funding). 4.9. Beginning in December 2026, the Company shall annually file with the City a report detailing the Company’s expected capital investments for the upcoming year and actual capital investments for the prior year. The Company shall be solely responsible for identifying confidential or proprietary information in such annual reports. The City agrees to maintain the confidentiality of any confidential or proprietary information as designated by the Company to the extent allowed by law. Every two years, the City will hire a consultant to review multiple years of the Company’s actual and projected capital investments and evaluate the quality and prudence of the Company’s capital expenditure planning, management and execution. This report will be shared with the public, other TGS cities and the RRC. Funding for this consultant’s work would come from a dedicated tariff or slight increase in the TGS franchise fee. 12.7 Beginning with implementation of rates determined by the next full rate case, the Company must immediately collect full Contributions in Aid of Construction for its new hookups and developments that occur in the Austin city limits. Within City limits, the entirety of the capital costs for new hookup and development will be collected from developers requesting line extensions or new hookup. None of the collected capital costs in aid of construction will be refunded or returned in any way to the developer, but will be used to reduce the Company’s effective ratebase and its level of return on ratebase investment. The Company will not reduce the collected amount based on expected future revenues from new Customers. Austin Customers will not be billed for uncollected development expenses within or outside of City limits. This full rate case should begin no later than January 1, 2028. 12.8 Beginning in January 2027, the company agrees to collect a new tariff to be adopted by the City to plan and implement an energy conservation program operated by the City for Company customers. This program is primarily intended to save natural gas, but under certain circumstances, funds can also be used to save other types of energy. The Company agrees not to implement its own simultaneous energy conservation program in the City of Austin. All previously collected but unspent conservation funds and previously purchased equipment for implementation of the Texas Gas Service program should be transferred to the City of Austin for continued operation of the programs. Previously collected but unspent TGS conservation funds should be directed towards low-income home weatherization. Renumber draft articles 12.7, 12.8, and 12.9