2016-3989 Ordinance ORDINANCE NO. 2016-3989
AN ORDINANCE GRANTING TO PEOPLES GAS SYSTEM, A DIVISION
OF TAMPA ELECTRIC COMPANY, ITS SUCCESSORS AND ASSIGNS,
A NON-EXCLUSIVE NATURAL GAS FRANCHISE AGREEMENT TO
USE THE PUBLIC RIGHTS-OF-WAY OF THE CITY OF MIAMI BEACH,
FLORIDA, AND PRESCRIBING THE PROVISIONS AND CONDITIONS
UNDER WHICH SAID FRANCHISE SHALL BE EXERCISED;
PROVIDING FOR MONTHLY PAYMENTS TO THE CITY; PROVIDING
AN EFFECTIVE DATE; AND REPEALING PRIOR ORDINANCE.
WHEREAS, there is currently in effect a franchise agreement between the City of Miami
Beach ("City") and Peoples Gas System, a division of Tampa Electric Company ("PGS"), the terms
of which are set forth in City of Miami Beach Ordinance No. 90-2679, passed and adopted
February 7, 1990, and PGS's written acceptance thereof dated January 2, 1990, granting to PGS,
its successors and assigns, a twenty (20) year gas franchise ("Current Franchise Agreement"); and
WHEREAS, PGS and the City desire to enter into a new agreement ("Franchise
Agreement") providing for the payment of fees to the City in exchange for the non-exclusive right
and privilege of supplying natural gas and other natural gas systems-related services within the
City of Miami Beach free of competition from the City of Miami Beach, pursuant to certain terms
and conditions; and
WHEREAS, the City Commission deems it to be in the best interest of the City of Miami
Beach and its citizens to enter into the new Franchise Agreement.
NOW THEREFORE, BE IT ORDAINED BY THE MAYOR AND CITY COMMISSION OF
THE CITY OF MIAMI BEACH, FLORIDA, AS FOLLOWS:
SECTION 1. For the purposes of this Ordinance, the following terms shall have the
meaning given herein:
A. "Customer" shall mean any Person served by the Company or to which gas is transported
within the corporate limits of the City.
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B. "City" or "Grantor" shall mean the City of Miami Beach, a municipal corporation operating
pursuant to Florida law.
C. "Company," "Grantee" or"PGS" shall mean Peoples Gas System, a division of Tampa Electric
Company, a Florida corporation, its successors and assigns.
D. "Distribution Systems" or"Distribution Facilities" shall mean any and all transmission pipe lines,
main pipe lines and service lines, together with all tubes, traps, vents, vaults, manholes,
meters, gauges, regulators, valves, conduits, attachments, structures and other appurtenances,
as are used or useful in the sale, distribution, transportation or delivery of natural gas and as
are situated within the corporate limits of the City.
E. "Effective Date" shall mean the date this Franchise becomes effective as described in Section
21 below.
F. "Franchise" or "Franchise Agreement" shall mean this Ordinance, as passed and adopted by
the City and accepted by PGS, as provided in Section 21 below.
G. "FPSC" shall mean the Florida Public Service Commission or any successor agency.
H. "Gross Revenues" shall mean all revenues (as defined by the Florida Public Service
Commission) received by PGS from any Customer from the sale, distribution, transportation,
delivery and conveyance of Natural Gas.
I. "Person" shall mean any individual, firm, partnership, estate, corporation, company or other
entity, including, but not limited to, any government entity.
J. "Natural Gas" or "Gas" shall mean natural gas and/or manufactured gas and/or a mixture of
gases which is distributed or transported in pipes and measured by meter on the Customer's
premise. It shall not mean propane gas or liquefied petroleum gas (commonly referred to as
"bottled gas").
K. "Right-of-Way" means any street, road, lane, highway, avenue, boulevard, alley, waterway,
bridge, easement, public place or other Right-of-Way that is owned by the City.
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SECTION 2. There is hereby granted to Grantee, for the period of ten (10) years from the
effective date hereof, the non-exclusive right, privilege, and franchise (hereinafter called
"Franchise") to construct, operate, and maintain in, under, upon, along, over, and across the
present and future Rights-of-Way) throughout all of the incorporated areas, as such incorporated
areas may be constituted from time to time, of the Grantor, in accordance with PGS's customary
practice with respect to construction and maintenance, distribution systems or distribution facilities
(including, without limitation, transmission and distribution pipe lines, and all other systems or
facilities installed in conjunction with or ancillary to all of the Grantee's operations), for the purpose
of supplying natural gas service and other natural gas-related services incidental thereto (which
other natural gas-related services are defined as PGS's facility-to-facility capabilities over the
distribution systems lines to identify future needs on improved methods of delivering natural gas,
and other services necessary or helpful to the provision of natural gas service, and which do not
include any services that are sold to others including, without limitation, the transportation and
delivery of natural gas) to the Grantor and its successors, and the inhabitants thereof, and persons
beyond the limits thereof.
SECTION 2.(a). The Distribution Systems shall be so located, re-located, installed,
constructed, and erected as to not unreasonably interfere with the convenient, safe, continuous
use, or with the maintenance, improvement, extension or expansion of any public "road," as
defined under the Florida Transportation Code, nor unreasonably interfere with reasonable egress
from and ingress to abutting property.
(b) To minimize such conflicts with the standards set forth in subsection (a) above, the
location, relocation, installation, construction, or erection of all facilities shall be made as
representatives of the City may prescribe in accordance with all applicable federal, state, and local
statutes, laws, ordinances, rules, and regulations, and pursuant to Grantor's valid rules and
regulations with respect to utilities' use of Rights-of-Way relative to the placing and maintaining in,
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under, upon, along, over, and across said Rights-of-Way, provided that such rules and regulations
shall be:
(i) for a valid municipal purpose;
(ii) shall not prohibit the exercise of Grantee's rights to use said Rights-of-Way for reasons
other than conflict with the standards set forth above;
(iii) shall not unreasonably interfere with Grantee's ability to furnish reasonably sufficient,
adequate, and efficient natural gas service to all its customers while not conflicting with the
standards set forth above; or
(iv) shall not require relocation of any of the Distribution Systems or facilities installed before or
after the effective date hereof in any Rights-of-Way unless or until the facilities unreasonably
interfere with the convenient, safe, or continuous use, or the maintenance, improvement,
extension, or expansion, of such Rights-of-Way.
(c) Such rules and regulations shall recognize that above-grade distribution systems of
the Grantee installed after the effective date hereof should, unless otherwise permitted, be installed
near the outer boundaries of the public Rights-of-Way to the extent possible, and such installation
shall be consistent with the Florida Department of Transportation's Manual of Uniform Minimum
Standards for Design, Construction and Maintenance for Streets and Highways, as same may be
amended from time to time.
(d) When any portion of a public Right-of-Way is excavated, damaged, or impaired by
PGS, or any of its agents, contractors or subcontractors, because of the installation, inspection, or
repair of any of its Distribution Systems or Distribution Facilities, the portion of the public Right-of-
Way so excavated, damaged, or impaired shall, within a reasonable time and as early as
practicable, but in no event greater than ten (10) days after completion of the underlying project, be
restored to its original condition before such excavation, damage, or impairment by the Grantee at
its expense.
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(e) The City shall not be liable to the Grantee for any cost or expense in connection
with any relocation of the Distribution Systems required under this Section, except, however, the
Grantee may be entitled to reimbursement of its costs from others and as may be provided by law.
(f) In the event the Grantor requires removal or relocation of the Distribution Systems
because the Distribution Systems unreasonably interfere with the standards set forth in subsection
(a) hereof, and Grantee fails to remove or relocate such Distribution Systems at Grantee's expense
within thirty (30) days after written notice from the City, then the City may proceed to cause the
Distribution Systems to be removed or relocated and the expense therefore shall be charged
against the Grantee.
SECTION 3. The City shall in no way be liable or responsible for any accident, injury, or
damage caused by PGS, and its officers, employees, agents, servants, contractors, or
subcontractors, whether to persons or property, that may occur in the construction, installation,
location, relocation, reconstruction, maintenance, repair, or operation by PGS of its distribution
systems hereunder. Accordingly, acceptance of this Franchise Agreement by PGS shall be
deemed an agreement on the part of the PGS, and PGS shall indemnify and hold harmless the
City, and its officers, employees, agents, servants, contractors, or subcontractors, from and against
any and all liability, loss, costs, damages, attorneys'fees, or expenses (including, without limitation,
those for or related to any accident, injury, personal injury, wrongful death, or other damage to
persons or property), including the City's reasonable attorneys' fees and costs incurred in
defending itself against any claims for such liabilities, losses, costs, damages, or expenses
asserted against the City by others which may accrue to or be incurred by or charged or sought
against the City, or any of its officers, employees, agents, servants, contractors, or subcontractors,
by reason of construction, installation, location, relocation, reconstruction, maintenance, repair, or
operation of the Distribution Systems by PGS, or by any acts or omissions of negligence, gross
negligence, strict liability, products liability, or intentional torts, default, or misconduct of PGS, or
any of its officers, directors, agents, servants, employees, contractors, or subcontractors. The
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indemnity hereunder shall include not only the reasonable costs, expenses, and attorneys' fees
incurred by the City in defense of any third party's claim (prior to and during all phases of litigation,
including trial and post-trial and appellate proceedings), but shall also include the reasonable costs,
expenses, and attorneys' fees incurred by the City in the event it must enforce the terms of this
indemnity prior to and during all litigation, including trial, post-trial, and appellate proceedings. This
indemnity shall survive expiration or other termination of this Franchise Agreement.
SECTION 4. All rates and rules and regulations established by the Grantee from time to
time shall be subject to such regulation as may be provided by law.
SECTION 5. Except as provided in Section 13, the Franchise hereby granted shall be for
a period of ten (10) years from the effective date of this ordinance.
SECTION 6. The Franchise hereby granted shall not be leased, assigned or otherwise
alienated or disposed of except with the prior express written consent of the City, which shall not be
unreasonably withheld or unduly delayed. No assignment shall be allowed without the assignee
assuming the terms of the Franchise Agreement with the City.
SECTION 7. As a consideration for this Franchise, PGS shall pay to the City, commencing
thirty (30) days after the effective date herein, and each month thereafter for the remainder of the
term of this Franchise, an amount which when added to the amount of all licenses, excises, fees,
charges and other impositions of any kind whatsoever (except ad valorem property taxes and non-
ad valorem tax assessments on property) levied or imposed by the City against PGS's property,
business or operations, and against the property, business, or operations of the Grantee's
subsidiaries that are directly involved in supplying natural gas and other natural gas-related
services as defined in Section 1 of this Franchise Agreement, during PGS's monthly billing period
ending sixty (60) days prior to each such payment, will equal six percent (6.00%) of the Grantee's
gross revenues a sum of money equal to six percent (6.00%) of Gross Revenues, less those
specific adjustments for uncollected accounts, from the sale, transaction, distribution,
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transportation, delivery and conveyance of Natural Gas to Customers within the corporate limits of
the City.
SECTION 8. As a further consideration, during the term of this Franchise, the Grantor
agrees: (a) not to engage in the distribution and/or sale, in competition with the Grantee, of natural
gas to any ultimate consumer of the natural gas (herein called a "customer") or to any Distribution
Systems established solely to serve any customer formerly served by the Grantee; and (b) not to
participate in any proceeding or contractual arrangement, the purpose or terms of which would be
to obligate the Grantee to transmit and/or distribute, natural gas from any third party(ies) to any
other retail customer's facility(ies); provided, however, that the Grantor shall not be considered a
"third party" or an "other retail customer" for purposes of this provision. Nothing specified herein
shall prohibit the Grantor from engaging with other utilities or persons in wholesale transactions or
franchise agreements surrounding those third party supplies of natural gas. Nothing specified
herein is intended to restrict the Grantor from securing the appropriate franchise fees from those
entities that are utilizing the Distribution Systems, which is the subject of the Grantor's agreement
not to compete set forth in this paragraph.
Nothing specified herein shall prohibit the Grantor, if permitted by law: (i) from purchasing
natural gas from any other person or utility; or (ii) from seeking to have the Grantee transmit
and/or distribute to any facility(ies) of the Grantor natural gas purchased by the Grantor from any
other person or utility in compliance with applicable laws and regulations. The City shall be free to
consummate such purchase transaction with such other person or utility, and all of the terms and
conditions of this Franchise shall remain in effect.
SECTION 9. The Distribution Systems shall be erected, placed, or laid in such manner as will,
consistent with necessity, least interfere with other public uses of the Rights-of-Way, and said
Rights-of-Way shall not be unnecessarily obstructed, and before, except in an emergency situation,
the Company makes any excavation or disturbs the surface of any of the Rights-of-Way, it shall
obtain a permit from the appropriate City authority. The City shall issue, or if applicable deny,
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permits within ten (10) business days of application by the Company. For each application by the
Company, a specific time to the Company shall, with due diligence and dispatch, place such
Rights-of-Way in as good a condition as before such excavation or disturbance was made shall
be included in the permit issued by the Miami Beach Department of Public Works for the Company
to complete any restoration of Rights-of-Way required. At the time of the approval of the terms and
conditions of this Franchise Agreement in accordance with applicable law, PGS shall file with the
City an annual bond in the minimum sum of$50,000 having as a surety thereon a surety company
qualified to do business in the State of Florida and conditioned for the full and faithful performance
by PGS of all requirements, duties and obligations imposed upon it by the provisions of this
Franchise Agreement, and such bond shall be furnished annually and shall provide a continuing
guarantee of such full and faithful performance at all times throughout the effective period hereof.
Should PGS fail, within ten (10) days of its receipt of written notice from the City, to restore such
Rights-of-way, then the City may undertake such restoration (other than any restoration work on
the Distribution Systems) and charge the reasonable cost thereof to PGS.
To the extent consistent with Florida law, PGS hereby agrees to abide by all the rules and
regulations and ordinances which the City has passed or might pass in the future, in the exercise of
its police power, and further agrees to abide by any established policy which the City or its duly
authorized representative has passed, established, or will establish, in the exercise of its police
power; provided, however, that the City shall not pass any ordinance or regulation that results in a
material change in the rights or obligations of the Company under the Franchise Agreement.
SECTION 10. All such components of the Distribution Systems or Distribution Facilities
located within the City shall be installed and maintained in accordance with accepted industry
practice and in accordance with the orders, rules, and regulations of the Florida Public Service
Commission.
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SECTION 11. All components of the Distribution Systems or facilities shall be laid
consistent with all applicable codes, rules, regulations and laws.
SECTION 12. The City reserves the right to permit to be laid, electric conduits, water and
gas pipes and lines, cables, sewers, and to do and permit to be done any underground work that
may be deemed necessary or proper by the City in, across, along, or under any Right-of-Way.
Whenever, by reason of establishing a grade or by reason of changes in the grade of any Right-of-
Way, or by reason of the widening, grading, paving, or otherwise improving present or future
Rights-of-Way, or in the location or manner of construction of any water pipes, electric conduits,
sewers, or other underground structure located within the Rights-of-Way, it shall be deemed
necessary by the City to remove, relocate or disconnect any portion of the Distribution Systems
hereto for any public purpose as determined in the sole discretion of the City, such removal,
relocation or disconnection shall be made by the Company as ordered in writing by the City without
claim for reimbursement. If the City shall require the Company to remove, relocate or disconnect
any portion of its Distribution Systems or in any way to alter the placement or location of the
Distribution Systems, to enable any other Person to use said Rights-of-Way, as part of its
permitting or approval process, the City shall require the Person desiring or occasioning such
removal, relocation, disconnection or alteration to reimburse the Company for any loss, cost or
expense caused by or arising out of such removal, relocation, disconnection or alteration of any
portion of the Distribution Systems. PGS further agrees that it will not intentionally interfere with,
change, or injure any water pipes, drains, or sewers of said City unless it has received specific
permission from the City or its duly authorized representative.
SECTION 13. Failure on the part of PGS to comply in any material respect with any of the
provisions of this Franchise shall be grounds for forfeiture. In the event Grantor reasonably
determines that it will invoke this forfeiture provision, Grantor shall give the Grantee at least sixty
(60) days advance written notice of its intent to invoke the forfeiture provision, and the Grantor and
Grantee agree to negotiate in good faith toward a mutually acceptable resolution of the claimed
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basis for the forfeiture during this sixty (60) day period. Such notice shall, without prejudice to any
of the rights reserved for the Grantor herein, advise the Grantee of the substance of the alleged
failure of Grantee to comply in a material respect with the provisions of this Franchise that Grantor
considers to be the basis for the forfeiture. The Grantee shall then have thirty (30) days in which to
correct or otherwise remedy the claimed basis for the forfeiture. If the Grantor reasonably
determines that such claimed basis for the forfeiture is not remedied by the Grantee within said
time period, the Grantor may invoke this forfeiture provision by delivering written notice to
Grantee's Corporate Secretary and forfeiture shall be effective on the date of delivery of such
notice. Nothing contained herein shall be construed as constraining Grantee's rights to legally
challenge at any time Grantor's determination of the claimed basis for the forfeiture leading to
termination under this Section. The Grantor maintains the right, at its discretion, to grant such
additional time to the Grantee for compliance as necessities in the case require.
Section 14. The City may, at its option and at its sole expense, examine the books and
records of Grantee as such books and records relate to the calculation of the franchise fee
payment to the Grantor for the calendar year preceding such anniversary date, and those records
related to third party natural gas suppliers based upon the sale, distribution, transportation,
delivery, and conveyance of the natural gas through the Distribution Systems; provided, that any
such inspection shall take place during regular business hours at Grantee's head office, no more
than once per year and City provides PGS with reasonable advance written notice. Grantee shall
observe all legal and regulatory requirements in establishing and maintaining its system of
accounts and forms of material. Grantee shall attach to each payment to Grantor a statement of its
gross revenues against which the franchise fee is to be calculated as to all accounts. Acceptance
of payment by Grantor shall not stop Grantor from asserting that the amount paid is not the amount
due. Grantee shall make available for review all accounts and records of Grantee that Grantor
may reasonably request or require relative to calculating the franchise fee. Such examination of
books and records of Grantee by Grantor shall be made during the regular business hours of the
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Grantee at the general office of the Grantee. Records not prepared by the Grantee in the ordinary
course of its business may be provided at the Grantor's expense and as the Grantor and the
Grantee may agree in writing. Additionally, where copies of Grantee's records may be properly
obtained by Grantor for purposes of this Section, said copies will be made at the Grantee's
expense. Such audit shall be impartial and all audit findings, whether they decrease or increase
payment to the Grantor, shall be reported to the Grantee. The Grantor's right to examine the
records of the Grantee in accordance with this Section shall not be conducted by any third party
employed by the Grantor whose fee, in whole or part, for conducting such audit is contingent on
findings of the audit. Records shall be retained by Grantee for a period of five (5) years. The
provisions of this Section shall survive termination of this Franchise Agreement for a period of five
(5) years.
Notwithstanding the preceding paragraph, Grantor shall have one (1) year following the
expiration or termination of the Current Franchise Agreement within which to conduct the
examination and audit contemplated by this Section, as to such Agreement; such examination and
audit to cover the last three (3) years of the Current Franchise Agreement.
SECTION 15. Notwithstanding any provision of this Franchise Agreement, nothing herein
shall prevent, prohibit, or in any way restrict the Grantor's ability to take advantage of all applicable
services set forth in Grantee's tariffs as those tariffs are approved from time-to-time by Grantee's
regulators, and nothing herein shall prevent, prohibit, or in any way restrict the Grantor's ability to
avail itself of all rights accruing to Grantor as a retail customer of Grantee under Florida law and the
rules and regulations of the Florida Public Service Commission.
SECTION 16. During the term of this Franchise, the Company shall file with the City Clerk
and shall keep in full force and effect at all times during the effective period hereof, insurance
certificates evidencing a general liability insurance policy or policies or evidence of self-insurance
within the corporate limits of the City, as they currently exist or may exist in the future. Each such
policy shall be in the minimum sum of$1,000,000.00 for injury or death to any one person, and in
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the minimum sum of$5,000,000.00 for injury or death to all persons where there is more than one
person involved in any one accident, and in the minimum sum of $1,000,000.00 for damage to
property, resulting from any one accident, and each of the said minimum sums shall remain in full
force and shall be undiminished during the effective period of this Ordinance. The coverage
requirements set forth in this Section may be satisfied, in whole or in part, with self-insurance.
Every such insurance policy shall contain a provision whereby every company executing
the same shall obligate itself to notify the clerk of the City, in writing, at least thirty (30) days before
any material alteration, modification, or cancellation of such policy is to become effective.
SECTION 17. Changes in the terms and conditions hereof may be made by written
agreement between the City and the Company.
SECTION 18.
A. If any section, part of a section, paragraph, sentence, or clause of this Ordinance shall
be adjudged by a court of competent jurisdiction to be invalid, such decision shall not affect the
validity of any other portion hereof, but shall be restricted and limited in its operation and effect to
that specific portion hereof involved in the controversy in which such decision shall have been
rendered; provided, however, that should elimination of the specific portion of the Franchise
Agreement adjudged to be invalid results in significant adverse consequences to a party, then that
party may terminate this Franchise Agreement by providing thirty (30) days written notice to the
other party.
B. Upon the issuance by a court of competent jurisdiction of an order, ruling, or decision,
or the enactment or adoption by the Florida Legislature, the City or any other governmental or
regulatory body, of a law, rule, regulation or ordinance, that materially diminishes a municipality's
ability to exact franchise fees from a utility, or that effectively does away with the ability of a
municipality to grant a franchise altogether, then the Company or City may terminate this Franchise
Agreement by providing ninety (90) days written notice to the other party.
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SECTION 19. Ordinance 90-2679, passed and adopted February 7, 1990 and all other
ordinances and parts of ordinances and all resolutions and parts of resolutions in conflict herewith,
are hereby repealed.
SECTION 20. As a condition precedent to the taking effect of this Ordinance, the Grantee
shall file its acceptance hereof with the Grantor's Clerk. Grantor and Grantee agree and
acknowledge that Grantee shall deliver its Acceptance to Grantor on or before January 29, 2016,
provided that this Ordinance has passed on first and second reading on or before January 29,
2016, and in that event the effective date of the Franchise Agreement shall be the date on which
said Acceptance is delivered to the Grantor's Clerk by Grantee.
PASSED on first reading this _ 7 day of DPct eviLtr , 201 5.
PASSED AND ADOPTED on second reading this /3 day of
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F:WTfO\BOKAWgreements\Peoples Gas System(TECO)Franchise Agreement-2016.docx
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COMMISSION ITEM SUMMARY
Condensed Title:
An Ordinance Granting To Peoples Gas System,A Division Of Tampa Electric Company, Its Successors
And Assigns, A Non-Exclusive Natural Gas Franchise Agreement To Use The Public Rights-Of-Way Of
The City Of Miami Beach, Florida, And Prescribing The Provisions And Conditions Under Which Said
Franchise Shall Be Exercised; Providing For Monthly Payments To The City; Providing An Effective Date;
And Repealing Prior Ordinance.
Key Intended Outcome Supported:
Item Summary/Recommendation:
The City Commission, through the ratification of Ordinance No. 90-2679, granted TECO/Peoples Gas
System, Inc. (PGS), a non-exclusive twenty year franchise to construct,operate and maintain gas system
facilities in the City (the "Agreement"). The Agreement remained valid through February 17, 2010, and
required PGS to pay the City a franchise fee that equals 6% of their monthly"gross sales of gas". The
Agreement further mandates that PGS file monthly returns within thirty days after the last day of the month
or be subject to a one percent per month penalty, and maintain sufficient insurance coverage. The
Agreement by Florida Law, automatically extended on a month-to-month basis as a new Agreement is
being negotiated.
ANALYSIS
Until about 20 years ago, PGS purchased all of its gas and sold it at its cost plus it's Florida Public Service
Commission-approved tariff rate. In 1990,certain large volume customers began purchasing their gas from
suppliers outside the State of Florida. PGS thereafter transported that gas and delivered it to the
customers who had purchased it. Those customers were then, and remain, billed by PGS for the
transportation of the gas only, not for the sale of the gas. Thus, PGS no longer collected the franchise fee
for the gas from these customers, since the gas was purchased by the customer from a seller other than
PGS. This appeared to be a new business practice throughout the natural gas industries for retail service.
PGS collected and remitted in the past, and continues to collect and remit, franchise fees on all sales of
gas made by PGS to its customers in Miami Beach as per the agreement, the vast majority of which are
residential and very small commercial customers.
In an audit report prepared in August 2010, the Internal Audit Division estimated that PGS's transports of
natural gas to various customers could have yielded a franchise fee of$242,679 that the City was legally
prohibited from collecting. These estimated fees have fluctuated based upon the change in natural gas
prices but there is the potential of additional franchise revenues to be achieved by renegotiating the existing
Agreement.
An agreement has been negotiated with PGS to collect and pay a franchise fee of 6% on the gross
revenues,which includes the transportation and the sale of natural gas by PGS. The franchise agreement
will be for a ten(10)year period, as recommended by the Budget Advisory Committee,which will allow the
City to reevaluate this matter to attain the most viable franchise agreement for the City of Miami Beach.
PGS will also be required to place a bond for doing work in the City's right of way.
THE ADMINISTRATION RECOMMENDS SETTING THE PUBLIC HEARING FOR THE ORDINANCE.
Advisory Board Recommendation:
Financial Information:
Funds: Amount Account Approved
OBPI Total
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Eric Carpenter, Public Works X6012
Sign-Offs:
Department tor Assistant Tanager City • 1 ager
JJF 2411. ETC JLM AL1`
T:WGENDA\2016\January\Public Works\TECO.Sum.doc
Agenda Item R
MIAMIBEACH Date I-13-1(0
MIAMIBEACH
City of Miami Beach, 1700 Convention Center Drive,Miami Beach, Florida 33139,www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Philip Levine and members o•the City Co / ission
FROM: Jimmy L. Morales, City Manager
DATE: January 13, 2016
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SUBJECT: AN ORDINANCE GRANTING TO - OPLES GAS SYSTEM, A DIVISION OF TAMPA
ELECTRIC COMPANY, ITS SUCCESSORS AND ASSIGNS, A NON-EXCLUSIVE
NATURAL GAS FRANCHISE AGREEMENT TO USE THE PUBLIC RIGHTS-OF-WAY
OF THE CITY OF MIAMI BEACH, FLORIDA, AND PRESCRIBING THE PROVISIONS
AND CONDITIONS UNDER WHICH SAID FRANCHISE SHALL BE EXERCISED;
PROVIDING FOR MONTHLY PAYMENTS TO THE CITY; PROVIDING AN EFFECTIVE
DATE; AND REPEALING PRIOR ORDINANCE.
BACKGROUND
The City Commission, through the ratification of Ordinance No. 90-2679, granted TECO/Peoples
Gas System, Inc. (PGS), a non-exclusive twenty year franchise to construct, operate and maintain
gas system facilities in the City(the"Agreement"). The Agreement remained valid through February
17, 2010, and required PGS to pay the City a franchise fee that equals 6% of their monthly"gross
sales of gas". The Agreement further mandates that PGS file monthly returns within thirty days after
the last day of the month or be subject to a one percent per month penalty, and maintain sufficient
insurance coverage. The Agreement by Florida Law, automatically extended on a month-to-month
basis as a new Agreement is being negotiated.
ANALYSIS
Until about 20 years ago, PGS purchased all of its gas and sold it at its cost plus its Florida Public
Service Commission-approved tariff rate. In 1990, certain large volume customers began
purchasing their gas from suppliers outside the State of Florida. PGS thereafter transported that
gas and delivered it to the customers who had purchased it. Those customers were then, and
remain, billed by PGS for the transportation of the gas only, not for the sale of the gas. Thus, PGS
no longer collected the franchise fee for the gas from these customers, since the gas was
purchased by the customer from a seller other than PGS. This appeared to be a new business
practice throughout the natural gas industries for retail service.
PGS collected and remitted in the past, and continues to collect and remit, franchise fees on all
sales of gas made by PGS to its customers in Miami Beach as per the agreement,the vast majority
of which are residential and very small commercial customers.
In an audit report prepared in August 2010, the Internal Audit Division estimated that PGS's
transports of natural gas to various customers could have yielded a franchise fee of$242,679 that
the City was legally prohibited from collecting. These estimated fees have fluctuated based upon
TECO Agreement
January 13,2016
Page 2 of 2
the change in natural gas prices but there is the potential of additional franchise revenues to be
achieved by renegotiating the existing Agreement.
An agreement has been negotiated with PGS to collect and pay a franchise fee of 6%on the gross revenues,
which includes the transportation and the sale of natural gas by PGS. The franchise agreement will be for a
ten (10) year period, as recommended by the Budget Advisory Committee, which will allow the City to
reevaluate this matter to attain the most viable franchise agreement for the City of Miami Beach. PGS will also
be required to place a bond for doing work in the City's right of way.
CONCLUSION
The administration recommends setting a public hearing for the Ordinance.
JLM/ETC/JJF
T:\AGENDA\2016\JANUARY\PUBLIC WORKS\TECO MEMO.DOC •
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