While it fights with the Oklahoma Corporation Commission (OCC)over an order dictating the upstream unbundling of its system,Oklahoma Natural Gas (ONG) is arguing with the City of Norman, OK,to retain rights to distribute gas there. ONG’s 25-year franchiseagreement with Norman expires Nov. 15, and so far the two partieshave yet to come to terms on an extension. The city wants afranchise agreement with ONG just like its last one, including aprovision allowing the city the opportunity to buy the distributionsystem from ONG every five years. ONG, however, wants to do awaywith the buyout provision this time around. ONG spokesman DonSherry said the city’s interest in owning the system stems, inpart, from a desire to beef up city coffers. “Our feeling about itis that their interest in a forced acquisition of the system isprincipally one of revenue. We have significant questions as towhether they could operate the system any more efficiently than wecould.”

From the city’s perspective, the vagaries of deregulation andunbundling make the prospect of owning the system potentiallyattractive. “We’re concerned about a lot of things that just seemedto naturally come with deregulation,” said Norman City AttorneyJeff Raley. “It just seems that the big fish always seem to gobbleup the little ones. We’re concerned with who we’re going to bedoing business with four or five years down the line. I think theindustry is going to change substantially.”

Currently, ONG pays Norman a 3% franchise fee based on grossreceipts derived from both commodity charges and cost of service.If/when ONG’s downstream system is unbundled, the portion of thefee derived from commodity charges would drop off. “We’ve indicatedto the city we believe there are ways to address that situation andare very willing to work with them to make sure that they are madewhole financially,” Sherry said. The city wants to switch to avolumetric rate for the franchise fee. Raley also said owning thedistribution system would give the city control of the right-of-wayit doesn’t enjoy now. He said not knowing what’s underground hascaused problems with excavation crews hitting pipes. However, Raleyconceded the city could obtain pipe locations from ONG. “I supposewe could, but that’s an issue.”

As it stands now, the city plans to study the feasibility ofowning the distribution system and will proceed with a request forproposals for distribution service.

As for ONG’s challenge to the upstream unbundling of its system,the Oklahoma Supreme Court must decide on an OCC motion to dismissONG’s appeal of its order (See Daily GPI Aug. 7, 1999). If themotion is not granted, the court must then decide the merits ofONG’s appeal.

Joe Fisher, Houston

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