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ONG May Lose Franchise Rights in Norman, OK

ONG May Lose Franchise Rights in Norman, OK

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 franchise agreement with Norman expires Nov. 15, and so far the two parties have yet to come to terms on an extension. The city wants a franchise agreement with ONG just like its last one, including a provision allowing the city the opportunity to buy the distribution system from ONG every five years. ONG, however, wants to do away with the buyout provision this time around. ONG spokesman Don Sherry said the city's interest in owning the system stems, in part, from a desire to beef up city coffers. "Our feeling about it is that their interest in a forced acquisition of the system is principally one of revenue. We have significant questions as to whether they could operate the system any more efficiently than we could."

From the city's perspective, the vagaries of deregulation and unbundling make the prospect of owning the system potentially attractive. "We're concerned about a lot of things that just seemed to naturally come with deregulation," said Norman City Attorney Jeff Raley. "It just seems that the big fish always seem to gobble up the little ones. We're concerned with who we're going to be doing business with four or five years down the line. I think the industry is going to change substantially."

Currently, ONG pays Norman a 3% franchise fee based on gross receipts derived from both commodity charges and cost of service. If/when ONG's downstream system is unbundled, the portion of the fee derived from commodity charges would drop off. "We've indicated to the city we believe there are ways to address that situation and are very willing to work with them to make sure that they are made whole financially," Sherry said. The city wants to switch to a volumetric rate for the franchise fee. Raley also said owning the distribution system would give the city control of the right-of-way it doesn't enjoy now. He said not knowing what's underground has caused problems with excavation crews hitting pipes. However, Raley conceded the city could obtain pipe locations from ONG. "I suppose we could, but that's an issue."

As it stands now, the city plans to study the feasibility of owning the distribution system and will proceed with a request for proposals 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 dismiss ONG's appeal of its order (See Daily GPI Aug. 7, 1999). If the motion is not granted, the court must then decide the merits of ONG's appeal.

Joe Fisher, Houston

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