Franchise fees are charged by government entities to utility companies in exchange for placing their facilities in public rights of way.

If you'd like to compare your franchise terms to those of other communities, a recent U. S. EPA study of gas and electric franchises in 55 Midwest municipalities may be of interest. Although the study focused on the use of
franchise incentives to promote green energy, the study provided a fascinating look at the fees and terms being used in the industry. Here is a summary of the findings. How do you stack up?

• No fee is charged. Of the 55 municipalities surveyed, 27 do not charge franchise fees. Reasons: Some do not have ordinances covering this situation, others have ordinances that allow free use for a time frame (i.e., 30 years) that has not yet been exceeded. In one municipality, state law did not allow for such charges. Others charged fees, but not to gas or electric companies. In other agreements, municipalities agreed not to impose charges beyond those set by the Public Service Commission.
  
• Municipalities provide their own gas and/or electric. This means no fee was charged for ROW use.


• Annual fees: In exchange for an annual charge, two municipalities exempt their utilities from taxes, assessments, rentals, and other charges associated with the use of their right of way. These agreements are in force for 20 years, one is lump sum and the other has graduated fee increases.


• One time or application fee: Five municipalities charge a one time fee to review applications to use the public right of way. Fees are updated periodically. Another city requires the payment of a nominal annual maintenance fee.


• Fees are charged on a percent of profits or revenues: Some municipalities charge based on a percent of gross revenue or gross profits. One mandates the use of renewable energy as a condition of ROW use; if percentages are not met then per kWh fees are charged. Still others charge on a per meter or gross revenue basis that often differs by
  customer class. Some have automatic increases that adjust per the Consumer Price Index, others are flat fees, and the rest are negotiated periodically per the conditions of their agreement.


• Utility provides free electric and/or gas. In exchange for right of way use, 6 municipalities elected to receive free electric and/or gas. One receives the electricity needed to light municipal buildings and traffic signals. Others receive electric only for street lights or for a portion of street light use. For gas franchises, one municipality receives therms on a per capita basis and another receives a lump sum of therms, all free of charge.


• Municipality reserves right to charge, but doesn't. Ten of the municipalities surveyed have the ability to charge fees but choose not to. Their agreements have provisions for fees on gross revenues, flat fees, and fees per
  customer type or energy use. One city did not state conditions, but agreed that one would be negotiated in good faith if implemented.


• Municipality provided a tax break in conjunction with one or more of the above arrangements. Three municipalities received lump sum fees, full or partial street light power, or gas therms in exchange for a tax break and use of right of way.

Some of the municipalities surveyed were not able to respond with data, because they were not able to identify whether or not they had a franchise fee in place. Others had expired and were not renewed. If you're a municipality, do you know what your status is? If not, you may want to dig through your records and see if you're being owed reimbursement for the right to use your right of way.

If you're interested in learning more about the results of this 2009 central mid-west survey, go to www.epa.gov/r5
climatechange/franchise-agreement-report.pdf.