December 6, 2005 FRANCHISE AGREEMENT WITH SOUTHERN CALIFORNIA GAS COMPANY December 6, 2005 FRANCHISE AGREEMENT WITH SOUTHERN CALIFORNIA GAS COMPANY December 6, 2005 FRANCHISE AGREEMENT WITH SOUTHERN CALIFORNIA GAS COMPANY



TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM: Carol Lynch, City Attorney

DATE: December 6, 2005

SUBJECT: FRANCHISE AGREEMENT WITH SOUTHERN CALIFORNIA GAS COMPANY

RECOMMENDATION

Read Ordinance No. ____ "AN ORDINANCE OF THE CITY OF RANCHO PALOS VERDES GRANTING TO SOUTHERN CALIFORNIA GAS COMPANY, A CORPORATION, ITS SUCCESSORS AND ASSIGNS, THE RIGHT, PRIVILEGE AND FRANCHISE TO LAY AND USE PIPES AND APPURTENANCES FOR TRANSMITTING AND DISTRIBUTING GAS FOR ANY AND ALL PURPOSES UNDER, ALONG, ACROSS OR UPON THE PUBLIC STREETS, WAYS, ALLEYS AND PLACES, AS THE SAME NOW OR MAY HEREAFTER EXIST, WITHIN SAID MUNICIPALITY" by title only, waive further reading, and introduce the ordinance.

Read Ordinance No. ____-U "AN ORDINANCE OF THE CITY OF RANCHO PALOS VERDES GRANTING TO SOUTHERN CALIFORNIA GAS COMPANY, A CORPORATION, ITS SUCCESSORS AND ASSIGNS, THE RIGHT, PRIVILEGE AND FRANCHISE TO LAY AND USE PIPES AND APPURTENANCES FOR TRANSMITTING AND DISTRIBUTING GAS FOR ANY AND ALL PURPOSES UNDER, ALONG, ACROSS OR UPON THE PUBLIC STREETS, WAYS, ALLEYS AND PLACES, AS THE SAME NOW OR MAY HEREAFTER EXIST, WITHIN THE CITY OF RANCHO PALOS VERDE AND DECLARING THE URGENCY THEREOF" by title only, waive further reading, and adopt the ordinance.

EXECUTIVE SUMMARY

Representatives of the Gas Company and the City have been negotiating the terms of a new franchise Agreement. The negotiations have resulted in a proposed agreement, which is set forth in the two ordinances that are attached to this Staff report. The ordinances are identical, except for the inclusion of urgency findings in the second ordinance. The amount of the franchise fee that the City can require the Gas Company to pay is established by the State and cannot be changed by the City. The City receives approximately $160,000 annually from the Gas Company under the current franchise agreement. As is discussed below, the proposed agreement contains terms that are more favorable to the City than the terms of the existing agreement. The proposed term of the agreement is twenty-five years. Staff is recommending that the City Council approve the proposed franchise agreement by introducing and adopting the two ordinances.

BACKGROUND

On September 20, 1955, the Board of Supervisors of the County of Los Angeles (the "County") adopted Ordinance No. 6765 ("LA County Ordinance No 6765") granting to Southern California Gas Company (the "Gas Company") the right, privilege, and franchise (the "Original Franchise") to lay, construct, erect, install, operate, maintain, use, repair, replace, and remove pipes, pipelines, mains, services, traps, vents, vaults, manholes, meters, gauges, regulators, valves, conduits, attachments, and other appurtenances for transmitting and distributing gas for any and all purposes under, along, across, over or upon the highways, ways, and alleys of unincorporated Los Angeles County for a period of fifty (50) years, expiring on October 21, 2005.

The City of Rancho Palos Verdes (the "City") subsequently incorporated, and the territorial limits of the City include former portions of the unincorporated County that were included in the Original Franchise area. Upon the City’s incorporation, the administration and authority to extend or renew the Original Franchise with respect to the newly incorporated area transferred to the City.

The Gas Company filed a timely application to renew its franchise pursuant to the Franchise Act of 1937, and City Staff, the City Attorney’s Office and the Gas Company have been engaged in negotiations during the past year to finalize terms for a New Franchise Agreement (the "New Franchise"). The parties were unable to reach agreement on the terms for the New Franchise agreement prior to the expiration of the Original Franchise, so to facilitate the continued negotiations, the City Council adopted Ordinance No. 426-U at its meeting of October 18, 2005, extending the term of the Original Franchise through and including December 20, 2005.

REGULATORY FRAMEWORK

Cities allow public utilities engaged in the distribution and sale of gas or water to lay and maintain pipes, wires and appurtenances under, along or across a city’s streets and public places through the grant of a franchise. General law cities may grant franchises for this purpose either through a bidding process provided for in the Broughton Act (Public Utilities Code Section 6001 et seq.) or without a bidding process under the Franchise Act of 1937 (Public Utilities Code Section 6201 et seq.).

The Broughton Act applies to franchises generally. This statutory scheme requires franchises to be awarded through a competitive bidding process, and limits franchise fees to two percent of the franchisee’s gross annual receipts arising from the use, operation or possession of the franchise.

By contrast, the Franchise Act of 1937 applies to gas, oil, water and electric franchises. This statutory scheme requires a public hearing to be held prior to the award of a franchise but does not require competitive bidding. The Franchise Act of 1937 provides a statutory scheme for establishing franchise fees and establishes procedures for granting franchises. The amount of the franchise fee that would be paid to the City under the 1937 Act is the greater of two percent (2%) of: (a) the gross annual receipts of the applicant arising from the use, operation, or possession of the franchise, or (b) one percent (1%) of the gross annual receipts that the applicant derived from the sale of the utility service within the City.

Although both statutory schemes are briefly summarized below, the City has been negotiating with the Gas Company pursuant to the provisions of the 1937 Act.

A. Broughton Act

Under the Broughton Act, the party seeking a franchise initiates the request for a proposed franchise by filing an application with the City. Upon receipt of the application for a franchise, the City must publish an advertisement describing the proposed franchise, indicating that bids for the described franchise will be accepted, and stating that the franchise will be awarded to the highest bidder and that the successful bidder will be required to pay the City two percent (2%) of the gross annual receipts arising from the use, operation or possession of the franchise. The advertisement must be published once a day for ten (10) consecutive days in a daily newspaper or, if no daily newspaper is published in the City, once a week for four (4) successive weeks in a weekly newspaper. The publication shall be completed not less than twenty (20) nor more than thirty (30) days prior to the City taking further action on the franchise application. (Id.)

The Broughton Act contains some limitations on the City’s authority to regulate gas and water franchises. The City may impose such additional terms and conditions on a franchise as it deems necessary for the public interest, provided those terms and conditions do not conflict with the provisions of the Broughton Act. However, the City may not regulate the rates or internal operations of the utility by the grant of the franchise or through an enabling ordinance, since such authority is vested exclusively with the California Public Utilities Commission.

The City may not include a clause or condition in franchises granted under the Broughton Act that directly or indirectly restricts free and open competition in bidding; nor may the City include any cause or condition that favors one person, firm or corporation over another in bidding for the purchase of the proposed franchise. (Cal. Pub. Util. Code § 6003.)

B. Franchise Act of 1937

Under the Franchise Act of 1937, the party seeking a franchise initiates the request for a proposed franchise by filing an application with the City. The application must contain a statement by the applicant that during the life of the franchise the applicant will pay the City the greater of two percent (2%) of the gross annual receipts of the applicant arising from the use, operation, or possession of the franchise or one percent (1%) of the gross annual receipts that the applicant derived from the sale of the utility service within the City. Upon receipt of the application for a franchise, the City must publish a resolution of intention to grant the franchise and then to hold a public hearing prior to adopting the franchise ordinance.

The Franchise Act of 1937 contains some limitations on the City’s authority to regulate gas and water franchises. As outlined more fully below, the City may impose such additional terms and conditions on a franchise as it deems necessary for the public interest, provided those terms and conditions do not conflict with the provisions of the Franchise Act of 1937. However, the City may not regulate the rates or internal operations of the utility by the grant of the franchise or through an enabling ordinance, since such authority is vested exclusively with the California Public Utilities Commission.

1. Franchise Fee

The amount of the franchise fee the City may collect is fixed by State law. (Cal. Pub. Util. Code § 6231.) Section 6231(c) of the Public Utilities Code establishes the payment formula for a franchise granted under the Franchise Act of 1937:

"[T]he applicant if granted the franchise will pay to the municipality during the life of the franchise 2 percent of the applicant’s gross annual receipts arising from the use, operation, or possession of the franchise, except that this payment shall be not less than 1 percent of the applicant’s gross annual receipts derived from the sale within limits of the municipality of the utility service for which the franchise is awarded." [Emphasis added.]

2. Term

The City may grant a franchise for as short or as long a term as can be negotiated. (Cal. Pub. Util. Code § 6264.) If no term is specified, State law provides that franchise remains in force indefinitely, unless it is surrendered or abandoned, purchased, taken by eminent domain or forfeited.

"Every franchise granted pursuant to this Chapter, except when a definite term thereof is specified in the Ordinance granting it is indeterminate, that is to say, every such franchise shall endure in full force and effect until, with the consent of the Public Utilities Commission, it is voluntarily surrendered or abandoned by its possessor, or until the State or some municipal or public corporation purchases by voluntary agreement or condemns and takes under the power of eminent domain, all property actually used and useful in the exercise of the franchise and situated within the territorial limits of the State, municipal, or public corporation purchasing or condemning such property, or until the franchise is forfeited for noncompliance with its terms by the possessor thereof."

(Public Utility Code Section 6264.)

3. Relocations

In the event the City desires to widen, realign or relocate a street, State law provides that the franchisee pay the cost of relocating its facilities. (Cal. Pub. Util. Code § 6297.) To avoid any confusion, language is typically included in the franchise agreement expressly setting forth this requirement. It should be noted, however, that if the relocation is required by a private entity or another utility constructed later in time, the franchise language will often require such other entity to pay the cost of relocating the franchisee’s facilities. (City of Anaheim v. Metropolitan Water District (1978) 82 Cal.App.3d 763.)

4. Compliance with Local Laws; Payment of Repairs

State law requires each franchisee to construct, install, and maintain all pipes, conduits, poles, wires, and appurtenances in accordance and in conformity with all local ordinances. (Cal. Pub. Util. Code § 6294.) In addition, the City may impose express provisions requiring a franchisee to obtain an excavation permit prior to laying or replacing pipes and wires in the public right-of-way and to file maps with the city showing the location of all such facilities within the city. Each franchisee is also required to pay the City, on demand, the cost of all repairs to public property made necessary by any of the operations of a franchisee under its franchise. (Cal. Pub. Util. Code § 6295.)

5. Indemnification and Performance Bonds.

The franchise agreement must include an indemnification clause requiring the franchisee to indemnify and hold harmless the City and its officers from all liability. (Cal. Pub. Util. Code § 6296). In addition, the City may require, as a condition of granting a franchise, that the franchisee post a performance bond with the City to ensure that the franchisee faithfully fulfills and performs its obligations under the franchise. (Cal. Pub. Util. Code § 6301).

6. Additional Considerations

Pursuant to Section 6203 of the Public Utilities Code, the City may impose such other terms and conditions on its grant of a franchise as it deems necessary to promote the public interest, provide those terms and conditions are consistent with the provisions of the Franchise Act of 1937.

To summarize, The Franchise Act of 1937 provides the City with more flexibility in negotiating and regulating franchises. Although the Broughton Act provides that the public entity must award the franchise to the "highest bidder", in reality this provision has little impact in these circumstances due to the fact that the PUC regulates the franchise fee under both statutes. In addition, the Gas Company is an established utility with infrastructure in place. The likelihood of finding a competitor that is interested in starting a new franchise in the City appears to be extremely remote. Thus, the added cost of advertising for bids, the longer process generally associated with the Broughton Act, and the greater restrictions imposed on local governmental entities were the factors that the City considered in proceeding to negotiate with the Gas Company pursuant to the provisions of the 1937 Act.

DISCUSSION

The City and the Gas Company have been negotiating terms for the renewal of the Gas Company’s existing franchise (the "Original Franchise") for the better part of the past year. The Gas Company has developed a standard franchise agreement form that served as the starting point for negotiations, but the City’s negotiating team was able to obtain several concessions that are worthy of note.

Term

Section Two, subparagraph (b) prescribes the term of the proposed Franchise. The Gas Company initially sought a franchise with an indeterminate term. Such a grant would allow the franchise to endure in full force and effect until, with the consent of the Public Utilities Commission, it is voluntarily surrendered or abandoned by its possessor. This would preclude the City from renegotiating the franchise in the future. After several rounds of discussion, however, the Gas Company is now proposing a definite term of 25 years, which is half of the term of the Original Franchise. The ultimate length of the franchise term is at the discretion of the City Council, but staff’s research indicates that most communities have indeterminate terms and no franchise agreements were located with terms less than 25 years.

Franchise Amendments

Section Two, subparagraph (c) prescribes the procedure for amending the Franchise in the event the Legislature makes changes to the Franchise Act of 1937. The Gas Company originally proposed a process that would have allowed the parties to amend the agreement only once every ten years. After negotiations, however, the Gas Company agreed to terms that provide for the parties to meet and negotiate changes to the franchise agreement in good faith if the Legislature amends the Franchise Act of 1937 in a manner that materially affects or alters the rights of either party under the franchise agreement.

Franchise Fee

As currently drafted, Section Three provides a separate amendment procedure if the Legislature were to amend the Franchise Act of 1937 in a manner that would affect the amount of the franchise fee that the City may collect. The standard franchise agreement proposed by the Gas Company would have lumped amendments to the franchise fee under the general amendment procedures discussed above in the previous section, limiting any adjustments to once every ten (10) years. The City was able to negotiate a provision that will allow for automatic adjustments (either up or down) to the maximum franchise fee that is collected to reflect the amount that is authorized by State law. However, an upward adjustment would not take effect until the California Public Utilities Commission ("CPUC") approves an application by the Gas Company for a rate adjustment commensurate with any such increase in the permissible franchise fee under the 1937 Act. This provision is a significant departure from the standard franchise agreement utilized by the Gas Company and offers a level of protection to the City that will ensure the City is able to collect the maximum franchise fee permitted by law, even if that rate increases after the City grants the New Franchise.

Relocation of Facilities

The Franchise Act of 1937 allows the City to require that the Gas Company relocate, at its own expense, any of its facilities in the public right-of-way when necessary to accommodate a valid public project such as widening of a street or construction of storm drains or sewers. Section Seven, paragraph (d) sets forth this requirement. The Gas Company originally proposed a very narrow provision that would not have adequately protected the City. Subject to any limitations imposed by State or Federal law, the City negotiated a broader protection that expands the definition of "public project" and requires the Gas Company to relocate or remove its facilities at no cost to the City. This is a substantial increase in the protection afforded most communities and conforms with the court’s broader interpretation of the Gas Company’s obligations under State Law.

Indemnification

Section Seven of the proposed Franchise includes requirements for insurance and indemnification, which include indemnification for the removal of any hazardous contamination caused by the Gas Company or its facilities.

Work within the Public Streets

Section Eight requires the Gas Company to work with the public works department when work will be performed within the public streets including a requirement that the streets be restored to the Director’s reasonable satisfaction following the completion of the work. It should be noted vents for underground facilities may extend above grade, when the vents will be located between the curb and the property line. This is situation that currently exists in the City.

Reimbursement for Costs

The Franchise Act of 1937 entitles the City to receive reimbursement for the costs of publication and other actual and reasonable costs incurred in processing an application for a franchise. Section Fourteen of the Franchise affirmatively imposes this duty on the Gas Company. The Gas Company originally sought to limit this obligation solely to publication costs. The City, however, successfully negotiated to require reimbursement for other expenses, including the legal costs incurred by the City in reviewing and processing the franchise request, up to a maximum total of $7,500.

City staff believes the terms of the proposed Franchise are favorable to the City and comply with the applicable provisions of State and Federal Law.

Additional Information

The Council has requested copies of franchise agreements from other jurisdictions. The City Attorney’s office has contacted other agencies and found that the vast majority of cities have franchises with indeterminate terms negotiated back in the 1940s and 1950s that lack the protections agencies usually seek today. The City was able to obtain a franchise agreement negotiated by the County of San Bernardino in 1991. The terms negotiated by the City in the Proposed Agreement are generally more favorable than the terms the County obtained. Most of the provisions in the County ordinance are the standard provisions set forth in the Gas Company’s standard franchise agreement. For example, the County franchise provides for the following:

It should be noted, however, that the County’s franchise agreement does include slightly more favorable terms in connection with amendments to the franchise fee that may be collected. Like the City’s proposed franchise agreement, Section Three of the County franchise provides that franchise fees shall be automatically adjusted to reflect any changes to the 1937 Act that effect the amount of franchise fees that may be permissibly collected. Unlike the City’s Proposed Agreement, the County’s agreement did not delay the effect of such increases pending approval by the CPUC of an application by the Gas Company for a rate adjustment commensurate with any such increase. The Gas Company‘s negotiating team indicated this provision is not something the Gas Company typically agrees to and will be available at the Council meeting to answer questions regarding the San Bernardino ordinance.

Urgency Ordinance

As the Council is aware, the Original Franchise (as extended by the Council on October 18, 2005) is set to expire on the 20th of this month. Assuming the Council introduces the non-urgency Ordinance awarding the new Franchise this evening, second reading will be scheduled for December 20, 2005. Since the new Franchise will not take effect until 30 days after second reading, it is necessary to adopt an urgency version of the new Franchise to ensure that there is no interruption in gas service to the City’s residents. This urgency ordinance must take effect immediately. Thus, the City Council must adopt the proposed urgency ordinance by at least a four-fifths vote and further must find that it is necessary that the proposed ordinance take immediate effect for the preservation of the public health, safety and welfare. Staff believes the following facts, which are set forth in Section 17 of the urgency ordinance, provide the legal basis for making these findings:

The Gas Company is a quasi-public utility that supplies natural gas service within the boundaries of the City. The gas service to the City’s residents must be continued without interruption in order to protect the public health, safety and welfare of the residents therein and the general public. Therefore, it is necessary to grant a new franchise before the expiration of the Original Franchise in order to ensure that the gas service continues without interruption of service. The Original Franchise is set to expire at 11:59 p.m. on December 20, 2005. The parties have reached final agreement on the terms for a new franchise, but there is insufficient time for the parties to complete these negotiations and adopt an ordinance granting a new franchise before the Original Franchise expires. Further, there is insufficient time for the proposed ordinance granting a new Franchise to become effective without a single reading and immediate effectiveness. It is therefore urgent that the grant of the new franchise become effective immediately to prevent an interruption in the gas service provided by the Gas Company to the City’s residents. An interruption in such service is of great public concern. The residents rely on natural gas for cooking, heating, and other necessities of daily life. It is imperative that the gas service to the City’s residents be continued without interruption in order to protect the public health, safety and welfare of the residents therein and the general public. The proposed ordinance is necessary for the immediate preservation of the public health, safety and welfare, declares the facts constituting the urgency, and is passed by at least a four-fifths vote of the City Council. Accordingly, the proposed ordinance should be adopted immediately upon introduction pursuant to Government Code Section 36934 and should take effect immediately pursuant to Government Code Section 36937(b).

If enacted, the proposed Ordinance will grant a new franchise to the Gas Company for twenty-five years that is subject to all of the terms and conditions discussed above. If the City Council concurs with staff’s recommendation that the ordinance be introduced and immediately adopted, the Council should read the proposed Ordinance by title only, waive further reading and adopt the Ordinance.

CONCLUSION

Adopting the staff recommendation will immediately grant a new gas franchise to Southern California for a term of 25-years, thereby ensuring that there is no interruption in the provision of gas service to the City’s residents.

Respectfully submitted, Reviewed by,

Carol Lynch, City Attorney Les Evans, City Manager

Attachments: Draft Ordinances, Current Ordinance, San Bernardino Franchise

ORDINANCE NO.       

AN ORDINANCE OF THE CITY OF RANCHO PALOS VERDES GRANTING TO THE SOUTHERN CALIFORNIA GAS COMPANY, A CORPORATION, ITS SUCCESSORS AND ASSIGNS, THE RIGHT, PRIVILEGE AND FRANCHISE TO LAY AND USE PIPES AND APPURTENANCES FOR TRANSMITTING AND DISTRIBUTING GAS FOR ANY AND ALL PURPOSES UNDER, ALONG, ACROSS OR UPON THE PUBLIC STREETS, WAYS, ALLEYS AND PLACES, AS THE SAME NOW OR MAY HEREAFTER EXIST, WITHIN SAID MUNICIPALITY.

THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES DOES ORDAIN AS FOLLOWS:

SECTION ONE

Whenever in this ordinance the words or phrases hereinafter in this section defined are used, they shall have the respective meanings assigned to them in the following definitions (unless, in the given instance, the context wherein they are used shall clearly import a different meaning):

(a) The word "Franchisee" shall mean Southern California Gas Company, and its lawful successors or assigns;

(b) The word "City" shall mean the City of Rancho Palos Verdes, a municipal corporation of the State of California, in its present incorporated form or in any later reorganized, consolidated or reincorporated form;

(c) The word "streets" shall mean the public streets, ways, and alleys as the same now or may hereafter exist within said City;

(d) The word "Director" shall mean the Director of Public Works of the City;

(e) The word "franchise" shall mean and include any authorization granted hereunder in terms of a franchise, privilege, permit, license or otherwise to lay and use pipes and appurtenances for transmitting and distributing gas for any and all purposes under, along, across or upon the public streets, ways, and alleys in the City, and shall include and be in lieu of any existing or future City requirement to obtain a license or permit for the privilege of transacting and carrying on a business within the City or any additional territory hereinafter annexed by or consolidated with the City; provided that any such additional territory shall only be subject to one surviving franchise agreement as determined by the Los Angeles County Local Agency Formation Commission;

(f) The word "gas" shall mean only natural or manufactured gas, or a mixture of natural and manufactured gas;

(g) The phrase "pipes and appurtenances" shall mean pipe, pipeline, cable, main, service, trap, vent, vault, manhole, meter, gauge, regulator, valve, conduit, appliance, attachment, appurtenance and any other property located or to be located in, upon, along, across, under or over the streets of the City, and used or useful in, or in carrying on the business of, transmitting and distributing gas;

(h) The phrase "lay and use" shall mean to lay construct, erect, install, operate, maintain, use, repair, replace, or remove;

(i) The word "release" shall mean any discharge, active or passive migration, deposit, burial, emplacement, seepage, or disposal of a Contaminant into the environment originating from any Facility or from Franchisee's activities; and

(j) The word "Contaminant" shall mean any material, substance or constituent originating from Franchisee’s facilities or activities, whether solid, liquid, semisolid, or gaseous in nature, including any hazardous substance or waste, hazardous material, chemical compound, petroleum (or fraction thereof), or any hydrocarbon substance, pollutant or contaminant, as those terms are defined by any federal, state or local law, rule, regulation or order.

(k) The phrase "Applicable Law" shall mean all present or future federal, state, municipal, or local laws, rules, regulations, ordinances, codes, orders, permit requirements, judgments, injunctions, or decrees, or any judgment or order or decree by a court applicable to the Franchisee or any of Franchisee’s facilities or activities.

SECTION TWO

(a) By this ordinance, the City Council hereby grants to Franchisee the nonexclusive right, privilege and franchise, subject to each and all of the terms and conditions contained in this ordinance, and pursuant to the provisions of Division 3, Chapter 2 of the Public Utilities Code of the State of California, known as the Franchise Act of 1937, for the sole purpose of laying and using pipes and appurtenances to transmit and distribute gas for any and all purposes, under, along, across or upon the streets of the City or any additional territory hereinafter annexed by or consolidated with the City; provided that any such additional territory shall only be subject to one surviving franchise agreement as determined by the Los Angeles County Local Agency Formation Commission. The granting of this Franchise shall not prevent the City from granting any identical or similar franchise to any person or entity other than the Franchisee.

(b) The term or period of this franchise shall be for a period of twenty-five (25 years) from and after the effective date hereof in full force and effect until the same shall, with the consent of the Public Utilities Commission of the State of California, be voluntarily surrendered or abandoned by its possessor, or until the State of California or some municipal or public corporation thereunto duly authorized by law shall purchase by voluntary agreement or shall condemn and take under the power of eminent domain, all property actually used and useful in the exercise of this franchise, and situated within the territorial limits of the State, municipal or public corporation purchasing or condemning such property, or until this franchise shall be forfeited for noncompliance with its terms by the possessor thereof.

(c) In the event the Franchise Act of 1937 ("Franchise Act") is amended by the Legislature or interpreted by a final decision of the Supreme Court of the State of California in a manner that materially affects or materially changes the rights or obligations of the parties (both of which events are hereafter referred to as "Change in Law"), City or Franchisee shall meet to negotiate changes to this franchise which may be appropriate in view of such Change in Law. The parties agree to meet and to negotiate in good faith in a commercially reasonable manner.

SECTION THREE

(a) The Franchisee shall pay to the City at the times hereinafter specified, in lawful money of the United States, a sum annually which shall be equivalent to two percent (2%) of the gross annual receipts of Franchisee arising from the use, operation or possession of said franchise; provided, however, that such payment shall in no event be less than one percent (1%) of the gross annual receipts of the Franchisee derived from the sale of gas within the limits of the City under this franchise; and further provided, notwithstanding any other provision of this Agreement, that in the event the Legislature shall amend the Franchise Act of 1937 (Public Utilities Code Section 6201-6302) to permit a franchise payment greater or less than the percentage formula specified herein, the Franchise fee agreed upon herein shall be automatically changed to the amount allowed by the Legislature in amending such act. No increase in the Franchise fee that results from the application of this section shall take effect until the Franchisee has filed in good faith and the California Public Utilities Commission (the "PUC") has approved an application to adjust rates to enable Franchisee to pass said Franchise fee increase through to consumers. The City agrees to support said application to the PUC and shall provide such reasonable assistance to the Franchisee as Franchisee may request, including, but not limited to, providing declarations and/or testimony in support of said rate adjustment. In the event the PUC approves a retroactive rate adjustment, the effective date of the increase in the Franchise fee will be correspondingly retroactive.

(b) The Franchisee of this franchise shall file with the Clerk of the City within three (3) months after the expiration of the calendar year, or fractional calendar year, following the date of the grant of this franchise, and within three (3) months after the expiration of each and every calendar year thereafter, a duly verified statement showing in detail the total gross receipts of the Franchisee, its successors or assigns, during the preceding calendar year, or such fractional calendar year, from the sale of the utility service within the City for which this franchise is granted. It shall be the duty of the Franchisee to pay to the City within fifteen (15) days after the time for filing such statement in lawful money of the United States, the specified percentage of its gross receipts for the calendar year, or such fractional calendar year, covered by such statement. Any neglect, omission or refusal by said Franchisee to file such verified statement, or to pay said percentage, at the times or in the manner hereinbefore provided, shall be grounds for the declaration of a forfeiture of this franchise and of all rights thereunder.

SECTION FOUR

This grant is made in lieu of all other franchises owned by the Franchisee, or by any successor of the Franchisee to any rights under this franchise, for transmitting and distributing gas within the limits of the City, as said limits now or may hereafter exist, and the acceptance of the franchise hereby granted shall operate as an abandonment of all such franchises within the limits of this City, as such limits now or may hereafter exist, in lieu of which this franchise is granted.

SECTION FIVE

The Franchise granted hereunder shall not become effective until written acceptance thereof shall have been filed by the Franchisee thereof with the Clerk of the City. When so filed, such acceptance shall constitute a continuing agreement of the Franchisee that if and when the City shall thereafter annex or consolidate with additional territory, any and all franchise rights and privileges owned by the Franchisee therein shall likewise be deemed to be abandoned within the limits of the additional territory. If Franchisee fails to file the written acceptance within the time and in the manner prescribed by this Section, Franchisee shall be deemed to have accepted each and every term of the Franchise.

SECTION SIX

The franchise granted hereunder shall not in any way or to any extent impair or affect the right of the City to acquire the property of the Franchisee hereof either by purchase or through the exercise of the right of eminent domain, and nothing herein contained shall be construed to contract away or to modify or to abridge, either for a term or in perpetuity, the City's right of eminent domain in respect to the Franchisee; nor shall this franchise ever be given any value before any court or other public authority in any proceeding of any character in excess of the cost to the Franchisee of the necessary publication and any other sum paid by it to the City therefore at the time of the acquisition thereof.

SECTION SEVEN

The Franchisee of this franchise shall:

(a) Construct, install and maintain all pipes and appurtenances in accordance with and in conformity with all of the ordinances, rules and regulations heretofore, or hereafter adopted by the legislative body of this City in the exercise of its police powers and not in conflict with the paramount authority of the State of California, and, as to State highways, subject to the provisions of general laws relating to the location and maintenance of such facilities;

(b) Pay to the City, on demand, the cost of all repairs to public property made necessary by any operations of the franchisee under this franchise;

(c) Indemnify, defend and hold harmless the City and its elected and appointed officials, officers, employees and agents from any and all liability for damages resulting from, arising out of, or claimed to arise out of, directly or indirectly, the negligent or wrongful acts, errors or omissions of Franchisee in conducting any operations under this Franchise; and be liable to the City for all damages resulting from the failure of said Franchisee well and faithfully to observe and perform each and every provision of this Franchise and each and every provision of Division 3, Chapter 2 of the Public Utilities Code of the State of California. Franchisee acknowledges that any claims, demands, losses, damages, costs, expenses, and legal liability caused by the release or spill of any Contaminant as a result of Franchisee’s use of or the existence of the pipes and appurtenances are expressly within the scope of this indemnity; to the extent they are imposed or required by the state agency with responsibility for the hazardous material or waste or the release or spill, the costs, expenses, and legal liability for environmental investigations, monitoring, containment, abatement, removal, repair, cleanup, restoration, remedial work, penalties, and fines arising from the violation of any local, state, or federal law or regulation, attorney’s fees, disbursements, and other response costs are expressly within the scope of this indemnity. This subsection (c) shall survive the termination or expiration of this franchise and shall continue for so long as franchise property of Franchisee is located within the City

(d) To the extent no in conflict with Applicable Law, if, in the reasonable discretion of the Director, subject to appeal to the City Council, the Franchisee's Facilities conflict in any way with the construction, relocation or repair of any City facility or storm drain or sewer owned by the City of Rancho Palos Verdes, County of Los Angeles, or any successor agency to any of these agencies, or if the Franchisee’s Facilities impede any lawful change of grade, alignment or width of any public street, way, alley or place, or conflicts with the construction of any subway or viaduct by the City or other proper governmental use of the streets (collectively referred to as "public projects"), the Franchisee shall remove or relocate its Facilities to the reasonably nearest alternative location or other location mutually agreeable to the City and the Franchisee necessary to accommodate the public project(s), either permanently or temporarily, as is mutually determined by the Director and Franchisee to be within the time required by the Director. Said removal or relocation shall be accomplished at no cost to the City. If the Franchisee, fails to remove or relocate its Facility within the required time, or to pave, surface, grade, repave, resurface or regrade, the City, to the extent permitted by Applicable Law, may cause the work to be done and shall keep an itemized account of the entire cost thereof, and the Franchisee shall reimburse the City or other public entity for such cost within thirty (30) days after presentation to said Franchisee of an itemized account of such costs. The Franchisee shall hold harmless the City, its officers and employees and the other public agency, if any, from any liability which may arise or be claimed to arise from the moving, cutting, or alteration of any of the Franchisee's Facilities, or the turning on or off of gas, electricity, cable or other services required to be accomplished by City or any other public agency as a result of the Franchisee's failure to relocate said facility by the date established by the City or other public agency. The Franchisee shall also be liable for any consequential damages incurred by the City or other public agency arising from the Franchisee's failure to timely complete the work required by this section;

(e) File with the legislative body of the City within thirty (30) days after any sale, transfer, assignment or lease of this franchise, or any part thereof, or of any of the rights or privileges granted thereby, written evidence of the same, certified thereto by the Franchisee or its duly authorized officers.

(f) At its own expense, Franchisee shall maintain during the life of the franchise a policy or policies of commercial general liability, including pollution legal liability coverage and workers’ compensation insurance from companies authorized to transact business in the State of California by the Insurance Commissioner of California and with an A.M. Best’s Rating of "A" or better.

(i) The commercial general liability insurance policy shall:

(A) be issued for Franchisee and name the City and its officers, agents and employees as additional insureds.

(B) defend and indemnify the insureds against liability for which the Franchisee is legally obligated to pay by reason of liability imposed upon Franchisee by law or liability assumed by Franchisee under the franchise for personal injury, bodily injury, wrongful death and property damage arising from the activities conducted pursuant to the franchise by providing coverage therefore, including but not limited to, coverage for the negligent acts or omissions of Franchisee and its agents, servants and employees, committed in the conduct of franchise operations.

(C) provide coverage limits in the amount of ten (10) million dollars ($10,000,000.00), per occurrence, and if a policy aggregate applies, such policy aggregate shall be twice the per occurrence limit;

(D) be noncancellable without thirty (30) days prior written notice, ten (10) days for non-payment of premium, directed to the City Clerk.

(ii) The Workers’ Compensation insurance requirement may be satisfied by self-insurance if the Franchisee is a qualified self-insured as approved by the State of California Department of Industrial Relations. Franchisee shall provide City a copy of the certificate to self insure as issued by the California Department of Industrial Relations.

(iii) Franchisee shall file with the City Clerk certificates of insurance providing the following information:

(A) The policy number.

(B) The policy effective date and the expiration date.

(C) The named insured and the certificate holder/additional insured.

(D) Type of coverage provided by each policy of insurance.

(E) The limits of coverage (required by the franchise) for each policy of insurance.

(F) If applicable, all endorsements required by this section and that form a part of the policy.

(iv) Franchisee retains the right to self-insure any of the insurance requirements above, as provided for as a qualified self-insured by the State of California. Franchisee also retains the right to determine what levels of deductibles or self-insured retentions it maintains.

(v) The Franchisee shall not commence operations until Franchisee has complied with the aforementioned provisions of this Section. The Franchisee shall cease operations if the Franchisee fails to maintain said policies in full force and effect. In the event any policy is cancelled, the Franchisee shall provide the City, at least five (5) business days prior to the effective date of the cancellation, but not later than one (1) day prior to the effective date of the cancellation, a certificate of insurance or confirmation of coverage binder showing that the Franchisee has replacement insurance in full force effective on the effective date of the cancellation.

The Franchisee may satisfy any or all of the insurances requirements under this Section 16 through self-insurance, provided the Franchisee is a qualified self-insured as approved by the State of California and the Franchise submits evidence of such qualifications to the City. The Franchisee retains the right to determine what levels of deductibles or self-insured retentions to maintain, provided, however, that such deductibles or self-insured retentions are declared to and acknowledged by City’s Risk Manager prior to the commencement of this Franchise.

SECTION EIGHT

(a) The Director shall have the power to give the Franchisee such directions for the location of any pipes and appurtenances as may be reasonably necessary to avoid sewers, water pipes, conduits or other structures lawfully in or under the streets; and before the work of constructing any pipes and appurtenances is commenced, the Franchisee shall file with said Director plans showing the location thereof, which shall be subject to the approval of said Director (such approval not to be unreasonably withheld); and all such construction shall be subject to the inspection of said Director and done to his or her reasonable satisfaction. All street coverings or openings of traps, vaults and manholes shall at all times be kept flush with the surface of the streets; provided, however, that vents for underground traps, vaults and manholes may extend above the surface of the streets when said vents are located in parkways, between the curb and the property line.

(b) Where it is necessary to lay any underground pipes through, under or across any portion of a paved or macadamized street, the same, where practicable and economically reasonable shall be done by a tunnel or bore, so as not to disturb the foundation of such paved or macadamized street; and in the event that the same cannot be so done, or in the event it is necessary to cut the street in order to access existing pipes and appurtenances, such work shall be done under a permit to be granted by the Director upon application therefor. Provided, however, that the fee to Franchisee for such a permit shall be imposed on a nondiscriminatory basis only to the extent such fees are imposed generally on all non-governmental applicants for such permits within the City, and the amount of such fee shall not exceed the reasonable expense to the City of processing such permit and inspecting the work done thereunder.

SECTION NINE

If any portion of any street shall be damaged by reason of defects in any of the pipes and appurtenances maintained or constructed under this grant, or by reason of any other cause arising from the operation or existence of any pipes and appurtenances constructed or maintained under this grant, Franchisee shall, at its own cost and expense, immediately repair any such damage and restore such portion of such damaged street to as good condition as existed before such defect or other cause of damage occurred, such work to be done under the direction of the Director, and to his or her reasonable satisfaction. If the Franchisee, within ten (10) days after receipt of written notice from the City, instructing it to repair such damage, shall fail to commence to comply with such instructions, or, thereafter, shall fail diligently to prosecute such work to completion, then the City immediately may do work necessary to carry out said instructions at the cost and expense of the Franchisee, which cost and expense, the Franchisee agrees, by its acceptance of this Franchise, to pay upon demand. If such damage constitutes an immediate danger to the public health or safety requiring the immediate repair thereof, the City without notice may repair such damage and the Franchisee agrees to pay all costs incurred.

SECTION TEN

(a) This Franchise is granted and shall be held and enjoyed upon each and every condition contained in this Ordinance and shall be strictly construed against the Franchisee. The Franchise shall grant only those rights that are stated in plain and unambiguous terms. Franchisee shall comply with all Applicable Law in the exercise of its rights under the Franchise. If the Franchisee shall fail, neglect or refuse to comply with any of the material provisions or conditions hereof, and shall not, within thirty (30) days after written demand for compliance, begin the work of compliance, or after such beginning shall not prosecute the same with due diligence to completion, then the City, by its legislative body, may declare this franchise forfeited but only after a hearing shall have been conducted. Notice of such hearing shall be given to Franchisee by certified mail not less than ten (10) days prior to such hearing.

(b) The City may sue in its own name for the forfeiture of this franchise, in the event of noncompliance by the Franchisee, its successors or assigns, with any of the conditions thereof.

SECTION ELEVEN

At all times during the term of this Franchise, Franchisee will comply with all applicable laws.

 

SECTION TWELVE

The Franchisee shall keep and preserve for a period of not less than four (4) years all financial records maintained by Franchisee in connection with this Franchise. Upon request, the Franchisee shall permit the City or its duly authorized representative to examine at reasonable times all of Franchisee's pipeline monitoring and repair reports subject to this Franchise, and any and all books, accounts, papers, maps, and other records kept or maintained by the Franchisee or under its control which concern the operations, affairs, transactions or property of the Franchisee with respect thereto. Said records shall be made available upon reasonable notice to the City at Franchisee’s office in Los Angeles, California.

SECTION THIRTEEN

Any decision made by the Director pursuant to authority delegated in this Ordinance may be appealed by any interested person to the City Council by filing a notice of appeal with the City Clerk within fifteen (15) calendar days of the issuance of the Director’s decision. The City Council shall fix a time and place for hearing such appeal, and the City Clerk shall give notice in writing to the Franchisee at the address on file with the City. The findings of the City Council shall be set forth in writing and shall be served upon the Franchisee by personal service or by depositing the notice in the United States mail, postage prepaid, addressed to the Franchisee at the address on file with the City. For purposes of seeking judicial review, the decision of the City Council shall be final when notice of the decision is served upon the Franchisee.

SECTION FOURTEEN

The Franchisee shall pay to the City within thirty (30) days after receiving a statement therefor, all actual and reasonable administrative and other costs incurred by the City in processing the application for a franchise, including but not limited to the costs of all technical experts, attorneys or other consultants retained by the City to negotiate the Franchise, the costs for the preparation of any reports, statements or studies reasonably required pursuant to the California Environmental Quality Act (Public Resources Code §§ 21000, et seq.,) and any similar Federal statute, or any successor statute, and for all reasonable advertising and publishing costs, including the cost of publishing the ordinance, if necessary, incurred in connection with the granting of the Franchise not to exceed a maximum amount of $7,500.00.

SECTION FIFTEEN

After the publication of this ordinance, the Franchisee shall file with the City Clerk a written acceptance of the franchise hereby granted, and an agreement to comply with the terms and conditions hereof. This Ordinance shall take effect on the 31st day after passage as provided by law.

SECTION SIXTEEN

In the event that either party to this Franchise commences any legal action or proceeding to enforce or interpret the provisions of this Franchise Agreement, the prevailing party in such action or proceeding shall be entitled to recover its costs of suit, including reasonable attorney’s fees.

SECTION SEVENTEEN

If any part of this Ordinance or the application thereof to either of the parties hereto or to circumstances is for any reason held invalid by a court of competent jurisdiction, the validity of the remainder of the Ordinance or the application of such provision to the parties hereto or circumstances shall not be affected. If any part of this Ordinance is found to be invalid in a manner that affects a material term of the Franchisee, then the affected party may request renegotiation of said term pursuant to Section Two of this Ordinance.

SECTION EIGHTEEN

The City Clerk shall cause this Ordinance to be posted in three (3) public places in the City within fifteen (15) days after its passage, in accordance with the provisions of Section 36933 of the Government Code. The City Clerk shall further certify to the adoption and publication of this Ordinance, and shall cause this Ordinance and its certification, together with proof of publication, to be entered in the Book of Ordinances of the City Council of this City.

PASSED, APPROVED and ADOPTED this _______ day of _______________, 2005.

Mayor

Attest:

City Clerk

I, Carolynn Petru, City Clerk of the City of Rancho Palos Verdes, hereby certify at a regular meeting of the City Council, held on the __________ day of _____________, 200_, the foregoing ordinance was adopted by the following votes:

AYES:

NOES:

ABSENT

________________________________
City Clerk


Dated __________________________

 

ORDINANCE NO.    -U

AN ORDINANCE OF THE CITY OF RANCHO PALOS VERDES GRANTING TO SOUTHERN CALIFORNIA GAS COMPANY, A CORPORATION, ITS SUCCESSORS AND ASSIGNS, THE RIGHT, PRIVILEGE AND FRANCHISE TO LAY AND USE PIPES AND APPURTENANCES FOR TRANSMITTING AND DISTRIBUTING GAS FOR ANY AND ALL PURPOSES UNDER, ALONG, ACROSS OR UPON THE PUBLIC STREETS, WAYS, ALLEYS AND PLACES, AS THE SAME NOW OR MAY HEREAFTER EXIST, WITHIN THE CITY OF RANCHO PALOS VERDE AND DECLARING THE URGENCY THEREOF.

THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES DOES ORDAIN AS FOLLOWS:

SECTION ONE

Whenever in this ordinance the words or phrases hereinafter in this section defined are used, they shall have the respective meanings assigned to them in the following definitions (unless, in the given instance, the context wherein they are used shall clearly import a different meaning):

(a) The word "Franchisee" shall mean Southern California Gas Company, and its lawful successors or assigns;

(b) The word "City" shall mean the City of Rancho Palos Verdes, a municipal corporation of the State of California, in its present incorporated form or in any later reorganized, consolidated or reincorporated form;

(c) The word "streets" shall mean the public streets, ways, and alleys as the same now or may hereafter exist within said City;

(d) The word "Director" shall mean the Director of Public Works of the City;

(e) The word "franchise" shall mean and include any authorization granted hereunder in terms of a franchise, privilege, permit, license or otherwise to lay and use pipes and appurtenances for transmitting and distributing gas for any and all purposes under, along, across or upon the public streets, ways, and alleys in the City, and shall include and be in lieu of any existing or future City requirement to obtain a license or permit for the privilege of transacting and carrying on a business within the City or any additional territory hereinafter annexed by or consolidated with the City; provided that any such additional territory shall only be subject to one surviving franchise agreement as determined by the Los Angeles County Local Agency Formation Commission;

(f) The word "gas" shall mean only natural or manufactured gas, or a mixture of natural and manufactured gas;

(g) The phrase "pipes and appurtenances" shall mean pipe, pipeline, cable, main, service, trap, vent, vault, manhole, meter, gauge, regulator, valve, conduit, appliance, attachment, appurtenance and any other property located or to be located in, upon, along, across, under or over the streets of the City, and used or useful in, or in carrying on the business of, transmitting and distributing gas;

(h) The phrase "lay and use" shall mean to lay construct, erect, install, operate, maintain, use, repair, replace, or remove;

(i) The word "release" shall mean any discharge, active or passive migration, deposit, burial, emplacement, seepage, or disposal of a Contaminant into the environment originating from any Facility or from Franchisee's activities; and

(j) The word "Contaminant" shall mean any material, substance or constituent originating from Franchisee’s facilities or activities, whether solid, liquid, semisolid, or gaseous in nature, including any hazardous substance or waste, hazardous material, chemical compound, petroleum (or fraction thereof), or any hydrocarbon substance, pollutant or contaminant, as those terms are defined by any federal, state or local law, rule, regulation or order.

(k) The phrase "Applicable Law" shall mean all present or future federal, state, municipal, or local laws, rules, regulations, ordinances, codes, orders, permit requirements, judgments, injunctions, or decrees, or any judgment or order or decree by a court applicable to the Franchisee or any of Franchisee’s facilities or activities.

SECTION TWO

(a) By this ordinance, the City Council hereby grants to Franchisee the nonexclusive right, privilege and franchise, subject to each and all of the terms and conditions contained in this ordinance, and pursuant to the provisions of Division 3, Chapter 2 of the Public Utilities Code of the State of California, known as the Franchise Act of 1937, for the sole purpose of laying and using pipes and appurtenances to transmit and distribute gas for any and all purposes, under, along, across or upon the streets of the City or any additional territory hereinafter annexed by or consolidated with the City; provided that any such additional territory shall only be subject to one surviving franchise agreement as determined by the Los Angeles County Local Agency Formation Commission. The granting of this Franchise shall not prevent the City from granting any identical or similar franchise to any person or entity other than the Franchisee.

(b) The term or period of this franchise shall be for a period of twenty-five (25 years) from and after the effective date hereof in full force and effect until the same shall, with the consent of the Public Utilities Commission of the State of California, be voluntarily surrendered or abandoned by its possessor, or until the State of California or some municipal or public corporation thereunto duly authorized by law shall purchase by voluntary agreement or shall condemn and take under the power of eminent domain, all property actually used and useful in the exercise of this franchise, and situated within the territorial limits of the State, municipal or public corporation purchasing or condemning such property, or until this franchise shall be forfeited for noncompliance with its terms by the possessor thereof.

(c) In the event the Franchise Act of 1937 ("Franchise Act") is amended by the Legislature or interpreted by a final decision of the Supreme Court of the State of California in a manner that materially affects or materially changes the rights or obligations of the parties (both of which events are hereafter referred to as "Change in Law"), City or Franchisee shall meet to negotiate changes to this franchise which may be appropriate in view of such Change in Law. The parties agree to meet and to negotiate in good faith in a commercially reasonable manner.

SECTION THREE

(a) The Franchisee shall pay to the City at the times hereinafter specified, in lawful money of the United States, a sum annually which shall be equivalent to two percent (2%) of the gross annual receipts of Franchisee arising from the use, operation or possession of said franchise; provided, however, that such payment shall in no event be less than one percent (1%) of the gross annual receipts of the Franchisee derived from the sale of gas within the limits of the City under this franchise; and further provided, notwithstanding any other provision of this Agreement, that in the event the Legislature shall amend the Franchise Act of 1937 (Public Utilities Code Section 6201-6302) to permit a franchise payment greater or less than the percentage formula specified herein, the Franchise fee agreed upon herein shall be automatically changed to the amount allowed by the Legislature in amending such act. No increase in the Franchise fee that results from the application of this section shall take effect until the Franchisee has filed in good faith and the California Public Utilities Commission (the "PUC") has approved an application to adjust rates to enable Franchisee to pass said Franchise fee increase through to consumers. The City agrees to support said application to the PUC and shall provide such reasonable assistance to the Franchisee as Franchisee may request, including, but not limited to, providing declarations and/or testimony in support of said rate adjustment. In the event the PUC approves a retroactive rate adjustment, the effective date of the increase in the Franchise fee will be correspondingly retroactive.

(b) The Franchisee of this franchise shall file with the Clerk of the City within three (3) months after the expiration of the calendar year, or fractional calendar year, following the date of the grant of this franchise, and within three (3) months after the expiration of each and every calendar year thereafter, a duly verified statement showing in detail the total gross receipts of the Franchisee, its successors or assigns, during the preceding calendar year, or such fractional calendar year, from the sale of the utility service within the City for which this franchise is granted. It shall be the duty of the Franchisee to pay to the City within fifteen (15) days after the time for filing such statement in lawful money of the United States, the specified percentage of its gross receipts for the calendar year, or such fractional calendar year, covered by such statement. Any neglect, omission or refusal by said Franchisee to file such verified statement, or to pay said percentage, at the times or in the manner hereinbefore provided, shall be grounds for the declaration of a forfeiture of this franchise and of all rights thereunder.

SECTION FOUR

This grant is made in lieu of all other franchises owned by the Franchisee, or by any successor of the Franchisee to any rights under this franchise, for transmitting and distributing gas within the limits of the City, as said limits now or may hereafter exist, and the acceptance of the franchise hereby granted shall operate as an abandonment of all such franchises within the limits of this City, as such limits now or may hereafter exist, in lieu of which this franchise is granted.

SECTION FIVE

The Franchise granted hereunder shall not become effective until written acceptance thereof shall have been filed by the Franchisee thereof with the Clerk of the City. When so filed, such acceptance shall constitute a continuing agreement of the Franchisee that if and when the City shall thereafter annex or consolidate with additional territory, any and all franchise rights and privileges owned by the Franchisee therein shall likewise be deemed to be abandoned within the limits of the additional territory. If Franchisee fails to file the written acceptance within the time and in the manner prescribed by this Section, Franchisee shall be deemed to have accepted each and every term of the Franchise.

SECTION SIX

The franchise granted hereunder shall not in any way or to any extent impair or affect the right of the City to acquire the property of the Franchisee hereof either by purchase or through the exercise of the right of eminent domain, and nothing herein contained shall be construed to contract away or to modify or to abridge, either for a term or in perpetuity, the City's right of eminent domain in respect to the Franchisee; nor shall this franchise ever be given any value before any court or other public authority in any proceeding of any character in excess of the cost to the Franchisee of the necessary publication and any other sum paid by it to the City therefore at the time of the acquisition thereof.

SECTION SEVEN

The Franchisee of this franchise shall:

(a) Construct, install and maintain all pipes and appurtenances in accordance with and in conformity with all of the ordinances, rules and regulations heretofore, or hereafter adopted by the legislative body of this City in the exercise of its police powers and not in conflict with the paramount authority of the State of California, and, as to State highways, subject to the provisions of general laws relating to the location and maintenance of such facilities;

(b) Pay to the City, on demand, the cost of all repairs to public property made necessary by any operations of the franchisee under this franchise;

(c) Indemnify, defend and hold harmless the City and its elected and appointed officials, officers, employees and agents from any and all liability for damages resulting from, arising out of, or claimed to arise out of, directly or indirectly, the negligent or wrongful acts, errors or omissions of Franchisee in conducting any operations under this Franchise; and be liable to the City for all damages resulting from the failure of said Franchisee well and faithfully to observe and perform each and every provision of this Franchise and each and every provision of Division 3, Chapter 2 of the Public Utilities Code of the State of California. Franchisee acknowledges that any claims, demands, losses, damages, costs, expenses, and legal liability caused by the release or spill of any Contaminant as a result of Franchisee’s use of or the existence of the pipes and appurtenances are expressly within the scope of this indemnity; to the extent they are imposed or required by the state agency with responsibility for the hazardous material or waste or the release or spill, the costs, expenses, and legal liability for environmental investigations, monitoring, containment, abatement, removal, repair, cleanup, restoration, remedial work, penalties, and fines arising from the violation of any local, state, or federal law or regulation, attorney’s fees, disbursements, and other response costs are expressly within the scope of this indemnity. This subsection (c) shall survive the termination or expiration of this franchise and shall continue for so long as franchise property of Franchisee is located within the City

(d) To the extent not in conflict with Applicable Law, if, in the reasonable discretion of the Director, subject to appeal to the City Council, the Franchisee's Facilities conflict in any way with the construction, relocation or repair of any City facility or storm drain or sewer owned by the City of Rancho Palos Verdes, County of Los Angeles, or any successor agency to any of these agencies, or if the Franchisee’s Facilities impede any lawful change of grade, alignment or width of any public street, way, alley or place, or conflicts with the construction of any subway or viaduct by the City or other proper governmental use of the streets (collectively referred to as "public projects"), the Franchisee shall remove or relocate its Facilities to the reasonably nearest alternative location or other location mutually agreeable to the City and the Franchisee necessary to accommodate the public project(s), either permanently or temporarily, as is mutually determined by the Director and Franchisee to be within the time required by the Director. Said removal or relocation shall be accomplished at no cost to the City. If the Franchisee, fails to remove or relocate its Facility within the required time, or to pave, surface, grade, repave, resurface or regrade, the City, to the extent permitted by Applicable Law, may cause the work to be done and shall keep an itemized account of the entire cost thereof, and the Franchisee shall reimburse the City or other public entity for such cost within thirty (30) days after presentation to said Franchisee of an itemized account of such costs. The Franchisee shall hold harmless the City, its officers and employees and the other public agency, if any, from any liability which may arise or be claimed to arise from the moving, cutting, or alteration of any of the Franchisee's Facilities, or the turning on or off of gas, electricity, cable or other services required to be accomplished by City or any other public agency as a result of the Franchisee's failure to relocate said facility by the date established by the City or other public agency. The Franchisee shall also be liable for any consequential damages incurred by the City or other public agency arising from the Franchisee's failure to timely complete the work required by this section;

(e) File with the legislative body of the City within thirty (30) days after any sale, transfer, assignment or lease of this franchise, or any part thereof, or of any of the rights or privileges granted thereby, written evidence of the same, certified thereto by the Franchisee or its duly authorized officers.

(f) At its own expense, Franchisee shall maintain during the life of the franchise a policy or policies of commercial general liability, including pollution legal liability coverage and workers’ compensation insurance from companies authorized to transact business in the State of California by the Insurance Commissioner of California and with an A.M. Best’s Rating of "A" or better.

(i) The commercial general liability insurance policy shall:

(A) be issued for Franchisee and name the City and its officers, agents and employees as additional insureds.

(B) defend and indemnify the insureds against liability for which the Franchisee is legally obligated to pay by reason of liability imposed upon Franchisee by law or liability assumed by Franchisee under the franchise for personal injury, bodily injury, wrongful death and property damage arising from the activities conducted pursuant to the franchise by providing coverage therefore, including but not limited to, coverage for the negligent acts or omissions of Franchisee and its agents, servants and employees, committed in the conduct of franchise operations.

(C) provide coverage limits in the amount of ten (10) million dollars ($10,000,000.00), per occurrence, and if a policy aggregate applies, such policy aggregate shall be twice the per occurrence limit;

(D) be noncancellable without thirty (30) days prior written notice, ten (10) days for non-payment of premium, directed to the City Clerk.

(ii) The Workers’ Compensation insurance requirement may be satisfied by self-insurance if the Franchisee is a qualified self-insured as approved by the State of California Department of Industrial Relations. Franchisee shall provide City a copy of the certificate to self insure as issued by the California Department of Industrial Relations.

(iii) Franchisee shall file with the City Clerk certificates of insurance providing the following information:

(A) The policy number.

(B) The policy effective date and the expiration date.

(C) The named insured and the certificate holder/additional insured.

(D) Type of coverage provided by each policy of insurance.

(E) The limits of coverage (required by the franchise) for each policy of insurance.

(F) If applicable, all endorsements required by this section and that form a part of the policy.

(iv) Franchisee retains the right to self-insure any of the insurance requirements above, as provided for as a qualified self-insured by the State of California. Franchisee also retains the right to determine what levels of deductibles or self-insured retentions it maintains.

(v) The Franchisee shall not commence operations until Franchisee has complied with the aforementioned provisions of this Section. The Franchisee shall cease operations if the Franchisee fails to maintain said policies in full force and effect. In the event any policy is cancelled, the Franchisee shall provide the City, at least five (5) business days prior to the effective date of the cancellation, but not later than one (1) day prior to the effective date of the cancellation, a certificate of insurance or confirmation of coverage binder showing that the Franchisee has replacement insurance in full force effective on the effective date of the cancellation.

The Franchisee may satisfy any or all of the insurances requirements under this Section 16 through self-insurance, provided the Franchisee is a qualified self-insured as approved by the State of California and the Franchise submits evidence of such qualifications to the City. The Franchisee retains the right to determine what levels of deductibles or self-insured retentions to maintain, provided, however, that such deductibles or self-insured retentions are declared to and acknowledged by City’s Risk Manager prior to the commencement of this Franchise.

SECTION EIGHT

(a) The Director shall have the power to give the Franchisee such directions for the location of any pipes and appurtenances as may be reasonably necessary to avoid sewers, water pipes, conduits or other structures lawfully in or under the streets; and before the work of constructing any pipes and appurtenances is commenced, the Franchisee shall file with said Director plans showing the location thereof, which shall be subject to the approval of said Director (such approval not to be unreasonably withheld); and all such construction shall be subject to the inspection of said Director and done to his or her reasonable satisfaction. All street coverings or openings of traps, vaults and manholes shall at all times be kept flush with the surface of the streets; provided, however, that vents for underground traps, vaults and manholes may extend above the surface of the streets when said vents are located in parkways, between the curb and the property line.

(b) Where it is necessary to lay any underground pipes through, under or across any portion of a paved or macadamized street, the same, where practicable and economically reasonable shall be done by a tunnel or bore, so as not to disturb the foundation of such paved or macadamized street; and in the event that the same cannot be so done, or in the event it is necessary to cut the street in order to access existing pipes and appurtenances, such work shall be done under a permit to be granted by the Director upon application therefor. Provided, however, that the fee to Franchisee for such a permit shall be imposed on a nondiscriminatory basis only to the extent such fees are imposed generally on all non-governmental applicants for such permits within the City, and the amount of such fee shall not exceed the reasonable expense to the City of processing such permit and inspecting the work done thereunder.

SECTION NINE

If any portion of any street shall be damaged by reason of defects in any of the pipes and appurtenances maintained or constructed under this grant, or by reason of any other cause arising from the operation or existence of any pipes and appurtenances constructed or maintained under this grant, Franchisee shall, at its own cost and expense, immediately repair any such damage and restore such portion of such damaged street to as good condition as existed before such defect or other cause of damage occurred, such work to be done under the direction of the Director, and to his or her reasonable satisfaction. If the Franchisee, within ten (10) days after receipt of written notice from the City, instructing it to repair such damage, shall fail to commence to comply with such instructions, or, thereafter, shall fail diligently to prosecute such work to completion, then the City immediately may do work necessary to carry out said instructions at the cost and expense of the Franchisee, which cost and expense, the Franchisee agrees, by its acceptance of this Franchise, to pay upon demand. If such damage constitutes an immediate danger to the public health or safety requiring the immediate repair thereof, the City without notice may repair such damage and the Franchisee agrees to pay all costs incurred.

SECTION TEN

(a) This Franchise is granted and shall be held and enjoyed upon each and every condition contained in this Ordinance and shall be strictly construed against the Franchisee. The Franchise shall grant only those rights that are stated in plain and unambiguous terms. Franchisee shall comply with all Applicable Law in the exercise of its rights under the Franchise. If the Franchisee shall fail, neglect or refuse to comply with any of the material provisions or conditions hereof, and shall not, within thirty (30) days after written demand for compliance, begin the work of compliance, or after such beginning shall not prosecute the same with due diligence to completion, then the City, by its legislative body, may declare this franchise forfeited but only after a hearing shall have been conducted. Notice of such hearing shall be given to Franchisee by certified mail not less than ten (10) days prior to such hearing.

(b) The City may sue in its own name for the forfeiture of this franchise, in the event of noncompliance by the Franchisee, its successors or assigns, with any of the conditions thereof.

SECTION ELEVEN

At all times during the term of this Franchise, Franchisee will comply with all applicable laws.

 

SECTION TWELVE

The Franchisee shall keep and preserve for a period of not less than four (4) years all financial records maintained by Franchisee in connection with this Franchise. Upon request, the Franchisee shall permit the City or its duly authorized representative to examine at reasonable times all of Franchisee's pipeline monitoring and repair reports subject to this Franchise, and any and all books, accounts, papers, maps, and other records kept or maintained by the Franchisee or under its control which concern the operations, affairs, transactions or property of the Franchisee with respect thereto. Said records shall be made available upon reasonable notice to the City at Franchisee’s office in Los Angeles, California.

SECTION THIRTEEN

Any decision made by the Director pursuant to authority delegated in this Ordinance may be appealed by any interested person to the City Council by filing a notice of appeal with the City Clerk within fifteen (15) calendar days of the issuance of the Director’s decision. The City Council shall fix a time and place for hearing such appeal, and the City Clerk shall give notice in writing to the Franchisee at the address on file with the City. The findings of the City Council shall be set forth in writing and shall be served upon the Franchisee by personal service or by depositing the notice in the United States mail, postage prepaid, addressed to the Franchisee at the address on file with the City. For purposes of seeking judicial review, the decision of the City Council shall be final when notice of the decision is served upon the Franchisee.

SECTION FOURTEEN

The Franchisee shall pay to the City within thirty (30) days after receiving a statement therefor, all actual and reasonable administrative and other costs incurred by the City in processing the application for a franchise, including but not limited to the costs of all technical experts, attorneys or other consultants retained by the City to negotiate the Franchise, the costs for the preparation of any reports, statements or studies reasonably required pursuant to the California Environmental Quality Act (Public Resources Code §§ 21000, et seq.,) and any similar Federal statute, or any successor statute, and for all reasonable advertising and publishing costs, including the cost of publishing the ordinance, if necessary, incurred in connection with the granting of the Franchise not to exceed a maximum amount of $7,500.00.

SECTION FIFTEEN

After the publication of this ordinance, the Franchisee shall file with the City Clerk a written acceptance of the franchise hereby granted, and an agreement to comply with the terms and conditions hereof. This Ordinance shall take effect on the 31st day after passage as provided by law.

SECTION SIXTEEN

In the event that either party to this Franchise commences any legal action or proceeding to enforce or interpret the provisions of this Franchise Agreement, the prevailing party in such action or proceeding shall be entitled to recover its costs of suit, including reasonable attorney’s fees.

SECTION SEVENTEEN

The Gas Company is a quasi-public utility that supplies natural gas service within the boundaries of the City. The gas service to the City’s residents must be continued without interruption in order to protect the public health, safety and welfare of the residents therein and the general public. Therefore, it is necessary to grant this Franchise the Gas Company prior to the expiration of the existing franchise. In order for the gas service to continue without interruption of service, the City must grant a new franchise before the expiration of the existing franchise. The existing franchise was extended once and is set to expire at 11:59 p.m. on December 20, 2005. The parties have reached final agreement on the terms for a new franchise, but there is insufficient time for the parties to adopt an ordinance granting a new franchise before the existing franchise expires utilizing standard procedures. Further, there is insufficient time for this ordinance granting the new Franchise to become effective without a single reading and immediate effectiveness. It is therefore urgent that this ordinance granting a new gas franchise become effective immediately to prevent an interruption in the gas service provided by the Gas Company to the City’s residents. An interruption in such service is of great public concern. The residents rely on natural gas for cooking, heating, and other necessities of daily life. It is imperative that the gas service to the City’s residents be continued without interruption in order to protect the public health, safety and welfare of the residents therein and the general public. This ordinance is necessary for the immediate preservation of the public health, safety and welfare, declares the facts constituting the urgency, and is passed by at least a four-fifths vote of the City Council. Accordingly, this measure is adopted immediately upon introduction pursuant to Government Code Section 36934 and shall take effect immediately pursuant to Government Code Section 36937(b).

SECTION EIGHTEEN

If any part of this Ordinance or the application thereof to either of the parties hereto or to circumstances is for any reason held invalid by a court of competent jurisdiction, the validity of the remainder of the Ordinance or the application of such provision to the parties hereto or circumstances shall not be affected. If any part of this Ordinance is found to be invalid in a manner that affects a material term of the Franchisee, then the affected party may request renegotiation of said term pursuant to Section Two of this Ordinance.

SECTION NINETEEN

The City Clerk shall cause this Ordinance to be posted in three (3) public places in the City within fifteen (15) days after its passage, in accordance with the provisions of Section 36933 of the Government Code. The City Clerk shall further certify to the adoption and publication of this Ordinance, and shall cause this Ordinance and its certification, together with proof of publication, to be entered in the Book of Ordinances of the City Council of this City.

PASSED, APPROVED and ADOPTED this _______ day of _____________, 2005.

Mayor

Attest:

City Clerk

I, Carolynn Petru, City Clerk of the City of Rancho Palos Verdes, hereby certify at a regular meeting of the City Council, held on the __________ day of _____________, 200_, the foregoing ordinance was adopted by the following votes:

AYES:

NOES:

ABSENT

________________________________
City Clerk


Dated __________________________