Over Monday’s lunch of barbecue ribs, white bread and peach cobbler, the board of the La Plata Electric Association and the Durango City Council discussed how to bring back a franchise agreement before city voters in time for the general election this November.
The rejection of the franchise agreement by 41 votes in April has put a $600,000 hole in the city’s current budget or $20 million loss over 20 years. Without a franchise agreement, LPEA no longer has to pay a franchise fee, a cost the LPEA had always passed along to Durango consumers on their monthly electricity bills.
In the only substantial change to the franchise agreement rejected by city voters, the franchise fee likely would be calculated as a percentage of the consumption charge for electricity.
Previously, the 4.67 percent fee was applied on top of all LPEA charges, including the sales tax, which led to criticisms that it was a “tax on a tax” or “double taxation.”
LPEA member Britt Bassett liked a franchise fee on consumption as an incentive for conservation, but LPEA member Pam Patton wondered if the city would be creating a “problem you don’t want to have” since a consumption-based fee would have to be figured at a higher rate to generate the same amount of revenue.
City and LPEA staff members will have to calculate the new franchise fee over the six weeks or so.
The City Council would need to have public hearings on the agreement in August in order to make a Sept. 10 deadline for submitting ballot language to the county elections office.
Coincidentally, the City Council on Tuesday approved a special election for July 31 to change the City Charter so all registered voters in Durango could participate in the next franchise vote. This is expected to double the pool of eligible city voters from 3,000 to 6,000, according to rough estimates from the meeting.
Currently, the City Charter restricts citywide voters on franchise agreements to only property owners who are registered to vote in Durango.
The perceived unfairness of the election in April is also believed to have undermined the franchise vote, city officials said.
In general, City Councilor Christina Rinderle said the city had a “communication problem” rather than “a content problem” because voters did not understand what they were voting for.
When voters don’t understand something, they are either going to vote against it or not vote at all, she said.
LPEA board member and Durango board representative Jeff Berman also would like LPEA to publicly support the franchise agreement after it stayed neutral during the April election.
If LPEA is going to agree to a franchise, then it should support it publicly, Berman said.
Durango represents about 18 percent of LPEA’s revenue from consumption charges. LPEA is a member-cooperative that distributes electricity in La Plata and Archuleta counties.
One controversial part of the franchise agreement that was not changed was the 20-year term. Critics have said the 20-year term is too long and does not consider the impact of changing technology.
But Jerry McCaw, LPEA board president, said the co-op needs the assurance of a long-term contract because LPEA has a long-term contract with its supplier, Tri-State Generation and Transmission Association.
LPEA board member Joe Wheeling said the 20-year term is valuable for LPEA because if that requirement is not in place, the utility could always get a competitor in the future.
The purpose of the franchise is to give one electricity supplier a monopoly over the city and to set the terms for working in the public right of way.
To be fair, the city will still put the franchise out for a competitive bid, but LPEA is expected to be the sole utility to apply. It was the only utility that applied last time.
Because LPEA is currently serving the city without a franchise agreement, LPEA expects to pay about $10,000 in fees to use the public right of way this year.
LPEA owns 106 miles of power line within the city limits, including 20 miles within the public right of way.