Letter from a Commissioner: Franchise Agreement Costs
For this edition I would like to discuss the impact of Franchise Agreements on Jefferson PUD, in particular those associated with WSDOT franchises. One of the responsibilities of a Public Utility District are potential payments and/or obligations to municipal, county and state governments in its service area through Franchise Agreements.
Franchise Agreements between local and state government and the PUD allow the placement of PUD facilities in roadways. They require the PUD to perform utility relocation, improvements, or repairs within right of ways when local and state governments undertake projects. The most common scenario of a Franchise Agreement being needed is along city, county, and state transportation corridors when expansion or repair of that infrastructure is undertaken. There is usually very limited ability for the utility to be reimbursed or compensated. Most often, there is no compensation granted to the utility.
An example of that scenario is the recently completed WSDOT bridge project between Marrowstone and Indian Islands, which cost PUD customer owners $720,000; $450,000 on the electric, $250,000 to the water and $20,000 for broadband departments, respectively. All non-reimbursable.Approximately $214,000 of the total costs to the PUD were for state and county permits on a project in which we had no hand in planning. Beginning in 2021, future projects like highway roundabouts, fish passage culverts, bridge replacements and roadway intersection revisions will be initiated in our service area and will continue for the next couple of years. Most likely, the PUD will see little or no compensation for our involvement in those upcoming projects. Whether you are public or private utility, this is one of the costs of doing business. In the case of Jefferson PUD, the burden of covering those costs will fall on our power and/or water customers depending on the location of the project.
We are currently working with other PUDs to have a conversation with WSDOT on the impact that state highway projects will have on PUD finances, rates, and budgets. Having those conversations with WSDOT does not ensure that anything is likely to change on the financial cost’s that PUDs will bear. There is a distinct need for better communication, coordination and continuity between entities like WSDOT and PUDs.
Unrecoverable franchise costs and required obligations are going to impact available funds and PUD budgeting as the utility contemplates or undertakes long term and/or high cost projects like broadband or a meter replacement program. I call this to your attention so that as we set rates, address strategic planning, and undertake capital projects to upgrade or maintain our aging infrastructure, that our customer owners are aware of one of the forces over which we have little or no control and that negatively impact our finances.