Franchise Compensation Rule

Dec 29, 2017

  UPDATED:  March 1, 2018

King County and several Special Purpose Districts are currently engaged in litigation to determine the validity and/or applicability of this new Rule. King County Superior Court Case No. 18-2-02238-0.   KC v Districts_Docket_ 02 27 2018    KC v Districts – Complaint for Declaratory Judgment    KC v Districts – Answer to Complaint    Read a very good article written by Jessica Lee and published on February 28, 2018, in The Seattle Times: Utility Customers Face Monthly Bill Increases .  Also, read the letter filed by Puget Sound Energy in opposition to the franchise fee:  PSE – Comment Letter

Franchise Compensation Rule – Effective January 29, 2018

FMD completed a draft process in October 2017, and issued it in the form of a proposed public rule. After reviewing comments submitted through the FMD website, email, U.S. mail, and a public meeting, FMD finalized the public rule, which became effective on January 29, 2018. Under authority granted in King County Code 6.27.080.D, the purpose of the rule is to describe a standardized approach for determining franchise compensation.  The final promulgated Rule and related guidance documents may be viewed here:  Final Franchise Compensation Rule   Decision Summary   Final Rule FAQs   Policy and Guidelines   Estimation Worksheet Inputs and Formulas   Estimation Worksheet Text Explanation   Franchise Compensation Methodology Inputs 

Franchise Compensation Public Rule Proposal

The King County Facilities Management Division (FMD), part of the Department of Executive Services (DES), intends to adopt administrative rules for the purpose of implementing the provisions of King County Code (KCC) Chapter 6.27.080, which requires that each franchise for electric, gas, water, or sewer utilities granted by King County include the requirement that the utility provide reasonable compensation to the County in return for the right to use the County road rights-of-way for the purpose of constructing, operating, maintaining, and repairing utility facilities and related appurtenances. Under authority granted by KCC Chapters 2.98 and 6.27.080.D., the purpose of these rules is to describe the processes for determining franchise compensation.


Franchise compensation public rule

In November 2016, the King County Council passed Ordinance 18403, which requires that electric, gas, water, and sewer utility providers compensate King County in return for using County road rights-of-way to construct, operate, maintain, and repair utility facilities and related appurtenances.

The Facilities Management Division (FMD) was assigned responsibility for implementing the ordinance, and issued a proposed public rule for comment. The initial public comment period ran from October 23 to December 7, 2017. As a result of the feedback, FMD revised the proposed rule and has now issued a final proposed public rule for implementing the ordinance. FMD is also proposing a department policy to complement the rule. The revised public rule and department policy are scheduled to become effective January 29, 2018.

A public meeting on the final proposed public rule and department policy is scheduled for January 19, 2018 from 2:15 to 4:15 p.m. at the Maleng Regional Justice Center, Room 2E, 401 Fourth Ave. N. in Kent. Each speaker will have two minutes to provide comments.

In addition, any interested person can submit written comments about the final proposed rule and/or department policy using the form below. Comments must be received by FMD no later than 5 p.m. on January 22, 2018. Comments previously submitted on the public rule have been considered, and do not need to be resubmitted or restated.

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The GMVUAC’s Corresponding Secretary, Peter Rimbos, recently received the following correspondence from Terri Hansen, King County Franchise Project Manager, to further explain this Franchise Compensation Rule:

Dear Mr. Rimbos,

Thank you for taking the time to review information related to the proposed rule for determining franchise compensation.  I will answer as best I can here, and I am also happy to meet or otherwise discuss additional questions or details.

Last November, the King County Council passed an Ordinance requiring that utility providers (electric, gas, water, and sewer utilities) compensate King County in return for using the County road rights-of-way to provide utility service in unincorporated King County areas.  The Ordinance assigns the responsibility for creating a process for the determination of franchise compensation to the Facilities Management Division (FMD).  FMD completed a draft process in October of this year, and utility providers using King County road rights-of-way in unincorporated King County were notified of the proposed rule you saw on the FMD website, so that FMD could hear comments.

The end result of what is described in the proposed rule is a general estimate that is intended to be a starting point for discussions/negotiation between the County and utility provider.  K.C.C. 6.27.080.D guarantees utility providers a “reasonable opportunity to suggest amendments to the estimate in order to reach agreement with King County as to the amount and type of franchise compensation.”  Our expectation is that franchise compensation would begin to accrue when the proposed rule becomes effective, however the actual amount and type of franchise compensation is subject to negotiation and agreement between King County and the utility.

The estimate calculates a per square foot value of the County road rights-of-way in unincorporated King County for each franchise area.  The process does not include roads in incorporated areas or private roads in the calculation.  King County currently does not collect a utility tax or franchise fee from utility providers as I understand some cities do.  I am not familiar with what utilities use to develop their rates, so I’m not able to answer questions about authorized charges and dispute mechanisms.

The proposed rule also authorizes FMD to apply a financial impact protection cap to the estimate before it is provided to the utility provider.  If the estimate shows a financial impact of more than a designated cap amount per month to residential utility customers in unincorporated areas, a formula will be applied to cap the estimate that the County provides to each affected utility. The financial impact protection for residential customers was meant to operate as a cap on the estimate that the County will provide to each affected utility, and does not operate as a requirement about what amount the utility provider charges its customers.  The designated cap amount is currently set at $5 per month, and would apply to each affected utility.  If the estimate shows a financial impact less than $5 per month per residential customer in unincorporated King County, the estimate will be provided to the utility without further adjustment.

FMD is in the process of reviewing a substantial number of comments, and will finalize the rule after making appropriate adjustments based on the comments.  This portion of FMD’s process that I’m working on does not include the authority to revoke or change Ordinance requirements that were previously approved by the King County Council.

Thank you again for contacting me.  In light of the volume of comments, I was not able to respond as quickly as I would have liked, and I appreciate your patience.  Please let me know if you have additional questions.

Terri Hansen
Franchise Project Manager
King County Facilities Management Division
206 477 9435