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&A-3 SAMPLE FRANCHISE ORDINANCE NEARING COMPLETION The League PG &E Franchise Task Force and legal consultant Michael Woods are in the final stages of reviewing and approving the final draft of the sample franchise ordinance for use by cities in the PG &E transmission territories. Responding to a request by city managers, this Task Force was organized last summer to assist cities in responding to PG &E's applicatioq for franchises for new companies proposed under their bankruptcy Plan of Reorganiza- tion. Since most franchise ordinances are based on standard language dating back to the early 1900s, the task force spent a great deal of time identifying issues and concerns that were not evident 70 or more years ago. The sample ordinance has been de- signed as a framework for future city negotiations with PG &E on behalf of its new transmission subsidiaries in the event the federal bankruptcy court approves the company's plan of reorganization. Neither it nor the work of the League's task force in any way expresses support for any specific outcome by the federal bankruptcy court. Background A League task force was initially formed when PG &E filed for bankruptcy in April 2001 to protect city and community interests from the potential impact of the bankruptcy on service delivery issues and eco- nomic repercussions. Realizing that bankruptcy litigation is a specialized area, several cities with specific concerns joined forces to hire legal services to keep them informed on the bankruptcy process. General city activity diminished until early June 2002 when cities throughout the PG &E territory were asked to schedule applications for franchise ordi- nances for new transmission companies on council agendas. City officials were overwhelmed by these PG &E requests, and they promptly turned to the League to forth a task force to study the franchise request and mobilize an appropriate response. In early July 2002 a task force of city managers, city attorneys, finance officers and public works officers met to discuss issues and concerns and develop a list of questions to submit to PG &E regard- ing the franchise application. In early September, the task force met with PG &E officials to discuss ques- tions raised by city officials and to obtain a clearer understanding of the need for the new franchises. Following the September meeting, the task force resolved that progress could only be accomplished if a legal consultant familiar with franchise issues was engaged. They also agreed to form a smaller work- ing group representing a cross section of functional expertise and types of cities. In late September, Michael Woods was retained by the League as legal consultant to assist cities in understanding their rights and privileges under public utility franchise law and to represent cities in talks with PG &E on the terms of a sample franchise ordinance. Since that date Woods has acted as the League's representative in all discussions with PG &E on the sample franchise issue. Over the last several months the discussions with PG &E ebbed and flowed, with both parties encounter- ing difficulties with the others' requests at various times. The objective has been to reach agreement on as many issues as possible, and considerable progress has been made toward that end. Woods has coordinated the League's effort with a similar one by a group of county counsels. The working group and PG &E are expected to independently review a final draft in the first few weeks of March. A sample ordinance should be distributed to cities shortly thereafter. Summary The purpose of the League's efforts to develop a sample franchise ordinance is to provide cities with a document that reflects their rights and privileges under state franchise laws, pointing out distinctions between general law and charter cities where appro- priate. The sample ordinance is designed to provide cities with a framework they can use in considering the adoption of future franchises that adequately protect city interests and unique needs. Since most franchise ordinances are based on terms and condi- tions negotiated in the 1930s and earlier, the sample ordinance is carefully constructed to consider current and future technological, environmental and eco- nomic conditions. At no time has the League ex- pressed support for the PG &E reorganization plan submitted to the bankruptcy court. This effort has been undertaken solely to help cities be prepared in the event the court approves the plan in the future. The sample ordinance also will prove beneficial in city negotiations with other franchise applicants in the future across the state. Visit the League's Official Web Site -- www.cacities.org PRIORITY FOCUS/PAGE 3