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Copyright 2005 -- Collinsville, Oklahoma

Natural Gas From ONG -or- City?
Mayor Responds To Gas Franchise Questions
June 30, 2005
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cvilleok.com Questions Mayor Stan Sallee's Answers
1) Will my gas bill be higher if the city provides my gas service instead of ONG? No. If the City of Collinsville owns and operates the gas system, services can be provided more cost efficiently than through an inverstor-owned utility service like ONG. Although the cost of the gas supply is related to supply and demand, the cost of services can be controlled and the City will have the ability to reduce cost of those services within the city limits.
2) Will I be less safe if the city provides my gas service instead of ONG?
No. The City of Collinsville fire, EMS, and police have always been the first responders for any type of emergency. The city has already trained two employees to qualify them for certification to safely and efficiently operate the gas system. ONG does not have an office in Collinsville, nor do they have any employees present in the City. If the City owns and operates the gas service, the traditional first responders and our trained and certified employees will assure that the gas system is operated as safely as possible.
3) How will the city pay for buying the system from ONG? The City of Collinsville has consulted with financial advisors and has numerous options available. With interest rates as low as they have ever been, the City's numerous options include revenue bonds, government financing and private financing. The city will continue to analyze and evaluate these options and will pursue the most cost-efficient and economical financing available for buying the gas system from ONG.
4) Will the city benefit from this? And How? Yes. With a City-operated gas system, the citizens of Collinsville become the owners. Investor-owned utilities like ONG use profits from the operation of gas systems to pay dividends to shareholders and finance capital improvements in other communities. Buying the gas system will allow the citizens of Collinsville to control their own utility system and keep dividends and profits at home. With the revenues created from the operation of the gas system, Collinsville will have the opportunity to invest in its own community, keeping Collinsville money in Collinsville.
5) If the city doesn't act now when would the next opportunity be? The existing gas franchise has been in effect for 25 years. The franchise with ONG provides the citizens of Collinsville with the option of purchasing the gas distribution system. ONG does not want to sell the system and does not want the new franchise to allow the opportunity to ever purchase this asset in the future. If the system is not purchased now, the citizens of Collinsville might lose the opportunity to ever purchase the system again.
6) What other Oklahoma communities run their own gas utilities? What insights have they offered from their experience? Over 50 Oklahoma municipalities own and operate their own gas systems. The majority of these systems are operated safely, efficiently, and generate profits for their citizens and their communities. Mike Nunley, the City Manager of Mannford and Ed Tinker, the City Manager of Drumright have provided their input, observations, and experiences. Both of these City Managers sussessfully and profitably operate gas systems for their communities. They have offered to provide their assistance to help Collinsville with the transition from an inverstor-owned utility to a city-owned utility if the voters give their approval. Both of these City Managers firmly believe that it is in the best interest of Collinsville and its citizens to purchase the gas system from ONG.
7) How will the city learn to operate a gas utility? The City has already begun training employees to operate the gas system. The City has engaged technical advisors and engineering support to ensure that all state and federal regulations are complied with. The City already provides electricity, water, and sewer utilities to residents of the City. With the established utility experience, ongoing training and outside consultants, the City can safely, efficiently, and economically operate the gas utility system.
8) Will new local jobs be created? The City would probably only need to hire one or two new employees to operate the gas system. However, the City will have the opportunity to offer gas to new industry if the City owns and operates its own gas system. Locally owned utilities can provide incentives to industry which can grow our econony and create new jobs.
9) What are potential risks to the city in this venture? And how will the city address those potential risks? The risks are similar to those the City deals wth on a day to day basis in the operation of the electric, water, and sewer services. To effectively deal with those risks, the City will manage the gas system like a business, providing effective training, management and budgeting to assure citizens that any potential risks are minimized.
10) How will (was?) the price set to buy the franchise from ONG? The franchise agreement with ONG provides that the purchase price of the system will be established by three appraisers. The City has already engaged one appraiser and has consulted with others to obtain input on the appraisal process. A strong indicator of the value of the system can be gleamed from looking at the assessed value of the business personal property taxes reported by ONG for the purpose of establishing ad valor taxes. The assessed value is $184,462.00 reflecting a market value of $807,274.00. Even if the appraised value turns out to be significantly higher, the cost of acquisition can be amortized over a period of years and the citizens will still have the opportunity to profit from purchasing the gas system.
11) What can the city do if ONG fights the sale, or asks an unfair price? The franchise states that the price will be established by three appraisers. ONG has similar buy-out provisions in franchise agreements across the state, including one with the City of Tulsa. We anticipate that as a good corporate citizen, ONG will stand by its word and sell the gas system at a fair price if the citizens of Collinsville vote to approve the purchase.
12) Will my gas service change? If the citizens of Collinsville approve this purchase, then the system will be owned by the City. In essence, the citizens will become the stockholders and will have the right to control the operation of the utility system through their votes. The money which is now spent on gas services will stay in the City instead of paying dividends to corporate shareholders and funding capital investments in other cities.
13) What percentage (or set amount) of revenue will go into maintaining / upgrading the gas system? The City anticipates setting a reserve of somewhere in the neighborhood of 30% gross profits into maintaining and upgrading the system. In addition, long term financing, revenue bonds, and general obligation bonds can be used to finance capital improvements.
14) Who can the city buy gas from after they own the local lines? There are numerous gas suppliers and they are highly competitive. Purchasing gas from one of these numerous suppliers will allow the City to obtain competitive bids and purchase gas at a rate which will benefit its citizens.