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City staff outline scope and timeline for Texas Gas Service franchise negotiations ahead of 2026 expiration
Summary
City controller and outside counsel told the committee the TGS franchise expires Oct. 15, 2026; staff must present a negotiated agreement for council consideration by May 7, and while cities can ask for items like low-income assistance or fee adjustments, some matters (rate-making and conservation programs) fall under the Railroad Commission.
City staff briefed the Climate, Water, Environment and Parks Committee on Dec. 2 about the scope and constraints of negotiating city gas franchise agreements, including the upcoming renewal for Texas Gas Service (TGS), whose current contract expires Oct. 15, 2026.
"Franchise agreements essentially allow utilities to use a city's right of way," Maria Norton (city controller) told the committee, and she noted that franchise ordinances must follow charter procedures including readings and effective-date rules. Norton said city staff expects a negotiated agreement to be ready for council by May 7 to meet timelines for adoption before the current agreement lapses.
Outside counsel (Thomas Mercado) reviewed typical franchise provisions — permitting and right-of-way management, operational maintenance and engineering expectations, excavation and restoration standards, relocation and cost-recovery rules, indemnification and compensation to the city. He cautioned that certain items are traditionally handled in rate cases before the Texas Railroad Commission rather than in franchise contracts.
Counsel and staff highlighted statutory limits. They said HB 2263 (2023) gave the Railroad Commission exclusive jurisdiction over conservation programs, which constrains the city's ability to require conservation program changes through franchise language. Norton added the city charter limits franchise duration to a maximum of 25 years and sets procedural steps for ordinance readings and effective dates.
Committee members asked whether Resource Management Commission recommendations on low-income assistance and other consumer protections could be incorporated. Norton said the city can request such terms in negotiations, but the utility may decline; one practical option would be reallocating franchise-fee revenue toward low-income assistance or raising the fee, though the state or contract terms might limit those moves.
Outside counsel noted a recent TGS rate-case settlement in which the utility sought a $41.1 million annual increase; staff negotiated that request down to roughly $15 million. Members also asked about municipalization, and Norton said while legal in Texas, municipalization would require a multiyear study and significant cost.
Committee members emphasized the importance of public engagement during the process. Staff said TGS currently briefs the Resource Management Commission on conservation programs and that incorporating public-involvement expectations into the franchise is possible to pursue in negotiations.
No formal action was taken. Staff advised that they will work with the Resource Management Commission, incorporate recommendations where feasible, and return with negotiation materials and a timeline that supports council consideration by May 7.
