For Flagstaff Voters: More Information about Proposition 434

Flagstaff voters have approved Proposition 434, a franchise agreement between the City of Flagstaff and UNS Gas, the operating subsidiary that provides natural gas service as UniSource Energy Services.

The following questions and answers provide more information about this agreement, which was approved by voters in the Aug. 4 primary election:

What is a franchise agreement?

A franchise is a legal agreement between a public utility and a municipality that allows the utility to use the city’s public rights-of-way and easements. Approval of Proposition 434 will allow UNS Gas to continue building, operating, and maintaining facilities for the handling, production, manufacturing, transporting, storing, sale, and distribution of natural gas in the City of Flagstaff.

Why was Proposition 434 considered in the primary election as opposed to the general?

The current franchise agreement between the City of Flagstaff and UNS Gas will expire Oct. 3, 2020, about a month before the Nov. 4 general election. Placing the measure on the primary election ballot gave voters an opportunity to approve a new franchise before the previous agreement expires.

What is a franchise fee and who pays for it?

Cities usually charge a fee for the rights granted under a franchise agreement, typically calculated as a percentage of customers’ bills. Utilities collect this fee from customers and pass it along to the municipality.

Proposition 434 will maintain the 2 percent fee included in the current franchise agreement – a fee comparable to those charged in other Arizona communities we serve. We collect this fee from customers and pass it along to the City of Flagstaff, which determines how the funds should be spent.

If the franchise fee was higher, who would pay those higher costs?

Any increase in the franchise fee would be paid by UNS Gas customers. Because voters approved Proposition 434, the franchise fee cannot be increased for 25 years.

Why is the agreement for 25 years?

Long-term franchise agreements allow utilities and jurisdictional leaders to make long-term plans for facilities that serve local residents’ needs. All of our company’s franchise agreements extend for 25 years, consistent with Ariz. Rev. Stat. § 9-502.

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