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<br />125. <br /> <br /> <br />v~tober 19, 2001 <br /> <br />Honorable David Chiu <br />City of San Marcos <br />630 East Hopkins <br />San Marcos, Texas 78666 <br /> <br />Dear Honorable Chiu: <br /> <br />As you know, the City of San Marcos renegotiated its franchise agreement <br />with Pedernales Electric Cooperative (PEC) this year. Our current <br />agreement with your city calls for franchise fees to be calculated not as a <br />percentage of retail sales, but as a flat fee for each kilowatt hour of <br />electricity delivered by PEC within the city beginning January 1, 2002. <br /> <br />This letter serves as notice that PEC will not implement the flat fee <br />calculation and will continue with the two percent calculation contained in <br />our past franchise agreement. PEC has determined that, at this time, the <br />franchise fees PEC pays to the City of San Marcos will be greater if <br />calculated as two percent of retail sales than if calculated using the flat <br />fee. Therefore, calculation of the franchise fees will not change until <br />the law requires PEC to compensate all cities according to the statutory <br />.at fee formula. That requirement will begin when PEC begins to offer <br />~tail customer choice. <br /> <br />The rules of the Public Utility Commission of Texas require PEC to make <br />certain filings with the Commission providing at least ninety days notice <br />before PEC can offer retail customer choice. At that time, PEC will also <br />provide notice to all of our incorporated cities that we will be required, <br />by law, to calculate franchise fees in compliance with the flat fee formula <br />that is already contained in your existing agreement. PEC values the <br />positive working relationship it has with our cities and citizens it <br />serves. If you have any questions concerning franchise fees, please <br />contact Russ Adamiak, Kyle/Buda District Manager at 1-888-554-4732. <br /> <br />Sincerely, <br /> <br /> <br />~M <br /> <br />General Manager <br /> <br /> <br />BF:JD:gb <br /> <br />Please sign, date and return one signed original document which signifies <br />~~at PEC will continue to pay two percent of the gross sales receipt of <br />ectricity within the city until PEC is required to apply the flat fee <br />lrmula contained in your existing agreement. <br /> <br /> <br />November 161 2001 <br /> <br />David Chiu <br /> <br />Date <br />