Pipeline &
Gas Journal
December issue 1999:
Heavy Burden
ROW Ordinances And
The End Of The Buyer’s Market
by Sharon Moffatt, Manager of Construction, Mobile Gas Service Corp., Mobile, AL
Federal deregulation has had a profound effect on the utility industry. The number of providers of telephone, cable television, natural gas, and electric power are increasing daily, allowing consumers to shop around for the best utility prices. Unfortunately, this “buyer’s market” may soon come to an abrupt close.
One of the inherent problems with opening up the utility market is rapidly dwindling space within public rights-of-way. It is not unusual to find two or more of the same type utility facilities occupying the same right-of-way. These days, it is not even odd to find more than one facility belonging to the same company within any given right-of-way. The result of the overcrowding? More frequent damage to utility facilities and an increase in easement purchases, both of which significantly increase the cost of providing service.
Another problem created by deregulation is the proliferation of construction contractors. With so much construction being undertaken at the same time, most municipalities do not have enough inspectors on staff to monitor all work in progress. Lack of sufficient policing makes it difficult to ensure rights-of-way are safely and properly repaired. Government officials are often left to deal with complaints stemming from shoddy restoration work long after utility contractors are gone.
In an effort to protect rights-of-way and stem the burgeoning flow of complaints from their constituents, government officials are fighting back with the most effective weapon at their disposal: Legislation. A case in point is the “Rights of Way Construction and Administration Ordinance” recently enacted by the city of Mobile. The ordinance, which was revised several times based on input from local utility representatives, sets strict guidelines and fee schedules for all work performed within city rights-of-way.
The enforcement of this ordinance places heavy burdens on utilities in terms of both labor and overall job cost. The permitting process alone requires the submission of plan and profile sheets, erosion control and Best Management Practice plans, a safety plan, a traffic control plan, and a landscape plan. All topographic features that will be impacted within the right-of-way must also be indicated on the construction plans.
This is a tall order at a time when most companies are in the process of being— or have already been—downsized. It requires the dedication of personnel to the permitting process in order to maintain the flow of construction work and provide service in a timely manner. In this case, “dedicated” personnel translates into “additional” personnel. Employees who have survived corporate downsizing can ill afford to fit more responsibilities onto their overloaded plates. Naturally, an increase in personnel means an increase in the bottom-line cost of doing business.
Additional personnel expenses aside, there is a potential for lost revenue inherent in the permitting process. The sheer volume of permits being submitted for approval ensures turnaround times will suffer greatly. Any delays on the permitting end of a project can spur customers to seek service elsewhere. A trend toward going all-electric would not be surprising, given the fact overhead electricity is widely available and does not necessarily require the detailed permit applications associated with underground utilities. The utility destined to suffer the most in this regard is the natural gas distribution company.
Unlike water and electricity, natural gas is an optional utility and, therefore, natural gas providers are in a position to lose the most customers. The fees associated with construction under the new ordinance inflate project costs considerably. The fees cover everything from excavation to the obstruction of rights-of-way, including lost revenue from obstructed parking meters. With numerous fees being calculated based on linear footage or square yardage of construction area, it does not take long for costs to add up.
The burning question of who will ultimately pay the additional costs associated with the ordinance must now be addressed. In theory, utilities will absorb the costs as a normal part of doing business. In actuality, the expenses will likely be passed on to consumers in the form of rate increases. This being the case, the utility “buyer’s market” may soon come to a premature close.
Government officials are acting within their rights to protect public rights-of-way. Yet, “good” contractors and utilities are being punished right along with the “bad.” A system under which fees are levied against the parties responsible for unacceptable or sub-standard contractors would be a fairer alternative to penalizing everyone across the board. Unfortunately, the best deal Mobile-area utility providers were able to negotiate with city officials was a kinder, gentler version of the initially proposed ordinance.
It is highly unlikely that the city of Mobile’s actions constitute an isolated incident. It is even more unlikely that other cities will fail to follow suit. As the field of energy providers grows in leaps and bounds so, too, will the concern for protecting public rights-of-way. The only protection utilities have against the backlash is the lobbying strength gained when they bond together to ensure any proposed regulations are reasonable and do not place undue burden upon any of the parties involved. Utilities can also gain valuable support from the communities they serve; there is nothing like the threat of increased rates to spur consumers into action. Their shopping spree has just begun; they will not relinquish their advantage without a fight.
As metropolitan areas continue to spread in all directions and utility facilities are upgraded in an effort to provide better customer service, few things bear as much importance as the little plots of land dedicated as public rights-of-way. Constituents rely on government officials to protect public interests while at the same time refusing to give up the right to exercise personal choice in the selection of utility providers. Like it or not, city ordinances may soon deprive the public of its right to choose by replacing “outlet” utility prices with “department store” prices and bringing an end to the “buyer’s market.” P&GJ
Sharon Moffatt holds a B.S. in civil engineering and has been employed by Mobile Gas for the past 10 years. She was recently promoted to the position of manager of construction.