Citizen Media Watch

december 5th, 2020

Chicago Franchise Agreement

Posted by lotta

”I think it`s also healthy for our relationship with ComEd, because they know we do it,” Reynolds says. ”Not that we hold it over our heads, but they know that this work is underway,” that the report will finally be released later in the spring and ”raises questions about their facilities.” Reynolds says it is up to others in the city to define what would make an ”imperative economic case” for phase 2 of the feasibility study. ”It`s unlikely we can do a phase 2, but we really can`t say for sure until we see the numbers.” Even then, this phase would cost millions of dollars and take years to fully study – meaning that proponents of communalization won`t see a victory until this new franchise contract is cemented. In situations where a franchisor sells franchisees to a large number of franchisees, with similar disclosure defects or breaches, franchisees may bring a class action for the franchises. A major obstacle to solving the problem is that franchise agreements generally take longer. According to the CEPOL report, 50-year agreements are customary. The City of Evanston is preparing to renegotiate its current franchise agreement with ComEd, which expires in September. Unlike most other cities in the region, Evanston`s agreement with ComEd lasts only five years, which the city negotiated decades ago to get the company to address service issues, said Kumar Jensen, Evanston`s Chief Sustainability and Resiliency Officer. The sale of a franchise business allows a company known as a franchisee to acquire an existing business model and an existing brand, as well as the related good. Another company, known as a franchisor, sells the right to use one or more trade names and operate a business under certain parameters, usually for a cash payment, a current fee and a share of turnover. This series of rights and obligations is called ”franchise.” It gives the franchisor the opportunity to continue to benefit from the brand and its goodwill without having to create or operate other sites. The current agreement, concluded in 1992, expires on 31 December, although its terms last until a new agreement is in force or until one of the parties announces its intention to withdraw. ”The city has a tremendous opportunity to take advantage of the franchise agreement to accelerate the development of renewable energy in Chicago neighborhoods,” said Colleen Smith, legislative director of the Illinois Environment Council, ”while getting reasonable relief for low-income households.” But Jensen said it can be difficult for many cities and municipalities that don`t have sustainability or energy supply personnel to navigate franchise agreements.

Ameren Illinois, which provides power to 1.2 million electricity consumers and 816,000 natural gas customers in central and southern Illinois, has moved to offer cash payments rather than free energy to municipalities, although some of its existing franchise agreements provide unbilled energy to municipalities. Pruitt, who runs an energy consulting firm and has worked with municipalities on franchise agreements, said the unbilled energy is unique not only to Illinois, but also to the northern part of the state, especially in the ComEd coverage area. A glimmer of hope for her – Reynolds has confirmed that the city will not sign another decades-long contract with ComEd. Three years is too short, 10 years too long. ”I think something between five and ten years is not unreasonable,” he said. ”The current agreement is long in the teeth. It is surprising how many provisions of 1948 are in the current agreement. We don`t want it again, but we don`t want the work of our lives to renew the franchise agreement. Pruitt said the problem is that many local elected officials don`t understand the mechanics of franchise agreements.



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