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2. AMENDMENTS TO THE GAS FRANCHISE ORDINANCE <br />t <br />Effective January 1, 2002, the City agrees to enact and TXiJ Gas agrees to accept an <br />amendment to the cunent gas franchise ordinance substantially in the form of the amendment <br />attached as Exhibit B to provide that, at the election of the City, the franchise fee will increase to a <br />maximum of 4.00% of the applicable franchise fee payment base and, at the election of the City, the <br />franchise fee payment base shall be amended to include miscellaneous fees, contributions in aid of <br />construction, bad debt expense, transportation revenues and third-party gas sales and gross receipts <br />fees as well as a favored nations clause with respect to franchise fee payments and franchise fee <br />calculations, substantially in the form of the provisions in Exhibit B. The City acknowledges that <br />TXU Gas has the right to recover from its ratepayers such additional franchise fee payments to the <br />City and the City agrees to cooperate with TXU Gas in order for TXU Gas to pass through to its <br />ratepayers the entire franchise fee payment, as amended, by taking the following actions: (i) as <br />regulatory authority, by adopting and approving the ordinance, rates or tariff which provide for <br />100% recovery of such franchise fees as part of TXU Gas' rates; (ii) in the event the City intervenes <br />in any regulatory proceeding before a federal or state agency in which the recovery of TXiJ Gas' <br />franchise fees is an issue, the City will take an affirmative position supporting 100% recovery of <br />stich franchise fees by TXU Gas and; (iii) in the event of an appeal of any such regulatory <br />proceeding in which a City has intervened, the City will take an affirmative position in any such <br />appeals in support of the 100% recovery of such franchise fees by TXil Gas. The City further agrees <br />not to take any action to prevent the recovery of such franchise fees by TXU Gas and to take other <br />action which may be reasonably requested by TXU Gas to provide for the 100% recovery of such <br />franchise fees from TXU Gas' ratepayers. <br />COMPROMISE cETTLEMFNTANDRELEASEACREEMENT-Paee3 <br />