Sec. 6.01.

(a)

In consideration for the rights and privileges herein granted, Grantee agrees to pay to City, an annual franchise fee (referred to herein as "Annual Franchise Fee"), subject to an Annual Adjustment Factor as set forth below. Except as set forth in Section 2.08, payment of the Annual Franchise Fee shall be the total compensation payable to City in consideration for the right, privilege and franchise herein conferred for Grantee's use of the Public Rights-of-Way to construct, operate, use and maintain its Facilities for the provision of electric transmission and distribution service and its right to use, license, or exploit its Facilities as permitted, herein.

The Annual Franchise Fee shall be calculated as follows:

1.

The "Annual Franchise Fee" shall be Thirty Five Thousand Seven Hundred Fifty Eight and 52/100 Dollars ($35,758.52).

2.

The Annual Franchise Fee for each twelve-month period beginning July 1, 2009, (each a "Franchise Year") shall be adjusted by multiplying $35,758.52 by the Annual Adjustment Factor. The "Annual Adjustment Factor" for any given year shall be a fraction, the numerator of which shall be the kWh delivered by Grantee within the City (inclusive of street lighting) in the previous calendar year and the denominator of which shall be the kWh delivered by Grantee within the City (inclusive of street lighting) in 2005, said amount being 8,931,219 kWh. (Example: The Annual Franchise Fee for the Franchise Year beginning July 1, 2010 = $35,758.52) × 2009 kWh/8,931,219 kWh).

In no case, however, shall the Annual Franchise Fee be less than the Annual Franchise Fee established in (1) above.

(b)

In calculating the amount to be paid each year, Grantee shall offset its Annual Franchise Fee payments with the amount of the Municipal Account Franchise Credits and Municipal Franchise Fee Credits provided in Grantee's tariffs and applicable to City in the prior calendar year.

(c)

The Annual Franchise Fee shall be payable in equal monthly installments due the first day of each calendar month. Grantee shall calculate the new franchise fee to be payable for each Franchise Year beginning July 1, 2009, and shall provide the same along with the basis for such calculation to City for its review no later than April 1st of each year. If Grantee does not receive an objection from City by May 31st, Grantee shall implement the adjusted Annual Franchise Fee payment on July 1st. If the term of this Franchise provided for in Section 9.01, below, ends on any day other than the last day of the last Franchise Year, then the Annual Franchise Fee for the final Franchise Year shall first be calculated pursuant to this Section 6.01 and then pro rated accordingly. Grantee shall begin paying the Annual Franchise Fee on the later of (a) the expiration of the prior franchise or (b) the first day of the month that is three (3) months prior to the Effective Date (the later of (a) or (b) being the "Payment Start Date"). (Example: If the Effective Date is July 15th, the Payment Start Date would be the later of (a) the expiration of the prior franchise or (b) the preceding April 1st.) If the Payment Start Date is any day other than July 1st, then the Annual Franchise Fee for the period between the Payment Start Date and the following July 1st shall first be calculated pursuant to this Section 6.01 and then pro rated accordingly and net of any amounts previously paid for such period.

(d)

City may conduct an audit or other inquiry, or may pursue a cause of action in relation to the payment of the Annual Franchise Fee only if such audit, inquiry, or pursuit of a cause of action concerns a payment made within the period that is the shorter of (a) the period provided by PURA §33.008(e) or any similar provision or (b) the five (5) years before commencement of such audit, inquiry, or pursuit of a cause of action.

(e)

Except as provided in Section 2.08, the Franchise Fee payable hereunder shall be the total compensation payable by the Grantee to the City for Grantee's use of the Public Rights-of-Way for the conduct of its business under this franchise. City shall not charge any additional license, charge, fee, street or alley rental, permit fee or other character of charge or levy for the use or occupancy of the Public Rights-of-Way in City, or any pole tax or inspection fee tax. If the City does charge Grantee any additional license, charge, fee, street or alley rental, or other character of charge or levy, then Grantee may deduct the amount charged from the next succeeding Franchise Fee payment or payments until fully reimbursed.

(f)

If, as the result of a final and non-appealable order issued by the PUCT, all or a portion of the then-effective Annual Franchise Fee is expressly found to be unreasonable or is otherwise expressly rejected or disallowed by the PUCT, then Grantee shall be permitted to reduce the Annual Franchise Fee by such amount; provided, however, that Grantee shall be obligated to support the reasonableness of the Annual Franchise Fee and shall not voluntarily agree to any reduction thereof.

Sec. 6.02. No More Favorable Fee Arrangement. For the entire term of this Ordinance, City shall not enter into any franchise or other agreement granting a franchise over City-owned or controlled property to any other entity producing, generating, transmitting, distributing, furnishing, and/or selling electricity within the corporate limits of City (residential or commercial) (an "Other Provider") that provides for a lower annual franchise fee to City than that payable by Grantee under this Ordinance. Should City enter into any such franchise agreement(s), with an Other Provider in violation of this provision, then, without limiting other remedies available to Grantee, the percentage franchise fee payable to City under this Ordinance shall automatically be reduced to that payable by the Other Provider under such other agreement.

Sec. 6.03. Waiver of Prior Claims. The parties agree to waive any and all claims, asserted or unasserted, arising out of prior franchise agreements including, without limitation, the Prior Franchise, except those claims relating to Grantee's obligations two years prior to the Effective Date of this Franchise.