11-29-2023 Council Packet - Laserfiche WebLink

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STAFF REPORT TO: Mayor Fischer and Members of City Council FROM: Chris Heineman, City Administrator Sam Magureanu, Finance Director DATE: November 29, 2023 RE: Public Hearing on Proposed Electric and Gas Franchise Fees ACTION TO BE CONSIDERED: The City Council is asked to conduct a Public Hearing on the proposed changes to Little Canada’s existing Electric and Gas Franchise Agreements with Xcel Energy. BACKGROUND: The Minnesota Public Utilities Commission regulates public utilities and has authorized cities to impose a franchise fee on energy providers for utilization of public rights-of-way through a utility franchise agreement. When a franchise fee is levied on a private utility, it is passed on directly to customers and itemized on customer bills. These fees are invoiced and collected from all property classes, including residential and commercial property, public agencies, and non-profit businesses. Franchise fees are an equitable way to raise funds for important infrastructure needs. A franchise fee can only be implemented through a franchise agreement with the local energy provider (Xcel Energy). There are over 370 franchise agreements that have been established throughout Minnesota, and the City of Little Canada has a long history of partnering with Xcel Energy with both gas and electric franchise agreements in place for many years. While both gas and electric franchise agreements are currently in place, the City of Little Canada has only levied a franchise fee for the electric franchise. The electric franchise fee ordinance was initially adopted in 2003 and updated on May 12, 2010. Franchise agreements with Xcel Energy have a 20- year term, and the current agreement expired on August 26, 2023. Staff has been in communication with representatives from Xcel Energy, and a letter was submitted to the Minnesota Public Utilities Commission (PUC) extending the terms of the current agreement until a new franchise agreement is established. Pursuant to Section 2.6 of our Electric Franchise Ordinance, the agreement will remain in effect until a new franchise agreement has been agreed upon, but no later than one year after expiration of the 20-year term, which means no later than August 25, 2024. The City Council initially discussed potential changes to the gas and electric franchise agreements at a workshop on July 12, 2023 followed by a workshop on September 13, 2023. The City’s infrastructure costs have increased significantly over the past decade, and the City Council was asked if they would be supportive of increasing the existing electrical franchise fees and/or adding a gas franchise fee in order to generate additional revenues to fund the increased cost for capital infrastructure.