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• WS — Item 3 WORK SESSION STAFF REPORT Work Session Item No. 3 Date: November 5, 2012 To: City Council From: Jeff Karl son Re: Circle Pines /Centennial Utilities Franchise Ordinance Background The City's 25 -year franchise agreement with Centennial Utilities expired on March 31, 2012. Centennial Utilities' proposed new terms included a change in the franchise fees. Specifically, the gas utility requested that Lino Lakes not impose a fee that is higher than what other gas suppliers are charged. The other franchise ordinances with CenterPoint and Xcel do not include a franchise fee. At the April 2, 2012 Council work session, Mayor Reinert and Councilmember O'Donnell were appointed to negotiate an agreement with Circle Pines. On April 17, Mayor Reinert, Councilmember O'Donnell, and I met with three representatives from Circle Pines, but no agreement was reached. After the meeting with Circle Pines, we held several meetings with CenterPoint and Xcel representatives to gauge their interest in: (1) purchasing the gas distribution system if Lino Lakes exercised its option to purchase it from Circle Pines; or (2) expanding its service into those portions of Lino Lakes currently being served by Circle Pines. In the end, we were able to reach a settlement with Circle Pines /Centennial. The new terms include a four percent franchise fee for non - interruptible customers, which can be increased to a maximum of five percent if Lino Lakes imposes a franchise fee of one percent or more for the other natural gas providers. The proposed ordinance does not include a provision for Lino Lakes to have a representative on the Centennial Utilities Commission. I spoke with Scott Bundy, who represented Lino Lakes on the Commission, and he pointed out that he had full voting privileges, even when it came to making decisions about Circle Pines' other utilities. Under these circumstances, it seemed reasonable that Lino Lakes relinquish its membership on the Commission. Requested Council Direction An ordinance granting a nonexclusive franchise to Circle Pines /Centennial Utilities is included on the November 13 Council agenda for consideration of approval. • Attachments An Ordinance Granting a Nonexclusive Gas Franchise to Circle Pines /Centennial Utilities