05/05/2008 Council Packet - Laserfiche WebLink

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utilities' use of ROW in the City is governed either by the franchise ordinances or in the case of Connexus (and telephone companies), by general ROW ordinances. City Franchise Rights. The City may, but is not required to, enter into a franchise with the gas and electric utilities serving customers in the City. Gas and electric utility franchises govern two issues — utility ROW and public ground use, and if the City chooses, the terms and conditions of franchise fees collected by the utilities and paid to the City. The Minnesota Public Utilities Commission regulates all other aspects of Xcel and CenterPoint. Centennial Utilities and Connexus set their rates and policies. The law regards franchises as a contract that is negotiated between the utility and the franchising city. Therefore, each utility has the independent right to accept or reject franchise ordinance provisions proposed by a city, subject to certain sovereign rights the City may exercise, such as: the City may require a franchise; it may require a franchise fee; it may exercise its full police power rights. The extent of these city rights as they relate to utilities is often the subject of disagreement in the franchise negotiation process. City Options. The City has a number of options here, and full discussion of each could go into far more detail than this memo will address. The following are available to the City and are recommended generally in the order most beneficial to the City. 1. Adoption of Comprehensive ROW Ordinance. A city of the size and development of Lino Lakes should adopt a comprehensive ROW Ordinance. This type of ordinance brings all utilities under one uniform set of standards, streamlines the franchising process, and removes questions about the extent of the City's authority over non - franchised utilities such as the telephone companies. The ROW Ordinance is a police power ordinance that does not require the consent of the utilities. It may be adopted unilaterally by the City. It is helpful, however, to give utilities prior notice of ROW ordinance adoption, but it is not necessary. 2. Establish One Franchise Form with Uniform Provisions Applicable to All Utilities Serving the City. With a ROW Management Ordinance in place, uniformity of treatment of utilities in the ROW can be carried over to the franchise ordinance. Currently, each of the franchise ordinances is different, and Connexus has no franchise. I recommend a city- prepared ordinance presented to all utilities for renegotiation (Centennial and CenterPoint) or new adoption (Xcel and Connexus). 3. Franchise Fee Revision. Currently, only Centennial Utilities customers pay a franchise fee. No other gas or electric utility customers in the City pay any fee. The fees collected from Centennial Utilities are available for any public use by the City and benefit all residents and businesses in the City, not just those customers paying them. Requirement of franchise fees is a right vested in cities and the terms and conditions are appropriately contained in the franchise ordinance. One method of proceeding would be to identify the total revenue the City seeks to recover annually through franchise fees from gas and electric utilities. That total could then be spread evenly and equitably amongst all utilities and collected as a franchise fee with an agreed - upon rate design (e.g., meter fee or straight percent of gross revenue) by each utility. This would eliminate the disparity that currently exists between Centennial Utilities customers and all other gas and electric customers in the City. There will be some issues of "equality" as between larger gas and electric customers. That hurdle can be overcome through dialogue between the City and utilities, however. 332569v1 JMS KG400 -3 2