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Utility Franchise Fees
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This material is provided as general information and is not a substitute for legal advice. Consult your attorney for advice concerning specific situations. <br /> <br /> <br /> <br />145 University Ave. West www.lmc.org 5/15/2024 <br />Saint Paul, MN 55103-2044 (651) 281-1200 or (800) 925-1122 © 2024 All Rights Reserved <br />INFORMATION M EMO <br />Gas and Electric Utility Franchising <br /> <br /> <br />Learn about city gas and electric utility franchising authority, especially authority to charge franchise <br />fees. <br />The League thanks James Strommen of the Kennedy and Graven Law Firm, who is attorney for <br />the Suburban Rate Authority, for his assistance in creating this memo and the model and sample <br />ordinances. <br />RELEVANT LINKS: I. Franchising authority <br /> <br />Minn. Stat. §216B.04 <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br />Minn. Stat. § 216B.36. Minn. <br />Stat. § 301B.01. Minn. Stat. § <br />222.37. Minn. Stat. § <br />237.162. and Minn. Stat. § <br />237.163. <br />Minnesota statute requires public gas and electric utility providers to provide <br />safe, adequate, and efficient utility services. In order to do so, utility <br />companies often need to use public rights-of-way, such as roads or <br />sidewalks, to deliver their services. Since cities are responsible for the <br />reasonable management of its rights-of-way, franchise agreements are often <br />necessary. Franchise agreements are a contract between the city and the <br />utility provider that allows the utility provider the right to use the public <br />rights-of-way to install, maintain and repair their equipment located on <br />public grounds or in the right-of-way. <br />Cities have broad gas and electric franchise rights under state law. In <br />Minnesota, these franchises are negotiated and take the form of a contract <br />set forth in an ordinance. Cities have the right to require franchises and to <br />include certain terms, such as franchise fees. There is little case law <br />guidance on what specific franchise terms may be required by the city. <br />Accordingly, a franchise can incorporate all reasonable terms within the <br />limits of a city’s statutory franchise and police power authority. These rights <br />are extensive and can be found in state statute and case law. <br /> II. Franchising ordinances <br /> <br /> <br />Minn. Stat. § 237.162 and <br />Minn. Stat. § 237.163. <br /> <br />LMC Information Memo, <br />Cell Towers, Small Cell <br />Technologies & Distributed <br />Antenna Systems. <br /> <br /> <br />Minn. R. ch. 7819. <br />There has been little legislative change in the scope of city franchise <br />authority in recent years. However, in 2017 new laws regarding the <br />regulation of telecommunications right-of-way users were adopted. Though <br />outside the scope of this memo, it is recommended cities review their <br />ordinances to ensure compliance with the new statutory requirements and <br />new federal requirements. The main focus of discussion involving gas and <br />electric franchises in the post-1999 right-of-way standards rules by the <br />Minnesota Public Utilities Commission (MPUC) is the franchise fee. That <br />remains a matter negotiated with the utility but also one where cities should <br />take care to retain their full franchise fee rights in the franchise agreement <br />itself.
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