Agenda Packets - 1999/11/22 - Laserfiche WebLink

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lob City of Mounds View Staff Report To: Mayor and members of the City Council From: Bruce A. Kessel, Finance Director Item Title/Subject: NSP request for changes in implementation of franchise fee on electric and natural gas sales Date of Report: November 18, 1999 Jim Strommen from Kennedy& Graven and City staff have been contacted by NSP relating to the recently enacted franchise fee on electric and natural gas sales within Mounds View. There are several issues that have been raised including: 1. Y2K issues. My understanding is that NSP has instituted a policy of not making any programming changes to its systems until after the middle of January. Their reasoning is that while they feel that their systems are Y2K compliant, they do not want to change any program code until after the first of the year since any changes could hamper their Y2K preparedness. Also, they wish to reserve technology personnel to fix any Y2K problems that are encountered on January 1 and as such, do not want to make commitments to change systems early in the year 2000. 2. Method of implementation/deregulation. In recent years, federal laws have been passed to deregulate electric and natural gas. Various states have also undertaken deregulation. Deregulation is in the early stages in Minnesota, however there are some larger customers who have received authority to purchase energy from alternative sources. As such, NSP is concerned that if any user in Mounds View receives such authority,NSP will be at a competitive disadvantage since it would have to charge the City's franchise fee while a competitor would not. The impact on the City of the competitor being awarded the contract is that the City would not receive its franchise fee on such energy sales. (Note in some cases, the alternative supplier would use NSP infrastructure and would pay NSP for such use, however, such a fee is a small fraction of the total billings and as such, the City's franchise fee would be on only the infrastructure charge). Options Attached is one option that NSP has proposed to implement the franchise fee. As you will note, the percentage of the bill varies, however, the total franchise fee generated would still equal the 4% specified in the franchise ordinance. We have also requested Fee Estimate reports using a 4% across the board fee and expect to have such reports prior to the Council meeting. There has also been discussions about leaving the franchise fee at 2.5% in January and then increasing it to 4% in February, or another option to a rate somewhat higher than 4% for the rest of the year so that the average rate for the year 2000 equaled 4%. Jim Strommen from Kennedy & Graven as well as representatives from NSP will be in attendance at Monday's meeting to expand upon these issues.