HomeMy WebLinkAbout05(E) - Ordinance Approving Franchise Agreement Renewal with Shakopee Public Utilities ReportITEM: 5ECITYCOUNCILAGENDAREPORT
MEETING DATE: March 10, 2026
PREPARED BY: Jason Wedel, City Manager
PRESENTED BY: Jason Wedel
AGENDA ITEM: Ordinance Approving Franchise Agreement Renewal with
Shakopee Public Utilities
RECOMMENDED ACTION:
Approve an ordinance that would renew the electric franchise agreement with Shakopee Public
Utilities.
BACKGROUND:
In 2006, the City of Prior Lake City Council established ordinances related to franchises as part
of the City Code and adopted an ordinance establishing the framework for franchise agreements
and subsequently entered into 20-year agreements with Xcel Energy, Minnesota Valley Electric
Cooperative (MVEC), Shakopee Public Utilities (SPU), and CenterPoint Energy. Section 312 of
the City Code relates to gas utilities and Section 313 relates to electric utilities. All these
agreements are scheduled to expire on March 20, 2026.
The franchise agreements address a variety of operational and regulatory matters, including the
placement ofutility facilities within the public right-of-way; restoration requirements following work
in the right-of-way; provision of utility mapping; tree trimming and maintenance; removal of
facilities upon vacation of right-of-way; authority to impose a franchise fee; service reliability
standards; and dispute resolution procedures.
In anticipation of the upcoming expiration, City staff began coordinating with each utility provider
several months ago to prepare updated franchise ordinances extending the agreements for an
additional 20-year term. While minor revisions have been incorporated to ensure compliance with
current State law, the substantive provisions remain largely consistent with the existing
agreements.
The service teritory for Shakopee Public Utilities within the corporate limits of Prior Lake has been
greatly reduced over the last several years. Portions of their territory have been exchanged with
Minnesota Valley Electric Cooperative. As of the date of this memorandum, there are 33
residential and 2 commercial accounts remaining in Prior Lake that are managed and operated
by Shakopee Public Utilities.
FINANCIAL IMPACT:
The franchise agreements authorize the City to impose a franchise fee pursuant to Minnesota
Statute 216B.36. When originally adopted in 2006, the franchise fee was established at a flat rate
of $1.50 per residential unit, with tiered rates applied tohigher-demand commercial and industrial
customers.
City ofPrior Lake | 4646 Dakota Street SE | Prior Lake MN 55372
Item 5E
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The fee structure remained unchanged for fifteen years. At its September 7, 2021, meeting the
City Council approved an increase to $5.00 per residential unit as well as adjustments to the tiered
rates for commercial and industrial customers. Of the incremental increase to the fee, the Council
dedicated the full amount to the Pavement Improvement Revolving (PIR) Fund to be used
exclusively for street reconstruction projects. The Council further established that any change in
the designated use of those funds would require asupermajority vote by the City Council.
At its September 10, 2024, meeting the City Council approved an increase, raising the residential
franchise fee to $5.60 effective in 2025. The Council’s stated intent has been to implement
modest, incremental adjustments to the franchise fee every three to five years, rather than
deferring increases for extended periods of time and requiring more substantial adjustments at a
later date.
There are no increases to the franchise fee as part of this franchise agreement renewal.
ALTERNATIVES:
1. Motion and second as part of the consent agenda toapprove an ordinance renewing the
franchise agrement with Shakopee Public Utilities for 20 years.
2. Motion and second to remove this item from the consent agenda for separate
consideration.
ATTACHMENTS:
1. Ordinance No. XX Granting Shakopee Public Utilities aFranchise Agreement
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CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
ORDINANCE NO. _____
AN ORDINANCE GRANTING TO SHAKOPEE PUBLIC UTILITIES A MINNESOTA
MUNCIPAL UTILITY, ITS SUCCESSORS AND ASSIGNS, A NONEXCLUSIVE
FRANCHISE TO CONSTRUCT, OPERATE, REPAIR AND MAINTAIN IN THE CITY OF
PRIOR LAKE, MINNESOTA, AN ELECTRIC DISTRIBUTION SYSTEM AND
TRANSMISSION LINES, INCLUDING NECESSARY POLES, LINES, FIXTURES AND
APPURTENANCES, FOR THE FURNISHING OF ELECTRIC ENERGY TO THE CITY,
ITS INHABITANTS, AND OTHERS, AND TO USE THE PUBLIC WAYS AND PUBLIC
GROUNDS OF THE CITY FOR SUCH PURPOSES.
The City Council of Prior Lake, Minnesota ordains:
SECTION 1. DEFINITIONS.
For purposes of this Ordinance, the following capitalized terms listed in alphabetical order shall
have the following meanings:
City. The City of Prior Lake, Scott County, State of Minnesota.
City Utility System. Facilities used for providing public utility service owned or operated by the
City or an agency thereof, including sewer, storm sewer, water service, street lighting and traffic
signals, but excluding facilities for providing heating, lighting, or other forms of energy.
Commission. The Shakopee Public Utilities Commission, or any successor agency or agencies,
which governs the Company.
Company. Shakopee Public Utilities, a Minnesota municipal utility, its successors and assigns
including all successors or assignees that own or operate any part or parts of the Electric
Facilities subject to this franchise.
Electric Facilities. Electric transmission and distribution towers, poles, lines, guylines, anchors,
conduits, fixtures, and necessary appurtenances owned or operated by the Company for the
purpose of providing electric energy for public or private use.
Notice. A writing served by any party or parties on any other party or parties. Notice to the
Company shall be mailed to General Manager, Shakopee Public Utilities, 255 Sarazini Street,
Shakopee, Minnesota 55329. Notice to the City shall be mailed to City Manager, 4646 Dakota St
SE, Prior Lake, Minnesota 55372. Any party may change its respective address for the purpose
of this Ordinance by written notice to the other parties.
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Public Way. Any public right-of-way within the City as defined by Minnesota Statutes, Section
237.162, subd. 3.
Public Ground. Land owned or otherwise controlled by the City for park, open space or similar
public purpose, which is held for use in common by the public and not a Public Way.
SECTION 2. ADOPTION OF FRANCHISE.
2.1. Grant of Franchise. The City hereby grants the Company, for a period of 20 years from
the date this Ordinance is passed and approved by the City, the right to transmit and furnish
electric energy for light, heat and power for public and private use within and through the limits
of the City as its boundaries now exist or as they may be extended in the future. For these
purposes, the Company may construct, operate, repair and maintain Electric Facilities in, on,
over, under and across the Public Ways and Public Grounds, subject to the provisions of this
Ordinance. The Company may do all reasonable things necessary or customary to accomplish
these purposes, subject however, to such reasonable regulations as may be imposed by the City
pursuant to ordinance or permit requirements and to the further provisions of this franchise
agreement.
2.2. Effective Date; Written Acceptance. This franchise shall be in force and effect from
and after the passage of this Ordinance and publication as required by law and its acceptance by
the Company. If the Company does not file a written acceptance with the City within 60 days
after the date the City Council adopts this Ordinance, the City Council by resolution may revoke
this franchise, seek its enforcement in a competent jurisdiction or pursue other remedies in law or
in equity.
2.3. Service, Rates and Area. The service to be provided and the rates to be charged by the
Company for electric service in City are subject to the jurisdiction of the Commission. The area
within the City in which the Company may provide electric service is subject to the provisions of
Minnesota Statutes, Sections 216B. 37 - .40.
2.4. Publication Expense. The Company shall pay the expense of publication of this
Ordinance.
2.5. Dispute Resolution. If either party asserts that the other party is in default in the
performance of any obligation hereunder, the complaining party shall notify the other party of
the default and the desired remedy. The notification shall be written. Representatives of the
parties must promptly meet and attempt in good faith to negotiate a resolution of the dispute. If
the dispute is not resolved within thirty (30) days of the date of written Notice, the parties may
jointly select a mediator to facilitate further discussion. The parties will equally share the fees
and expenses of this mediator. If a mediator is not used or if the parties are unable to resolve the
dispute within 30 days after first meeting with the selected mediator, either party may commence
an action in District Court to interpret and enforce this franchise or for such other relief as may
be permitted by law or equity.
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2.6. Continuation of Franchise. If the City and the Company are unable to agree on the
terms of a new franchise by the time this franchise expires, this franchise will remain in effect
until a new franchise is agreed upon, or until 90 days after the City or the Company serves
written Notice to the other party of its intention to allow the franchise to expire. However, in no
event shall this franchise continue for more than one year after expiration of the 20 year term set
forth in Section 2.1.
SECTION 3. LOCATION, OTHER REGULATIONS.
3.1. Location of Facilities. Electric Facilities shall be located, constructed, and maintained so
as not to interfere with the safety and convenience of ordinary travel along and over Public Ways
and so as not to disrupt or interfere with the normal operation of any City Utility System. Electric
Facilities may be located on Public Grounds as determined by the City. The Company's
construction, reconstruction, operation, repair, maintenance, location and relocation of Electric
Facilities shall be subject to other reasonable regulations of the City consistent with statutory
authority granted the City to manage its Public Ways and Public Grounds under state law.
3.2. Street Openings. The Company shall not open or disturb the surface of any Public Way
or Public Ground for any purpose without first having obtained a permit from the City, if
required by a separate ordinance for which the City may impose a reasonable fee. Permit
conditions imposed on the Company shall not be more burdensome than those imposed on other
utilities for similar facilities or work. The Company may, however, open and disturb the surface
of any Public Way or Public Ground without a permit if (i) an emergency exists requiring the
immediate repair of Electric Facilities and (ii) the Company gives telephone notice to the City
before, if reasonably possible, commencement of the emergency repair. Within two business
days after commencing the repair, the Company shall apply for any required permits and pay any
required fees.
3.3. Restoration. After undertaking any work requiring the opening of any Public Way, the
Company shall restore the Public Way in accordance with Minnesota Rules, part 7819.1100 and
applicable City ordinances consistent with law. The Company shall restore Public Ground to as
good a condition as formerly existed, and shall maintain the surface in good condition for six (6)
months thereafter. All work shall be completed as promptly as weather permits, and if Company
shall not promptly perform and complete the work, remove all dirt, rubbish, equipment and
material, and put the Public Ground in the said condition, the City shall have, after demand to
Company to cure and the passage of a reasonable period of time following the demand, but not to
exceed five days, the right to make the restoration of the Public Ground at the expense of the
Company. The Company shall pay to the City the actual cost of such work done for or performed
by the City. This remedy shall be in addition to any other remedy available to the City for
noncompliance with this Section 3.3. The Company shall also post a construction performance
bond consistent with provisions of the Minnesota Rules, parts 7819.3000 and 7819.0100, subpart
6.
3.4. Shared Use of Poles. The Company shall make space available on its poles or towers for
City fire, water utility, police or other City facilities whenever such use will not interfere with the
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use of such poles or towers by the Company, by another electric utility, by a telephone utility, or
by any cable television company or other form of communication company. In addition, the City
shall pay for any added cost incurred by the Company because of such use by City.
3.5. Avoid Damage to Electric Facilities.. Nothing in this Ordinance relieves any person
from liability arising out of the failure to exercise reasonable care to avoid damaging Electric
Facilities while performing any activity
3.6. Notice of Improvements to Streets. The City must give the Company reasonable written
Notice of plans for improvements to Public Ways where the City has reason to believe that
Electric Facilities may affect or be affected by the improvement. The notice must contain: (i) the
nature and character of the improvements, (ii) the Public Ways upon which the improvements
are to be made, (iii) the extent of the improvements, (iv) the time when the City will start the
work, and (v) if more than one Public Way is involved, the order in which the work is to
proceed. The notice must be given to the Company a sufficient length of time, considering
seasonal working conditions, in advance of the actual commencement of the work to permit the
Company to make any additions, alterations or repairs to its Electric Facilities the Company
deems necessary.
3.7. Mapping Information. The Company must promptly provide mapping information for
any of it underground Electric Facilities in accordance with Minnesota Rules, parts 7819.4000
and 7819.4100.
SECTION 4. FACILITIES RELOCATION.
4.1. Relocation in Public Ways. The Company and the City shall comply with Minnesota
Rules, part 7819.3100 and applicable City ordinances, Article VIII Right of Way Management,
consistent with state law.
4.2. Relocation in Public Grounds. The City may require the Company at the Company’s
expense to relocate or remove its Electric Facilities from Public Ground upon a finding by the
City that the Electric Facilities have become or will become a substantial impairment to the
existing or proposed public use of the Public Ground. Such relocation shall comply with
applicable ordinances in City ordinances, Article VIII Right of Way Management, consistent
with state law.
4.3. Projects with Federal Funding. Relocation, removal, or rearrangement of any Electric
Facilities made necessary because of the extension into or through the City of a federally-aided
highway project shall be governed by the provisions of Minnesota Statutes, Section 161.46. For
relocation, removal, or rearrangement of any Electric Facilities otherwise eligible for funding in
whole or in part by the federal government or any agency thereof, the City shall pay the
Company the reasonable non-betterment costs of such relocation, removal, or rearrangement of
Electric Facilities only if the City has received funding from the federal government for purposes
of such relocation.
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SECTION 5. TREE TRIMMING.
Unless otherwise provided in any permit or other reasonable regulation required by the City
under separate ordinance, the Company may trim all trees and shrubs in the Public Ways and
Public Grounds of the City to the extent the Company finds necessary to avoid interference with
the proper construction, operation, repair and maintenance of any Electric Facilities installed
hereunder. The Company shall be responsible for its own acts or omissions and those of any
third-party for which it is responsible arising from such trimming of trees and shrubs.
SECTION 6. INSURANCE AND INDEMNIFICATION.
6.1. Insurance. The Company is required to maintain Commercial General Liability
Insurance on an occurrence basis protecting it from claims for damages for bodily injury,
including death, and for claims for property damage, which may arise from operations under this
Ordinance. Insurance minimum limits are as follows:
• $2,000,000 – per occurrence
• $4,000,000 – annual aggregate
The following coverages shall be included: Premises and Operations Bodily Injury and Property
Damage; Personal and Advertising Injury Blanket Contractual Liability and Products and
Completed Operations Liability. Alternatively, the Company may maintain coverage through
the League of Minnesota Citiess Insurance Trust (LMCIT) under standard LMCIT coverage.
The City must be endorsed as an Additional Insured.
With the City’s consent, which shall not be unreasonably withheld, the Company shall have the
option of providing a program of self-insurance to meet its obligation under this Ordinance. In
such event, the Company shall submit to the city a Certificate of Self-Insurance or other
documents showing proof of its financial responsibility.
6.2. Indemnity of City. The Company shall indemnify and hold the City harmless from
claims involving injury to persons or damage to property from the Electric Facilities located in
the Public Ways and Public Grounds to the extent caused by the negligent acts or omissions of
the Company. The City shall not be indemnified for losses or claims occasioned through its own
negligence except for claims by a third party arising out of or alleging the City's negligence as to
the issuance of permits for, or inspection of the Company's plans or work.
6.3. Defense of City. In the event a suit is brought against the City under circumstances
where the Company’s agreement to indemnify applies, the Company at its sole cost and expense
shall defend the City in such suit if written notice thereof is promptly given to the Company
within a period wherein the Company is not prejudiced by lack of such notice. If the Company is
required to indemnify and defend, it will thereafter have control of such litigation, but the
Company may not settle such litigation without the consent of the City, which consent shall not
be unreasonably withheld. Nothing contained in this franchise, including any provisions
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regarding Company responsibility, shall in any way limit, waive, affect, or impair the limitations
on liability for the City or the Company or their respective representatives set forth in Minnesota
Statutes, Chapter 466, as may be amended.
6.4. Defenses and Protections. Nothing contained in this franchise shall limit, waive, affect,
or impair the rights or protections provided to the City or the Company as a local unit of
government, including, but not limited to official immunity, legislative immunity, statutory
immunity, discretionary immunity, or other immunity under applicable law.
SECTION 7. VACATION OF PUBLIC WAYS.
The City shall give the Company at least two weeks prior written notice of a proposed vacation
of a Public Way. The City and the Company shall comply with Minnesota Rules, 7819.3200 and
applicable ordinances consistent with state statutes.
SECTION 8. ABANDONED FACILITIES.
The Company shall comply with Minnesota Statutes, Sections 216D.01 et seq. and Minnesota
Rules, part 7819.3300, as they may be amended from time to time, and City ordinance 8-227 .
The Company shall maintain records describing the exact location of all abandoned and retired
Facilities within the City, produce such records at the City’s request, and comply with the
applicable location requirements of Section 216D.04 with respect to Electric Facilities.
SECTION 9. CHANGE IN FORM OF GOVERNMENT.
Any change in the form of government of the City shall not affect the validity of this Ordinance.
Any governmental unit succeeding the City shall, without the consent of Company, succeed to
all of the rights and obligations of the City provided in this Ordinance.
SECTION 10. FRANCHISE FEE.
10.1. Form. During the term of the franchise hereby granted, and in addition to permit fees
being imposed or that the City has a right to impose, the City may charge the Company a
franchise fee. The fee may be (i) a percentage of gross revenues received by the Company for its
operations within the City, or (ii) a flat fee per customer based on metered service to retail
customers within the City or on some other similar basis, or (iii) a fee based on units of energy
delivered to any class of retail customers within the corporate limits of the City. The formula for
a franchise fee based on units of energy delivered may incorporate both commodity and demand
units. The method of imposing the franchise fee, the percentage of revenue rate, or the flat rate
based on metered service may differ for each customer class or combine the methods described
in (i) - (iii) above in assessing the fee. The City shall seek to use a formula that provides a stable
and predictable amount of fees, without placing the Company at a competitive disadvantage. If
the Company claims that the City-required fee formula is discriminatory or otherwise places the
Company at a competitive disadvantage, the Company shall provide a formula that will produce
a substantially similar fee amount to the City and reimburse the City’s reasonable fees and costs
in reviewing the formula. The City will attempt to accommodate the Company but is under no
franchise obligation to adopt the Company-proposed franchise fee formula and such review will
not delay the implementation of the City-imposed fee.
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10.2. Separate Ordinance. The franchise fee shall be imposed by separate ordinance duly
adopted by the City Council, which ordinance shall not be adopted until at least thirty (30) days
after written notice enclosing such proposed ordinance has been served upon the Company. The
fee shall become effective ten (10) days after written notice enclosing such adopted ordinance
has been served upon the Company by certified mail.
10.3. Condition of Fee. The separate ordinance imposing the fee shall not be effective against
the Company unless it lawfully imposes a fee of the same or substantially similar amount on the
sale of electric energy within the City by any other electric energy supplier, provided that, as to
such supplier, the City has the authority to require a franchise fee.
10.4. Collection of Fee. The franchise fee shall be payable not less than quarterly during
complete billing months of the period for which payment is to be made. The franchise fee
formula may be changed from time to time; however, the change shall meet the same notice
requirements and the fee may not be changed more often than annually. Such fee shall not
exceed any amount that the Company may legally charge to its customers prior to payment to the
City. Such fee is subject to subsequent reductions to account for uncollectibles and customer
refunds incurred by the Company. The Company agrees to make available for inspection by the
City at reasonable times all records necessary to audit the Company's determination of the
franchise fee payments.
10.5. Continuation of Franchise Fee. If this franchise expires and the City and the Company
are unable to agree upon terms of a new franchise, the franchise fee, if any being imposed by the
City at the time this franchise expires, will remain in effect until a new franchise is agreed upon
notwithstanding the franchise expiration as provided in section 2.6 above.
SECTION 11. SERVICE RELIABILITY, INFRASTRUCTURE REPORTING.
The Company and the City shall meet annually at a mutually convenient time to discuss items of
concern or interest relating to the Company’s service reliability in the previous year, compared to
other service areas, infrastructure plans for the coming year and other matters raised by the City
or the Company. Upon request, the Company shall produce reports of aggregated data comparing
its service record in the City to other service areas and provide, among other reasonably required
data, System Average Interruption Duration Index (SAIDI), Customers Experiencing Multiple
interruptions (CEMI) and municipal pumping station and general customer outage data for the
previous year.
SECTION 12. PROVISION OF ORDINANCE.
12.1. Severability. Every section, provision, or part of this Ordinance is declared separate from
every other section, provision, or part; and if any section, provision, or part shall be held invalid,
it shall not affect any other section, provision, or part; provided, however, that if the City is
unable to enforce its franchise fee provisions for any reason the City will be allowed to amend
the franchise agreement to impose a franchise fee pursuant to statute. Where a provision of any
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other City ordinance conflicts with the provisions of this Ordinance, the provisions of this
Ordinance shall prevail.
12.2. Limitation on Applicability. This Ordinance constitutes a franchise agreement between the
City and the Company as the only parties and no provision of this franchise shall in any way
inure to the benefit of any third person (including the public at large) so as to constitute any such
person as a third party beneficiary of the agreement or of any one or more of the terms hereof, or
otherwise give rise to any cause of action in any person not a party hereto.
SECTION 13. AMENDMENT PROCEDURE.
Either party to this franchise agreement may at any time propose that the agreement be amended.
This Ordinance may be amended at any time by the City passing a subsequent ordinance
declaring the provisions of the amendment, which amendatory ordinance shall become effective
upon the filing of the Company’s written consent thereto with the City Clerk after City Council
adoption of the amendatory ordinance. This amendatory procedure is subject, however, to the
City’s police power and franchise rights under Minnesota Statutes, Sections 216B.36 and
301B.01, which rights are not waived hereby.
Passed by the City Council Prior Lake, Minnesota this _____ day of , 2026.
_______________________
Kirt Briggs, Mayor
Attested:
________________________
Jason Wedel, City Manager