HomeMy WebLinkAbout05(K) - Approve Franchise Agreement Renewal with Xcel Energy Report
ITEM: 5K
CITY COUNCIL AGENDA REPORT
MEETING DATE: April 14, 2026
PREPARED BY: Jason Wedel, City Manager
PRESENTED BY: Jason Wedel
AGENDA ITEM: Approve Franchise Agreement Renewal with Xcel Energy
RECOMMENDED ACTION:
Approve an ordinance that would renew the electric franchise agreement with Xcel Energy.
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 of utility 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.
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 to higher-demand commercial and industrial
customers.
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 a supermajority 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
City of Prior Lake | 4646 Dakota Street SE | Prior Lake MN 55372
Item 5K
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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 to approve an ordinance renewing the
franchise agreement with Xcel Energy for 20 years.
2. Motion and second to remove this item from the consent agenda for separate
consideration.
ATTACHMENTS:
1. Ordinance No. XX Granting Xcel Energy a Franchise Agreement
CITY OF PRIOR LAKE
SCOTT COUNTY, MINNESOTA
ORDINANCE NO. _____
AN ORDINANCE GRANTING TO NORTHERN STATES POWER COMPANY, A
MINNESOTA CORPORATION, ITS SUCCESSORS AND ASSIGNS, A 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 Minnesota Public Utilities Commission, or any successor agency or agencies,
including an agency of the federal government, which preempts all or part of the authority to
regulate electric retail rates now vested in the Minnesota Public Utilities Commission.
Company. Northern States Power Company, a Minnesota corporation, d/b/a Xcel Energy, 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
th
Company shall be mailed to General Counsel, 401 Nicollet Mall, 8 Floor, Minneapolis, MN
55401. 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, power and other purposes 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 procedures 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 90 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.
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 reimburse the expense of publication of this
Ordinance to City.
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 for breach of contract, or take any other action permitted by law.
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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 authority
granted the City to manage its Public Ways and Public Grounds under state law, to the extent not
inconsistent with a specific term of this franchise agreement.
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. However, if
City imposes a franchise fee under Section 11 of this Ordinance, City shall not also impose
permit fees on the Company. 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 as soon as practicable regarding commencement of
the emergency repair. Within two business days after commencing the repair, the Company shall
apply for any required permits and, subject to the terms of this Section 3.2, 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 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.
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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 upon terms and conditions acceptable to
Company whenever such use will not interfere with the 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,
including Company, 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 its underground Electric Facilities in accordance with Minnesota Rules, parts 7819.4000
and 7819.4100. Any mapping information so provided shall be treated as protected nonpublic
data, not public data, trade secret information and security information, as is protected from
public or unauthorized disclosure consistent with the Government Data Practices Act, Minn.
Stat. §13.
SECTION 4. FACILITIES RELOCATION.
4.1. Relocation in Public Ways. The Company shall comply with Minnesota Rules, part
7819.3100 and applicable City ordinances consistent with law. If a relocation is ordered by the
City within five years of a prior relocation of the same Electric Facilities, which was made at
Company expense, the City shall reimburse Company for non-betterment costs on a time and
material basis, provided that if a subsequent relocation is required because of the extension of a
City Utility System to a previously unserved area, Company may be required to make the
subsequent relocation at its expense.
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.
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4.3. Projects with Federal Funding. City shall not order Company to remove or relocate its
Electric Facilities when a Public Way is vacated, improved or realigned for a right-of-way
project or any other project which is financially subsidized in whole or in part by the Federal
Government or any agency thereof, unless the reasonable non-betterment costs of such relocation
are first paid to Company. The City is obligated to pay Company only for those portions of its
relocation costs for which City has received federal funding specifically allocated for relocation
costs in the amount requested by the Company, which allocated funding City shall request.
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.
SECTION 5. NO WAIVER.
The provisions of this franchise apply only to facilities constructed in reliance on a franchise
from the City and shall not be construed to waive or modify any rights obtained by Company for
installations within a Company right-of-way acquired by easement or prescriptive right before
the applicable Public Ground or Public Way was established, or Company’s rights under state or
county permit.
SECTION 6. 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, provided that the Company shall hold the City harmless from any liability arising
therefrom.
SECTION 7. INSURANCE AND INDEMNIFICATION.
7.1. Insurance. The Company is required to maintain Commercial General Liability
Insurance on an occurrence basis, or self-insure on an equivalent 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.
The City must be endorsed as an Additional Insured.
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.
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7.2. Indemnity of City. The Company shall indemnify and hold the City harmless from any
and all liability, on account of injury to persons or damage to property occasioned by the
construction, maintenance, repair, inspection, the issuance of permits, or the operation of the
Electric Facilities located in the Public Ways and Public Grounds. The City shall not be
indemnified for losses or claims occasioned through its own negligence except for losses or
claims 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. The City shall not order or direct Company to
perform acts reasonably deemed hazardous by Company.
7.3. Defense of City. In the event a suit is brought against the City under circumstances
where this 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. This section is not, as to third parties, a waiver of any defense or immunity otherwise
available to the City; and the Company, in defending any action on behalf of the City shall be
entitled to assert in any action every defense or immunity that the City could assert on its own
behalf. This franchise agreement shall not be interpreted to constitute a waiver by the City of any
of its defenses of immunity or limitations on liability under Minnesota Statutes, Chapter 466.
SECTION 8. 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 law. Except where required for a City improvement
project, the vacation of any Public Way, after installation of Electric Facilities, shall not operate
to deprive Company of its rights to operate and maintain such Electric Facilities, until the
reasonable cost of relocating the same and the loss and expense resulting therefrom are first paid
to Company.
SECTION 9. ABANDONED FACILITIES.
The Company shall comply with City ordinances, Minnesota Statutes, Sections 216D.01 et seq.
and Minnesota Rules, part 7819.3300, as they may be amended from time to time.
SECTION 10. 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 11. FRANCHISE FEE.
11.1. Form. During the term of the franchise hereby granted, and in lieu of permit fees being
imposed or that the City has a right to impose, the City may charge the Company a franchise fee
by collecting the amounts the parties have agreed to as indicated in a Fee Schedule set forth in a
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separate franchise fee ordinance from each customer in the designated Company Customer
Class. 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, or (iii) a fee based on some other basis
as agreed to by the parties. The method of imposing the franchise fee, the percentage of revenue
rate, or the flat rate 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.
11.2. 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 ninety (90) days
after written notice enclosing such proposed ordinance has been served upon the Company. The
fee shall not become effective until the beginning of a Company billing month at least 90 days
after written notice enclosing such adopted ordinance has been served upon Company by
certified mail. Section 2.5 shall constitute the sole remedy for solving disputes between
Company and City in regarding to the interpretation of, or enforcement of, the separate
ordinance. No action by City to implement a separate fee ordinance will commence until this
Ordinance is effective, .
11.3 Terms Defined. For the purpose of this Section 11, the following definitions apply:
11.3.1 “Customer Class” shall refer to the classes listed on the Fee Schedule and as defined
or determined in Company’s electric tariffs on file with the Commission.
11.3.2 “Fee Schedule” refers to the schedule in the separate franchise fee ordinance
setting forth the various customer classes from which a franchise fee would be collected if the
separate franchise fee ordinance were implemented immediately after the effective date of this
franchise agreement. The Fee Schedule in the separate ordinance may include new Customer
Class added by Company to its electric tariffs after the effective date of this franchise agreement.
11.4. Collection of Fee. The franchise fee shall be payable quarterly and shall be based on the
amount collected by Company during complete billing months during the period for which payment
is to be made by imposing a surcharge equal to the designated franchise fee for the applicable
customer classification in all customer billings for electric service in each class. The payment shall
be due the last business day of the month following the period for which the payment is made. The
franchise fee may be changed by ordinance from time to time; however, each change shall meet the
same notice requirements and not occur more often than annually and no change shall require a
collection from any customer for electric service in excess of the amounts specifically permitted by
this Section 11. The time and manner of collecting the franchise fee is subject to the approval of the
Commission. No franchise fee shall be payable by Company if Company is legally unable to first
collect an amount equal to the franchise fee from its customers in each applicable class of customers
by imposing a surcharge in Company’s applicable rates for electric service. Company may pay the
City the fee based upon the surcharge billed subject to subsequent reductions to account for
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uncollectibles, refunds and correction of erroneous billings. Company agrees to make its records
available for inspection by the City at reasonable times provided that the City and its designated
representative agree in writing not to disclose any information which would indicate the amount
paid by any identifiable customer or customers or any other information regarding identified
customers.
11.5 Equivalent Fee Requirement. The separate ordinance imposing the fee shall not be effective
against Company unless it lawfully imposes and the City monthly or more often collects a fee or tax
of the same or greater equivalent amount on the receipts from sales of energy within the City by any
other energy supplier, provided that, as to such a supplier, the City has the authority to require a
franchise fee or to impose a tax. The “same or greater equivalent amount” shall be measured, if
practicable, by comparing amounts collected as a franchise fee from each similar customer, or by
comparing, as to similar customers the percentage of the annual bill represented by the amount
collected for franchise fee purposes. If the Company specifically consents in writing to a franchise
or separate ordinance collecting or failing to collect a fee from another energy supplier in
contravention of this Section 11.5, the foregoing conditions will be waived to the extent of such
written consent.
11.6. 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,
subject to the franchise expiration as provided in section 2.6 above.
SECTION 12. 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, but not more than annually, the Company shall provide to City
reporting information on service reliability, including System Average Interruption Duration
Index (SAIDI) and other measures as may be beneficial and mutually agreeable, such as
Customers Experiencing Multiple Interruptions (CEMI) or other outage data, infrastructure
investments and capital improvements, and customer usage and program participation, the exact
format and content of which shall all be mutually agreed to by City and Company.
SECTION 13. PROVISION OF ORDINANCE.
13.1. 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 parties will renegotiate mutually
acceptable franchise fee provisions. Where a provision of any other City ordinance conflicts with
the provisions of this Ordinance, the provisions of this Ordinance shall prevail.
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13.2. 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 14. 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
parties’ rights under applicable law including but not limited to Minnesota Statutes, Chapters
216B and 301B.
SECTION 15. PREVIOUS FRANCHISES SUPERSEDED.
This franchise supersedes any previous electric franchise granted to the Company or its
predecessor(s).
Passed by the City Council of _______, Minnesota this _____ day of Month, Year.
_______________________
Kirt Briggs, Mayor
Attested:
________________________
Jason Wedel, City Manager
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