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HomeMy WebLinkAbout05(L) - Approve Franchise Agreement Renewal with Minnesota Valley Electric Cooperative Report ITEM: 5L 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 Minnesota Valley Electric Cooperative RECOMMENDED ACTION: Approve an ordinance that would renew the electric franchise agreement with Minnesota Valley Electric Cooperative (MVEC). 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. City of Prior Lake | 4646 Dakota Street SE | Prior Lake MN 55372 Item 5L Page | 2 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 to approve an ordinance renewing the franchise agreement with Minnesota Valley Electric Cooperative for 20 years. 2. Motion and second to remove this item from the consent agenda for separate consideration. ATTACHMENTS: 1. Ordinance No. XX Granting Minnesota Valley Electric Cooperative (MVEC) a Franchise Agreement ORDINANCE NO. _____ AN ORDINANCE GRANTING TO MINNESOTA VALLEY ELECTRIC COOPERATIVE, A MINNESOTA CORPORATION, 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: 313.100 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, County of Scott, State of Minnesota. City Utility System. Facilities used for providing public utility service owned or operated by City or agency thereof, including sewer, storm sewer, water service, street lighting and traffic signals, but excluding facilities for providing hearing, lighting, or other forms of energy. Commission. In the case of utilities subject to the regulation by the Minnesota Public Utilities Commission, or any successor agency of 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. Municipally owned utilities and cooperatives shall be subject to applicable regulations. Company. A corporation or partnership 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, guys, anchors, conduits, fixtures, and necessary appurtenances owned or operated by 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. 1 238795v1 Public Utility. Any company organized for the purpose of providing electric utility service including municipally-owned utilities and electric cooperatives. Public Way. Any street, alley or other public right-of-way within the City including all public utility easements. 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. 313.200 ADOPTION OF FRANCHISE. 313.201 Grant of Franchise. City hereby grants 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, 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. 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 and to the further provisions of this franchise agreement. 313.202 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 Company. If Company does not file a written acceptance with the City within 60 days after publication, the City Council by resolution my revoke this franchise. 313.203 Service, Rates and Area. The service to be provided and the rates to be charged by Company for electric services in City may be subject to the jurisdiction of the Commission. The area within the City in which Company may provide electric service is subject to the provisions of Minnesota Statutes, Section 216B.37 - .40. 313.204 Nonexclusive Franchise. This is not an exclusive franchise. 313.205 Default. 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, the desired remedy, and the time within which the default or obligation must be remedied. The notification shall be in writing. 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 30 days of the 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. 2 238795v1 If a mediator is not used or if the parties are unable to resolve the dispute within 30 days after first meeting with a 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 either party may take any other action permitted by law. 313.206 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 313.201. 313.300 RIGHT OF WAY MANAGEMENT. 313.301 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 the normal operation of any City Utility System previously installed therein. Electric Facilities may be located on Public Grounds as reasonably determined by the City. Company’s construction, reconstruction, operation, repair, maintenance, location and relocation of Electric Facilities shall be subject to permits if required by a separate ordinance and 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. 313.302 Field Locations. Company shall provide field locations for its underground Electric Facilities within City consistent with the requirements of Minnesota Statutes, Chapter 216D and Minnesota Rules parts 7819.4000 and 7819.4100. 313.303 Street Openings. 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 Company shall not be more burdensome than those imposed on other utilities for similar facilities or work. Company may, however, open and disturb the surface of any Public Way or Public Ground without permission from the City if (i) an emergency exists requiring the immediate repair of Electric Facilities and (ii) Company gives telephone notice to the City before, if reasonably possible, commencement of the emergency repair. Within two business days after commencing the repair, Company shall apply for any required permits and pay any required fees. 3 238795v1 313.304 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. 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 no 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 Company. 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. The City hereby waives any requirement for Company to post a construction performance bond, certificate of insurance, letter of credit or any other form of security or assurance that may be required, under a separate existing or future ordinance of the city, of a person or entity obtaining the City’s permission to install, replace or maintain facilities in a Public Way. 313.305 Shared Use of Poles. 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 use of such poles or towers by 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 Company because of such use by City. The installation and placement of any of the foregoing shall comply with the National Safety Electric Code. 313.306 Avoid Damage to Electric Facilities. The Company must take reasonable measures to prevent the Electric Facilities from causing damage to persons or property. The Company must take protective measures when the City performs work near the Electric Facilities, if given reasonable notice by the City of such work prior to its commencement. 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. 313.307 Notice of Improvements to Streets. The City must give Company reasonable written Notice of plans for improvements to Public Ways or Public Ground 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 or Public Ground upon which the improvements are to be made, (iii) the extent of the improvements, (iv) the time 4 238795v1 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 Company a sufficient length of time, considering seasonal working conditions, in advance of the actual commencement of the work to permit Company to make any additions, alterations or repairs to its Electric Facilities the Company deems necessary. 313.308 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. 313.400 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. 313.500 FACILITIES RELOCATION. 313.501 Relocation in Public Ways. The Company shall comply with Minnesota Statutes, Minnesota Rules, part 7819.3100 and applicable City ordinances consistent with law. Nothing in this Ordinance requires Company to relocate, remove, replace or reconstruct at its own expense its Electric Facilities where such relocation, removal, replacement or reconstruction is solely for the convenience of the City and is not reasonably necessary for the construction or reconstruction of a Public Way or City Utility System or other City improvement. 313.502 Relocation in Public Grounds. City may require Company at Company’s expense to relocate or remove its Electric Facilities from Public Ground upon a finding by City that the Electric Facilities have become or will become a substantial impairment to the existing or proposed public use of the Public Ground. In the event the City requests relocation, rearrangement, or removal of the Company’s Electric Facilities from Public Ground solely for the convenience of the City and not because the Electric Facilities have become or will become a substantial impairment to the existing or proposed public use of the Public Ground, the City shall promptly reimburse the Company for all of the Company’s costs and expenses related thereto. 313.503 Projects with Federal Funding. Relocation, removal, or rearrangement of any Company Electric Facilities made necessary solely because of the extension into or through City of a federally-aided highway project shall be governed by the provisions of Minnesota Statutes, Section 161.46, as supplemented or amended. It is understood that the right herein granted to Company is a valuable right. City 5 238795v1 shall not order Company to remove or relocate its Electric Facilities when a Public Way is vacated, improved or realigned because of a renewal or a redevelopment plan which is financially subsidized non-betterment costs of such relocation and the loss and expense resulting therefrom are first paid to Company, but the City need not pay those portions of such for which reimbursement to it is not available. 313.504 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 Way or Public Ground was established, or Company’s right under state or county permit. The provision is unrelated to the collection of any franchise fee imposed by the City. 313.600 FRANCHISE FEE. 313.601 Form. During the term of the franchise hereby granted, and in lieu of any other permit fees being imposed or that the City has a right to impose, the City may charge the Company a scheduled fee. The Company shall collect the amounts indicated in a Fee Schedule set forth in a separate ordinance from each customer in the designated Company Customer Class. “Customer Class” shall refer to the classes listed on the Fee Schedule and as defined or determined in Company’s electric tariffs on filed with the Commission. “Fee Schedule” refers to the schedule below setting forth the various customer classes from which a franchise fee would be collected if a separate ordinance were implemented immediately after the effective date of this franchise agreement. The Fee Schedule in the separate ordinance may include new Customer Classes added by Company to its electric tariffs after the effective date of this franchise agreement. 313.602 Separate Ordinance. The franchise fee shall be imposed by separate ordinance duly adopted by the City Council and served upon Company by certified mail. The fee shall not become effective until the beginning of a Company billing month at least 60 days after written notice enclosing such adopted ordinance had been served upon Company by certified mail. 313.603 Condition of Fee. The separate ordinance imposing the fee shall not be effective against the Company unless its lawfully imposes a fee of the same or substantially similar amount on the sale of energy within the City by any other energy supplier, provided that, as to such supplier, the City has the authority to require a franchise fee. 6 238795v1 313.604 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 to the Company 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 the franchise fee ordinance. 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 accounts for 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. 313.605 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. The franchise fee or tax shall be applicable to energy sales for any energy use related to heating, cooling or lighting, or to run machinery and appliances, but shall not apply to energy sales for the purpose of providing fuel for vehicles. 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, the forgoing conditions will be waived to the extent of such written consent. 7 238795v1 313.606 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 for a period not to exceed one year. 313.700 TREE TRIMMING. Unless otherwise provided in any permit or other reasonable regulation required by the City under separate ordinance, Company may trim all trees and shrubs in the Public Ways and Public Grounds of City to the extent Company finds necessary to avoid interference with the proper construction, operation, repair and maintenance of any Electric Facilities installed hereunder, provided that Company shall hold the City harmless from any liability arising therefrom. 313.800 INDEMNIFICATION. 313.801 Indemnity of City. Company shall indemnify and hold 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, Company’s plans or work. The City shall not be indemnified if the injury or damage results from the performance in a proper manner of acts reasonable deemed hazardous by Company, and such performance is nevertheless ordered or directed by City after notice of Company’s determination. 313.802 Defense of City. In the event a suit is brought against the City under circumstances where this agreement to indemnify applies, Company at its sole cost and expense shall defend the City in such suit if written notice thereof is promptly given to Company within a period wherein Company is not prejudiced by lack of such notice. If Company is required to indemnify and defend, it will thereafter have control of such litigation, but Company may not settle such litigation without the consent of the City, which consent shall not be unreasonable withheld. This section is not, as to third parties, a waiver of any defense or immunity otherwise available to the City; and Company, in defending any action on behalf of the City shall be entitles to assert in any action every defense or immunity that the City could assert in its own behalf. 313.900 VACATION OF PUBLIC WAYS. The City shall give Company at least two weeks prior written notice of a proposed vacation of a Public Way. The City and the Company shall comply with 8 238795v1 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 the 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 from such relocation are first paid to Company. In no case, however, shall City be liable to Company for failure to specifically preserve a right-of-way under Minnesota Statutes, Section 160.29. 313.1000 ABANDONED FACILITIES. Company may abandon underground electric Facilities in place per state statute and administrative rule, provided at the city’s request, Company will remove abandoned metal or concrete encased conduit interfering with a City improvement project, but only to the extent such conduit is uncovered by excavation as part of the City improvement project. 313.1100 PROVISIONS OF ORDINANCE. 313.1101 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 other City ordinance conflicts with the provisions of this Ordinance, the provisions of this Ordinance shall prevail. 313.1102 Limitation on Applicability. This Ordinance constitutes a franchise agreement between the City and 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. 313.1200 AMENDMENT PROCEDURE. Either party to this franchise agreement may at any time propose that the agreement be amended. If an amendment is agreed upon by the parties, 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 Company’s written consent 9 238795v1 thereto with the City Manager within 90 days after the effective date of the amendatory ordinance. Passed by the City Council of Prior Lake, Minnesota this ____ day of _____, 2026. CITY OF PRIOR LAKE Kirt Briggs, Mayor Attest: Jason Wedel, City Manager 10 238795v1