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CR 02-127 Franchise Ordinance - Reliant Energy Minnegasco C\IY Or: , ~ August 20, 2002 HOPKINS CoundlReport2002~27 . First Reading of Ord. 2002-879 - Franchise Ordinance for Reliant Energy Minnegasco Proposed Action Staff recommends adoption of the following motion: Move to approve Ordinance 2002-879 for first readinQ. Overview Reliant Energy Minnegasco currently holds a franchise to operate and supply gas within the City of Hopkins. This nonexclusive franchise was granted in 1983 by Ordinance No. 83-523 and is set to expire on June 30, 2003. Ordinance 2002-879 will grant Reliant Energy Minnegasco a franchise to continue operating within the City and to use City-owned rights-of-way for a period of 20 years. The ordinance grants to the company a "nonexclusive franchise to construct, operate, repair and maintain facilities and equipment for the transportation, djstribution, manufacture and sale of gas energy for public and private use and to use public rights of way of the City for such purposes." Ordinance 2002-879 details the terms and conditions to be followed by the company and the City with regard to this franchise. Primary Issues to Consider . . What is the relationship between the City's Right-of-Way Management Ordinance and the franchise ordinance? . Does the franchise ordinance allow a franchise fee (in consideration for the use of the City- owned rights-of-way, etc.) to be imposed a later date should the Council decide to do so? . What is the term of the franchise? . Review by City Attorney. . Who will pay for the publication of the franchise ordjnance? SupportinQ Information . Ordinance 2002-879 ~d ,5~ k- Steve Statw'fler Assistant to the City Manager Financial Impact: $ Budgeted: Y/N Source: Related Documents (CIP, ERP, etc.): Notes: . .~-,-- -- -- ----- -.-- --- ---- --- - . Analysis of Primary Issues . What is the relationship between the City's Right-at-Way Management Ordinance and the franchise ordinance? In the event of a conflict between the provisions of the franchise ordinance and the City's Right-of-Way Management Ordinance relating to the management of the right-of-way, the Right-of-Way Management Ordinance will control. In general, the franchise ordinance defers to the Right-of-Way Management Ordinance. . Does the franchise ordinance allow a franchise fee (in consideration for the use of the City-owned rights-of-way, etc.) to be imposed a later date should the Council decide to do so? Yes. The City may at any time impose a franchise fee (by separate ordinance), in accordance with Minnesota Statutes 9216B.36, if it chooses to do so. . What is the term of the franchise? The franchise ordinance has a term of 20 years from the effective date (the date on which the ordinance becomes effective). The Hopkins City Charter does not allow franchises to be granted for a period of longer than 20 years. . Review by City Attorney. . City Attorney Jerry Steiner has reviewed the ordinance. Changes were made to the draft ordinance based on Mr. Steiner's recommendations. All of Mr. Steiner's concerns have been addressed within the current draft of proposed Ordinance 2002-879. . Who will pay for the publication ot the franchise ordinance? Publication of the ordinance will be paid for by Reliant Energy Minnegasco. Altern atives 1. Approve Ordinance 2002-879 for first reading. 2. Do not approve Ordinance 2002-879 for first reading. 3. Continue for additional information. Staff recommends approval of Ordinance 2002-879 for first reading. . ..- - ----.- -- .-- CITY OF HOPKINS . Hennepin County, Minnesota ORDINANCE NO. 2002-879 FRANCHISE ORDINANCE FOR RELIANT ENERGY MINNEGASCO AN ORDINANCE GRANTING TO RELIANT ENERGY MINNEGASCO, A NATURAL GAS UTILITY, A DIVISION OF RELIANT ENERGY RESOURCES CORPORATION, A DELAWARE CORPORATION, ITS SUCCESSORS AND ASSIGNS, A NONEXCLUSIVE FRANCHISE TO CONSTRUCT, OPERATE, REPAIR AND MAINTAIN FACILITIES AND EQUIPMENT FOR I THE TRANSPORT A IlON, DISTRIBUTION, MANUFACTURE AND SALE OF GAS ENERGY FOR PUBLIC AND PRIVATE USE AND TO USE PUBLIC RIGHTS OF WAY OF THE CITY FOR SUCH PURPOSES; AND PRESCRIBING CERTAIN TERMS AND CONDITIONS THEREOF. THE CITY COUNCIL OF THE CITY OF HOPKINS DOES HEREBY ORDAIN: SECTION 1. DEFINITIONS. For purposes of this Ordinance, the following capitalized tenus shall have the following meanings: . 1.1. City. The City of Hopkins, County of Hennepin, State of Minnesota. 1.2. City Utility System. Facilities used for providing non-energy related public utility service owned or operated by the City or agency thereof, including sewer and water service. stoml sewer, street lighting and traffic signals but excluding facilities for providing heating or other tonus of energy. 1.3. Commission. The Minnesota Public Utilities Commission, or any successor agency or agencies, including an agency of the federal government that preempts all or pali of the authority to regulate gas retail rates omv vested in the Commission. 104. Company. Reliant Energy Mirmegasco, a Division ofReEant Energy Resources Corporation. its successors and assigns, including successors to assignees of those portions of the Company that constitute any part or parts of tbe Gas Facilities subject to this franchise. 1.5. Effective Date. The date on which the ordinance becomes effective under Section 2.2. 1.6. Gas. Natural gas, manufactured gas, mixture of natural gas and manufactured gas or other f0l111S of gas energy. 1.7. Gas Facilities. Gas transmission and disttibution pipes, mains, lines, ducts, fixtures. and all . necessary facilities, equipment and appUltenances owned, operated or otherwise used by the Company for the purpose of providing gas energy for public use. 1 1.8. Non-Betterment Costs. Costs incurred by the Company ii-om relocation, removal or rearrangement of Gas Facillties that do not result in an improvement to the Gas Facilities. . 1.9. Notice. A writing served by a party or pmiies on another party or pat1ies. Notice to Company must be mailed by I Sl class United States Mail to: Reliant Energy Minnegasco V.P., Regulatory & Supply Service 800 LaSalle A venue Minneapolis, MN 55402 Notice to City must be mailed by 1 st class United States Mail to: City of Hopkins A TTN: City Manager 1010 1st St. So. Hopkins, MN 55343 1.10. Public Right-of-Way or Right-of-\Vay. The area on, below, or above any public road\vay, highway, alley, street, caIiway, bicycle lane and public sidewalk in which the city has an interest and includes all areas, owned, granted or established for public rights-of-way for travel purposes or public utility easements. Public right-of-way includes areas that have not been opened or improved for street use or other public purposes. A right-of-way does not include the airwaves above a right-of-way with regard to cellular or other non-wire telecommunications or broadcast . serVIce. 1.11. Right-of-\Vay J\1anagement Ordinance. Right-of-Way Management Ordinance shall mean and refer to Section 805 of the Hopkins Code of Ordinances which regulates the installation and maintenance of utility improvements within public right-of-way. SECTION 2. FRANCHISE. 2.1 Grant of Franchise. The City grants the Company, for a peliod of twenty (20) years from the Effective Date, the right to impOl1, manufacture, transport, distribute and seII Gas for public and private use within and through the limits of the City. This right includes the provision of Gas that is (i) manufactured by the Company or its affiliates and delivered by the Company, (ii) purchased and delivered by the Company or (iii) purchased from another source by the retail customer and delivered by the Company. For these purposes, the Company may construct. operate, repair and maintain Gas Facilities in, on, over, under and across the Public Right-of-Way subject to the provisions of this ordinance. The Company may do all things reasonably necessary or customary to accomplish these purposes, subject however, to such statutes, ordinances and regulations as currently exist including the Right-of-Way Management Ordinance, the provisions of which are incorporated in this Franchise Ordinance. The Company shall be given Notice 60 days in advance of the proposed adoption of future amendments to the Right-of-Way Management Ordinance that would materially impair or affect any of the Company's rights under this Ordinance. The City and Company shall negotiate in good faith to agree upon the provisions . of any such amendments to the Right-of-Way Management Ordinance. If the City and Company are unable to agree, disputes wil1 be handled under the tenus of Section 2.6 D4ault, of this Ordinance. Future amendments to the Right-of-Way Management Ordinance that would materially impair or affect any of the Company's lights under this Ordinance shall be binding on the Company only when agreed upon as provided in this section 2.1. 2 2.2 Effective Date. This franchise is effective from and after its acceptance by the Company. . Written acceptance or rejection of the fi-anchise by the Company must be filed with the City Clerk within ninety (90) days after publication oftl1is ordinance or this Ordinance shall no longer be effective. 2.3 Non exclusive Franchise. This ordinance does not grant an exclusive franchise. 2.4 Legal Fees. Each party is responsible for its own legal fees incurred related to granting of this franchise. 2.5 Publication Expense. The expense of publication ofthis ordinance must be paid by the Company. 2.6 Dispute Resolution. If the City or Company asserts that the other par1y is in default in the performance of any obligation hereunder, the complaining party must notify the other party in writing of the default and the desired remedy. Representatives nfthe parties must promptly meet and attempt in good faith to negotiate a resolution of the dispute. If the dispute is not resolved within thiriy (30) days after service of the Notice, the parties shall select a mediator to facilitate further discussion. The patiies will equally share the fees and expenses of the mediator. If a mediator is not used or if the parties are unable to resolve the dispute within thirty (30) days after first meeting \vith the mediator, either party may commence an action in District Court to interpret and enforce this franchise or for such other relief as may be pennitted by law or equity. The provisions o[this section 2.6 shall not be interpreted to limit, impair or restrict the City's . rights and remedies under the Right-of-Way Management Ordinance, all of which shall be in addition to the rights and remedies of the City and the obllgations of the company under this Ordinance. In the event of any conflict between the tenns and provisions of this Franchise Ordinance and those of the Right-of-Way Management Ordinance, as in effect on the EfTective Date of this Ordinance. relating to the management of the Public Right-of-Way, the terms and provisions of the Right-of-Way Management Ordinance shall control SECTION 3. CONDITIONS OF USE. 3.1 Location of Facilities. Gas Facilities in the Public Right-of-Way shal1 be located, pem1itted, constructed, and maintained so as not to disrupt normal operation of any City Utility system and to otherwise comply with the Right-of-Way Management Ordinance. 3.2 Field Location. Upon request by the City, the company must provide field locations for any of its Gas Facilities within the peliod of time required by Mirmesota State Statute 216D. 3.3 Permit Required. The Company shall be subject to al1 pennitting requirements of the Right-of.. Way Management Ordinance. 3.4 Restoration. Restoration ofthe Public Right-of-Way shall be subject to the Right-of-Way Management Ordinance. After completing work requiring the opening of a Public Right-of-Way, the Company must restore the same, including paving and its foundation, to the condition . fonnerly existing and maintain the paved surfaces in good condition for two years thereafter. The work must be completed as promptly as weather pennits. lfthe Company does not promptly perf 01111 and complete the work, remove all dirt, rubbish, equipment and material, and restore the Public Right-of-Way, the City may, after demand to the Company to cure and the passage of a reasonable period of time not less than five calendar days following the demand, make the 3 restoration at the expense of the Company. The Company must pay to the City the cost of such work done for or perfonned by the City, including administrative expense and overhead, plus ten . percent of cost and administrative expense. This remedy is in addition to any other remedies available to the City for noncompliance with this section or with the Right-of-Way Management Ordinance. 3.5 Protection of Gas Facilities in Public Ways: The Company must take reasonable measures to prevent the Gas Facilities fi'om causing damage to persons or property. The Company must take reasonable measures to protect the Gas Facilities fi-om damage that could be inflicted on the Gas Facilities by persons, property or the elements. The Company and the City will comply with all applicable laws and codes \",hen perfonning work near the Gas Facilities. Nothing in this Ordinance relieves any person fi'0l11 liability arising out of the failure to exercise reasonable care to avoid damaging Gas Facilities while performing any activity. I 3.6 Notice of [mprovements. The City must give the Company reasonable Notice of plans for I improvements to Public Rights-of-Way where the City has reason to believe that Gas Facilities may affect or be affected by the improvement. The notice must contain; (i) the nature and character of the improvements, (ii) the Public Rights-of-Way upon which the improvements are to be made. (iii) the time when the City will stmi the work, and, (iv) if more than one Right-of- 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 in advance of the actual commencement of the work to pem1it the Company to make any necessary additions, alterations, or repairs to its Gas Facilities. If streets are at final width and grade and the City has installed underground sewer and water mains and service connections to the property line abutting the streets prior to a penn anent . paving or resurfacing of such streets, and the Company's main is located under such street, the City may require the Company to install gas service connections prior to such paving or resurfacing, if it is apparent that gas st;;rvice will be required during the five years following the paving or resurfacing. SECTION 4. RELOCATIONS. 4.1 Relocation of Gas Facilities and Vacation of Public Rights-of-Way: Gas Facilities in Public Rights-or-Way shall be subject to the requirements of the Right-of-Way Management Ordinance relating to relocation of Gas Facilities and other utility facilities in Public Rights-of-Way. If the City detennines. by the proper exercise of its police power, to vacate a Public Right-of-Way for a City improvements project, or to grade, regrade or change the aligru11ent of any Public Right-of- Way, or construct or reconstruct any City Utility System in any Public Right-of-Way, the City may order the Company to relocate its Gas Facilities at the Company's expense. The City must give the Company sufficient notice of City plans atTecting Gas Facilities in the Right-ot~ Way. The provisions of this Section 4.1 apply only to Gas Facilities constructed in reliance on this fi'anchise or any plior franchise e,Tfanted to the Company or its predecessors and the Company does not waive its rights under an easement or prescriptive right acquired by the Company in the Public Rights-of-Way. If the vacation of the Public Right-of-Way does not require the relocation ofthe existing gas facility, the City shall reserve a public utility easement, created by and within the document establishing the vacation. In no case, however, will City be liable to Company for failure to specifically preserve a Right-of-Way under Minnesota Statutes, Section . 160.29. 4.2 Relocation of Gas Facilities in Public Right-of-Way. The City may. by the proper exercise of its police plnver, require the Company to relocate the Gas Facilities within or remove the Gas Facilities from Public Right-of-Way, upon a finding by City that the Gas Facilities have become 4 .-- or will become a substantial impairment ofthe public use or enjoyment to which the Public Right-of-Way is or will be put. The relocation or removal will be at the Company's expense. . The provisions of this Section 4.2 apply only to Gas Facilities conshucted in reliance on this fi-anchise or any prior franchise granted to the Company or its predecessors and the Company does not waive its rights under an easement or prescriptive right acquired by the Company in the Public Right-of-Way. 4.3 Projects with Federal Funding. Relocation, removal or reanangement of any Company Gas 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, as supplemented or amended. SECTION 5. DEFENSE AND INDEMNIFICATION. 5.1 Terms. The Company shall indemnify, keep and hold the City, its elected oftlcials, officers, employees, and agents free and hannless from any and all liability on account of injury or death of persons or damage to properiy occasioned by the construction, maintenance, repair, inspection, the issuance of pennits, or the operation of the Gas Facilities located in the Public Rights-of- Way. The City will not be indemnified for losses or claims occasioned through its own negligence except for losses or claims mising out of or alleging the City's negligence as to the issuance of penn its for, or inspection of, Company's plans, work, or Gas Facilities. The City will not be indemnified if the injury or damage results from the perfomlance in a proper manner of acts reasonably detennined to be hazardous by Company, and such perfonnance is nevertheless ordered or directed by City, in writing, after notice of Company's detennination. . 5.2 Litigation. If such a suit is brought against the City under circumstances where the agreement in this Section 5 to indemnify appl1es, the Company at its sole cost and expense will defend the City in such suit if Notice thereof is given to the Company within a reasonable period. 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 will not be umeasunably withheld. This section is not intended to be a waiver of any defense, limitation ofliability, or immunity otherwise available to the City. The Company, in defending any action on behalf of the City shall asselt in any action every defense, limitation ofliability, or immunity that the City could asseri. SECTION 6. CHANGE IN FORM OF GOVERNMENT. i Any change in the fom1 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 lights and obligations of the City provided in this Ordinance. SECTION 7. FRANCHISE FEE. 7.1 Form. During the teml of the fi"anchise hereby hTfanted, and in addition to pemlit 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 tor its operations . within the City, or (ii) a t1at 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 ofretail customers within the corporate limits of the City. The method of imposing the fi'anchise fee, the percentage of revenue rate, or the flat rate based on metered service may differ for each customer class or combine the methods desclibed in (i) - (iii) above in assessing the fee. 5 - - The City shall seek to use a fonnula that provides a stable and predictable amount of fees, without placing the Company at a competitive disadvantage. If the Company claims that tbe . City-required fee fonnula is discriminatory or otherwise places the Company at a competitive disadvantage, the Company shall provide a fommla that will produce a substantially similar fee amount to the City and reimburse the City's reasonable fees and costs in reviewing and implementing the fonnula. The City will attempt to accommodate the Company but is under no franchise obligation to adopt the Company-proposed franchise fee fonnula and each review will not delay the implementation of the City-imposed fee. 7.2 Sepal"ate Ordinance. The franchise fee shall be imposed by separate ordinance duly by the City Council, which ordinance shall not be adopted until at least thirty (30) days after wIitten Notice enclosing such proposed ordinance has been served upon the Company. The fee shall become effective ten (10) days after wIitten Notice enclosing such adopted ordinance has been served upon the Company. 7.3 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 gas energy within the City by any other gas energy supplier, provided that, as to such supplier, the City has the authority or contractual right to require a fi'anchise fee or similar fee through a previously agreed upon franchise. 7.4 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 fi'anchise fee tonnula may be changed from time to time, however, the change shall meet the same notice requirements and the . tee may not be changed more often than annually. Such fee shall not exceed any amount that the Company may legally charge to its customers pIior to payment to the City. Such fee is subject to subsequent reductions to account for uncollectibles and customer refunds incuned 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 detenuination of the franchise fee payments. 7.5 Continuation ofthe Franchise Fee. If this franchise expires and the City and Company are unable to agree upon tenns 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. SECTION 8. LIMITATION ON APPLICABILITY. Limitations on Applicability. This Ordinance constitutes a franchise agreement between the City and the Company. No provision of this franchise inures 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 anyone or more of the tenus hereof, or otherwise give rise to any cause of action for any person not a pmiy hereto. SECTION 9. PREVIOUS FRANCHISES SUPERSEDED. This franchise supersedes and replaces previous franchises granted to the Company or its predecessors. . SECTION 10. AMENDMENTS. Either pm1y to this franchise agreement may at any time propose that the agreement be amended. This ordinance may be amended at any time by tbe City. An amendatory ordinance becomes effective 6 upon the filing of the Company's wlitten consent thereto with the city clerk within 90 days after adoption. . SECTION 11. NOTICES. Any Notice required to be given by this Ordinance shall be deemed to have been given 2 business days after being sent by 1 st class United States Mail and deposited with the U.S. Postal Service. SECTION 12. SEVERABILITY. If any portion of this ordinance is found unenforceable for any reason, the validity of the remaining provisions will not be affected. First Reading: August 20, 2002 Second Reading: Date of Publication: Date Ordinance Takes Effect: Gene Maxwell, Mayor . ATTEST: TelTY Obel111aier, City Clerk APPROVED AS TO FORM AND LEGALITY: City Attorney Signature Date . 7