VII.3. Update on Franchise Fee; Bishop
CITY OF HOPKINS
Memorandum
To: Honorable Mayor and Council Members
Mike Mornson, City Manager
From: Nick Bishop, Finance Director
Date: July 11, 2023
Subject: Update on Franchise Fees
_____________________________________________________________________
PURPOSE
To provide an update on the process for increasing gas and electric franchise fees
beginning on January 1, 2024.
INFORMATION
Background
City Council has met twice to discuss gas and electric franchise fee ordinances that
expire on December 31, 2023. City Council directed staff to increase fees for a five-year
term and to continue subsidizing the general fund and supporting the parks and capit al
improvement funds. City Council was in support of the increased amount going towards
parks and sustainability.
At the June 20, 2023 City Council meeting, staff prop osed a rate increase of $1.50
monthly for gas and electric for residential customers, or $3.00 combined per mo nth.
The total paid by a residential customer would be $10 per month or $120 per year. At
that same meeting City Council directed staff to pursue a franchise fee model based on
percent of revenue, and not a flat fee for each customer type.
Timeline for Adopting Ordinance
The City’s 2007 Ordinance with Xcel Energy says the City must provide two sixty-day
notice periods to Xcel before a new fee can become effective. Xcel is waiving the initial
sixty-day notice period and asking for a 90 day notice to implement the fee. This will
give City Council and staff additional time to discuss and review the proposed fee
structure. Centerpoint requires a shorter timeline and can still be done in conjunction
with Xcel.
Flat Fee Based on Account Type
On June 20, 2023, staff proposed a rate increase with flat fees for each account type.
City Council could still move forward with that pro posal or look at flat rates that place
more of the burden on commercial/industrial account types. Based on our ordinances,
rates can be updated annually.
Finance Department
Fee as a Percent of Revenue
City staff are working with Xcel Energy, Center Point Energy and Kennedy & Graven on
a proposed ordinances based on percent of revenue.
FUTURE ACTION
City staff will come back to City Council at a later date with proposed ordinances.
Tentatively, the first and second readings could occur on September 5th and 19th.