VII.3. First Reading Ordinances Adopting Gas and Electric Franchise Fees Beginning on January 1, 2024 Bishop
CITY OF HOPKINS
City Council Report 2023-091
To: Honorable Mayor and Council Members
Mike Mornson, City Manager
From: Nick Bishop, Finance Director
Date: September 5, 2023
Subject: First Reading of Ordinances Adopting Gas and Electric Franchise Fees
Beginning on January 1, 2024
_____________________________________________________________________
RECOMMENDED ACTION
MOTION TO Adopt for First Reading on An Ordinance Setting a Franchise Fee on
Electric Operations within the City of Hopkins – Northern States Power D/B/A Xcel
Energy
MOTION TO Adopt for First Reading on An Ordinance Setting a Franchise Fee on Gas
Operations within the City of Hopkins – Center Point Energy Resources Corporation
D/B/A Centerpoint Energy Minnesota Gas
OVERVIEW
City Council has had four meetings to discuss gas and electric franchise fee ordinances
that expire on December 31, 2023. City Council directed staff to increase fees for five-
year term and to continue subsidizing the general fund and supporting the parks and
capital improvement funds. City Council was in support of increasing the fees for parks
and sustainability. City Council directed staff to pursue a franchise fee model based on
utility revenues.
Staff has reviewed utility revenue by account type compared to franchise revenue. The
current breakdown of fees between residential and commercial properties is 57% to
43%, respectively. This is compared to the utility revenue break down between
residential and commercial of 36% to 64% respectively. Residential properties are
paying a greater percentage when compared to the total utility costs.
A new fee methodology based on percentages will reduce the disparity. The following
charts show the recommended rates based on a percent of utility revenues and a
projected average fee for each account type. Customers would pay more or less than
the averages based on usage.
Finance Department
Residential
Small C&I
Non
Small C&I
Demand Large C&I
Current 3.50$ 6.15$ 24.70$ 170.50$
Proposed 5.00%4.25%4.25%4.25%
Average Fee 3.78$ 5.16$ 36.72$ 619.86$
Xcel Energy
Residential
Commercial
A
Commercial
B
Commercial/
Industrial C
Small Dual
Fuel A
Small Dual
Fuel B
Large
Volume
Dual Fuel
Current 3.50$ 3.50$ 8.75$ 24.70$ 48.55$ 170.50$ 170.50$
Proposed 5.00%4.25%4.25%4.25%4.25%4.25%4.25%
Average Fee 3.83$ 3.23$ 9.44$ 51.91$ 74.84$ 120.42$ 1,097.35$
Centerpoint Energy
The proposed fees are broken out between residential and commercial customers at
40% to 60%, respectively. The utility revenue breakdown is the same residential and
commercial customers at 36% to 64%, respectively.
The recommended ordinances are projected to generate approximately $1.54 million of
revenue. Franchise fees can be used for any governmental purpose.
Proposed Uses of Franchise Fees
Current Uses (No Change)
General Fund 311,695
Parks Fund 308,000
Capital Fund 360,000
979,695
2024 Increase
Climate Solution Fund - Grants 200,000
Sustainability - Staffing, Consulting Etc.185,000
Parks Fund 50,000
Unallocated 127,811
562,811
Total Proposed Uses 1,542,506
The First Reading of the ordinances needs to occur on September 5th for the fees to be
effective in January 2024. However, City Council can allocate the funds during the
ongoing budget process.
SUPPORTING INFORMATION
• Ordinance No. 2023-1199
• Ordinance No. 2023-1200
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CITY OF HOPKINS
COUNTY OF HENNEPIN
ORDINANCE NO. 2023-1199
AN ORDINANCE SETTING A FRANCHISE FEE ON ELECTRIC OPERATIONS
WITHIN THE CITY OF HOPKINS – NORTHERN STATES POWER D/B/A XCEL
ENERGY
The City Council of the City of Hopkins ordains:
Subdivision 1. Purpose. The Hopkins City Council has determined that it is in the best interest
of the city to impose a franchise fee as authorized in Minnesota Statutes – section 216B.36 on
those public utility companies that provide natural gas and electric services within the City of
Hopkins.
(a) Pursuant to City Ordinance No. 2007-984, a Franchise Agreement between the City of
Hopkins and Northern States Power Company, a Minnesota corporation, dba Xcel
Energy, its successors and assigns, the city has the right to impose a franchise fee on
Northern States Power Company, a Minnesota corporation, dba Xcel Energy, its
successors and assigns, in an amount and fee design as set forth in Section 9 of the
Northern States Power Company Franchise and in Subdivision 9 of this Ordinance.
Subdivision 2. Franchise Fee Statement. A franchise fee is hereby imposed on Northern
States Power Company, a Minnesota corporation, dba Xcel Energy, its successors and assigns,
under the electric franchise in accordance with Subdivision 9, commencing with the Xcel
Energy’s January 2024 billing month.
Subdivision 3. Payment. The said franchise fee shall be payable to the city in accordance with
the terms set forth in Section 9 of the Franchise and the terms of this Ordinance.
Subdivision 4. Surcharge. The city recognizes that the Minnesota Public Utilities Commission
may allow Company to add a surcharge to customer rates to reimburse Company for the cost of
the fee.
Subdivision 5. Record Support for Payment. Xcel Energy shall make each payment when
due and, if requested by the city, shall provide at the time of each payment, a statement
summarizing how the franchise fee payment was determined, including information showing any
adjustments to the total surcharge billed in the period for which the payment is being made to
account for any uncollectibles, refunds, or error corrections.
Subdivision 6. Enforcement. Any dispute, including enforcement of a default regarding this
ordinance will be resolved in accordance with Section 2.5 of the Franchise Agreement.
Subdivision 7. Effective Date of Franchise Fee and Repeal of City Ordinance 2018-1135
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The effective date of this ordinance shall be after its publication and ninety (90) days after the
sending of written notice enclosing a copy of this adopted Ordinance to Xcel Energy by certified
mail. Collection of the fee shall commence as provided above. Upon the effective date of this
Ordinance, City Ordinance 2018-1135 shall be repealed and replaced by this Ordinance 2023-
1199.
Subdivision 8. Termination of Ordinance
This ordinance and the franchise fee imposed by it shall remain in effect until December 31 2026, at
which time they shall terminate and be of no further effect, except that the Company shall remain
obligated after that date to pay the City all franchise fees due with respect to any period of time prior to
December 31, 2026, and collected after that date
Subdivision 9. Fee Schedule.
Class Percent (%) of Gross
Revenue Per Account
Residential 5.00%
Sm C & I – Non-Dem 4.25%
Sm C & I – Demand 4.25%
Large C & I 4.25%
The term “gross revenues” shall have the same meaning as in Section 9.2 of the Franchise.
Franchise fees are to be collected by the Utility in the amounts set forth in the above schedule
and submitted to the city on a quarterly basis as follows: January-March collections due by April
30, April-June collections due by July 31, July-September collections due by October 31, and
October-December collections due by January 31.
First Reading: September 5, 2023
Second Reading: September 19, 2023
Date of Publication: September 28, 2023
Date Ordinance Takes Effect: January 1, 2024
Adopted this 5th day of September, 2023 by the Hopkins City Council.
______________________________________
Patrick Hanlon, Mayor
Attest:
______________________________________
Amy Domeier, City Clerk
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CITY OF HOPKINS
COUNTY OF HENNEPIN
ORDINANCE 2023-1200
AN ORDINANCE SETTING A FRANCHISE FEE ON NATURAL GAS OPERATIONS
WITHIN THE CITY OF HOPKINS – CENTERPOINT ENERGY RESOURCES
CORPORATION D/B/A CENTERPOINT ENERGY MINNESOTA GAS
The City Council of the City of Hopkins ordains:
Subdivision 1. Purpose. The Hopkins City Council has determined that it is in the best interest
of the city to impose a franchise fee as authorized in Minnesota Statutes section 216B.36 on
those public utility companies that provide natural gas and electric services within the City of
Hopkins.
(a) Pursuant to City Ordinance No. 2002-879, a Franchise Agreement between the City of
Hopkins and CenterPoint Energy Resources Corporation d/b/a CenterPoint Energy
Minnesota Gas, its successors and assigns, the City has the right to impose a franchise fee
on CenterPoint Energy in an amount and fee design as set forth in Section 7 of the
CenterPoint Energy Franchise and in Subdivision 9 of this Ordinance.
Subdivision 2. Franchise Fee Statement. A franchise fee is hereby imposed on CenterPoint
Energy Resources Corporation d/b/a CenterPoint Energy Minnesota Gas, its successors and
assigns, under its gas franchise in accordance with Subdivision 9, commencing with CenterPoint
Energy’s January 2024 billing month.
Subdivision 3. Payment. The said franchise fee shall be payable to the city in accordance with
the terms set forth in Section 7 of the Franchise and this Ordinance.
Subdivision 4. Surcharge. The city recognizes that the Minnesota Public Utilities Commission
may allow Company to add a surcharge to customer rates of city residents to reimburse
Company for the cost of the fee.
Subdivision 5. Record Support for Payment. CenterPoint Energy shall make each payment
when due and, if requested by the city, shall provide at the time of each payment, a statement
summarizing how the franchise fee payment was determined, including information showing any
adjustments to the total surcharge billed in the period for which the payment is being made to
account for any uncollectibles, refunds, or error corrections.
Subdivision 6. Enforcement. Any dispute, including enforcement of a default regarding this
ordinance will be resolved in accordance with Section 2.6 the Franchise Agreement.
Subdivision 7. Effective Date of Franchise Fee and Repeal of City Ordinance 2018-1136
The effective date of this ordinance shall be after its publication and ninety (90) days after the
sending of written notice enclosing a copy of this adopted Ordinance to CenterPoint Energy by
certified mail. Upon the effective date of this Ordinance, City Ordinance 2018-1136 shall be
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repealed and replaced by this Ordinance 2023-1200. Collection of the fee shall commence as
provided above.
Subdivision 8. Termination of Ordinance
This ordinance and the franchise fee imposed by it shall remain in effect until December 31, 2028, at
which time they shall terminate and be of no further effect, except that the Company shall remain
obligated after that date to pay the City all franchise fees due with respect to any period of time prior
to December 31, 2028, and collected after that date
Subdivision 9. Fee Schedule.
Class Percent (%) of Gross
Revenue Per Account
Residential 5.00%
Commercial A 4.25%
Commercial/Industrial B 4.25%
Commercial/Industrial C 4.25%
Small Dual Fuel A 4.25%
Small Dual Fuel B 4.25%
Large Volume Dual Fuel 4.25%
The term “gross revenues” means all sums, excluding the surcharge to reimburse the cost of the
franchise fee as described in Subdivision 4, received by the CenterPoint Energy from the sale of
gas within the corporate limits of the City, subject to subsequent reconciliation for uncollectibles,
refunds and correction of erroneous billings.
Franchise fees are to be collected by the CenterPoint Energy in the amounts set forth in the
above schedule and submitted to the city on a quarterly basis as follows: January-March
collections due by April 30, April-June collections due by July 31, July-September collections
due by October 31, and October-December collections due by January 31.
First Reading: September 5, 2023
Second Reading: September 19, 2023
Date of Publication: September 28, 2023
Date Ordinance Takes Effect: January 1, 2024
Adopted this 5th day of September, 2023 by the Hopkins City Council.
______________________________________
Patrick Hanlon, Mayor
Attest:
_____________________________________
Amy Domeier, City Clerk