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REQUEST FOR COUNCIL ACTION Date: 11/10/2025 Item No.: 7.i. Department ApprovalCity Manager Approval Item Description:Discuss and Consider Gas and Electric Franchise Ordinances and Gas and Electric Franchise Fees 1 2 Background 3 Under Minnesota Law, statutory cities have the authority to grant franchises to privately- 4 owned public gas and electric utilities for the use of public rights-of-way. The franchise 5 agreement, which takes the form of an ordinance, sets expectations between the city and 6 the utility company, including how the company constructs, operates and maintains 7 equipment located on public grounds and rights-of-way. Roseville's 20-year franchise 8 agreement with Xcel Energy expired in 2018. During that time, Xcel still pulled permits for 9 any work in the right-of-way. 10 11 It is best practice to have a franchise agreement in place, and both the City and Xcel are 12 interested in entering into a new franchise agreement. Based on conversations with Xcel, 13 the City has prepared draft ordinances (Attachments 1 - 4) instituting a gas and electric 14 franchise and franchise fees with Xcel. 15 16 In summary, the ordinances grant Xcel Energy a 20-year franchise to construct, operate, 17 repair, and maintain electric and gas transmission and distribution facilities within the City 18 of Roseville. This includes the right to use public rights-of-way and public grounds to 19 provide electric service to residents, businesses, and the City itself. 20 21 Under the ordinances, the city retains the right to require permits for work in public areas. 22 However, if electric and gas franchise fees are imposed, the City agrees to waive permit 23 fees. The City currently averages about $50,000 in revenue from Xcel Energy through 24 permits. To make up for that loss in revenue, staff is proposing to allocate each year a 25 portion of the franchise fees collected from Xcel to cover the lost revenue for the 26 operational costs as part of their permits. 27 28 Lastly, under the franchise ordinances, the City may impose a franchise fee for electric and 29 gas services. The franchise fees are charged to all customers, including those properties 30 that are tax-exempt. (It is estimated that about 84 properties in Roseville are tax-exempt 31 and subject to the franchise fee. These tax-exempted properties are estimated to generate 32 around $175,000 in annual franchise fees). The City can determine the amount, structure 33 and use of collected franchise fees. Generally, they are structured in two ways: a flat rate 34 per utility account or a percentage of consumption used by each utility account. 35 Page 1 of 4 Qbhf!:6!pg!74: