5.5. SR 07-12-1999
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Item #5.S:
MEMORANDUM
River TO:
FROM:
Mayor & City co~
Pat Klaers, City ~trator
July 12, 1999
DATE:
SUBJECT: Gas Franchise Requests
The city has been approached by NSP representatives regarding the
possibility of obtaining a gas franchise agreement from the city. Two staff
meetings have been held with NSP representatives and all of the pluses and
minuses of having two gas franchises within the municipality have been
discussed and reviewed.
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The biggest positive for this request is competition and free enterprise.
However, it should be noted that the benefit of this competition generally will
be for the developers in the community and not necessarily passed onto the
citizens/resident/business owner. Accordingly, this positive for having two
gas franchise's within the municipality may not exactly trickle down to our
citizens.
Two of the major concerns with having two gas franchises within the city
relate to public safety and having another utility within the city's right-of-
way. The public safety concern has generally been dismissed by Reliant
(Minnegasco), NSP, and the Fire Chief as both utilities will respond if there
is a gas line break and both utilities will work on each other's gas lines if
they are the first on the scene. The right-of-way concern is largely based on
the future being unknown in terms of what additional requests the city will
have for utilities, telephone systems, cable TV systems, etc., to be located in
its right-of-way. We certainly don't want a congested right-of-way system
that inhibits any type of utility maintenance or repair activities. The way
technology is improving and changing, it is very uncertain as to what, for
example, the telecommunication industry will be doing in the future and
where they will want to be located. The right-of-way concern is probably our
biggest issue with this request and the loudest voice of concern is coming
from me and Utilities General Manager Bryan Adams.
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Another issue that must be dealt with regarding two gas franchises within
the city is deciding which company serves which development or area of the
city. This is a problem that can be dealt with, but it may involve additional
work at the staff level, and maybe at the City Council level. The City Council
could let the "market" decide which company serves which development, or if
the city could establish "territories" where one company has a certain part of
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
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the city and the other company cannot serve that area. Dealing with two
franchises and gas companies will require additional city rules and
regulations for development activities. There will be some situations where
both companies will have mains down the same street (assumed to be major
streets, and lines on opposite sides of the street) and these dual main
situations will not be able to be avoided. However, the city can avoid double
mains in subdivisions that most likely would be uneconomical for the
companies and would raise the safety issue of "who to call" if a gas leak is
experienced.
The existing gas company in Elk River is Reliant (Minnegasco). The
franchise with Reliant started in 1953 and this franchise agreement was for
25 years. This agreement was renewed in 1978 for another 25 years, which
will expire in 2003. This is a non exclusive franchise agreement that allows
us to enter into other gas franchise agreements. Not surprisingly, Reliant
does not support NSP's request. Based on recent discussions with Reliant
representatives, it is being requested that Elk River consider renewal of the
Reliant franchise agreement at the same time as we consider the request
from NSP. Reliant has been an excellent corporate citizen for Elk River and
is a major player in Elk River's Energy City efforts. We would expect similar
involvement in this program from NSP and also that this company would be
an excellent corporate citizen.
Attached for your review is some material from both NSP and Reliant
. regarding their companies and this request.
There is not a request for approval or denial of the NSP proposal at this
meeting, but only a discussion on this issue. If the City Council is, in
general, looking favorable or even open to this request, then it is suggested
that we go through the public hearing process to consider these franchise
agreements. On the other hand, if the City Council is not in favor of even
considering entering into a franchise with NSP, then this needs to be stated
early in the process and we will not go through the public hearing to consider
this request.
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Regardless if the request moves forward, it is also appropriate for the City
Council to consider a franchise fee for the gas utility or utilities. A franchise
fee based on usage or number of meters or another such system could be
discussed at the public hearing. Any franchise fee imposed by the city should
be identical for both utilities and franchise fees are printed on the bills. The
cable commission (Elk River is a member) currently has a franchise fee as
part of its cable TV agreement and, in effect, the city receives a franchise fee
from the municipal utilities (although this expense is not printed on the
bills). Franchise fees come from the same "pockets" as tax revenue, but this
is not a tax and could be based on use and consumption. Franchise fees may
be a viable source of funds as municipal revenues become increasingly
restricted by the state through such things as levy limits and cutbacks in
state aid programs. Based mainly on utilities being in the city owned,
managed, and controlled right-of-way, a franchise fee seems reasonable.
.
~Relianf
", Energ'frM
Minnegasco
Patrick Klaers
City Administrator
City of Elk River
P.O. Box 490
Elk River, MN, 55330-0490
Tracy Bridge
Director
Government
& Public Relations
BOO LaSalle Avenue
Minneapolis, MN 55402
Voice: 612-321 -4723
Fax: 612-321-5137
July 6, 1999
Dear Administrator Klaers:
I'm taking this opportunity to express Reliant Energy Minnegasco's opposition to NSP's request for a franchise
agreement in Elk River. Reliant Energy Minnegasco ("Minnegasco") has provided safe, reliable and affordable
natural gas service to the City since 1960, and is well positioned to invest additional resources to extend gas
service into the developing areas of the City. Minnegasco's price, investment in and commitment to serving
Elk River makes NSP's requested franchise unnecessary. Granting NSP a franchise will not create additional
benefits for the City or its residents.
Price: Reliant Energy Minnegasco's ("Minnegasco") residential rates for natural gas service are consistently
lower than NSP's. Minnegasco employees pride themselves in operating our gas delivery system safely and
. efficiently, allowing customers to realize the benefits of lower cost service.
Investment: We have made a significant financial commitment to Elk River. We have invested $4.8 million to
create a comprehensive natural gas delivery system. A few years ago, we upgraded this system specifically so
we are ready to support Elk River's future growth. In the past five years, our gas delivery system has generated
more than $500,000 in property taxes for Elk River, including $109,000 last year alone.
Commitment: Minnegasco has served the natural gas needs of Elk River for the past 39 years. We are an
active participant in the Chamber of Commerce, Energy City and other civic activities. We participate in Elk
River's safety fair and have twenty-seven employees living in the community. We recently were selected to
provide natural gas to the planned Trott Brook Farms development and the Commercial Asphalt facility along
Highway 169. These are two recent examples of our commitment to grow with the community.
Reliant Energy Minnegasco is proud of the cooperative, mutually beneficial relationship we have with Elk
River, its businesses and its residents. We look forward to continuing to serve the community well into the
future. A fact sheet and map ofMinnegasco's extensive infrastructure commitment in Elk River is enclosed for
your reVIew.
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.
.
~fleliant
\,\ Energy.
Minnegasco
800 LaSalle Avenue
PO. Box 59038
Minneapolis, Minnesota 55459-0038
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Reliant Energy Minnegasco:
Serving the Natural Gas Needs
Of Elk River Since 1960
For the past thirty-nine years, Reliant Energy Minnegasco has provided natural gas and related energy
services to Elk River and the surrounding community. We have provided millions of dollars in property
taxes to Elk River, and we have invested additional millions of dollars to build a gas distribution system
designed to meet not just current needs, but to accommodate the city's future expansion. We also have
worked hard to be a good corporate citizen. Reliant Energy Minnegasco values the cooperative, mutually
beneficial relationship we have with Elk River, and we are committed to continuing to deliver safe,
reliable, affordable service. We are in Elk River for the long term.
An Established Service Provider and Business
Reliant Energy Minnegasco currently serves 4,350 area residential and 505 business customers - with
the capacity to serve more. We recently were selected to provide natural gas for the planned Trott Brook
Farms development, involving more than 600 homes, as well as the Commercial Asphalt facility located
along Highway 169. We have invested $4.8 million to establish our local gas distribution system, which
comprises more than 202 miles of natural gas main, plus service lines and meters connecting individual
customers. In recent years, we made upgrades specifically to support Elk River's future growth. From
the beginning of our relationship, we have paid property taxes to Elk River. Our gas distribution system
has generated more than $500,000 in personal property taxes over the past five years, including more
than $109,000 in 1998 alone.
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An Active Corporate Citizen
Reliant Energy Minnegasco has been helping fuel Minnesota communities' success since 1870. We've
been around for more than 100 years partly because we are committed to supporting the communities in
which we operate. We support the Elk River business community through our Chamber of Commerce
membership. Jeff Daugherty, a Reliant Energy Minnegasco director, is a recent graduate of Leadership
Elk River. We participate in Elk River's fall safety fair, and our staff has provided safety training to fire
department personnel at no cost. Twenty-seven current and retired Reliant Energy Minnegasco
employees call Elk River "home."
Advancing Elk River's Interests through Energy Alley
From the beginning, Reliant Energy Minnegasco has been an active participant in Elk River's activities as
Minnesota's first Energy City. As members of the Minnesota Energy Initiative, and Energy Alley, we
were on the selection committee that bestowed the Energy City title on Elk River. We played a major
role in the recently completed Energy House II, which showcases new natural gas technologies. Our staff
members are active members of the Energy City ACE, demonstration and marketing committees.
Through our efforts, we are not only helping build recognition for Elk River as a progressive city; we also
are helping to create an atmosphere of value to attract efficient and renewable energy companies here.
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.~ Printed on recycled paper with soy ink
t.~ 60% recycled and 30% post consumer waste
@1999 Reliant Energy CQ-2709
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RELIANT ENERGY MINNEGASCO - GAS MAINS Scale: 1in:5200ft
RED=INSTALLED, GREEN=IN PROGRESS, BLUE=NO. NATURAL ~
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Plotted by: adlaume
Plot Date: 06/25/1999 at 0847:04