5.1. SR 02-24-2003MI:MORANDUM
Item # 5.1.
TO:
Mayor and City Council
FROM:
Pat Klaers, City Administrator
DATE:
February 24, 2003
SUBJECT: Gas Franchise Renewal Ordinance
The city has had a non-exclusive gas franchise agreement in place since 1953. Recendy, the
name of the gas company changed from Minnegasco to Reliant Energy to CenterPoint
Energy. The f~rst two agreements were for 25 years each. This proposed franchise renewal
ordinance is for 20 years. While the franchise agreement is non-exclusive, it should be noted
that the City Council did hear a request from NSP in 1998 to offer gas services within the
city limits and this request was denied.
The city has been working with Arne Hendrickson, Program Manager for Local
Government and Economic Development, on this franchise renewal. Arne has been
excellent to work with.
This gas franchise renewal has been discussed a few times by the City Council over the past
eight months. Most of the conversation regarding the franchise renewal had to do with a
possible franchise fee rather than any issues related to the actual renewal of the franchise
agreement. As you may recall, the City Council decided to not initiate a franchise fee;
although it should be noted that due to recent budget concerns, the gas company has had
numerous inquiries from municipalities regarding the franchise fee issue.
The draft ordinance that is before the City Council is a combination of two model gas
ordinances (a short version and a long version), as recommended by the League of
Minnesota Cities. The short form is the most accepted version and has been adopted in a
number of communities within the last six months. Director of Planning Michele
McPherson and Prosecuting Attorney Chris Johnson reviewed both the long and short
models and felt it was best to combine some language from both in order to meet all of our
particular needs. The attached draft ordinance is a product of their work. The city has also
adopted the League model right of way ordinance (with a few minor changes) and there are a
number of references in this gas franchise ordinance to the right of way ordinance. All of the
language in both ordinances is compatible. In the future, it will be much easier to change the
city right of way ordinance as compared to changing this proposed gas franchise ordinance;
therefore, a great deal of the regulatory language is in the right of way ordinance and
numerous references to this ordinance are within the gas franchise ordinance. Management
of activities within the city's right of way was a key issue in this gas franchise ordinance.
There is no public hearing required prior to consideration of this ordinance and there are no
planning approvals required, such as a conditional use permit. This ordinance, once adopted,
will be published and the gas company will pay for this expense.
Recommendation
It is recommended that the City Council approve the attached gas franchise ordinance,
which calls for a 20-year, non-exclusive, renewal of the franchise agreement with
CenterPoint Energy.
CenterPoint, M
Energy
Minnegasco
February 18, 2003
800 LaSalle Avenue
PO Box 59038
Minneapolis, MN 55459-0038
Mr. Pat Klaers
Administrator
City of Elk River
13065 Orono Pkwy
Elk River, MN 55330-5600
Dear Pat:
Thank you for the work you and your staff have done on CenterPoint Energy
Minnegasco's gas franchise renewal request. We look forward to providing the City of
Elk River and its residents with natural gas service now and in the future. At CenterPoint
Energy Minnegasco we continually work to improve our system reliability and safety
while making sure we have the capacity to serve Elk River's growth in the future. I look
forward to the Council meeting on the 24th of February and will be happy to answer any
questions Council may have.
Pat thanks again for the work you and your staff have done on the gas franchise; I have
included some additional information on the service we provide in Elk River along with a
rate comparison with the other two large gas utilities in Minnesota. I would appreciate it
if you would include the additional information in the Council's packet. Pat I look
forward to seeing you on Monday at the Council meeting.
Sincerely,
Ame Hendrickson
Local Government Relations
SERVING THE NATURAL GAS NEEDS
of Elk River since 1960
Please visit our web site at minnegasco. CenterPointEnergy.com for more information.
Established Service
CenterPoint Energy Minnegasco (formerly Reliant
Energy Minnegasco) serves over 5,728 residential
and business customers in the City of Elk River with
the capacity to serve more. We have invested
$6,914,416 in your community over the last 43 years
to establish and grow our natural gas distribution
system. This infrastructure comprises 763,168 feet of
natural gas main, plus 6,912 service lines and meters
connecting individual customers. Since we began
serving your community in 1960, CenterPoint
Energy Minnegasco has paid property and real estate
taxes to the City. In 2002, we paid $123,710 of total
taxes on our gas distribution system in Elk River. As
important as these investments are, we are committed
to providing our customers with the high quality
service they have come to expect and receive from us.
This commitment was recently recognized with an
award from J.D. Power and Associates, in which we
tied for first place in the Midwest region for
residential customer satisfaction among natural gas
utilities.
Active Corporate Citizenship
For more than 130 years, CenterPoint Energy
Minnegasco has played an active role in making
Minnesota communities' better places to live and
work. We support the communities through our
chamber of commerce memberships and sponsored
events. We also support non-profit organizations that
benefit from our expertise, employee volunteer
programs and financial support. Our training staff
also provides free safety training to local fire
departments and emergency personnel upon request.
Proven Service Advantages
Price (see enclosed Fact Sheet): Wholesale natural
gas prices change monthly, but our rates are
consistently some of the lowest in the region
and nation. For example, we did a two-year
comparison using Xcel's and Aquila's residential
rates, and their rates averaged five to eight percent
more than ours. In addition, their monthly
"Customer Charge" continues to be higher than our
$5.00 charge.
Emergency Response: We have over 400
emergency and construction repair crews and service
technicians trained to respond to system related
emergency situations in your community. Our service
technicians also keep their fully stocked company
vehicles at their homes. This policy allows for the
quickest response time to any emergency. We are
committed to rapid and efficient emergency response
and to working cooperatively with local public safety
officials.
Reliabili~- & Commitment: Our new name reminds
us of our commitment to putting the needs of our
customers and communities at the "center" of
everything we do. Our extensive service and
distribution system in your community enables us to
provide safe, reliable gas service; and we maintain
that infrastructure with regular inspection and
maintenance activities that meet or exceed mandated
standards. Last year we performed gas leak surveys
on 177.15 miles of gas mains and services in Elk
River, using the latest infrared equipment.
Products & Services: The company offers products
and services through its Home Service Plus business
including heating, cooling and appliance repair and
maintenance plans; locally monitored home security
systems; sales of heating and air conditioning
equipment; and other home comfort products such as
gas fireplaces. CenterPoint Energy Minnegasco also
offers energy conservation programs including energy
audits, rebate programs, and system design assistance
for businesses.
CenterPoint,,
Energy
M/nnegasco
800 LaSalle Avenue
PO Box 59038
Minneapolis, MN 55459-0038
2002 RESIDENTIAL GAS RATE COMPARISON
CenterPoint
Avg. Cust Energy Xcel
Month Usage Minnegasco Energy Aquila
Therms Rate Bill Rate Bil..__[ Rate Bil__.[
Jan.02 205 $0.53837 $115.37 $0.57870 $125.13 $0.53991 $117.48
Feb. 162 $0.50350 $86.57 $0,53184 $92.66 $0.59373 $102.98
Mar. 134 $0.52997 $76.02 $0.56422 $82.11 $0,49765 $73.49
Apr, 78 $0.61487 $52.96 $0.60260 $53.50 $0.53536 $48.56
May 41 $0.56038 $27.98 $0.59400 $30.85 $0,51827 $28.05
Jun. 26 $0.53719 $18.97 $0.57145 $21.36 $0.51208 $20.11
Jul. 23 $0.53719 $17.36 $0.56298 $19.45 $0,50700 $18.46
Aug. 23 $0.51228 $16.78 $0.53539 $18.81 $0.47727 $17.78
Sep. 29 $0.55038 $20.96 $0,53981 $22.15 $0.50127 $21.34
Oct. 65 $0.57957 $42.67 $0.60348 $45.73 $0.53313 $41.45
Nov. 125 $0,65796 $87.25 $0.70802 $95.00 $0.61469 $83.64
Dec. 179 $0.64162 $119.85 $0,69987 $131.78] $0.61044 $116.07
Total 1090 $682.72 $738.53 ! $689.41
Average Rate $0.626 $0.678 $0.632
Monthly Basic Chg $5.00 $6.50 $6.80
Note: Aquila's rates are interim rates and subject to refund
ORDINANCE NO. 03 -
CITY OF ELK RIVER
AN ORDINANCE GRANTING CENTERPOINT ENERGY MINNEGASCO, A
NATURAL GAS UTILITY, A DIVISION OF CENTERPOINT ENERGY RESOURCES
CORPORATION, A DELAWARE CORPORATION, ITS SUCCESSORS AND
ASSIGNS, A NONEXCLUSIVE FRANCHISE TO CONSTRUCT, OPERATE, REPAIR
AND MAINTAIN FACILITIES AND EQUIPMENT FOR THE TRANSPORTATION,
DISTRIBUTION, MANUFACTURE AND SALE OF GAS ENERGY FOR PUBLIC
AND PRIVATE USE AND TO USE THE PUBLIC WAYS AND GROUNDS OF THE
CITY OF ELK RIVER, MINNESOTA, FOR SUCH PURPOSE; AND, PRESCRIBING
CERTAIN TERMS AND CONDITIONS THEREOF.
THE CITY COUNCIL OF THE CITY OF ELK RIVER, SHERBURNE COUNTY,
MINNESOTA, ORDAINS:
SECTION 1. DEFINITIONS.
For purposes of this Ordinance, the following capitalized terms listed in alphabetical
order shall have the following meanings:
City. The City of Elk River, County of Sherburne, State of Minnesota.
City Utility System. Facilities used for providing public utility service owned or
operated by City or agency thereof, including sewer, storm sewer, water service, street lighting
and traffic signals, but excluding facilities for providing heating, lighting, or other forms of
energy.
Commission. The Minnesota Public Utilities Commission, or any successor agency or
agencies, including an agency of the federal government, which preempts all or part of the
authority to regulate gas retail rates now vested in the Minnesota Public Utilities Commission.
Company. CenterPoint Energy Minnegasco, a division of CenterPoint Energy
Resources Corporation~ a Delaware corporation, its successors and assigns including all
successors or assigns that own or operate any part or parts of the Gas Facilities subject to this
franchise.
Gas Facilities. Gas transmission and distribution pipes, lines, ducts, fixtures, and all
necessary equipment and appurtenances owned or operated by the Company for the purpose of
providing gas energy for public or private use.
Gas. Natural gas, manufactured gas, mixture of natural gas and manufactured gas or
other forms of gas energy.
Gas Franchise Ordinance
February 6, 2003 Page I
Non-Betterment Costs. Costs incurred by Company from relocation, removal or
rearrangement of Gas Facilities that do not result in an improvement to the Gas Facilities.
Notice. A writing served by any party or parties on any other party or parties. Notice
to Company shall be mailed to CenterPoint Energy Minnegasco, V.P., Regulatory & Supply
Service, 800 LaSalle Avenue, Minneapolis, MN 55402. Notice to the City shall be mailed to the
City Manager/Administrator, City of Elk River, 13065 Orono Pkwy, Elk River, MN 55330-
5600. Any party may change its respective address for the purpose of this Ordinance by written
notice to the other parties.
Public Way. Public right-of-way within the City as defined in Minn. Stat. $ 237.162,
subd. 3.
Public Ground. Land owned or otherwise controlled by the City for park, open space
or similar public purpose, which is held for use in common by the public.
SECTION 2. ADOPTION OF FRANCHISE.
2.1. Grant of Franchise. City hereby grants Company, for a period of 20 years from
the date this Ordinance is passed and approved by the City, the right to import, manufacture,
distribute and sell gas for public and private use within and through the limits of the City as its
boundaries now exist or as they may be extended in the future. 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, Company may construct,
operate, repair and maintain Gas Facilities in, on, over, under and across the Public Ways and
Public Grounds, subject to the provisions of this Ordinance. Company may do all reasonable
things necessary or customary to accomplish these purposes, subject however, to such reasonable
regulations as may be imposed by the City pursuant to ordinance or permit requirements and to
the further provisions of this franchise agreement. The Company shall be notified 30 days in
advance of proposed changes to City Ordinance (ROW) Chapter 66, Article II in order to
provide input to the proposed changes.
2.2. Effective Date; Written Acceptance. This franchise shall be in force and effect
from and after its passage of this Ordinance and upon publication as required by law and its
acceptance by Company. If Company does not file a written acceptance with the City within 60
(sixty) Days after the date the City Council adopts this Ordinance, or otherwise places the City
on written notice, at any time, that the Company does not accept all terms of this franchise, the
City Council by resolution may either repeal this ordinance or seek its enforcement in a court of
competent jurisdiction.
2.3. Service and Gas Rates. The service to be provided and the rates to be charged
by Company for gas service in City are subject to the jurisdiction of the Commission
Gas Franchise Ordinance
February 6, 2003 Page 2
2.4. Publication Expense. The expense of publication of this Ordinance shall be paid
by the Company.
2.5. Dispute Resolution. If either party asserts that the other party is in default in
the performance of any obligation hereunder, the complaining party shall, in writing, notify the
other party of the default and the desired remedy. Representatives of the parties must promptly
meet and attempt in good faith to negotiate a resolution of the dispute. If the dispute is not
resolved within 30 days of receipt of the written notice, the parties may jointly select a mediator
to facilitate further discussion. The parties will equally share the fees and expenses of this
mediator. If a mediator is not used or if the parties are unable to resolve the dispute within 30
days after first meeting with the selected mediator, either party may commence an action in
District Court to interpret and enforce this franchise or for such other relief permitted by law.
2.6. Continuation of Franchise. If the City and the Company are unable to agree
on the terms of a new franchise by the time this franchise expires, this franchise will remain in
effect until a new franchise is agreed upon, or until 90 days after the City or the Company serves
written Notice to the other party of its intention to allow the franchise to expire.
SECTION 3. LOCATION, OTHER REGULATIONS.
3.1. Location of Facilities. Subject to regulation under City Code (ROW) Chapter
66, Article II, gas facilities shall be located, constructed, and maintained so as not to interfere
with the safety and convenience of ordinary travel along and over Public Ways and so as not to
disrupt normal operation of any City Utility System. Gas Facilities may be located on Public
Grounds as determined by the City.
3.2 Street Openings. Company shall comply with the provisions within Chapter
66, Article II in regards to street openings.
3.3. Restoration of Public Ways and Public Ground. Restoration of the Public
Way shall be subject to City Code (ROW) Chapter 66 Article II.
3.4. Avoid Damage to Gas Facilities. The Company must take reasonable measures
to prevent the Gas Facilities from causing damage to persons or property. The Company must
take reasonable measures to protect the Gas Facilities from damage that could be inflicted on the
Facilities by persons, property, or the elements. The Company must take protective measures
when the City performs work near the Gas Facilities, if given reasonable notice by the City of
such work prior to its commencement.
--3.5 Abandoned Facilities. The Company shall comply with City ordinances,
Minnesota Statutes, Section 216D.01 et seq. and Minnesota Rules Part 7819.3300, as they may
be amended from time to time. The Company shall maintain records describing the exact
location of all abandoned and retired Facilities within the City, produce such records at the
City's request and comply with the location requirements of Section 216D.04 with respect to
all Facilities, including abandoned and retired Facilities.
Gas Franchise Ordinance
February 6, 2003 Page 3
SECTION 4. RELOCATIONS.
4.1. Relocation of Gas Facilities in Public Ways. Relocation of Gas Facilities in
Public Ways shall be subject to City Code (ROW) Chapter 66, Article.
4.2. Relocation of Gas Facilities on Public Grounds. City may require Company
at Company's expense to relocate or remove its Gas Facilities from Public Grounds upon a
finding by City that the Gas Facilities have become or will become a substantial impairment to
the existing or proposed public use of the Grounds. Relocation Gas Facilities in Public Ground
shall comply with applicable City ordinances consistent with law.
4.3. Projects with Federal Funding. Relocation, removal, or rearrangement of any
Company Gas Facilities made necessary because of the extension into or through City of a
federally-aided highway project shall be governed by the provisions of Minnesota Statutes
Section 161.46, as supplemented or amended.
4.4. No Waiver. The provisions of Section 4 apply only to Gas Facilities
constructed in reliance on a permit or franchise from City. Company does not waive its
rights under an easement or prescriptive right or State or County permit.
SECTION 5. INDEMNIFICATION OF CITY
5.1 Indemnity of City. Company shall indemnify the City as required under Chapter 66,
Article II, Section 54.
SECTION 6. FRANCHISE FEE.
6.1. Reservation of Rights. The City reserves all rights under Minn. Stat.
S 216B.36, to require a franchise fee at any time during the term of this franchise. If the City
elects to require a franchise fee it shall notify Company and negotiate in good faith to reach a
mutually acceptable fee agreement, which shall be set forth in a separate ordinance and not
adopted until at least 60 days after Notice enclosing such proposed ordinance has been served
upon the Company by certified mail. If the City and Company are unable to agree on a
franchise fee or on any terms related thereto, each hereby consents to the jurisdiction of State
District Court, Sherburne County, to construe their respective rights under the law, subject to
all rights of appeal.
Gas Franchise Ordinance
February 6, 2003 Page 4
SECTION 7. LIMITATION ON APPLICABILITYi NO WAIVER.
This Ordinance constitutes a franchise agreement between the City and its successors
and the Company and its successors and permitted assigns, as the only parties. No provision
of this franchise shall in any way inure 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
any one or more of the terms hereof, or otherwise give rise to any cause of action in any
person not a party hereto. This franchise agreement shall not be interpreted to constitute a
waiver by the City of any of its defenses of immunity or limitations on liability under
Minnesota Statutes, Chapter 466.
SECTION 8. AMENDMENT PROCEDURE.
Either party to this franchise agreement may at any time propose that the agreement be
amended. This Ordinance may be amended at any time by the City passing a subsequent
ordinance declaring the provisions of the amendment, which amendatory ordinance shall
become effective upon the filing of Company's written consent thereto with the City Clerk
within 60 days after the effective date of the amendatory ordinance.
SECTION 9. VACATION OF PUBLIC WAYS.
The City shall give Company at least two weeks prior written notice of a proposed
vacation of a Public Way. The City and the Company shall comply with Minnesota Rules,
7819.3200 and applicable ordinances consistent with law.
Passed and adopted by the City Council of the City of Elk River this 24~h day of
February, 2003.
Attest:
Stephanie Klinzing
Mayor
Sandra A. Peine
City Clerk
Gas Franchise Ordinance
February 6, 2003 Page 5