Item 4.1 Franchise Fee Ordinance Amendment
Request for
City Council Action
DEPARTMENT INFORMATION
ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE:
Administration City Administrator/Finance Director Flaherty November 25, 2024
PRESENTER(s) REVIEWED BY: ITEM #:
Administration City Attorney Kendall 4.1 – Franchise Fees
STRATEGIC VISION
MEETS: THE CITY OF OTSEGO:
X Is a strong organization that is committed to leading the community through innovative communication.
X Has proactively expanded infrastructure to responsibly provide core services.
Is committed to delivery of quality emergency service responsive to community needs and expectations in a
cost-effective manner.
Is a social community with diverse housing, service options, and employment opportunities.
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council adopt an ordinance amending a franchise fee ordinance.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
No No
BACKGROUND/JUSTIFICATION:
In October 2021, the City entered into a franchise agreement, and in May 2022 adopted Ordinance 2022-09 implementing an
electric service franchise fee on Wright-Hennepin Cooperative Electric Association (W/H).
The City has since determined that verbiage within Subdivision 2 (Terms) of the franchise fee ordinance was not being
implemented as the City intended. The result was that certain parcels within the City that had multiple meters and electric
accounts with W/H were being charged a franchise fee for each meter and/or account.
City staff and the City Attorney have worked together with W/H to amend the language within Subdivision 2 of the franchise fee
ordinance to remedy the matter.
City staff is developing a rebate program that will be available upon implementation of the amended ordinance. The rebate
program will be eligible only to those parcels who can show proof of Wright-Hennepin invoices that include franchise fees for
multiple meters and electrical accounts. Those who are eligible will be required to complete a form and provide invoice support
and submit to the City for processing. This program is anticipated to initiate in January 2025 and conclude after six months.
SUPPORTING DOCUMENTS ATTACHED:
• Ordinance 2024-12
• Publication Summary of Ordinance 2024-12
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to adopt Ordinance 2024-12 Implementing an Electric Service Franchise Fee on Wright-Hennepin Cooperative
Electric Association.
Motion to approve the Publication Summary of Ordinance 2024-12 and authorize staff to publish in summary form.
BUDGET INFORMATION
FUNDING: BUDGETED:
Fund 201 – Pavement Management
The rebate program will be funded from available fund
balance within the Pavement Management Fund.
209423v8 1
ORDINANCE NO. 2024-12
CITY OF OTSEGO
WRIGHT COUNTY, MINNESOTA
AN ORDINANCE IMPLEMENTING AN ELECTRIC SERVICE FRANCHISE FEE ON
WRIGHT-HENNEPIN COOPERATIVE ELECTRIC ASSOCIATION, A MINNESOTA
COOPERATIVE FORMED UNDER MINNESOTA STATUTE CHAPTER 308A, ITS
SUCCESSORS AND ASSIGNS, FOR PROVIDING ELECTRIC SERVICE WITHIN THE CITY
OF OTSEGO, MINNESOTA
THE CITY COUNCIL OF THE CITY OF OTSEGO DOES ORDAIN:
SECTION 1. The City of Otsego City Code is hereby amended to include reference to the following
Special Ordinance.
Subdivision 1. Purpose. The Otsego City Council has determined that it is in the best interest of
the City to impose a franchise fee on those public utility companies that provide electric services within
the City of Otsego. Pursuant to City Ordinance 2021-22, (adopted October 25, 2021), a Franchise
Agreement between the City of Otsego and Wright-Hennepin Cooperative Electric Association, a
Minnesota Cooperative, its successors and assigns (the “Company”), the City has the right to impose a
franchise fee on the Company in an amount and fee design as set forth in the fee schedule attached hereto
as Schedule A.
Subdivision 2. Terms. A franchise fee is hereby imposed on the Company, its successors and
assigns, under its electric franchise in accordance with the schedule attached hereto and made a part of
this Ordinance, commencing with the Company’s January 2025 billing month.
The fee shall be in addition to any permit or other fees being imposed on Company under the City
Code. This fee is a parcel-based fee and not a meter- or account-based fee. A parcel means land, buildings,
and outbuildings that are together considered a single property, except that commonly owned multi-
occupant properties with multiple utility meters shall be considered a separate parcel per meter (e.g.
apartment complexes, commercial strip malls, row homes, duplexes, etc.). For example, a house with a
detached garage used for any purpose, including but not limited to rental purposes at the same address
shall be considered a single parcel, and a multifamily building with separate meters for each unit will be
considered a separate parcel per unit. In the event that an entity covered by this ordinance has more than
one account, meter, or facility at a single parcel, only one fee shall be assessed to that parcel. The franchise
fee assessed to the parcel will be the largest franchise fee applicable to a single rate classification for
energy delivered to that property address. If an entity covered by this ordinance has more than one parcel,
each parcel shall be subject to the appropriate fee. In the event a question arises as to the proper fee
amount for any parcel, the Company’s manner of billing for energy used at all similar parcels in the City
will control.an account-based fee on each premise and not a meter-based fee. In the event that an entity
covered by this ordinance has more than one meter at a single premise, but only one account, only one fee
shall be assessed to that account. If a premise has two or more meters being billed at different rates, the
Company may have an account for each rate classification, which will result in more than one franchise
fee assessment for electric service to that premise. If the Company combines the rate classifications into
a single account, the franchise fee assessed to the account will be the largest franchise fee applicable to a
single rate classification for energy delivered to that premise. In the event any entities covered by this
209423v8 2
ordinance have more than one premise, each premise (address) shall be subject to the appropriate fee. In
the event a question arises as to the proper fee amount for any premise, the Company’s manner of billing
for energy used at all similar premises in the City will control.
Subdivision 3. Payment. The franchise fee shall be payable quarterly and shall be based on the
amount collected by Company during complete billing months during the period for which payment is to be
made by imposing a surcharge equal to the designated franchise fee for the applicable customer classification
in all customer billings for electric service in each class. The payment shall be due the last business day of
the month following the period for which the payment is made. The franchise fee may be changed by
ordinance from time to time; however, each change shall meet the same notice requirements and not occur
more often than annually and no change shall require a collection from any customer for electric service in
excess of the amounts specifically permitted by the attached fee schedule. The time and manner of collecting
the franchise fee may be subject to the approval of the Commission. No franchise fee shall be payable by
Company if Company is legally unable to first collect an amount equal to the franchise fee from its customers
in each applicable class of customers by imposing a surcharge in Company’s applicable rates for electric
service. Company may pay the City the fee based upon the surcharge billed subject to subsequent reductions
to account for uncollectibles, refunds and correction of erroneous billings. Company agrees to disclose to the
City (1) the total number of members in the City limits; (2) the rate classification totals; and (3) the total
amount collected. The Company shall not be required to disclose identifiable customer or customer
information or any other information regarding identified customers.
Subdivision 4. Surcharge. The City recognizes that the Company will surcharge its members
located in the City and subject to this Ordinance the amount of the fee.
Subdivision 5. Equivalent Fee Requirement. This ordinance shall not be effective against
Company unless it lawfully imposes and the City monthly or more often collects a fee or tax of the same or
greater equivalent amount on the receipts from sales of energy within the City by any other energy supplier,
provided that, as to such a supplier, the City has the authority to require a franchise fee or to impose a tax
pursuant to Minnesota Statutes, Section 216B.36. The “same or greater equivalent amount” shall be
measured, if practicable, by comparing amounts collected as a franchise fee from each similar customer, or
by comparing, as to similar customers the percentage of the annual bill represented by the amount collected
for franchise fee purposes. The franchise fee or tax shall be applicable to energy sales for any energy use
related to heating, cooling or lighting, or to run machinery and appliances, but shall not apply to energy sales
for the purpose of providing fuel for vehicles. If the Company specifically consents in writing to a franchise
or separate ordinance collecting or failing to collect a fee from another energy supplier in contravention of
this section, the foregoing conditions will be waived to the extent of such written consent.
Subdivision 6. Enforcement. This ordinance is enacted in accordance with the Franchise
Agreement and shall be interpreted as such. Any dispute, including enforcement of a default regarding
this ordinance will be resolved in accordance with Section 2.5 of the Franchise Agreement. Provisions of
the Franchise Agreement, including notice of future proposed ordinance amendments, requests for
amendments, and other provisions shall apply to this ordinance.
Subdivision 7. Effective Date of Franchise Fee. 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 the Company by certified mail. Collection of the fee shall commence as provided
above.
209423v8 3
Subdivision 8. Prior Ordinance Repealed. Ordinance 2022-09 adopted by the City Council on
May 23, 2022, is hereby repealed in its entirety upon the effective date of this Ordinance as provided by
Subdivision 7 of this Ordinance.
ADOPTED by the City Council of the City of Otsego, Minnesota this _____ day of _____________,
2024.
CITY OF OTSEGO
SEAL
______________________________________
Jessica Stockamp, Mayor
ATTEST:
________________________________
Audra Etzel, City Clerk
SCHEDULE A
Franchise Fee Rates:
Electric Utility
The franchise fee shall be in an amount determined by applying the following schedule per customer
premise/per month based on metered service to retail customers within the City:
Class Amount per month
Residential $ 4.00
Sm C & I – Non-Dem $ 5.00
Sm C & I – Demand $ 40.00
Large C & I $ 95.00
Franchise fees are to be collected by the Utility at the rate listed below, 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.
October – December collections due by January 31.
209423v8 4
209423v8 5
PUBLICATION SUMMARY OF
ORDINANCE NO. 2024-12
CITY OF OTSEGO
WRIGHT COUNTY, MINNESOTA
OFFICIAL SUMMMARY FOR PUBLICATION
ORDINANCE IMPLEMENTING A FRANCHISE FEE FOR
WRIGHT-HENNEPIN COOPERATIVE ELECTRIC ASSOCIATION
Ordinance Number 2024-12 was recently adopted by the City Council. Because of the lengthy nature of
the ordinance, the following summary of the ordinance has been prepared for publication as authorized by
law.
The Ordinance imposes a franchise fee on Wright-Hennepin Cooperative Electric Association, its
successors and assigns as part of the franchise previously granted the company by ordinance number 2021-
22.
Ordinance 2024-12 provides for the imposition, collection, quarterly payment, and periodic auditing of a
franchise fee at the following rates:
Class Amount per month
Residential $ 4.00
Sm C & I – Non-Dem $ 5.00
Sm C & I – Demand $ 40.00
Large C & I $ 95.00
Printed copies of both ordinances are available for inspection by any person during the City Hall
regular office hours.
Approved for publication by the City Council of the City of Otsego, Minnesota this ________
day of _________________, 2024.
SEAL CITY OF OTSEGO
_______________________________
Jessica Stockamp, Mayor
ATTEST:
________________________________
Audra Etzel, City Clerk
Date Published:____________________