City Council Meeting Date: September 23, 2025
To: Mayor and City Council
From: Ben Martig, City Administrator
Title
Second Reading of Ordinance No. 1086 Amending Gas Service Franchise Fee.
Body
Action Requested:
The Northfield City Council considers Second Reading of Ordinance No. 1086 Amending Gas Service Franchise Fee.
Summary Report:
The City Council unanimously approved the initial First Reading on September 9th. There were no requests for additional background summary of the franchise fee history and structure when prompted on at that meeting.
Background Summary
In 2020, the City of Northfield implemented gas and electric franchise fees to replace special assessments for street reconstruction projects. Additionally, the funding mechanism authorized a flat fee structure as required by the Franchise Agreement with Xcel Energy. The fees are not allowed to have automatic inflationary numbers. The plan in 2020 was to update the fees every five years and to include an inflationary adjustment. The rates have not yet been updated and staff did present this information at prior budget meetings in 2025. The proposed rates in the attached ordinance reflects an inflationary increase from 2020 through 2029. Once set, these fees would not be planned to be adjusted again until 2030.
Alternative Options:
If the franchise agreement is not updated the City Council would need to replace revenue in the Capital Improvement Plan with property taxes to make up the difference. Or, significantly change the Capital Improvement Plan that would also reduce the pavement conditions on the streets. fee.
Financial Impacts:
Xcel Energy has completed the estimated flat fees necessary to meet the inflationary increase. The total estimated revenue projected is $1.8 million compared to a total of $1.2M current target goal.
The rate increase would cover the rates through 2029.
|
GAS Customer Classification |
Current Rates |
New Options |
|
Residential |
$2.25 |
$3.30 |
|
Commercial Firm: Non-Demand |
$12.50 |
$17.85 |
|
Commercial Firm: Demand |
$485.00 |
$685.00 |
|
Small Interruptible |
$99.50 |
$105.00 |
|
Medium and Large Interruptible |
$1,880.00 |
$2,245.00 |
|
Gas Rate Classifications |
Monthly Gas Usage |
|
Commercial Firm: Non-Demand |
Firm peak day load less than five hundred Therms per day Example: Convenience store, retail, small business |
|
Commercial Firm; Demand |
Firm peak day load greater than five hundred Therms per day Example: Large retailer, industrial business, school |
|
Small Interruptible |
Peak day loads of more than five hundred Therms but fewer than two thousand Therms and agree to curtailment of gas service. Example: Manufacturer, school, hospital, business with a central heating plant |
|
Medium and Large Interruptible |
Peak day loads of more than two thousand Therms per day and agree to curtailment of gas service. Example: Same as above |
Tentative Timelines:
New or amended franchise fees must be filed with and approved by the Minnesota Public Utilities Commission prior to implementation. To complete review and filing, we require the fee ordinance approved by the city be received at least 90 days prior to anticipated fee collection.
ü First Reading September 9, 2025
o Second Reading September 23, 2025
o Summary Publication October 1, 2025
o Ordinance Takes Effect Tentatively January 1, 2026