05-344Council File # �3�,1.�
ORDINANCE
Green Sheet # 3026097
OF SAINT PAUL, MINNESOTA aa
Presented
Referred To
Committee Date
1 An ordivauce granting the Energy Pazk Utility Company Franchise, held by the
2 Saint Paul Port Authority for July 1, 2005 through July 1, 2012
3 THE COUNCIL OF THE CITY OF SAINT PAUL DOES ORDAIN:
4 Section l.
5 That the Saint Paul Legislative Code be amended by repealing Appendix G.
6 Section 2.
7 That the Saint Paul Legislative Code be amended by adding thereto a new
8 Appendix G to read as follows:
9 APPENDIX G. ENERGY PARK UTILITY CONII'ANY FRANCHISE--PORT AUTHORITY
lo Cross reference(s)--General franchise requirements, Charter Chapter 16.
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11 Sec. 1. Grant of Franchise.
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12 The Port Authority of the City of Saint Paul, a body corporate and politic under the laws of the State
13 of Miunesota, hereinafter designated as"company," owns the Energy Pazk Utility Company, an integrated
14 community energy system demonstrating innovative technologies and techniques in energy production,
15 energy conservation and energy management which applies new and emer�ng technology to the task of
16 providing efficient and economical delivery of heating, cooling and other energy services. The company is
17 hereby granted a nonexclusive franchise to use the streets and other public properry located in such city far
1 s such purpose far a term extending from the effective date of this ordinance as provided in Section 14 to
19 July 1, 2012, with an option for a three-year renewal by agreement of the parties and approved by Council
2o resolution. Said franchise may not be sold, transferred, assigned, pledged, mortgaged or in any way
21 disposed of or encumbered without the consent of the city by ordinance, any of the foregoing to be treated
22 as a modification of this franchise.
23 Sec. 2. Use of Right-of-Way.
24 The franchise granted herein shal] eactend to the company's use of all streets and public properiy
25 now being used by the company in connection with such service and of such other streets and public
26 property as may from time to fime be designated by the city council. Such franchise to use the streets and
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1 other public property located in the city shall include such use for the purpose of conshucting, maintaiuing
2 and operating a system of pipes, subways and manholes with all other necessary appurtenances for carrying
3 on the business of conveying hot and cold water for consumers for all purposes.
4 Sec. 3. Location of Facilities.
5 In locating its energy system facilities, the company shall in no way unreasonably interfere with the
6 safety and convenience of ordinary tra�el along and over said streets and public properry nor interfere with
7 other uses to which such places may be put by the City of Saint Paul, and in the event it shall become
8 necessary during the term of this franchise to remove or relocate the physical properry of the company
9 located within ar upon any of the streets or public properiy in the City of Saint Paul, because of such
l0 interference or use by the city, or as a result of any public improvement undertaken by the city, the
11 company shall, when so advised by the council, remove and relocate said facilities without cost to the City
12 of Saint Paul, and shall place the streets ar public properiy in the same condition as they were prior to said
13 removal or relocafion. All restorations within the right-of-way sha11 conform to the "City of Saint Paul,
ia Minnesota, Deparhnent of Public Works, Standazd Specifications for Street Openings," as amended. Any
15 relocation or removal of the company's facilities made necessary because of the extension through or into
16 the city of a federally aided trunk highway, included within the National System of Interstate Highways,
17 shall be governed by the provisions of the Minnesota Statutes 2003, Section 161.46; provided, that the city
is shall not bear any cost or expense as a result of the application by the company and for assistance under
19 said section, and the streets and public property shall be restored as required even though federal or state
20 assistance is not available for any reason under said section.
21 Sec. 4. Installation, Maintenance and Operation, Contractors Subject to Franchise.
22 The company in the installation, maintenance and operation of its facilities sha11 be subject to such
z3 reasonable regulations as may be provided by the council, and no pipe or pipes ar other appurtenances shall
24 hereafter be installed or laid by the company upon the streets and public property of the city, except upon
25 application to the department of public warks or other persons designated by the city council, and written
26 pernussion granted by said department or person. The company may enter into contracts and agreements to
27 provide far the installation, conshuction, reconstruction, maintenance and operation of the energy systems.
28 Exisfing and future contracts for the operation and management of the utility (1) shall be subject to the
29 terms and conditions of this franchise; (2) shall be for a terxn not to exceed four years, and shall be subject
30 to revision or renewal at the expiration of the term, with a copy of such revision or renewal to be provided
31 to the City within thirty (30) days; (3) shall require any contractor to comply with all terms and conditions
32 of the franchise, including without limitation reporting requirements and rate regulation, as if said
33 contractor were the company; and (4) sha11 not relieve or be construed to relieve the company from its
34 obligations under this franchise.
35 Sec. 5. Franchise Fees.
36 (a) During the term of the franchise hereby granted, the company shall pay into the treasury of
37 the City of Saint Paul, a yeazly franchise fee of eight (8) percent, the monetary amount of
38 which is to be measured by the energy system's gross earnings during the preceding yeaz,
39 and the payxnent of such amount shall be in the following manner:
4o In monthly installments commencing in the month in which this ordinance becomes
41 effective pursuant to Section 14 hereof, and continuing through the term of the franchise.
42 The installment payxnent for each month shall be due on or before the 25th day of the
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1 following month. The company's payment obligation shall be met if payment is mailed and
2 postmarked on or before the due date.
3 (b) The amount of the franchise fee shall be allowed as an operating expense to the company
4 attributable solely to the company's operations within the City of Saint Paul, and in
5 calculating such amount, "gross earnings" shall be held to mean and include all sums
6 receivable by the company from the sale of hot water and cold water dishibuted and used
7 within the city limits of the City of Saint Paul. In no event shall the company be required to
8 pay a franchise fee in excess of the amount which it can legally collect from its customers in
9 the city by means of a surchazge on its rate schedules for the purpose of collecting the
l0 franchise fee. The terms "sale of hot (and) cold water" include the heating or cooling
11 therefrom.
12 (c) The city and company hereby agree that company sha11 be deemed a"public utility" far
13 purposes of applying the provisions of Laws of Minnesota for 1984, Chapter 548, to
14 residential customers. For as long as this law remains in effect, the city and company shall
15 not impose ar collect a franchise fee from residential customers for the billing months of
16 January, February, March, April, November and December. Company agrees that it will
t7 also abide by the provisions of Minn. Stat. Section 216B.097, as if it were a"municipal
18 utility," so long as the statute remains in effect.
19 Sec. 6. Rates and Regulation.
20 (a) All rates made, demanded or received by the company shall be just and reasonable. Rates
21 shall not be unreasonably preferential, unreasonably prejudicial or discrnninatory, but shall
22 be sufficient, equitable and consistent in appiication to a class of consumers. Rates shall
23 generate sufficient revenue to allow the company to recover its reasonable operating costs
24 and expenses; to provide for the timely and orderly payment of costs and expenses; to
25 provide for the timely and orderly retirement of debt; and to provide for improvements,
26 enlazgements and extensions necessary to adequately service the territory of the city
27 authorized herein or later designated by the city pursuant to Section 2.
28 (b) The rates contained in Schedule A, incorporated herein by reference, sha11 remain and
29 continue in force until amended or changed as provided herein.
30 (c) The company sha11 not directly or indirectly charge, demand, collect or receive from any
31 consumer or person a greater or less compensation for any service rendered or to be rendered
32 by it than that prescribed in Schedule A; nor shall any person lrnowingly receive or accept
33 any service from the company for compensation greater or less than that prescribed in
34 Schedule A. The company shall not, as to rates or service, make or grant any unreasonable
35 preference or advantage to any person or subject any person to any unreasonable prejudice or
36 disadvantage.
37 (d) The company shall keep and render its books, accounts, papers and records accurately and
38 faiflifizliy in the manner and form prescribed by the city, and shall comply with a11 directions
39 of the city relating to these books, accounts, papers and records, including fiirnishing of such
4o information or compilations and permitting an audit of the books, accounts, papers and
41 records, as may be requested by the city.
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i (e) The company may, with the approval and concurrence of its governing boazd and after sixty
2 (60) days' notice to the city, file in the office of the city clerk a new ar amended Schedule A,
3 containing new or amended rates, rules or regulations. Such norice shall include statements
a of facts, substantiating documents and e�ibits supporting the changes requested, and fixrther
5 shall state the changes proposed to be made in the rates then in farce, and the time when the
6 changes will go into effect. Such new or amended rates shall be effective and may be
7 chazged on the tenth day (or such later date that the company shall designate on its filing)
8 after the filing of the new or amended Schedule A in the o�ce of the city clerk, and shall
9 continue in effect for a period not to exceed 4 yeazs until approved or denied by City
lo Council resolution, or until deemed approved, pursuant to the terms of this ordinance and
I 1 the Charter, which Charter requires a public hearing after proper notice.
12 (fl The city shall be required to take into account the operation of the terxns and conditions of
13 the customer's Hot and Chilled Water Service Agreement, including Parts 4, 5 and 10
14 thereof, wluch is the uniform contract entered into by the company and its customers
I S providing for a detailed method of charges for demand and commodity related costs. The
16 customer service agreement shall be filed in the office of the city clerk at the same time as
17 the written acceptance required by Section 14 herein. Amendments to the customer service
18 agreement sha11 be filed with the city clerk and Office of Financial Services at least thirty
19 (30) days prior to the effective date of such an amendment or amendments; provided,
20 however, that no amendment to Parts 4, 5 and 10 of said agreement, pertaining to heating
21 demand, cooling demand and rate changes, sha11 be effective unless and until approved by
22 the city council by resolution. Any amendment to other secdons of the customer service
23 agreement shall be effective sixty (60) days after filing in the absence of a resolution by the
24 city council disapproving such amendment.
25
26 (g) At the request of the company and in arder to assist in determining whether the proposed
27 changes in Schedule A shail be approved or denied, the city may require a public hearing
28 before a hearing examiner who shall be selected by mutual agreement of ciry and the
z9 company within ten (10) days of the company's request. The hearing exauiiner shall hold a
30 hearing as a contested case and make recommendarions to the city. Upon receipt of such
31 recommendations, the city shall by resolution approve or deny the proposed changes in
32 Schedule A. Tf no such action is taken by the city within thirty (30) days after receipt of the
33 hearing examiner's recommendations, such proposed changes are deemed approved.
34 (h) Proposed changes to Schedule A can only be approved, approved in part if severable, or
35 denied; and cannot be modified or amended. The city may notwithstanding require the
36 company to refund or credit to its customers any increases in rates which aze in excess of the
37 lawful and reasonable rates as finally determined.
38 Sec. 7. Appointment of City Staff.
39 For the purpose of assisting the council in the regulation of the activities and rates of the company
4o as provided in this franchise, the ofFice of financial services shall provide sufficient staff resources for the
41 regulatory effort and the office of the city attorney shall designate an individual on its staff to serve to
42 perform the duties that such regulation necessitates.
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1 Sec. 8. Company to Pay Regulation Costs.
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2 The company shall pay the city, during the term hereof, an annual amount of twenty-five thousand
3 dollazs ($25,000.00). This fee shall be payable annually on May 1, begiuning May 1, 2006, and sha11 be
4 used solely to pay the cost of regulation, which is not limited to, but may include, that part of the salary and
5 expenses of the individuai appointed by the financial services director and the city attorney, their assistaut
6 or assistants, clerical help and office expenses, outside accountants, attorneys, advisors and consultants'
7 fees reasonably related to the regulation of the company, its rate schedules and other matters and operations
8 under this franchise. The amount of such payment or payments sha11 be allowed as an operating expense of
9 the company in the City of Saint Paul. Such sum shall be adjusted each yeaz by a dollaz amount expressed
10 in percentages equal to the percentage increase or decrease in the All Urban Consumers; Area:
11 Minneapolis/St. Paul index (or its successor index) for the latest twelve-month period, the adjushnents to
12 be cumulative and based on the amount of the latest adjustment plus the previous yeaz's payment.
13 Sec. 9. Reports to be Fffed.
14 The company shall file during each month, with the Director of the Office of Financial Services
15 ("Director") for the city, a report containing such information as may be directed by the Director, including,
16 but not limited to, the number of customers, sales and revenues by classes of service for the preceding
17 month based upon its utility operations within the City of Saint Paul, and energy usage, a comparison of
t8 actual and projected revenues.
19 The company sha11 also file with the Director witlun six (6) months after January 1 of each year, a
zo complete detailed and audited financial statement covering the utility operations within the City of Saint
21 Paul for the preceding year, including all revenues, expenses and plant inveshnent. In addition the company
22 will provide an Income and Expense report on the accrual basis that includes a budget to actual comparison
23 for the yeaz and a reconciliation to the audited financial report, in a format approved by the Director and the
24 company. The Director shall have the right to require additional information concerning operations under
25 this ordinance from fime to time in such form as may be prescribed. .
26 The Director or his or her designee shall have the right, at all reasonable rimes and upon reasonable
27 notice, to examine the books of account, records, vouchers, disbursements, rates, revenues, contracts,
28 purchases, sale and other transactions bearing on and relevant to the rates the company charges and the
29 service it provides to its customers in the City of Saint Paul.
30 Sec. 10. Publication; Adoption of Ordinance.
31 Before this ordinance shall be finally adopted by the council, a public hearing shall be held upon ten
32 (10) days' published notice in the official newspaper and after said hearing the council may pass this
33 ordinance, revise or amend the same. The company shall bear the costs of publication of the franchise
34 ordinance and shall make a sufficient deposit with the city clerk to guarantee publication before the
35 ordinance is passed.
36 Sec. 1L Indemnification; Insurance.
37 The company shall defend, indemnify and save the city whole and hannless from any and all claims
38 for injury or damage to persons ar properry occasioned by or arising out of the construction, maintenance,
39 operation ar repair of said transmission and distribufion system or by the conduct of the company's business
4o in the city; and shall insure the obligations in this section with an insurer authorized to do business in the
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i StaYe of Minnesota in form approved by the city attorney and the director of the Office of Financial Services.
2 Sec.12. Severability Clause.
3 Every section, provision or part of this ordivance is declazed separate from every other section,
4 provision or part; and if any section, provision or part shall be held invalid, it shall not affect any other
5 section, provision or part.
6 Sec.13. Police Power Reserved.
7 The company shall haue the right to promulgate, from time to time, such rules, regulations, terms
8 and conditions governing the conduct of its business, not in conflict with this francluse ordinance, as sha11
9 be reasonably necessary to enable the company to exercise its �ights and perform its obligations under this
lo franchise ordinance, and to assure safe, adequate and continuous service to its customers. Nothing herein
11 shall be construed as a limitation upon, or as a bar to the future exercise of, proper and lawful action in the
12 exercise of the city's police or any other legitimate municipal legislative or administrative power.
13 Sec. 14. Passage; Effect of Ordinance.
14 The company shall, within thirty (30) days after the passage, approval and publication of this
IS ordinance, file with the city clerk of said city its written acceptance thereof in form to be approved by the
16 city attorney, and therein shall agree to abide by, keep and perForm all of the terms, limitations, conditions
17 and provisions of this ordinance. This ordinance shall take effect and be in force after the public hearing
18 prescribed in Section 10 and thirty (30) days after its passage, approval and publication, and upon its
19 acceptance,as provided herein.
20 Sec. 15. Franchise Not Eaclusive.
21 This franchise herein granted shall not be exclusive nor irrevocable, but may be terminated and
z2 forfeited after notice and hearing for any breach or failure by company to comply with the terms, limitations
23 or conditions hereof.
24 Sec. 16. Company Charges to Customer.
25 A. Types of Charges
26 Company charges shall be established in Schedule A and adopted by the City in the form of
27 a resolution, which sha11 be subject to a public hearing before the City Council. Charges shall be
28 limited to the following:
29 Fixed Customer Charge: that part of the charge that is a flat fee charged to customers for
30 access to the Energy Park Utility Company service.
31 Demand Charge: that part of the rate schedule to be paid by customers which relates to the
32 m�imum amount of energy in BTUs added to or removed during a one-hour period from Central
33 Energy Plant Chilled or Hot Water. The demand charge is equal to the budgeted operating
34 expenses, excluding fuel and water treahnent costs, plus a fixed reimbursement of $270,000,
35 divided by projected energy production, as measured in BTUs produced hourly. An additiona110%
36 will be included for capital improvement reserve.
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1 Commodity Charge: that part of the rate schedule to be paid by customers which relates to
2 the amount of fuel used to produce hot and chilled water. Commodity chazges are intended to cover
3 the cost of fuel to operate the plant and water treatment.
4 Fuel Adjustment Charge: that part of the rate based on the variation of the estimated
5 commodity revenues developed in an annual projection and actual commodity related costs incurred
6 by the company. The fuel adjustment chazge is intended to be used from time to time to compensate
7 the company for revenue shorifalls, typically attributable to higher than anticipated fuel costs.
8 Administrative Services Charge: that part of the rate schedule to 1) offset adwinistrative and
9 overhead costs to the Saint Paul Port Authority, which shall be calculated using $28,000 in costs in
l0 2005 and be adjusted each yeaz by a dollaz amount expressed in percentages equal to the percentage
11 increase or decrease in the All Urban Consumers; Area: Minneapolis/St. Paul index (or its successor
12 index) for the latest twelve-month period, the adjustments to be cumulative and based on the
13 amount of the latest adjustment plus the previous year's payment; and to 2) be paid by customers
14 who desire to have their total monthly bill subdivided and billed directly to tenants based on
15 allocation factors and submeters. Such service includes the cost of preparing and mailing
16 statements, automatically reading submeters, and prorating total bills to tenants based on allocation
17 factors provided by each customer.
18 Late Fee: the company may charge a late payment penalty of five (5) percent of the total
19 amount due which may be added to bills which are not paid within twenty-one (21) days of the
2o billing date.
21 Surcharge: that part of the chazge used to cover company costs associated with the franchise
22 fee, state and local taxes.
z3 B. Off Season Customer Sales
2a Company charges to customer for heated water generated during the cooling season, and cooled
25 water generated during the heating season, or to operate chiiling or heating equipment as appropriate for the
26 efficient and economical distribution of off-season by-product energy shall not be less than the operating
27 costs incurred by the company in distributing such water, but sha11 not be greater than the commodity
28 chazge. However, company and customer may agree upon a flat monthly or annual rate for off-season
29 byproduct energy or a reservation of off-season byproduct energy as long as the rate is not less than the
3o above-mentioned costs of company.
31 C. Reports
3z Unless delayed by causes beyond the company's reasonable control, the company shall deliver to its
33 customers within 120 days after the end of each calendaz yeaz a written statement setting out in reasonable
34 detail the amount of actual demand-related expenses and actual energy demand for the preceding calendar
35 yeaz. If the aggregate of monthly demand-related expense payments actually paid by customers to the
36 company during each such period differs from the amount budgeted demand-related expenses for the same
37 time period as per the above schedule, or if the actual energy demand during each such period differs from
38 the amount of budgeted energy demand for the same time period as per the above schedule, such actual
39 amounts sha11 be used to calculate a revised demand chazge, and customers sha11 pay or the company sha11
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1 refixud the difference (as the case may be) without interest within thirty days after the date of delivery of
2 said statement.
3
4
5
Section 3.
Tlus ordina.nce shall take effect and be in force flurty (30) days following its
passage, approval and publication.
Requested by Department of:
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Bostrom
Harris �
Helgen ,i
Lantry ,/
Montgomery
Thune �
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Adopted by Council: Date
Adoprion Certified by Council Secretary
By:
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An ordinance granting the Energy Pazk Utility Company Franchise, held by the Port Authority, for July 1, 2005 through Juty 1, 2012.
idations: Appm�e (A) w R
Pl�ning Commissian
CIB Committee
Ciwl Service Commission
Personal Service Contrads
1. Has this persorJfirm e�er wnrked uoder a coMtact forthis departmeM?
Yes No
2. Has this pasoNfirtn e�er been a city employee?
Yes No
3. Does th�s person/firm possess a skill not normally poss�sed by any
curterrt city employee?
Yes No
Euplain all yes a�swers on separate sheetand adach W green sheet
Initia6ng Problem, lssues, Opportunity �WYio, What, When, Where, Why):
Advantages M Approved:
DisadvarMages H Approved:
DisadvaMages B Not Approved:
7otal Amount of
Transaclion:
Funding Source:
Financial Information:
(Explain)
Apn( 13, 2005 Z07 PM
CostlRevenue BudgeMd:
Activity Number:
Page 1
Energy Park Utility Company Franchise DS-_35/5�
Briefing Sheet on Franchises Changes for City Council Public Hearing
Background:
Appendix G of the Legisiative Code, the Energy Park Utility Co�any (EPUC) Franchise Agreement, is a
franchise granting the Samt Paul Port Authority use of the GYty's right-of-way for the purpose of delivering
hot and chilled water to heat and au� condition buiidings withm Energy Pazk. The City aLso regulates the rates
and charges used by EPUC and paid by its customers. EPUC paid $120,750 m franchise fees m 2004.
Negotiated Changes to the Franchise Agreemen�
Previously, tivs was a 20.yeaz franctuse. Now, it is being established as a 7-year franchise. This makes the
franchise agreement cotermmous with EPUC's ciistomer service agreements. The City and EPUC have the
option to renew the franchise agreeme� for 3 yeazs. (Sec.l)
If EPUC chooses to contract the management of the utility outside of the Port Authority, then: 1) the Port
must provide 30 days norice to the City; 2) the contractor is subject to the (same) ter�ns and conditions of this
franchise; and 3) the management contract shall not exceed 4 years. C�srently, EPUC is managed by Market
Street Energy, LLC. (Sec. 4)
Rates and charges used by EPUC with its customers may not be approved for longer tban a 4yeaz time period.
(Sec. 5)
There is now a provision in the francluse agreement that franchise fees will not be collected on heat provided
to residents from the months of November through April, consistent with the e�cisting special state law
prolv'biting collection of franchise fees on heat dtu�ing winter mouths in the City of Saint Paul. (Sea 5)
'The customer service agreement used by the Port Authority with EPUC customers can be changed with 30
days notice to the City, and will be effective within 60 days if no action is taken by the City CounciL However,
changes to the customer service agreemeut pertaining to raYes and charges used by EPUC requffe approval by
City Council resolution before they can take effect. (Sec. 6)
An annual regulatory fee of $25,000, rather than the previous $15,000, will be paid beginning in May of 2006.
There is an inflation index buih in for firtiue annual adjustme�s. (Sec. 8)
In the past, audited information on EPUC was not directly available. RaYher, the City had audited stakements on
the Port Authority as a whole, and annual(tm-audited) financial reports from EPUC. The proposed change to
the franchise agreement makes it easier for the G�ty to review annual financial information from EPUC and
compaze it to audited records, without an undue burden on the Port Authority for sepazate, additional, auditing
expenses. (Sec.9)
The types of charges and rates used by EPUC are now defined "m the franchise agreement. These chazges and
rates are also (and have been) defined in the Port Authoriry's agreement used with EPUC customers. (Sec. 16)
The old Schedule A attached to Appendix G set forth rates and charges used by EPUC at the time the franchise
was adopted. Subsequent changes to rates and charges were adopted by resolution — per the francivse
agreemexrt. Now, the definition and structure of rates and charges is contained in the agreement, bttt the actual
rates will be adopted by resolution, and amended by resolution in the future. Tlris is a house-keeping
matter. The actual rates and charges to be used through the end of 2005, have been put forward in resolution
form, and this is also on for public heazing 5-405. The rates in the resotution aze a continuaYion of Council
approved "fixed" and "demand" rates, and the energy rate is set up to be a pass-through to customers. A rate
review is anticipated later in 2005 for rates used in 2006.
EPUC BrieSng Sheet 52/OS