On September 23, 2026, the Saint Paul City Council voted 7–0 to adopt new electric and gas franchises with Northern States Power Company, d/b/a Xcel Energy, along with companion franchise fee ordinances. The package includes a feature that, to our knowledge, is the first of its kind in the nation: a progressive franchise fee, under which income-qualified, energy-burdened households pay half the franchise fee that other residential customers pay.
For cities, the franchise fee is often treated as a fixed percentage applied uniformly to every bill. Saint Paul’s agreements show that the fee can instead be designed as a policy tool, one that shifts cost among customer classes, supports climate goals, and reduces the burden on the households least able to pay. The Council’s September 23 consideration of the franchises can be viewed on the City’s meeting video, beginning at approximately the 1:02 mark.
Background and Negotiations
Saint Paul’s prior Xcel franchises were negotiated more than 20 years ago and carried what local reporting described as the most complex franchise fee structure in Minnesota. The City Charter requires a fee of at least 5% of a utility’s gross earnings, and in 2025 the City collected $26,474,593 in Xcel gas and electric franchise fees.
At the outset, the City’s negotiating team set four goals:
- Simplify the fee schedule
- Maintain or increase revenue
- Reduce the burden on residential ratepayers, with special emphasis on energy-burdened households
- Discourage natural gas use
The City’s team was led by staff from the Office of Financial Services, the City Attorney’s Office, the Mayor’s Office, and the Council Office. Michael R. Bradley of Bradley Werner assisted the City’s negotiating team in negotiating the franchises. The Mayor announced the agreement on September 3, 2026. Staff presented it to the Council on September 9, and the Council adopted the ordinances on September 23. Mayor Kaohly Her approved them on September 24.
The First Progressive Franchise Fee
To our knowledge, Saint Paul’s franchises are the first in the nation in which a city and a utility have negotiated a progressive franchise fee. Section 9.3 of the electric franchise (Ord 26-41) and Section 8.3 of the gas franchise (Ord 26-40), each titled “Progressive Franchise Fee Credit for Energy Burdened Customers,” work as follows:
- Who qualifies. An “Energy Burdened Customer” is a residential customer who has received assistance through Minnesota’s federally funded Energy Assistance Program (LIHEAP) in the current program year. About 9,821 Saint Paul households participate.
- The credit. Each qualifying customer receives a monthly credit equal to 50% of the franchise fee on the prior month’s bill, shown on the bill as the “StP Discount.”
- Duration. The credit runs for 12 invoices and resets each time the customer receives another assistance payment.
- Who pays. Xcel remits the franchise fee net of the credits. The ordinances state that the resulting reduction “constitutes the City’s contribution to the program as a matter of public policy,” so neither other ratepayers nor the utility subsidize it.
Staff projected the credit at about $601,092 per year, against projected total franchise fee revenue of roughly $29.8 million. Saint Paul’s approach uses the fee itself, rather than a separate appropriation, to deliver targeted relief through the utility’s existing billing system.
Revised Franchise Fees
The City lowered the franchise fee on residential electric service from an effective 7.0% to 5.5%. It also re-balanced the fees paid by residents and businesses. Under the prior agreements, residential customers paid a disproportionately high share and many commercial and industrial customers a disproportionately low one. The new schedule brings the classes into closer alignment and makes the fees more equitable overall. The new fees also set uniform rates for every month of the year and price gas slightly above electric to encourage electrification. Fees take effect January 1, 2027, under separate fee ordinances (Ord 26-43 for gas, Ord 26-44 for electric).
| Customer class (example) | Electric: prior equivalent | Electric: new | Gas: prior equivalent | Gas: new |
|---|---|---|---|---|
| Residential | 7.0% | 5.5% | 5.5% | 6.7% |
| Small commercial, non-demand (small retail) | 2.5% | 7.25% | 9.3% | 8.25% |
| Commercial, demand (restaurant, large retailer, or school) | 5.2% | 7.26% | 5.1% | 9.5% |
| Large commercial and industrial (manufacturer, hospital) | 4.8% | 7.75% | 2.4%–53.3% | 9.5% |
| Street lighting and municipal pumping | 2.7%–4.9% | Exempt | — | — |
Source: City staff presentation to Council, September 2026. Prior rates are effective percentages for the median customer in each class.
For the median residential customer, the electric fee falls about $11 per year and the gas fee rises about $11, so the combined annual fee is unchanged at about $99.
Other Key Terms
Other provisions of note:
- Term. Both franchises run through December 31, 2036, with one optional five-year extension by mutual agreement.
- Narrower grant. Many utility franchises in Minnesota grant the utility the use of both the public rights-of-way and other public property, such as parks and City-owned land. Saint Paul limited both grants to the public rights-of-way, preserving the City’s control over its other property.
- Fee flexibility. After the first year, the City may adjust the fee by amending the fee ordinance once in any 12-month period on 60 days’ notice, but never below the Charter’s 5% floor. This answers advocates’ calls for an adjustable structure.
- Right-of-way fees. Under the electric franchise, Xcel pays a $100,000 annual flat fee in lieu of City permit fees.
- Annual meeting and reporting. The parties meet each year on infrastructure planning, vegetation management, and reliability. Xcel provides reliability and low-income program data by Census block group.
- Memorandum of Understanding. A companion MOU commits Xcel to targeted weatherization outreach in energy-burdened areas, collaboration on gas-reduction pilots (including under the Natural Gas Innovation Act), a goal of 80% carbon-free electricity in Saint Paul by 2030 and 100% by 2040, consolidated City invoicing with machine-readable data, and a dedicated account manager.
Considerations for Local Governments
Minnesota cities approaching franchise renewal can draw several lessons from Saint Paul:
- Set policy goals before negotiating. Saint Paul defined revenue, equity, and climate objectives at the start and measured each proposal against them.
- Revisit class allocations. Legacy fee schedules can leave residential customers paying a disproportionate share. A fresh look at effective rates by class can support re-balancing without reducing revenue.
- Consider a progressive fee. An income-based credit tied to an existing assistance program can be administered through the utility’s billing system, with the cost borne by the City’s own fee revenue.
- Keep flexibility. A fee ordinance separate from the franchise, with an annual adjustment right, lets the City respond to changing conditions without reopening the franchise.
- Use a companion MOU. Commitments that fall outside the franchise itself, such as energy-efficiency outreach, pilot projects, and billing improvements, can be documented in a separate agreement.
Bradley Werner, LLC
Michael Bradley and Nancy Werner are nationally recognized and respected local government attorneys. Our firm is dedicated to representing local governments on broadband, cable, telecommunications, utilities, and right-of-way management issues. We have decades of experience representing municipalities on communications and utilities matters.
Sources and Further Reading
- City of Saint Paul Ord 26-40 (Gas Franchise), Ord 26-41 (Electric Franchise), Ord 26-43 (Gas Franchise Fee), and Ord 26-44 (Electric Franchise Fee), passed September 23, 2026
- Memorandum of Understanding between the City of Saint Paul and Northern States Power Company
- City staff presentation to Council, “Xcel Franchise Agreements” (September 2026)
- City of Saint Paul Announces New Franchise Agreement with Xcel Energy, City of Saint Paul, September 3, 2026
- Saint Paul City Council meeting video, September 23, 2026 (franchise item begins at approximately 1:02)
- Council hears staff overview of Xcel Energy franchise deals, Citizen Portal, September 9, 2026
- Staff outlines Xcel franchise agreements; city secures LIHEAP rebate, Citizen Portal
- Local group wants to see St. Paul reach a more climate-forward, flexible contract with Xcel, MPR News, April 14, 2026
- City of St. Paul Negotiates with Xcel, East Side Area Business Association, September 2026