Utility Franchise Fee

Gas & Electric Franchise Fee

The Burnsville City Council has established franchise fees on utilities (gas and electric) to help offset future property tax/special assessment increases.

What is a Franchise Fee?

The City of Burnsville currently has franchise agreements with CenterPoint Energy, Minnesota Valley Electric Cooperative, Xcel Energy and Dakota Electric Association. The agreements allow the utility companies to install their service lines within the City’s public rights-of-way to provide gas and electric services to their customers. The utility companies have historically been allowed to install their services in the City’s right-of-way free of charge. 

Under Minnesota Statute (216B.36), cities can impose a fee on utility companies that use the public rights-of-way to deliver service. The City can determine the amount, structure and use of franchise fees. Generally, they are structured in one of two ways: 

A flat rate per utility account OR
A percentage of consumption used by each utility account

The City chose the “flat rate” fee, rather than one based on consumption - which would vary each month.

What Does This Mean for Residents?

Utility companies have the right to pass franchise fees on to their customers. Utility customers have likely seen a line item on their gas and electric bills for a “City fee.” The utility companies collect this fee and remits it to the City.

Residential Franchise Fee

The current franchise fee is $8 per month, per account on residential gas and electric bills. That means, utility customers see a $8 fee on BOTH their gas and electric bill.

Commercial Franchise Fee

Commercial rates vary based on the utility company’s account classification based on usage volume. The commercial fees range from $28.80-$80 for small to medium accounts and $468 per month for high volume accounts.

Why Franchise Fees?

Utility franchise fees help cities cover increasing costs of providing important services – such as maintaining aging facilities and infrastructure – without raising property taxes. Many cities in Minnesota have them in place.

Burnsville uses utility franchise fees to cover increasing costs of providing important services such as improving and maintaining aging facilities without raising property taxes. Utilities Franchise Fees were initially implemented in 2016 and are dedicated to funding the long-term facilities improvement plan. Improvements to the police station, city hall and construction of Fire Station No. 1 have been funded by utility franchise fees.

On January 21, 2025, the City Council amended the franchise fee ordinance to increase franchise fees to fund the police city hall project. Click here for more information on the project.

What are the Pros and Cons of Franchise Fees?

When comparing franchise fees as a revenue source to property taxes, some advantages include:  

Equally spread across all gas and electric users, including tax exempt properties such as schools, churches and nonprofits that also benefit from city services
Diversify the City’s revenue sources
Consistent, reliable sources of revenue
A flat-rate franchise fee would be the same for each property, making it easy to administer
New construction would contribute immediately, which would eliminate the one to two-year lag for the City to receive property taxes for property owners receiving municipal services

Some potential disadvantages include:

A flat-rate franchise fee would be the same for all homes, regardless of their value
Not subject to state property tax relief programs