I've got a question about rural franchise fees that's been bugging me. I represent several agricultural customers served by Otter Tail Power in rural North Dakota - we're talking grain elevators, feed mills, that sort of thing. Some are getting charged franchise fees to various townships and counties, others aren't. The fees range from 1% to 4% depending on the local jurisdiction. My question is: should rural customers in unincorporated areas be subject to franchise fees at all? I thought these were mainly a municipal utility thing.
Otter Tail Power franchise fees in rural areas
Kurt, rural franchise fees are tricky territory. Here in Colorado, rural electric cooperatives sometimes pay franchise fees to counties for right-of-way access, but investor-owned utilities like Xcel usually don't charge these to customers in unincorporated areas. The key question is whether the local jurisdiction actually has a franchise agreement with Otter Tail. Counties and townships can impose franchise fees, but they need proper legal authority and due process.
In Texas, we see this with some of the smaller municipal utilities that serve rural areas outside city limits. They can charge franchise fees to customers in their certificated service territory even if it's unincorporated, but only if the county has granted them franchise rights. The inconsistency you're seeing suggests some of your clients might be in areas where the county has franchise agreements and others don't. Worth checking county records for each location.
That makes sense Angela. I've started requesting franchise agreements from the affected counties and townships. What I'm finding is that some have legitimate agreements dating back to the 1980s and 1990s, but others have no documentation at all. In at least two cases, the "franchise fee" appears to be something Otter Tail started collecting without any local government authorization. Those customers are definitely getting refunds.
Kurt, the unauthorized collection issue is serious. Here in Minnesota, we had a similar situation with Great River Energy where they were charging franchise fees to some rural customers based on verbal agreements with townships that were never formalized. The Minnesota PUC made them stop and refund three years of improper charges. Document everything and file complaints for any charges that can't be backed up with proper franchise agreements.
Thanks Hank, that's exactly the kind of precedent I was hoping to find. I've got solid documentation now showing that at least four of my clients are being charged fees without proper authorization. Filing complaints with the North Dakota PSC this week and requesting three years of refunds based on the Minnesota precedent you mentioned. Rural customers shouldn't have to pay made-up fees any more than urban ones.