At the Two-Year Mark, a Few Lessons from the Minneapolis Clean Energy Partnership – Episode 40 of Local Energy Rules Podcast

So John, tell me what’s the clean energy partnership origin story. Where did things start for you?

And so the big question for us was how can we take charge of this problem? How can the actually do something about the climate change problem and actually do something with its climate action plan? Some folks sat down and started kind of like basically brainstorming ideas. What can we do? We can beg and plead the utilities to do something more than they were already doing. But we had seen over many years that that was rarely successful. We could try to change state policy, but we had a legislature at the time that was not really amenable to improving renewable energy policies or doing climate legislation in particular. At that time, getting anything at the federal level was simply laughable. The Republican Congress was not willing to consider anything. It was only a couple years after the big failure of the climate legislation.

We thought about what was it that the city had within their power. And, you know, we thought, you know, there were some significant things that the city could do. It had control over the water bill and has its own water utility. It could offer incentives in terms of buying down loans for energy efficiency improvements. It could give money to neighborhoods to help do like revolving loan programs, which is something that they had done, but that ultimately whatever the city would do, it would be a rather lonely in terms of trying to attack this problem, but also still insufficient to meet those ambitious goals.

The two last things we talked about then where, you know, the city could take over, it could try to become a municipal utility. And in 40 years, since the adoption of legislation in the mid seventies, kind of upgrading state-based utility regulation. And not only that we knew it would be really laborious. It would take a number of years. It would be very expensive and it would involve lots of money for lawyers. Uh, and so the final thing that we came to was this notion of franchise contracts, which was this agreement between the city and the utility. Utilities were given a monopoly by state law. So we didn’t have control over that except for, with municipalization, but these franchise contracts, which were expiring in the next year or two from this perspective of 2012, governed the use of public property in order to deliver those services. And it felt like, Hey, this might be a place where the city actually could have a conversation with the utilities. So that, that’s how we started thinking about approaching this problem was these franchise contracts.

And the idea behind it was that we have an intentional goal, which is we need the city to be able to pursue this climate action plan, but we’re open to the options the strategies that the city might pursue. So we weren’t saying that we thought any particular way was the right way, but that we knew that we were gonna need leverage if we were gonna get into these negotiations. What we also realized is that the only leverage we were ever gonna have was this notion of a municipal takeover. That was the only real legal leverage that a city would have over its investor-owned and monopoly utilities. And so we knew that what we wanted to do is get that on the ballot, get municipalization on the ballot, not even to say that the city should take over, but just to give it the authority to let the citizens give the city the authority to take over. And we thought that then when the city sat down with the utilities, they could really honestly say to them either give us something substantial or we’ll exercise this authority that we’ve been given to take over.

But I, one of the biggest successes too, is that we also got the city to put $250,000 into what they called an energy pathway study, which was to say, we recognize as a city that we don’t actually know how we’re gonna meet this climate action plan. So we need to figure out what our, our legal pathways for getting there. And we knew in about July that we had been successful already because we got the utilities attention enough and Xcel energy, the incumbent electric utility, sent a full color opposition mailer to every single customer in the city of Minneapolis saying that this was a horrible idea to put municipalization on the ballot because Xcel was such a great company and was giving the city everything that it wanted. And it was great because there was a lot of skepticism among city officials, among electricity customers or whatever. And I think that letter, in some ways, only heightened it for them like, oh, here’s the utility just being heavy handed, who knows how they paid for this flyer, for example, you know, we sort of paid for that, but we knew that we had their attention.

But the real tension and the struggle was that we weren’t sure that we had the votes. We needed to have seven out of 13 council members willing to put this on ballot. And then we needed to know for sure that we could win having a ballot initiative for municipalization and losing wasn’t something that we thought would be very useful in the long run. So we knew that what we needed was that leverage. And we knew that we had gotten the attention of them. We’d organized well enough that the utilities were paying attention, but we weren’t sure that we could win, you know, in mid-summer there was a lot of debate within our campaign about whether or not we should really keep pushing for this, if we weren’t sure if we could win.

And what ended up happening is right around that time that that big glossy flyer went out from Xcel Energy, CenterPoint Energy gave us a call and asked us to come meet with them. And they said, we’re willing to negotiate. We would like to sign on and say, we’re willing to help the city meet its climate action goals. And as long as you guys basically remove us from the equation, say that when you’re for municipalization, you’re not talking about taking over the gas utility. So it was a huge breakthrough. We signed a memorandum of understanding with them, with their regional president or whatever, and myself and some of the other organizers of the Minneapolis Energy Options campaign that they were committed to this that broke the whole thing open because within the next couple of weeks, Xcel energy published a public letter saying they were gonna do you the same, that they were willing to work with the city on its climate action plan. Again, this was, this created some tension for us, cuz what ended up happening of course is that the city council said, well, we’re not gonna take the vote. Then if the utilities are willing to work with us, we’re not gonna go down this road toward municipalization. And there was some question among us about whether or not we had won or whether or not we had lost.

At the same time they were through a municipalization fight in Boulder, Colorado. It was starting to look kind of ugly for them. And as I recall that the, CEO of Xcel actually was invited to the Star Tribune editorial board and apparently was very, very emotional and very angry about what was happening about the idea that the city would consider municipalization. They were in the process actually building a new headquarters building downtown and he was angry enough to talk about them all, you know, picking up and leaving town and whatever. So we got under their skin.

And the good news is that the city still had that pathway study I had mentioned earlier and the results of that came out in February. So there were a couple months where we kind of went back and forth about, are we getting what we want? Are we not getting what we want? And that pathway study came out and it had four options that the city had explored, starting with municipal and kind of dismissing it as under the state law that we had very expensive and time consuming. And even if we could in the end, because we had controlled the utility do what we wanted, it would take five to 10 years to actually start down that path because we would have to fight the incumbents to take over for that long. Another thing they looked at was a policy called community choice aggregation, which would’ve involved changing state law. And as I mentioned before, the state legislature was not a hospitable place. And so we thought that that was fairly unlikely. And then the last two things were kind of a modified franchise agreement that included some of these policy ideas, which we weren’t sure was totally legal.

And then this novel idea, this Clean Energy Partnership, which none of us had ever heard of before. And it’s a credit to the Center for Energy and the Environment that in doing the study, the pathway study, that they kind of came up with this concept, but we felt like this was the pathway that we had open to us that we could use and, and the best chance that we have for continuing our campaign. What that meant then was we’re now several months after our aborted attempt to put municipalization on the ballot, the franchise contracts were set to expire at the end of 2014. We’re now in February or March and was to figure out, okay, how do we get an agreement before those franchise contracts have to be signed around this partnership idea? And how do we make sure that that structure gets set up in a way that doesn’t just give the utilities the ability to roll us over? So how do we make sure there’s lots of city power and authority in that group? How do we make sure that there’s a role for community members to have input in this process? So that even if we really believe that the folks at the city are doing the right thing, that if they should all change five years from now that we’re not stuck without a way that we can give input and that we were successful.

And so in October, 2014, the city signed and created this first in the nation clean energy partnership, including a substantive role for community participation called an Energy Vision Advisory Committee, which I actually am still sitting on in my first term, and also a shorter franchise contract. So instead of the 20 year contract that had signed previously, the contract was 10 years, but with an optout provision after five years, which maintained the city’s leverage then over this contract, so that if something went wrong, if we felt like the utilities were not in fact living up to their promises, the city would have some leverage short of municipalization that they could use in a reasonable timeframe.

And to be honest, in terms of the output, they released the first annual report on the partnership about a month ago for the calendar year 2015, there’s not much in there to brag about. It’s a good comprehensive review of the programs utilities were already offering that overlap with the goals of the first work plan, but it’s not really showing a lot of substantive difference in the way that we’re doing things. And in some cases it’s just sort of a puff piece for things utilities were doing. Xcel, for example, has a program called wind source where you can pay a premium to get all of your electricity from wind energy, and you can buy it in, I think a hundred kilowatt hour blocks. Well, wind energy is the cheapest resource there is when you build new power generations. So why we should still be paying a premium for wind is beyond me. And then the second thing was that there just wasn’t a lot of evidence that other new things were happening.

And so, the key right now is gonna be, what does this next work plan look like? What’s gonna be put into it. What’s gonna come out of it. The one last thing hanging over from the first work plan is this notion of community engagement, which is how do we pivot utilities from simply marketing and like putting in bill inserts and sending out flyers and sending out emails about conservation programs or renewable energy programs to doing serious community engagement, where we are taking folks who are trusted members of communities of color or in low income communities and having them out, going out there and carrying the message of here are the kind of services that can help you reduce your energy costs. And, and the tension is of course that we don’t even have the programs designed in the right way to do that. That’s kind of the key to this next work plan then is what are we gonna put in there that’s gonna accomplish some of those goals.

I also wear in this conversation my hat with Minneapolis Energy Options are now, we’ve called our group Community Power and Minneapolis Energy Options is the campaign that we’re running. And our goals are more ambitious in that we wanna see a hundred percent renewable energy in the city of Minneapolis. We wanna see 75% of it coming from local sources or locally owned sources, but we also share a lot of the city’s goals in terms of eliminating disparities and reducing energy consumption. So I think we measure success under both of those things. So our goal at Community Power is to kind of push the city and the partnership to be even more ambitious, but primarily to make sure that they can even live up to the goals that they have in the existing plan.

I’m optimistic that the partnership will prove more effective because we have more time to work with it. Although the key is whether or not some of the programs that have already launched are gonna be ambitious enough and whether or not the new items that we add can be successful. They just launched a multifamily energy efficiency program to get to renters in a way that they haven’t been able to before. It’s only been active for maybe six months, they’ve got a couple pilots for community engagement, but they haven’t yet even put out the RFP, the request for proposals to deliver those services yet. And what we are really lacking is what, what we like to call inclusive financing, which is to say that probably half or more of the residents of Minneapolis couldn’t get a loan based on their credit score in order to finance renewable energy or energy efficiency in their home, or their apartment. And so we need a tool that allows them to participate if we’re gonna reach 75% of, of households. And so those are kind of the key issues I think, that I think the partnership can allow us to do a lot of that stuff and it can even do that on a better time scale than municipalization, but it remains to be seen.

I also think that there’s a lot of really fascinating and interesting things that we can do that combine sort of city policy and utility resources. One of the things that we’re looking at is the city currently has what’s called a truth and sale of housing form. So it’s this boring five page document that you get when you are buying a house and it discloses all sorts of things about the presence of lead paint or asbestos or whether or not the water comes from a well or all those sort of things that you probably need to know in buying a house. But what you don’t learn anything about is whether or not that house consumes a lot of energy or not, or whether or not the house has insulation. You know, many Minneapolis homes actually have none, which is sort of startling in that it’s 2016 and in this climate that you could have a property without insulation. The city, however, has authority to change that they can require that a seller provide information about the energy consumption in that prop.

And so what we’re looking for is that the seller of a home would have to have an energy audit conducted that would give the person who’s going to buy that home an idea of what it would cost month to month to pay the energy bills. So that instead of just talking with their realtor about what kind of house they can afford, based on the mortgage payment, that they’re factoring in energy costs, which can be very substantial. And we hope that’ll do two things. We’ll one is it will create a market for more energy efficient homes, cuz people will be shopping for that alongside the cost of the property, but also that it will, if we tie it together with other things like inclusive financing, allow us to give tools to people to make changes. So maybe in one case, the seller will say, well, my energy score was really bad. Well, I’ll make some improvements before I sell of the house with what some folks call on-bill repayment, the improvements are done immediately. The property is now much more energy efficient. The energy savings will accrue to whoever’s gonna live there and with on bill repayment, the payments actually stay with the property. And so that seller knows that they don’t have to put in a bunch of money and somehow recoup that in the sale price, they can make those improvements and know that their house will look efficient to the person moving in. And that the person who moving in will also assume responsibility for paying for those improvements. So I think there are a lot of interesting ways in which the city and utility resources can combine in the partnership to do some pretty impressive things.

I think the second thing though, too, was also making energy an issue that folks in the city and candidates would care about. So making Minneapolis Energy Options a campaign issue was important because it let folks know that it was something that their constituents would be responsive to. I think those were the big challenges informing the partnership and in kind of getting to where we are in terms of the structure and the biggest challenges now are overcoming the inertia that utilities have still toward like doing the same old thing. So, you know, energy conservation is a marketing strategy and not as a community engagement strategy, still wanting to make money by selling more energy and, and also not being very open to new and innovative program designs.

So for example, we’re interested in ways that the city could potentially own renewable energy generation outside of city limits kind of out in rural areas, wind turbines or solar panels, and sell that power to the utility and also keep the renewable energy credits. So keep the renewable attributes to be used for, you know, meeting the city’s climate action goals. Well, that’s kind of a challenge to the utilities way of doing things. They wanna build the power generation and sell it to somebody they don’t wanna lose their market share. So that I think that continues to be an issue that we have to struggle with. And then also pushing people to city, you know, like the city has a franchise fee that’s part of their franchise contract, which is money the city collects on utility bills. They could raise that fee and collect more revenue that could go toward this partnership. You know, you talk to people in the city finance department though. They’re not usually very enthusiastic about you finding ways to dedicate revenue that have been going into the general fund. So it goes both ways. I think both the city and the utilities continue to be pushed to think about new and different ways of doing things.