“We have this once-in-a-generation negotiation coming up next year and it’s a chance for Minneapolis to explore what its energy choices might be and how it could achieve its energy goals.”

Earlier this week, the Minneapolis city council got an early look at an important “pathways study,” outlining the legal and policy strategies the city could follow toward a cleaner, more affordable, reliable, and local energy future.  It’s one of the outcomes from a robust grassroots campaign to move the city toward a better energy future this summer, and it touched a nerve with the city’s incumbent, monopoly electric utility.  In July, Xcel Energy dispatched a glossy letter to all its Minneapolis customers, warning them of the dire consequences should the city consider the boldest option – forming a city-owned utility.  ILSR Senior Researcher John Farrell explains the letter and its import in this podcast, interviewed by his colleague, Lisa Gonzalez.

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Only One Legal Route

The problem for most cities that are served by private utilities, says Farrell, is that the only alternative to their incumbent monopoly is to municipalize, to have the city take over the utility service.  All of the rules and policy about renewable energy, energy efficiency, and affordability are debated at the legislature or at the Public Utilities Commission, and in both places the voices of city residents and businesses are watered down as part of a larger utility system or buried by utility lobbyists and lawyers.  So if a city needs improvements to its energy system that its utilities aren’t interested in providing, the threat of municipalization is the only credible tool in the city’s energy toolbox.

Gaining Leverage

The legal options notwithstanding, the Minneapolis Energy Options shows how other touch points can be leveraged.  Every 20 years in Minneapolis (and in many other cities), the utility and city negotiate a “franchise” agreement that governs how the utility will use city property to deliver its service and how much revenue from customers will be shared with the city. In 2014, those agreements with both electric and gas utilities in Minneapolis expire, and the looming deadline gave strength to the city’s efforts to secure a better energy future.

“We’ve raised the level of conversation about the city’s energy future”

In the year since the Minneapolis Energy Options campaign has been active, it and the city have a remarkable list of accomplishments:

• A set of principles and desired outcomes for the city’s franchise negotiations, from the city’s Citizens Environmental Advisory Committee, reflecting a desire to make progress on clean, affordable, reliable, and local energy
• A city-funded Energy Pathways study that will explain how the city can reach these outcomes, up to and including forming a municipal utility
• A legislative agenda (see page 9 – Utility Franchise) focused on expanding the city’s flexibility in its franchise negotiations and removing perverse barriers to forming a locally-owned utility
• A remarkable number of candidate endorsements from those running for city council and mayor, and a persistent focus on energy in the city election campaign in 2013.
• A historic memorandum of understanding with the city’s gas utility committing it to partner with the city on achieving greenhouse gas emission reductions of 30% by 2025
• A letter from Xcel Energy promising to work toward the city’s energy goals (a start, with a suitably skeptical reply from the mayor)
• A unanimously adopted “Framework for Reaching City of Minneapolis Energy Goals” (RESOLUTION 2013R-353) that articulates the need for progress, the steps ahead, and the city council’s commitment to using the franchise negotiations to move toward a better energy future.

Which Energy Future Pathway?

Ultimately, the continued success of the city’s efforts will hing on its chosen strategy, says Farrell, and those pathways are largely captured in the presentation to city council this week (shown below). [Download the full study here] The options range from an “enhanced franchise agreement” (which may require changes to state law) to the formation of a municipal utility for electricity (or gas) services. The latter would also require legislative changes, to remove a perverse “lost profits” clause that requires the city to pay Xcel Energy’s profits for the next decade even if that utility no longer serves its customers. In Farrell’s words, “Xcel Energy is entitled to keep making money off people [who have decided it’s] no longer adequate to serve their needs.”