Minneapolis Franchise Fee Funding Plan Passes, Next Challenge is Allocation of the New $

 In the fall of 2017, Community Power and our partners took advantage of a rare opportunity to be on the offense rather than on defense in addressing the climate crisis via an elected governmental body.

On December 4th, 2017 we mobilized a total of 32 people to speak in unanimous support of the Clean Energy Partnership Franchise Fee Funding Plan at a public hearing held by the Minneapolis City Council Ways and Means Committee

The public hearing was one of the necessary steps City Council needed to take in order to unlock a $2.9 Million reliable stream of annual funding for scaling up the work of the Minneapolis Clean Energy Partnership.

Prior to this time, the City had not dedicated ongoing funding to activities that would allow the City to get on track to meet its long-term Climate Action Plan goals.

Mayor Hodges’ 2018 budget proposal arranged for this stream of new funds to come from a 0.5% increase in the gas and electric franchise fee (57 cents per month for average residential customer) instead of from property taxes or from competition with city basic operations budget items. 

For more background on this plan, see this previous blogpost

Prior to the December 4th public hearing, Luke Hollenkamp and Patrick Hanlon, some of the City's lead staff for the Clean Energy Partnership, along with Energy Vision Advisory Committee co-chair Matt Kazinka gave a presentation on Potential Programming for Utility Franchise Fee Increase revenue

In addition, the Clean Energy Partnership Franchise Fee Funding Plan was also the single most frequently invoked topic among the speakers at the December 6th City Budget public hearing in front of the full council, and once again all in unanimous support.

The entire plan we all spoke in support of was technically 2 separate ordinance changes; one being a change to the City's Electric franchise fee ordinance and another to the City’s Gas franchise fee ordinance .

On Friday, December 8th, all attending members of City Council gave unanimous final approval to both of these ordinance changes with no additional commentary and in a vote that also included all other items in the Ways & Means Committee Report (from the same meeting as the December 4th public hearing).

 

 

The Clean Energy Franchise Fee Funding Plan easily passed City Council without a trace of organized or vocal opposition at any of the public hearings and info sessions that the City set up. However, a more substantial challenge comes next year in deciding which specific programs and initiatives this new stream of franchise fee revenue will be allocated toward.  

 

As the City process for its 2018 budget was approaching its conclusion there was a growing concern about the possibility of the new franchise fee revenue being diverted to budget items that do not help the city meet its climate action plan goals. In a letter, the Energy Vision Advisory Committee issued a recommendation that “this additional new and ongoing revenue should be used solely for the purpose of helping residents and businesses reduce energy use and implement clean energy projects”. As a way to address these concerns, City Council also passed on December 8th a Resolution establishing a framework for clean energy funding for Minneapolis. In sum, it resolved that the city commits to using the franchise fee revenue "to fund energy efficiency and renewable energy programs, policies and interventions" rather than being diverted for other uses. The resolution was initially approved by the Health, Environment & Community Engagement Committee in its Nov 27th, 2017 Meeting 

  In addition to speaking in basic support of the franchise see ordinance changes on both December 4th and December 6th, Community Power and partners also emphasized to the council the importance that the new revenue raised from it be used for additional and expanded energy equity outreach/ engagement & programs rather than using the revenue to cover other existing staffing & admin budget items as a way to free up general fund dollars.

 

Toward, that end, here are some of the ways how the $2.2 Million* in new franchise fee revenue has been allocated in the 2018 budget.

  • $272,000 to the Green Business Cost Share program, which will now be ongoing funding in contrast to the one-time funding the program had in previous budgets.
  • $190,000 to support the Clean Energy Partnership, Green Zone Initiative, Homegrown Minneapolis Initiative, and other Sustainability office programming that will now be built in as ongoing funding whereas having been one-time in previous budgets.
  • $74,000 for the Health Department to initiate a multifamily building energy benchmarking program.
  • Approximately $300,000 to support staff in the City Sustainability office that has been ongoing in the past but at risk of cuts in previous budget discussions.

 

*A quick note on the overall numbers. The new franchise fee is projected to add $2.9 Million (in an average weather year) to the City budget years in 2019 and beyond. However, the 2018 City budget assumed only $2.2 Million in additional revenue because the collections from the 0.5% increase in the gas and electric franchise fees will begin in early spring 2018, rather than on January 1st of 2018. 

So out of the entire pool of $2.2 Million this leaves $1,364,000 as the portion of the budget is set aside for Clean Energy Partnership recommendations to the City as for use of those funds. The budget had previously assumed that $375,000 of this would offset the ongoing annual cost associated with the City’s contract with Xcel Energy for Renewable Connect, a program where Xcel Energy gets credit for providing the City with renewable power but at a premium price. 

Following the December 6th public hearing, the one franchise fee related budget amendment City Council did pass was a staff directive to re-evaluate City expenditures toward Xcel’s Renewable Connect.

Overall, this leaves between $1,000,000 and $1,200,000 left depending on what happens with the Renewable Connect contract.

Toward that end, where can we draw the line that distinguishes between an appropriate versus inappropriate use of the $1,000,000 to $1,200,000 funds?

 

The whole reason behind having the Clean Energy Franchise Fee is to see that the extra 57 cents per month that the average residential customer pays be returned back into our pockets many times over in the form of energy savings. 

In other words, the core purpose of the franchise ordinance change is to benefit utility customers who have had social and financial barriers to accessing the traditionally available utility energy efficiency program offerings. 

At the public info session on the franchise fee plan, City staff for the Clean Energy Partnership commented that our energy utilities have abundant Conservation Improvement funds and energy efficiency incentives at hand but that a lot of that capacity goes unused. A main reason why is that so many of their traditionally available programs have not been accessible to renters, people/organizations without available capital or credit, residents and businesses whose primary language is not English. 

 In addition to the up-front financial cost of energy improvements and the common split incentives between tenants and building owners, another major barrier to higher participation is simple lack of awareness that these conservation and efficiency programs exist.

 What is needed is the right messenger to approach a resident or small business owner who could benefit from the free services to help them save energy; someone they trust who can guide them through the system.

To accomplish that goal, the new funding could be put toward expanding the Clean Energy Partnership’s community engagement pilot project for residential energy efficiency as well as scaling up of the small business energy coaching program that has thus far been implemented around Lake Street.   

This basic model of the franchise fee funding plan, where Minneapolis Energy users pay via their monthly utility bills for services, in is nothing new or radical. Utility customers are already paying for the dollars that utilities spend on state-mandated Conservation Improvement Programs. What violates the spirit of equity is a situation when all utility customers pay monthly into a utility energy saving program that half are not able to fully access.  

Energy equity means investing directly into overcoming the typical social and financial barriers that have limited greater program participation. 

The large commercial sector is often the low-hanging fruit for doing energy-saving projects, because it has fewer barriers to program access.

In contrast, doing energy-saving projects in the small business and low-income residential housing sectors cost more dollars per energy savings to do (and that is the purpose for the new franchise fee funding stream) but has a larger impact in relieving energy cost burden.  

 

Through funding new and expanded energy equity programs, the extra Franchise Fee Dollars will leverage the current utility energy efficiency spending to be more effective, as described on page 6 in EVAC’s "Funding the Minneapolis Clean Energy Partnership" document from last summer.

The purpose of the Clean Energy Partnership is for the city to collaborate its regulatory authority and neighborhood engagement assets with the utility’s assets such as programs, incentives, financing methods, and infrastructure in a way that will make each more effective. 

In terms of the Minneapolis Clean Energy Partnership, making programs accessible to renters or households with a low credit score would be where the city inserts itself toward accomplishing an outcome that neither the utility nor the city could accomplish alone. For example, energy utility bureaucracies have considered addressing problem landlords as outside of their scope of usual business, if only because that is not the sort of issue they are used to handling. Utility staff at Clean Energy Partnership related meetings have also commented that community engagement is not their area of expertise. However, addressing problem landlords and doing community engagement is what the City is used to doing. If successfully implemented, this arrangement in Minneapolis can set a new precedent for collaboration between local government and energy utilities. 

If this Clean Energy Partnership Franchise Fee Funding before us is successful in delivering energy equity and cost savings in Minneapolis, it can set a new precedent for collaboration between local governments and their energy utilities.

Our best hope for meeting the goals of the Paris Climate Accord is for major city governments to be inspired by the type of example we set in Minneapolis and follow suit. It is not the mere presence of having climate pledges on paper but also specific funding for specific programs in order to help fulfill the pledges.