4 weeks after she released a 2018 City budget overview on August 15th, Minneapolis Mayor Betsy Hodges presented to the City Council a 2018 Budget proposal that puts nearly $6 Million behind meeting the City’s Climate & Energy Pledges and (in her words) "to ensure we’re not ignoring communities that have faced a disproportionate share of environmental vulnerability.”
At long last, we could finally be seeing a path to unlock millions for clean energy and making cost & energy saving improvements more accessible to Minneapolis residents & businesses.
About half of this near $6 million comes from Mayor Hodges taking the Clean Energy Franchise fee recommendation from the Minneapolis Energy Vision Advisory Committee (EVAC).
EVAC concluded that increasing the City’s natural gas and electricity utility franchise fee by 0.5 percent would be both the most fair and most effective option to create a reliable stream of ongoing funding dedicated to scaling up the work of the Minneapolis Clean Energy Partnership. In their report, EVAC laid out a roadmap on how the Minneapolis Clean Energy Partnership can most effectively spend the $2.89 Million in dedicated funding naming proven & reliable initiatives in need of more funding such as the City's Green Business Cost Share Program.
The funding plan we see before us is a moment that has been years in the making. In 2013, we launched the Minneapolis Energy Options campaign with the intent of increasing the willingness of electric utility Xcel Energy and natural gas utility Centerpoint to take clean energy negotiations seriously on the local level. In response, Xcel and Centerpoint promised to be good partners in helping the City meet its ambitious Climate Action Plan goals
This exchange led directly to the formation of the Minneapolis Clean Energy Partnership by late 2014- a first of its kind collaboration between the local government of a major city and both utilities who serve it.
In 2015 & 2016, the Partnership collected data, formed a pilot project and set the baselines for measuring its eventual success. In 2017, the time had now come for the Partnership to scale up its work so the City can get on track to meet urgent energy goals such as 75% of households participating in energy efficiency efforts and 80% greenhouse gas reduction by 2050.
It is important to recognize how EVAC’s recommendation is the result of the formal advisory process that the City and the Partnership have set up to determine how the City can best demonstrate local climate leadership in practice as well as on paper.
A subgroup of EVAC looked at many options for funding sources and this franchise fee funding plan is what they concluded would be both the most fair and most effective option. At its July 11th meeting, members of EVAC voted to approve their funding plan recommendation. Next, the Minneapolis Clean Energy Partnership board approved a more general proposal at its July 25th meeting which advised its staff team to move forward on the franchise fee funding plan.
However, raising the franchise fee by 0.5% and dedicating the revenue toward a specific purpose in next year's budget requires the current Minneapolis City Council to undertake an ordinance change and hold a public hearing which we expect the Ways and Means Committee to hold on December 4th 2017.
If approved by the City Council as it is, EVAC’s proposal would add only 57 cents per month to the bills of the average Minneapolis residential customer while providing $2.89 million per year for comprehensive energy programs that make it easier for ALL utility customers of ALL levels (residential, commercial, industrial) and incomes to save money and energy.
One example of a proven & reliable use of new franchise fee revenue is the City's Green Business Cost Share Program. That specific program has proven itself to get good results (saving 116,253 pounds of air pollutants and 16.4 million pounds of GHG emissions), is able to be scaled up, and is in higher demand than currently available funds for it.
The common question remaining is how would the Partnership best spend the $2.89 Million in dedicated funding in ways that will have a high energy saving per dollar expended ratio?
On that matter, EVAC did the work and laid out a roadmap in their report. They looked at Energy Savings potential, the common barriers to access for current programs and how to best leverage the $22 million in current utility investments to get expanded program participation.
What if the City of Minneapolis dedicated that $2.89 million per year in new revenue toward programs, financing tools, and outreach strategies that help utility customers of all classes cut down their energy costs by 10%-40%? It would yield a savings for Minneapolis energy users that far outweighs any additional cost of the increased franchise fee. Several state studies and national reports have identified cost-effective energy savings potential of around 50% of current energy use, which would save Minneapolis residents and businesses $285 Million each year if applied.
The $2.89 million per year in up-front public investment should pay off and should be returned back into our pockets, many times over in the form of energy savings which mean a lower cost of living and more affordable costs of doing business.
BACKGROUND INFORMATION ON UTILITY FRANCHISE FEES
In Minneapolis, utility franchise fees currently provide a reliable revenue stream to the City General fund, amounting to an average of about $26 million annually. It provides a model for how the City can secure a dedicated source of revenue to fund a shift to clean energy and energy efficiency.
Utilities like Xcel Energy and CenterPoint Energy pay franchise fees to cities for their use of public space for building privately-owned poles, wires, and underground gas lines. Xcel and CenterPoint collect franchise fees as a percentage on their Minneapolis customers’ utility bills; you can see this item on your bill labelled “City Fees” or “City Franchise Fees”.
Currently Minneapolis Franchise fee rates are 4.5% for residential, 5% for small commercial, and 3% for large commercial and industrial. The total dollar amount each customer pays in franchise fees pays depends upon how much energy they consume as opposed to being a flat fee or fixed charge. The average Minneapolis resident currently pays about $5.30/month on combined franchise fees collected from Xcel and CenterPoint. Minneapolis residential franchise fees are lower than those charged in many neighboring cities.
In 2014, the City had to negotiated its new utility franchise agreements because the previous 20-year franchise agreements were set to expire on Jan 1, 2015. The knowledge we had back in 2012 of these expiring franchise agreements, and that the City and both utilities will be in negotiations in 2014, is what motivated us to lay the groundwork for the Minneapolis Energy Options Campaign.
The proposed franchise fee increase would be the first time franchise fee revenue was dedicated specifically to help Minneapolis energy users reduce their energy costs and switch to cleaner energy sources.