Minneapolis rethinks pacts with utilities
Posted: 5:23 pm Thu, April 4, 2013
By Drew Kerr
Tags: CenterPoint Energy, Dylan Kesti, Elizabeth Glidden, Jack Kegel, Laura McCarten, Minneapolis Energy Options, Minnesota Municipal Utility Association, Xcel Energy
Xcel Energy continues work on a new power substation east of the Hiawatha Avenue and East 28thStreet intersection in Minneapolis. City officials are backing legislation that would require the utility to disclose more information about its maintenance plans and system reliability. (STAFF PHOTO: BILL KLOTZ)
City wants Xcel, CenterPoint to do better job meeting energy goals
The city of Minneapolis may be playing a game of brinkmanship as it works to get privately held electric and gas utilities to put more effort into meeting its local energy goals.
But as negotiations ramp up, it’s also putting real money toward the effort and trying to win the support of Minnesota lawmakers who could help them improve their hand.
Hamstrung by state laws limiting cities’ ability to influence energy policy, Minneapolis is pursuing a $250,000 study of the costs and challenges involved with a municipal takeover of electric and gas distribution. The study, approved by a committee of the Minneapolis City Council on Thursday, is expected to show initial results this fall.
The city is also backing legislation that would force utilities to include energy-efficiency goals, maintenance plans, alternative energy policies and quarterly reports on system reliability in franchise agreements with the city. Such agreements allow utilities access to publicly owned right of way in exchange for giving cities a share of revenue.
Officials say Minneapolis remains a long way from creating a municipal utility, a costly and time-consuming endeavor in which the city would purchase utility assets and assume control of electric or gas distribution.
But as Minneapolis negotiates a pair of expiring franchise agreements with Xcel Energy and CenterPoint Energy, it is getting more serious about following in the path of Boulder, Colo., and other cities where takeover threats are being used to advance local energy goals.
Minneapolis’s franchise agreements with Xcel and CenterPoint brought $24 million into city coffers last year. Xcel’s agreement expires in January 2014, and CenterPoint’s in 2015.
Minneapolis officials see the renewal time as a key opportunity to advance the city’s goal of reducing greenhouse gas emissions by 30 percent during the next decade.
As talks continue, City Council member Elizabeth Glidden said the study is needed to help her and other officials understand all of the possibilities.
“This is all a part of the process to make sure we have all of the options in front of us,” Glidden said. “This is a city that cares very much about clean energy and energy efficiency and how we can support that in everything we do.”
Representatives from Minneapolis-based Xcel Energy and CenterPoint Energy each said Thursday they would cooperate on the study and through negotiations but that they did not believe a municipal takeover was needed to meet city goals.
“What we have conveyed to the city is that we think we have a lot to bring to the table to help them achieve their goals,” said Laura McCarten, Xcel’s regional vice president. “We have a great foundation to keep building on.”
McCarten said Xcel also opposes the city-based franchise agreement legislation because it could create a patchwork of standards that would be difficult to meet.
“Our grid just doesn’t work that way,” she said. “We work on economies of scale and not by city boundaries.”
Xcel also opposes proposed legislation that would allow municipalities to take over a private utility without having to pay ongoing loss of revenue, a barrier to a municipal takeover. Such payments are designed to protect ratepayers from picking up the costs after a municipal exit and are seen as a significant barrier for municipalities interested in taking over a utility.
Dylan Kesti, campaign coordinator for Minneapolis Energy Options, a group of residents pushing Minneapolis to be aggressive in its franchise negotiations, said he was encouraged by the city’s actions.
The group is hoping for a citywide referendum on the creation of a municipal utility later this year that would give the city the authority to purchase utility assets and do more study of ratepayer impacts.
“Compared to just going along with the status quo, we’ve asked the city to partner with us and we see this as a step towards that,” Kesti said. “It [the study] shows they’re willing to take this seriously.”
Still, creating a municipal utility is a complicated endeavor. The obstacles have prevented a municipal takeover for more than four decades, and Minneapolis is perhaps the only city in the state actively pursuing such a move now.
“We are operating in an environment where a lot of these decisions were made 100 years ago, so it is difficult, time-consuming and expensive to move from one model to the other,” said Jack Kegel, executive director of the Minnesota Municipal Utility Association.
Still, with 125 municipally run electric utilities and 35 municipally run gas utilities in the state, the model has its advantages, Kegel said.
“The governing bodies live in town … so everyone knows who they are and if people have something to say about the utility they’re not shy about saying it,” he said. “Municipal utilities are typically very aware of and sensitive to community feelings.”