The most common misconception about Minneapolis Energy Options was that voter approval of such a ballot initiative would be an automatic jump straight to the city acquiring the power grid to form a municipal utility as if there were no steps in between with the PUC or a feasibility study.
Even if Minneapolis’ voting electorate had approved the ballot initiative to authorize formation of a municipal utility, it would not have required Minneapolis to go forward with the actual acquisition immediately or even at all.
If Minneapolis voters had been offered the referendum and passed it then it would have required that the City be able to document it can pay back the municipalization bonds in a timely and cost-effective manner without increasing long-term rates before the city could can go ahead with acquisition. City Council Member Cam Gordon, who proposed the referendum, made it clear he only intended for the City to be able to create a city-owned utility if it can meet several criteria, including meeting climate change and energy efficiency goals and increasing locally generated renewable energy. The questions in the feasibility study includes whether this municipal utility will have the capital needed to hire crews when needed, to manage its workers, to purchase the needed equipment, to provide a call center for ratepayers or to offer targeted help with billing services.
From this perspective, there was no risk in voting yes for the ballot initiative. Even if the ballot initiative had materialized and had been successful, there was still a chance we could have ended back up with Xcel anyway if that is what the feasibility study were to recommend.
There is a positive precedent for the feasibility study process that Cam Gordon was suggesting. The City of Boulder invested $3.3 million into a feasibility study that found that the city could get 40 percent of its electricity from wind and solar, effective immediately, and without raising rates, if it took the municipal utility path. Boulder’s feasibility study suggested that the city can reduce greenhouse gas emissions by 50% through increasing renewable energy production by more than 54%, which is far above Xcel’s targets, while reaching lower utility rates than Xcel (for residential, commercial, and industrial sectors) with as good or better levels of system reliability projected over an estimated 20-year span. NOTE 1
A big debate during the heat of the Minneapolis Energy Options campaign in mid-2013 was a question on how many bonding dollars municipalizing would cost Minneapolis and the extent to which Minneapolis could be compared with Boulder in that regard.
A formal feasibility study (not to be confused with the City Council-approved Energy Pathways Study) is the detailed analysis that would determine the cost of buying back all the power lines, poles and other equipment from Xcel. But as described earlier we were in a catch 22 in getting the actual numbers people on both sides of the debate wanted.
Only with the municipalization option approved by a vote of the people, could Minneapolis then have standing in front of the PUC to do a formal feasibility study and determine whether, how and under what circumstances to pursue the option to municipalize.
The differing claims as to the overall price tag of starting a municipal utility vary widely depending upon whose interest is at stake. For example, the city of Boulder estimated municipalization will cost the city about $290 million, while Xcel came up with figures that put the payment due at about $1.2 billion; a dramatic difference of about 4 fold. NOTE 2
Boulder’s feasibility study found that even if Xcel’s wildly-exaggerated cost estimates were applied, the city they could repay the bonds needed to finance a city utility using only the revenue from electric sales – no taxpayer money – keep rates the same or lower and reduce power outages.
Doing such a feasibility study for Minneapolis would be so informative for inquisitive or skeptical voters who understandably want to replace the cloud of uncertainty with actual numbers and figures on municipalization.
However, doing a $2.5 million formal feasibility study would be a waste of time and money if the city doesn't even have the legal OPTION (from its voters) to municipalize. Why invest $2.5 million into doing a formal feasibility study unless voters show that are at least confident of a good outcome?