THE LOST REVENUE STRIKE AMENDMENT IS THE LINCHPIN FOR EVENTUAL SUCCESS WITH MUNICIPALIZATION
The municipal utility route may be the only alternative path to negotiating higher franchise fees and right of way terms that state law clearly lays out for cities. However, state law still imposes a hefty financial obstacle even for this one alternative path it provides.
If the City of Minneapolis were to acquire electricity distribution infrastructure currently owned by Xcel, state law MN 216 B 45 suggests that the price figure would have to consider the profits the utility would have made if municipalization had not taken place. NOTE 1 To draw a comparison, consumers who switch phone companies face a similar dilemma where they have to pay compensation for the loss of future revenues to a phone company whose service they no longer use.
Many constituents and City Council Members who were supporters of municipal power in principle, felt municipalization would be unaffordable for Minneapolis if the city is required to reimburse Xcel for the lost future revenues that it would have made.
This state legislation passed in the early 1970’s, hugely inflates the cost for cities to form their own municipal utilities.
Having to pay a utility compensation for future lost revenue is the poison pill that dissuades cities like Minneapolis from following through on municipalization even if a PUC-sanctioned feasibility study decides that a City of the Lakes Power and Light can otherwise do a better job than Xcel.
Not surprisingly, new municipal utilities ceased to be formed in Minnesota after that particular statute took effect.
During the 2013/ 2014 MN State Legislature, there was a proposed strike amendment SF 911 / HF 945 to remove the six words in the statute that requires that the state’s Public Utilities Commission factor in lost revenue to a utility company when determining how much a city should pay a utility for its’ the line, pole and substation infrastructure.
Going forward will take a substantial grassroots coalition to act as a counterweight to the utility lobbyists who are determined to keep the lost revenue provision as their poison pill.
HOW ABOUT FORMING ENERGY COOPERATIVES IN MINNEAPOLIS?
Formulating an argument on how state law makes municipalization unaffordable for cities begs another question.
Couldn’t several smaller, multi-neighborhood electric co-ops accomplish the same goals that Minneapolis Energy Options laid out for clean, affordable, reliable, local energy at far less cost than buying up all poles, electric lines and other Minneapolis equipment from Xcel to form a municipal electric utility? Electric co-op utilities are owned by their own customers, elect their own board to run the utility, and return the profits back to the customer base. Wouldn’t creating energy co-ops within Minneapolis be a more practical way for the city to introduce completion into management?
Forming a new energy cooperative is indeed an exciting idea for those reasons. Unfortunately, Minnesota state law does not give Minneapolis or parts of Minneapolis the option to switch directly to a co-op owned utility. In order for an energy generation co-op to form within the city, one of three things would have to happen. 1: The incumbent utilities would have to agree to buy power from such a cooperative 2: The city would have to form its own municipal utility 3: A major state law change would have to take place to allow a competitive non-monopolistic energy service in Minnesota. Let’s assume that Xcel is not going to support a local clean energy co-op that would eat into their market share. Now if the state legislature doesn’t overthrow the legalized monopoly statutes that protect Xcel from competition by prohibiting cities from accessing alternative suppliers, then what are we left with?
The only legally-provided option is to form a municipal utility and then have that muni contract with such member-owned co-ops to provide power to the city utility.
Once again the only path the city is allowed to take other than continue service with their incumbent utility is to get voter approval to explore a municipal utility and to proceed only if the findings of a feasibility study meet expectations.
State law sets up huge political and financial obstacles for cities to form their own municipal utilities. In addition, it would take a major change in state law to form a cooperatively owned utility.
There is yet another much more feasibly applicable but politically blocked path for cities like Minneapolis that want its energy utility companies to meet a whole range of their adopted climate action plan goals.
It would be to open up utility franchise agreements to be inclusive of a city’s energy efficiency, renewable energy and local jobs goals rather than the scope be restricted to a narrow focus on public right of way.
There was some legislation SF 1450 / HF 1490 introduced in the 2013-2014 session that would allow goals for clean energy, improved air quality, equity and green jobs to be included into utility franchise agreements.
The Minneapolis City Council supported this 2013 legislation which would have allowed cities more flexibility in franchise agreements and picking their own fuels or transmission delivery systems.
Even though passing the legislation would have taken away much of the drive to consider a municipal utility, Xcel lobbyists still fought Minneapolis legislators’ attempts to ensure these more efficient and renewable energy goals could be included in new municipal franchise agreements. In 2013, the Star Tribune quoted Xcel lobbyist and director of regional government affairs Rick Evans said the company “would fight the proposal if it gained momentum in the Legislature.” NOTE 1
As a result the Minneapolis-backed bill SF 1450 / HF 1490 languished in the Minnesota Legislature when it had a moment of opportunity in 2013.
Utility lobbyists usually say that giving a legislative pathway for cities to have more control/ influence will lead to “balkanization”. They argue it would be economically inefficient if each city wants something different AND that state government can still overrule what individual cities want anyway when there is a mismatch.
I noticed this pattern for myself during the 2013 Minneapolis Energy Options campaign.
The statements I heard Xcel spokespeople use against Minneapolis Energy Options at neighborhood meetings typically did not argue against the merits of the campaign’s environmental goals and in fact they spent a lot of time touting Xcel’s environmental credentials. Instead, Xcel spokespeople have argued the legalistic technicality that environmental goals are supposed to be done at the level of state legislatures and the PUC rather than by individual cities.
Here is the more general picture as to why Xcel lobbied against pro-local control legislation SF 1450 / HF 1490. The utilities like to steer their public process for decision making into centralized arenas like the PUC and the state legislature where they can most easily manage. This concentrated ability to influence and lobby is something they can’t do with 50 different communities setting their own goals.
NOTE 1 (Citation from http://www.startribune.com/local/minneapolis/217856111.html Stakeholders
mobilize for hearing on Minneapolis municipal utility debate Article by: MAYA RAO , Star Tribune Updated:
August 1, 2013 - )
THE EXTENT OF XCELS LOBBYING PRESENCE
Could Xcel perhaps be setting up a trap for us by making claims that the state and the federal governments are the only ones who have standing to set the environmental friendly standards?
If Xcel were so trusting of the state then why would Xcel so heavily lobby the legislature? Or do they trust the state because they basically run the show at that level? According to the Center for Public Integrity, Xcel Energy Services inc. has spent $2,360,000 in 2011, $2,430,000 in 2010 and $2,627,326 in 2009 on lobbying in the State of Minnesota. That is a larger expenditure than any other association or business group on the list provided by the Minnesota Campaign Finance Board. It is even higher than the MN Chamber of commerce spent on lobbying in those respective years.On one hand it feels awkward to demonize energy utilities because they are supposed to provide an essential service to us. Yes real people work for the utilities and when we need them we call them. The role of providing a service does include having employees to report to the PUC. But why should this role of providing a service include sending 45 registered lobbyists to the capitol to interfere with the people's public decision making though elected officials? It is questionable whether it should even be legal for regulated monopolies to do lobbying of that extent, but it is too normalized.
When customers pay their utility bills, they are also paying the utilities’ lobbyists to advocate for the companies’ own interests even when they come up against our own potential collective interests. It was utility lobbyists that made it prohibitively expensive to form a municipal utility or too legally complex to do community controlled energy.
In addition, there is no box on your utility bill that reads: “check here if you want your money to go toward lobbyists for community-owned power rather than paying for Xcel’s lobbying presence.”
In this way Xcel has hence engineered a catch-22 where they can’t lose. As the utility gets bigger from more mergers (such as the merger that turned NSP into Xcel), it snowballs more political clout, thus making it harder for state level regulators to exercise any real control over them. Average citizens can’t even come close to competing with Xcel at the state legislature.Let’s take a look at all parties present at the March 17th 2014 informational hearing and break them down by the number of registered lobbyists each party had:
Xcel Energy Services Inc has 58 Registered Lobbyists total and 45 without any termination dates
CenterPoint Energy MN Gas has 33 total registered lobbyists 30 without termination dates
MN Power (ALLETE) has 32 total registered lobbyists 27 without termination dates.
Otter Tail Power Co has 18 registered lobbyists total 15 without termination dates.
Missouri River Energy Services has 11 total registered lobbyists 8 without termination dates.
The MN Municipal Utilities Assn has 8 total registered lobbyists
The City of Minneapolis has only 8 registered lobbyists without termination dates.
Center for Energy & Environment has only 5 lobbyists
MN Rural Electric Assn has 4 registered lobbyists without termination dates.
Southern MN Municipal Power Agency (SMMPA) has only 3 registered lobbyists.
Minneapolis Energy Options and Community Power collectively have 3 registered lobbyists.
Given these numbers, it is rather duplicitous for Xcel to argue that the state regulators and the PUC are the rightful ones to keep them in check while spending more than any other entity in lobbying the state of Minnesota.Yes, the Public Utilities Commission is the quasi-judicial body in charge of directly regulating the utilities. But it is basically a five-person court appointed by the governor. Even though the PUC technically takes public commentary, the PUC as a body is a lot further removed from we the people than local city councils or state legislatures who are more face to face with their constituents.
Here is the end sum of all the roadblocks that the interplay between state legislation and Xcel’s lobbying have brought forth: Either Minneapolis takes the path of pursuing Municipal Utility or Xcel and Centerpoint agree to meet Minneapolis’ climate and energy goals. As a campaign, Minneapolis Energy Options decided that we can’t have the advantage of the latter without pursuing the former.