THE OPTION TO AUTHORIZE FORMATION OF A MUNICIPAL UTILITY
So given the above situation, what sort of negotiating strategy would the utilities take seriously? The early steering committee decided the only viable option for using Minneapolis’ upcoming franchise renegotiations as leverage was to put the option to form a municipal utility on the table. The early thought leaders behind Minneapolis Energy Options found out that municipal utility was the only path Minnesota State law clearly laid for a city to take besides signing whatever franchise agreement that the incumbent utilities will agree to.
John Farrell, who eventually became the chair of the Minneapolis Energy Options steering committee, had been researching the topic for years and is frequently asked to speak on behalf of many of the cities about energy municipalization.
In addition, City Council Member Cam Gordon had been interested in municipal power since he first ran for City Council in 2001. He gave Timothy DHT a very detailed guidebook he had on strategies to pursue municipalization and the typical counter offensive tactics the incumbent utilities use to try to stop it. Leslie Glustrom, who was very involved with the Clean Energy Now campaign in Colorado, told the early steering committee the story about Boulder’s activity pursuing muncipalization.
The rest of the early steering committee found out there are municipal utilities around the nation who have been doing a lot of cool stuff. In general their rates are 14% cheaper and have less power outage time than corporate owned utilities and are more sustainable, clean/efficient and /”smart” at least in big cities. For example the Municipal Utility of Austin, Texas has committed to reaching 35% renewable energy by 2020.
In addition there are close to 2,000 municipal utilities that are in operation across the United States with 125 Municipal electric utilities in Minnesota and 31 municipal gas utilities including Rochester, Moorhead and Wilmar. NOTE 1 (See addendum on why Muni is better in theory for more)
They determined Municipalization as an investment for Minneapolis would at minimum cost not very much short of billion dollars in bonding.
Yes it is a substantial investment, but we figured the investment would be spread out over the course 20 years and could pay off since city residents and businesses were already paying $450 billion and rising annually to Xcel and Centerpoint.
Nevertheless, municipalization was still really exciting and worth researching and exploring because it presents a threat to Xcel and Centerpoint and a point of leverage to have them take negotiating clean energy goals seriously. If we put the option on the table then Xcel and Centerpoint would have an incentive to take us seriously.
NOTE 1 (http://mmua.org/about/why.htm )
THE PUBLIC PROCESS FOR FORMING A MUNICIPAL UTILITY SETS UP A CATCH 22
About June of 2012, the early steering committee was looking into the public process that has to happen under Minnesota state law MN to form a municipal-owned utility.
Minnesota state law says a city or town has to stay with their incumbent energy utility unless its residents vote yes on a council-approved ballot initiative to authorize formation of their own municipal utility. Even if Minneapolis refused to sign a contract with Xcel to operate in the city, Xcel could easily argue in court how state law requires them to serve their current customer base so therefore Minneapolis has to allow them to operate. On the other hand Minneapolis (among other Minnesota cites) has full legal authority under State Statute 216 B to offer their voters a municipal ballot initiative to authorize formation of a municipal utility and to pursue forming a municipal utility if the voters approve.
It is quite a lengthy process. First, the City Council has to give a notice to hold a public hearing on the issue at least 30 days in advance of the hearing. At this public hearing anyone can give comment to say if city residents should be given the option to vote on a ballot initiative to authorize formation of a municipal utility. Following the public hearing, city council has to vote in favor of putting such an initiative on the ballot and even offering their constituents the choice in the first place. This vote has to happen at least 60 days in advance of Election Day. Then on Election Day, voters could say yes or no to a ballot initiative that gives the city the authority to form a municipal utility but DOES NOT require it. Only after this ballot initiative passes could a city have standing to do a feasibility study in front of the PUC to find out the numbers of how much it would cost the city to purchase the electrical infrastructure currently owned by Xcel.
A key strategy which incumbent investor-owned utilities typically use to beat such ballot initiatives is to make claims as if the municipalization ballot initiative REQUIRES the city to form a municipal utility. There is in fact a whole handbook utilities use on how to prevent cities from forming municipal utilities which Minneapolis Energy Options and other communities had access to.
Here is why this process for forming a municipal utility is laid in in a way that gives the incumbent utilities free range to employ their usual tactics and strategies for getting people to vote no on such a ballot initiative.
A city be only allowed to attend PUC meetings and figure out the actual numbers how much forming a municipal utility would cost only after its public votes yes on the ballot initiative. Passing the ballot initiative would give the City standing in Until that point then the incumbent utility has room to misleadingly claim “not only does a YES vote mean you are required to municipalize but it will be billions and billions of dollars based on our numbers.”
Jumping ahead a bit in the story, one of the main critiques of the Minneapolis Energy Options resolution was that it was backwards to vote to authorize municipalization before the numbers were crunched and before voters could have some numerical figures from which to make an educated vote. Although it does sound instinctually backwards to vote on authorization of municipal utility before a formal feasibility study is done, that is the process we have to follow according to Minnesota state statutes in 216 B. Overall, it was not an idea from Minneapolis Energy Options or the City of Minneapolis to put the proverbial cart before the horse.
Whether or not it was intentional, state law is set up to make the process of municipalization and similar big changes VERY complex and difficult to accomplish. It sets up a catch 22 where a city has to pass the ballot initiative in order to have standing at the PUC to get the numbers. Opponents of the would-be ballot initiative among the public could claim that the city is uninformed because it hasn’t done the research yet, however the city couldn’t do the needed research until the ballot initiative gets a city-wide yes vote! Doing such a campaign is like threading a needle: you have to get it perfect or it won’t work.
In addition, a city that wants to municipalize would then have to go through a long and complex legal process with the PUC just to get the numbers on what it would cost.
Otherwise the only information you can get about the cost of municipalization is from the utilities who wildly inflate the costs out for their self-interest over market share. As for Xcel’s operation in Minneapolis, there is nothing to compare it to so it is hard to come up with data. This whole set up gives the incumbent utilities the opening they need in order to do a scaremongering hit job as to how much going muni will cost.
A NEW STRATEGY TO ACHIEVE CLEAN ENERGY WINS
The early steering committee came to terms with the daunting nature of this process for putting the municipal utility option on the table. But decided we needed to do it and take the opportunity.
Upon the knowledge of the process, Minneapolis Energy Options started laying the groundwork for a campaign for such a ballot measure that would simply authorize the city to begin exploring a municipal utility as an option. Simply stated, it would have given the City the option but not requirement of forming a Municipal utility.
There was a brief moment where Minneapolis Energy Options considered putting the initiative on the ballot in 2012 but quickly determined that was a very bad idea because: 1) The issue was too unfamiliar with City Council. 2) We had no coalition among the public who had heard of the issue. 3) There were already two very big VOTE NO campaigns against Constitutional Amendments and they would have had a hard time undoing confusion among voters if we injected a “Vote Yes” ballot initiative 4) All of the support networks of organizers we needed like MPIRG were busy with the 2012 election and could not have given a lot of muscle to this campaign 5) 2013 was a City Council election year and it was strategic to could couple the municipal energy issue with the municipal elections… 6) Waiting until late 2012 to announce the campaign would give the utilities minimum time to prepare a backlash campaign 7) Waiting until after the 2012 election gave us more time to build $70,000 in financial resources for 2013. The funders behind the campaign were not interested in Minneapolis forming its own municipal utility but funded the upcoming campaign to use the threat of municipalization as leverage.
As a result, we used 2012 to quietly build up a network of coalition partners sharing about our new strategy (as described in a previous chapter).
Minneapolis Energy Options brought about a strategy that was quite new to organizers and funders: to use threat of municipalization and franchise agreements negotiations to achieve clean energy wins.
The dominant strategy for creating change in our energy system has been “get legislation at the state level that tells the utilities they have to do it”. But we know from experience there are limits on how much the familiar strategy can accomplish because of likely gridlock and the requirements upon utilities not being specific enough.
Almost all the way across the board the result of this typical strategy is that the clean energy requirements are achieved but incumbent utility management is left with a great deal of control to determine the specifics about how to accomplish them. This usually results in giant wind farms whose cost the utilities they get to build into their rate base. Giant wind farms are part of the solution. The main issue of contention is that incumbent utility management has been oppositional to provisions on decentralization, and locally-based, small-scale generation that are also part of the solution and have inspired Minneapolis Energy Options thought leaders like John Farrell.
Some energy policy organizations have spent the last 2-4 decades of using state regulations to push energy utilities were less than thrilled about this new strategy of considering municipalization. A City of Minneapolis Municipal utility would be out of the control of state regulation and hence throw a wrench into the familiar strategy. This is why many funders were skeptical and why Minneapolis Energy Options could not secure some environmental/ energy groups as coalition partners. It was a disruptive strategy indeed. But the point of Minneapolis Energy Options was disruption because the current system was not working. We needed to change the power dynamic to achieve the long-held goals.
BOULDER COLORADO SETS AN INSPIRING PRECEDENT FOR THE CAMPAIGN
In 2013, Minneapolis Energy Options campaigned for getting this ballot initiative in order to provide a signal that a significant constituency within the city was not content with a status quo that combined yearly utility rate hikes with continued dependence upon dirty energy.
The spirit of Minneapolis Energy Options was not about exploring a municipal utility just for the sake of municipal ownership. It was about to be pursuing the option to municipalize for purposes of CLEAR, the acronym Minneapolis Energy Options invented for how we want our energy to be “Clean, Localized, Equitable Affordable, and Reliable.”
For that reason, the 2011 success of two similar pro-municipal utility ballot measures in Boulder Colorado has provided a main source of inspiration and precedent to Minneapolis Energy Options.
Boulder, Colorado is the first city to authorize a municipal utility for the specific purpose of increasing clean energy to meet climate emissions reduction goals. Boulder is home to the National Renewable Energy Laboratory. It is also a city with an abundance of climate and environmental scientists and energy experts who were practically volunteering to carry out feasibility studies and to educate the community about Boulder’s energy pathways.
Like Minneapolis, Boulder Colorado also had a franchise agreement with Xcel: one which expired in 2010. According to the Colorado Constitution, the renewal of the franchise agreement had to go to the voters.
Xcel first offered a win-win deal of selling Boulder a wind farm in the years up to 2010. But then Xcel reneged on that offer and instead insisted on a status quo franchise agreement ballot initiative.
In protest, the City of Boulder put two initiatives on the ballot.
The first ballot initiative gave the city the authorization to pursue municipalization, so long as the city could prove they have the capability of providing electricity with the same reliability and at a cost not higher than Xcel. The second ballot initiative was intended to raise the consultant and legal fees anticipated for the municipalization process. NOTE 1
On Election Day 2011, the voters of Boulder narrowly passed both ballot initiatives despite the campaign being outspent 10 to 1 by the Xcel-led opposition.
It provided inspiration and confidence to the Minneapolis Energy Options campaign to see how those campaigning for the ballot measures could spend only about $107,000 to win a campaign against Xcel spending nearly $961,000 to defeat the measures. NOTE 1
However that story provided confidence with a caution. The poll numbers in support of the ballot initiatives were at a lofty 70% before the Xcel-led opposition succeeded in narrowing down the voter support to just barely above 50%.