The Minneapolis City Council will hold a public hearing on August 1 to discuss the concept of forming a municipal utility—a move that would involve cutting ties with longtime partners Minneapolis-based Xcel Energy, Inc., and Houston-based CenterPoint Energy.
And while there is currently no vote scheduled to take place at the hearing, the meeting has been described as an important step toward adding a so-called “municipalization” measure to the November ballot.
In fact, the council has only until August 16 to vote on whether it would add such a measure to this year’s ballot, according to a city spokesman.
The City of Minneapolis signed its latest “franchise agreements” with Xcel and CenterPoint in the early 1990s, and both contracts are set to expire at the end of 2014. The companies pay the city “franchise fees” under the terms of the contracts; in 2012, for example, Xcel paid $16.7 million in such fees. (Learn more about Xcel’s contract here and CenterPoint’s here.)
The city is exploring the concept of creating a city-owned utility as it also gears up to negotiate new franchise agreements with the utilities. Part of the city’s challenge is finding the most cost-efficient way to meet its goal of reducing citywide greenhouse gas emissions by 15 percent by 2015 (and 30 percent by 2025), using 2006 as a baseline.
The City Council voted in late June to hold the upcoming public hearing, at which time it also agreed to fund a $250,000 study designed to explore the municipalization concept. The results of the study are expected to come out early next year, and they will outline the city’s future energy goals and potential ways in which to meet them, according to a Star Tribune report.
That means that the issue may appear as a ballot measure before the full results of the study are released. And some members of the business community, including, not surprisingly, Xcel, have criticized the process.
Laura McCarten, a regional vice president for Xcel, told Twin Cities Business in a Monday phone interview that putting the municipalization matter to a vote is a “divisive path,” and rather than spending time and resources on whether to put it on the ballot, the city should work with Xcel to craft a new plan to meet its energy goals.
Xcel has long provided “reliable, cost-effective, and environmentally sound service” to the city, and it aims to continue the partnership, McCarten said. “We don’t think there’s a problem to be fixed,” she added.
Todd Klingel, president and CEO of the Minneapolis Regional Chamber of Commerce, echoed McCarten’s statements, saying that a better use of resources would involve moving ahead with negotiations with the utilities, rather than first going after a ballot measure for the sake of having more leverage in those negotiations.
In a recent email, Klingel urged chamber members to contact city councilmembers and express opposition to placing the municipalization issue on the ballot.
“We think asking the public to vote on this in November is a mistake,” he wrote. “We need your help make sure the Minneapolis City Council hears our voice and rejects the plan.”
A citizens group called Minneapolis Energy Options, meanwhile, has pushed the city to explore municipalization and supports the ballot measure. The group has said that the upcoming public hearing is “a first step toward addressing rising energy costs and moving toward a clean, affordable, reliable, local energy future.”
Xcel has been battling a similar municipalization effort in Boulder, Colorado, where voters passed a 2011 ballot measure allowing the city to replace Xcel with a municipal electric utility, contingent upon whether such a utility could offer similar rates and service as Xcel.
Boulder officials wrote in a report last week that the Boulder City Council should move ahead with creating a municipal utility and procure—through condemnation, if necessary—Xcel's distribution system, according to a report by the Denver Post. The council is reportedly reviewing the report and will now determine whether to move ahead with the condemnation process.
Xcel has argued that Boulder is underestimating the costs and challenges of running an electric utility and has said that acquiring its business there through a condemnation process could take years to complete.
Xcel is among Minnesota's 15 largest public companies based on revenue, which totaled $10.1 billion in 2012.