Xcel Energy weighs exit from Minneapolis under municipal utility

CEO Ben Fowke links the headquarters’ departure from downtown to a possible city takeover of utility services.

Xcel CEO Ben Fowke
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Xcel CEO Ben Fowke

 

If the city of Minneapolis forms a municipal electric utility, it stands to lose one of its biggest downtown employers: Xcel Energy.

Xcel CEO Ben Fowke said in an interview Thursday that the utility company would not keep its headquarters in the city if it took over distribution of electric service, a matter that is likely to go to voters in November and will receive a public hearing before the City Council on Aug. 1.

“There is not a utility in the nation that has their headquarters in a city that has municipalized,” Fowke said in remarks to the Star Tribune editorial board.

The company, with a market value of $14 billion, operates in eight states. It has served Minneapolis for a century, has long maintained its headquarters on Nicollet Mall and now employs about 2,000 people downtown.

When Fowke talked about leaving, he didn’t present it as a threat — as sports teams have done when demanding government subsidies — but rather as an inevitable result of a city utility takeover. But the prospect adds another wrinkle to the complex negotiations that are looming with City Hall as the company’s 20-year franchise agreement with Minneapolis is set to expire at the end of 2014.

“Any municipalization is years down the road,” said Council Member Cam Gordon, who is vice chairman of the Regulatory, Energy and Environment Committee. “We can’t influence where anybody keeps their headquarters, and I think Minneapolis is a great place to keep their headquarters, but it’s early to talk about that at this point.”

Xcel seeks discussions

Fowke said he can’t understand why city officials are talking about replacing Xcel with a municipal utility without first having serious discussions with the company.

“It is kind of astonishing to me that we don’t have a dialogue,” he said.

The current franchise agreement gives Xcel space below or along streets, alleys and other public rights of way in exchange for millions of dollars in franchise fees paid to the city.

Minneapolis officials have shied away from a rubber-stamp renewal of the franchise agreement, instead pushing this as an opportunity to make Xcel produce more clean energy and further the city’s goal of dropping greenhouse gas emissions 30 percent by 2025.

An environmental coalition, Minneapolis Energy Options, has advocated for the city to consider a municipal takeover of Xcel’s assets as one possibility to accomplish that; signing a shorter franchise agreement is also in discussion.

Some Minneapolis City Council members have expressed hesitation about taking over electric service, even as they are taking early steps to put the issue on the November ballot, a process that would have to be finalized next month.

Proponents of the ballot vote say it could give the city leverage going into negotiations with Xcel in 2014 and keep the option on the table while not forcing Minneapolis to form a utility if the city later explores other alternatives.

This summer, the council approved a $250,000 study due in February to explore ways Minneapolis can meet its renewable energy goals when franchise agreements with Xcel and CenterPoint Energy, the city’s natural gas provider, expire. Council President Barb Johnson and other critics questioned why the city is moving toward a referendum before the report comes back. They also raised doubts about whether the city could afford the move and handle major power disruptions, like last month’s storm that knocked out power to hundreds of thousands.

Bill Breon, fundraising director for Minneapolis Energy Options, said Xcel’s talk of moving suggests “their heads are pretty far down the road.” He said the push for municipalization, including the ballot measure, is an effort “to put more options on the table” as the franchise agreement comes up for renewal.

Gordon, the council member, said Minneapolis is looking forward to the end of the franchise agreement because it “will offer that opportunity for us to have that dialogue and discussion. The fact that we’re having a public hearing has actually gotten more interest from them to sit down and talk” about the city’s energy future.

  • Xcel Energy

    Headquarters: Minneapolis, Minn.

    CEO: Ben Fowke

    In the news: In a letter to its 183,000 Minneapolis customers, Xcel said a move toward municipalization of electrical service could cost the city billions.

    Business: Regulated utility with 3.4 million electricity customers, 1.9 million natural gas customers in eight states, including 1.2 million electric customers in Minnesota.

    2012 revenue: $10.1 billion

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Xcel CEO Ben Fowke