As Minneapolis pushes to reduce greenhouse gas emissions by nearly a third by 2025, city leaders are debating what role their franchise agreements with utility companies should play.
The agreements, signed in the early 1990s, give Xcel Energy and CenterPoint Energy space below or along streets, alleys and other public rights of way in exchange for millions of dollars in franchise fees.
But the city imposes no renewable energy requirements in the contracts. Minnesota law doesn't allow municipalities to make those conditions in franchise agreements.
City Council members last week voted to create a work group to help determine the city's future with Xcel and CenterPoint, whose agreements expire at the end of 2014. Officials expect to examine a range of possibilities, including pressing the state to give cities more authority in their utility agreements, reducing the span of agreements to just a couple of years rather than decades and having the city take over providing utilities.
Examining franchise contracts is only one way to meet emissions targets, said Council Member Elizabeth Glidden, who chairs the regulatory committee.
"But it's a big agreement, and it is directly with utility companies, and so, obviously, thinking about those goals, and is there a way to impact them, is going to be on our minds," she said.
She added that it's too early to say what course the city wants to follow. Negotiations have yet to start.
"I do think that right now, state law is restrictive on how we're able to incorporate achieving those goals into franchise agreements, so part of our strategy will be about how to ask the state to loosen some of those restrictions," Glidden said.
This year, Xcel's franchise payments to Minneapolis are expected to run $16 million. CenterPoint's are projected to be about half that. Both utilities pay the city between 3 and 5 percent of their gross revenue from Minneapolis customers, depending on the type of customer.
City attorneys, in a memo to council members, pointed to Ann Arbor, Mich., as an example to follow. The U.S. Environmental Protection Agency noted in a 2009 study of 55 Midwestern municipalities that Ann Arbor had a utility contract containing renewable energy requirements.
But that has not been in effect for years, the city said this week.
Several years after Ann Arbor incorporated renewable energy requirements into its franchise agreement in the 1990s, the Michigan legislature redefined utilities so that they no longer were required to have a franchise agreement with the city, officials said.
That may no longer matter if voters approve a ballot question in November to increase Michigan's use of renewable energy to 25 percent by 2025, following other states that have adopted ambitious green energy targets.
Some want city to go further
In Minnesota, the Next Generation Energy Act of 2007 called for cutting greenhouse gas emissions 30 percent by 2025. While that's in line with Minneapolis' targets, city leaders and some energy advocates want to see the city go even further.
"The statewide goal is reflective of some of the same principles that the city shares, but I think what the city is looking to do is accomplish it in their own borders," said John Farrell, senior researcher at the Institute for Local Self-Reliance, which promotes energy independence.
An Xcel spokeswoman said 46 percent of the electricity the company delivers to Minneapolis comes from carbon-free sources and that it helped build at the city's Convention Center one of the state's largest solar electric generating units. Xcel also worked with the city to convert the Riverside power plant from coal to high-efficiency natural gas, the company said.
Becca Virden, a spokeswoman for CenterPoint, noted that natural gas has half the carbon footprint of coal. Xcel still relies heavily on coal, though it has enacted many renewable energy and conservation initiatives. And CenterPoint has ramped up conservation programs since the Next Generation Energy Act, she said.
Officials are also looking for answers to Boulder, Co., which decided against renewing a 20-year franchise agreement with Xcel to provide electricity. Residents last fall voted to have Boulder form a municipal utility to help better meet clean energy goals.
"Most cities, they rubber-stamp these franchise agreements, and they go through with little or no discussion, but I will tell you there are many people who are concerned that these are 20 years," said Ken Bradley, program director for Environment Minnesota.
Maya Rao 612-673-4210