The St. Paul City Council is looking to increase the franchise fees it charges Xcel Energy for electricity and gas distribution to residential properties, though not by as much as what the mayor and city council previously proposed.
Utility companies pay the city for the right to access the public right-of-way with their wires, pipes and cables, but until recently, the city of St. Paul was barred by state statute from collecting franchise fee revenue for electricity and gas during high-usage winter months.
That law, in place since 1979, blocked the city from collecting the fees from November through April, effectively preventing St. Paul from accessing half the residential fee revenue available to other cities, but it was recently lifted by state lawmakers with the help of state Rep. Athena Hollins and state Sen. Foung Hawj, DFL-St. Paul.
The budget proposal unveiled by St. Paul Mayor Melvin Carter this summer called for imposing franchise fees for an extra two months annually — during November and April — through August 2026, which would allow the city to collect an average of another $35 annually per household, or at least another $1.5 million annually citywide, and possibly much more. The projection for total collections was recently revised upward from $1.5 million to $3.25 million by the mayor’s office, and then revised upward again to $4.25 million.
Climate initiatives
Under the mayor’s proposal, a portion of the added revenue will be dedicated toward climate initiatives, including $500,000 for the city’s new “Power of Home” program to weatherize and electrify the homes of low-income residents.
The added money also would pay for a new Climate Action Coordinator, a staff position that had previously been funded by a grant, among other climate efforts.
“I think it’s in the council’s best interest and the community’s best interest not to leave any money on the table. We don’t know exactly how much money we can anticipate,” said Council Member Saura Jost, during a Nov. 13 council meeting. “It’s based on data, and it’s based on the type of winters that we’ll have, and we know that has fluctuated significantly over time.”
“We’ve always had the power to decide how this money is spent, and we still do,” Jost added.
She noted the funds could offset general fund spending, help to lower the city’s property tax levy or fund new initiatives. She said impacts to low-income residents could be offset in part by the Low Usage Affordability Credit, Xcel Energy’s new program to reduce bills for low-income residents who use limited energy, as well as by the state energy assistance program.
Yang amendment cuts fees in half — but still projects a surplus
Alarmed at the prospect of increasing residential utility bills, Council Member Nelsie Yang submitted an amendment earlier this month to reduce the proposed fee structure by eliminating the charges during the month of November, cutting potential revenues roughly in half by limiting them to April alone. She noted the upwardly-revised collection totals still fully fund the green initiatives in the mayor’s budget, with a surplus.
“I constantly hear from constituents in my ward that they’re feeling really deeply the financial constraints of the cost of living increasing, taxes being imposed,” said Yang, addressing the council last week. “With just April alone, we still have so much money left over to figure out what it could be used for.”
Yang’s amendment was approved 4-3, with Jost, Council President Mitra Jalali and Anika Bowie opposed. The council will vote on the final package on Wednesday.
Yang, in a phone interview Tuesday, said she settled on collections for the month of April so the revenue could be generated sooner rather than later. “My understanding was that the amount generated in April would be similar to November, and we could start collecting that next spring,” she said.
Climate advocates weigh in
Jost’s support for the larger franchise fee was echoed by climate advocates from Unidos St. Paul — formerly St. Paul 350 — who have worked this the past year to help change the state law and promote funding for the city’s green initiatives.
The Power of Home is a program “we were really excited about, because it identifies communities that needed that approach,” said Chelsea DeArmond, climate organizer with Unidos St. Paul, in an interview Tuesday. “Nobody gets left behind. This is more of a community approach. It will help energy-burdened households reduce their costs, so there’s the equity part.”
DeArmond noted that even after Yang’s amendment, the added funding is be the largest ever budgeted for climate action by the city.
“It’s ongoing funding, so it will grow,” she said. “There’s more than 42,000 energy-burdened homes in St. Paul, so we have a lot of work to do.”
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