The Showdown at the Electricity Meter

Utilities and the communities they serve are getting out of sync with each other. Three cities show what can -- and can't -- be done.
by | December 3, 2015

Bentham Paulos

Principal of PaulosAnalysis

This is a period of great change in the energy world. Driven by new technologies and the threat of climate change, the old ways of doing business are under pressure from customers and regulators alike.

Individuals want to take advantage of new energy technologies like solar panels and LED lights to save money, save the planet, be more self-reliant and have more secure energy. But the money they save is money that doesn't go to electric utilities, creating a threat to the traditional business model predicated on ever-increasing sales.

Some utilities are fighting back, seeking changes that would slow things down and keep them in control. Utilities in over half the states, for example, are attacking "net metering," a simple accounting system that allows customers who go solar to swap surplus daytime power for nighttime power. Many utilities are proposing onerous fixed charges that ensure that customers pay regardless of how much energy they use, undercutting incentives to be more efficient.

In other cases, utilities are simply not moving fast enough on what many of their customers consider the biggest problem of the 21st century, climate change. While federal regulators are finally developing carbon emission rules for existing power plants -- EPA's Clean Power Plan -- it has been slow in coming, and many utilities and states are fighting it.

These trends have triggered a backlash in a growing number of communities, as customers and their communities look for new options. Three of these cities are the subject of my book, "Empowered," and have important lessons for what can -- and can't -- be done locally:

Boulder, Colo.: In addition to outdoor-sports enthusiasts, Boulder is full of climate and energy scientists at local national labs. The city's climate action plan, as a result, is taken very seriously. Boulder is the only city in the country with a local carbon tax.

But in the eyes of civic leaders, their utility, Xcel Energy, was not doing enough to help meet the carbon goals. Xcel is a leading buyer of renewables, getting 19 percent of its Colorado power from wind. But it still is largely reliant on fossil fuels and plans to use coal and gas to generate over 70 percent of its energy in 2020.

Negotiations between the city and the utility dragged on for years, and slowly degenerated. Buttressed by four ballot initiatives, the city decided to condemn and buy Xcel's equipment and start its own utility. This "hostile takeover" is taking years of litigation and studies, but if all the hurdles are surmounted Boulder Light & Power could start operations by 2017.

Minneapolis: In Minneapolis, Xcel Energy's hometown, people looked at Boulder and thought, "We have a climate plan too. Why isn't Xcel doing more to help us?" Coincidentally, Xcel's 20-year contract to operate in Minneapolis, called the franchise agreement, was up for renewal. Activists starting asking how the city could get cleaner and more-efficient energy service, with more local control and local economic benefits. They started a campaign to look at options that could be discussed before renewing the franchise agreement.

After commissioning a consultant's study and convening many meetings, the city settled on a partnership with the gas and electric utilities to explore new programs and policies. Municipalization is off the table for now in hopes that a collaborative approach will yield benefits with a minimum of hassle.

Madison, Wis.: In the Madison area, the dynamic has been different. Last year, Madison Gas & Electric (MGE) proposed to increase the mandatory part of its customers' electric bill from $10 monthly to $69. The energy charge, which depends on the number of kilowatt-hours consumed, would decline. This change would penalize customers who use the least energy, typically low-income people and seniors, and take away the incentive to save energy or go solar.

In almost every state where such changes have been proposed they have been rejected by state regulators. Only in Wisconsin have they been welcomed -- regulators at the Public Service Commission actually encouraged the utilities to ask for them. The reaction in Madison was swift and loud. Local governments hired lawyers to intervene and protestors took to the streets. MGE scaled back its proposal to $19 a month (which was approved) and began a series of community conversations.

While their specific circumstances vary, all three of these communities would like to embrace the transition to a cleaner, more distributed and more efficient energy future. But all three lack control of their energy supply -- their electric utilities are regulated by state and federal governments, not locally.

As a result, they are forced to take extreme measures, as in Boulder, or work out voluntary partnerships with uncertain outcomes, as in Minneapolis, or protest by any means available, as in Madison.

Other communities, such as the 2,000 that have municipally-owned utilities, are more fortunate. And in some states, communities are allowed to buy power on behalf of their citizens, using what's known as "community choice aggregation." This "muni-lite" approach allows greater local control over the sources of energy consumed by a community while the utility still owns and runs the grid.

Cities can always use local policy levers, such as building codes, permitting, incentives and taxes, to encourage the energy outcomes they favor. But as long as the main decisions about how the local energy market works is out of their hands, local policy actions will have a marginal impact.

Prudent utilities will be responsive to their customers in this time of rapid change. Barring this, we can expect more turmoil as empowered cities struggle to take charge of their energy future.

For a short explanation of the fight over fixed charges, watch this video.

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VOICES is curated by the Governing Institute, which seeks out practitioners and observers whose perspective and insight add to the public conversation about state and local government. For more information or to submit an article to be considered for publication, please contact editor John Martin.

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