Free Markets Create Real Incentives

It’s frustrating to watch Minnesota communities pursue bad policy, when the right approach is staring them right in the face. In mid-December, the Star Tribune reported that the Minneapolis City Council raised its franchise fee, which is a payment that Xcel Energy and CenterPoint Energy collect from their utility customers and pass to the city, in their 2018 budget.[1] This additional money will be spent on climate change and energy efficiency programs in order to meet the goals of a 2013 city resolution requiring the city to drop their emissions by 30 percent, commercial property owners to drop emissions by 20 percent, and for 75 percent of homeowners to retrofit their homes for energy efficiency.

Unfortunately, even with all this additional revenue available for redistribution, the Minneapolis City Council is unable to reach their lofty goals. Proponents admitted that they are not going to reach the 2013 targets because the city and local advocates are unable to convince citizens to engage in expensive and often low priority retrofit and energy efficiency remodels. Even worse, some of the franchise fee money will be used to reimburse Xcel Energy to sell more expensive Renewable Energy through its Renewable Connect program. Somehow the City of Minneapolis managed to make energy more expensive and can’t even follow through on its carbon emissions and energy efficiency goals.

The good news is that the City of Minneapolis has access to a better way. If they focus on letting market forces move customer choices, educating customers on the new changes and possible savings from improvements, and stop using utilities as a tool to implement an ideological agenda, they may find that they will reach their goals but also make energy more affordable for their residents. Minnesota currently has a terrible business climate. In 2010, Minnesota had 21 companies on the Fortune 500 list with headquarters in the state. In the last seven years the state has lost 5. Many of these companies have left for tax and business reasons.[2] Further, in a combination of weather and poor economics, talented workers have been leaving the state for years.[3] People make personal and business decisions based on economic factors and indicators, Minneapolis should utilize these levers when evaluating policy effectiveness.

The general public is also woefully under educated about the most up to date information regarding energy, energy policy, and the latest advances in technology. When people have set opinions based in outdated information, bad actors are able to take advantage. One of the reasons I am passionate about working with the Minnesota Conservative Energy Forum is their goal to educate Minnesotans on the developments taking place in the energy sector. Without complete knowledge, you are going to face resistance, distrust, and bad decision making from residents. Minneapolis should focus on education. Even if change doesn’t come as fast when it is mandated, people will make logical decisions if they have good data to work from, and they will do it willingly and cheaper than other options.

Finally, we can’t keep letting only utilities be used to implement ideological goals. Instead, we should encourage utilities to work toward a strong grid that incorporates as much new technology as possible, encourages energy efficiency, and draws on energy sources that are going to save ratepayers money. When Renewable Energy is able to compete on its own, it will present a compelling argument to increase its use in Minnesota and Minneapolis will deliver cleaner AND cheaper energy.

[1] Belz, Adam. “Minneapolis is using electric bills to fight climate change.” Star Tribune, 12 Dec. 2017, www.startribune.com/minneapolis-is-using-electric-bills-to-fight-climate-change/464650183/.

[2] Gilyard, Burl. “Minnesota’s Fading Fortunes.” Twin Cities Business, 12 May 2017, tcbmag.com/news/articles/2017/may/minnesota-s-fading-fortunes.

[3] Nelson, Peter J, and Dale Kurschner. “Counterpoint: Minnesota is, in fact, losing the ultrarich.” Star Tribune, 25 May 2016, www.startribune.com/counterpoint-minnesota-is-in-fact-losing-the-ultrarich/380330331/.

 

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