By John Farrell, ILSR, June 29, 2020
Last week, we went digging for data on a little-known city-level climate tool, city franchise agreements and franchise fees. Thanks to intern Lilli Ambort, we now have a complete picture of how cities in every state can use these contract negotiations with utilities and fee levels to juice their local investments in clean energy.
Also, I just listened to this terrific interview with Saul Griffith on the Ezra Klein podcast. Three key takeaways:
- If we want to hit scientifically described temperature limits, we need to be literally decarbonizing every home heating, vehicle, and power plant starting Yesterday.
- Carbon sequestration is not only technologically and economically limited, but due to the chemistry of combustion, the carbon dioxide produced when we burn fossil fuels has a volume 4-5 times larger than the fuel we extract (because we add oxygen to combust it). So sequestration has significant limits.
- Australia — a country with similar demographics, politics, and markets — made significant investments in cutting the cost of installing rooftop solar, which is nearly two-thirds less than in the U.S. We could emulate their strategies (installation training, cutting soft costs).
P.S. Frustrated with poor service and prices from incumbents, Mainers are looking at public ownership of broadband networks and electricity. Check out this interview with state representative Seth Berry on Building Local Power. Whether or not they succeed, it’s a great use of Franklin Roosevelt’s “birch rod in the cupboard” to discipline poorly-behaving companies
Utility Franchise Fee Update
We created a map that shows which states allow cities to assess franchise fees on utility bills. It shows states where cities can negotiate their own franchise agreements, if they can have franchise fees, and whether they have the authority to set the fee.
Utility Franchise Fee Update
Franchise fees are quickly becoming a source of revenue for supporting local renewable energy and climate action. A recent evaluation of over 3,500 cities by the National Renewable Energy Lab has revealed that over 3,200 have franchise agreements. Of those, 57 of the cities surveyed have a goal of reaching 100% renewable energy and 75 of the franchise agreements refer to renewable energy. For instance, the City of Dunnellon, Fla. used its franchise agreement to prevent Duke Energy from instituting limits on developing renewable energy and selling that energy back to the utility. The City of Alamosa, Colo. (with a handful of other Colorado cities) used its franchise agreement to set baseline expectations for both city and utility climate goals. Minneapolis, Minn., Salt Lake City, Utah, Denver, Colo., and more are going even further by using franchise agreements with their electric utility to create clean energy partnerships. Their franchise fees fund a substantial portion of cities’ climate and energy efforts.
Similar to the clean energy partnership pioneered by Minneapolis, Minn., Salt Lake City, Utah has incorporated clean energy goals into its franchise agreement. While the city does not assess franchise fees, both Salt Lake City Corporation and Rocky Mountain Power signed on to the city’s Joint Clean Energy Cooperation Statement in their franchise agreement. The joint venture establishes a cooperative relationship between the city and utility in achieving the city’s goal of 100% renewable energy by 2032. The city and the utility plan to work together on demand response, energy storage, renewable energy projects, energy efficiency, and other initiatives designed to help the city reach its clean energy and energy efficiency goals.
ILSR has compiled a map, below, showing which states allow cities to assess franchise fees on utility bills. The map shows states where cities can negotiate their own franchise agreements, if they can have franchise fees and whether they have the authority to set the fee.
The updated map above shows data for all states, concluding that franchise fees are allowed in 45 states. Franchise fees can be set at the city level in 40 states, at the state level in 5 states, and are prohibited in 5 states. Cities in 40 states have the ability to pursue franchise agreements, with 10 states either excluded from this option (due to majority public utility or state management) or prohibited from doing so. Cities may be prohibited or excluded from pursuing franchise agreements, but are still able to set franchise fees. For instance, Tennessee and Nebraska both have the authority to assess franchise fees, but because their states are constituted by majority public utility, they are less likely to do so.
Thousands of cities have the ability to leverage their franchise agreement negotiations into clean energy commitments from their electric utility. They can use franchise fees to fund new projects related to renewable energy, energy storage, and more. Cities interested in flexing their franchise fee muscle should search their state laws to identify the extent of their franchise authority.