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Saint Paul rebalances Xcel franchise fees away from residential customers

Saint Paul rebalances Xcel franchise fees away from residential customers

Rule Changes Saint Paul, MN local

New agreement raises fees on commercial and industrial users, holds residential rates flat, adds a 50% rebate for low-income households.

4 days ago: City Council unanimously approves franchise ordinances

Overview

Updated 2 hours ago

For decades, Saint Paul residents paid a larger share of Xcel Energy franchise fees than commercial and industrial customers. On Sept. 23, the city council unanimously approved a new agreement that flips that balance.

The plan lowers the residential electric franchise rate from about 7% to 5.5%, raises commercial and industrial rates, and rebates 50% of the fee to households qualifying for the Low Income Heat Energy Assistance Program. Critics said the higher commercial fees would hurt businesses and nonprofits, and that some legacy apartment buildings with central heating would be classified as commercial, excluding low-income residents.

Why it matters

The fee shift raises costs for commercial and industrial energy users while shielding residential customers and adding rebates for low-income households.

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Key Indicators

$26.5M
Annual Xcel franchise fee revenue
What Saint Paul collected from Xcel gas and electric franchise fees in 2025.
9,821
Households qualifying for LIHEAP rebate
Low-income households in Saint Paul eligible for the 50% fee rebate.
5.5%
New residential electric franchise rate
Down from about 7% under the old schedule.

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People Involved

Organizations Involved

Timeline

January 2006 September 2026

5 events Latest: 4 days ago
Tap a bar to jump to that date
  1. City Council unanimously approves franchise ordinances

    Latest Vote

    All related ordinances pass; the new fee structure is set to take effect Jan. 1, 2027.

  2. Public hearing draws opposition testimony

    Hearing

    Chamber, District Energy, and resident John Purdy oppose fee increases, citing costs for businesses and apartment residents.

  3. City Council introduction and staff presentation

    Hearing

    City staff present the ordinances and MOU; the agreements are laid over for second reading and public hearing.

  4. Mayor's office announces proposed franchise agreement

    Announcement

    The city unveils the negotiated agreement, shifting fees to commercial and industrial users and adding a LIHEAP rebate.

  5. St. Paul signs 20-year franchise agreement with Xcel

    Contract

    The old agreement created a complex fee schedule with 13 gas and 20 electric customer categories.

Scenarios

1

MPUC modifies or rejects St. Paul franchise fee structure

Unlikely Resolves by Q1 2027

Discussed by: Utility regulatory analysts

After Xcel submits the franchise agreement to the Minnesota Public Utilities Commission, the commission could alter or reject the fee structure if it finds it discriminatory or against the public interest. The MPUC has broad authority over rate schedules, and commercial groups might challenge the shift as unfair.

2

Commercial ratepayers file lawsuit challenging the fee shift

Possible Resolves by End of 2026

Discussed by: Business and legal observers

Business groups such as the St. Paul Area Chamber could sue the city or Xcel, arguing the fee increases are an unreasonable burden or that the classification of certain customers (e.g., apartment buildings) violates state law. A lawsuit would delay implementation or force a revision.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2006

Saint Paul's 2006 franchise agreement with Xcel

Saint Paul signed a 20-year franchise agreement with Xcel Energy, creating a complex fee structure with 13 gas and 20 electric customer categories. Each category had its own dollar-per-meter and per-energy-unit charges.

Then

The complexity made it difficult to adjust fees equitably across customer classes.

Now

Residential customers ended up paying a higher percentage of franchise fees than commercial and industrial users, which the 2026 agreement sought to correct.

Why this matters now

The 2006 agreement created the very imbalances that the current overhaul addresses.

2013–2014

Minneapolis franchise negotiation and Energy Options campaign (2013–2014)

Minneapolis faced expiring franchise agreements with Xcel Energy and CenterPoint. Local advocates launched the Minneapolis Energy Options campaign, threatening to create a municipal utility to force the companies to commit to climate goals.

Then

The campaign pressured Xcel and CenterPoint to sign agreements with stronger energy efficiency and greenhouse gas reduction provisions.

Now

Established a precedent for franchise agreements to be treated as climate documents, not just operational permits.

Why this matters now

St. Paul's 2026 negotiation mirrors Minneapolis's approach, using the franchise agreement to shift fee burdens and secure climate commitments.

Sources

(8)

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